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RAVE RESTAURANT GROUP, INC.

RAVE RESTAURANT GROUP, INC.RAVEEarnings & Financial Report

Nasdaq · Consumer Discretionary · Wholesale-Groceries & Related Products

RAVE Restaurant Group, Inc. is a U.S.-headquartered restaurant franchising and operation enterprise, owning well-known casual dining brands including Pizza Inn and Pie Five Pizza. It offers pizza, pasta, salads and supporting menu items, primarily operates in the North American market with both company-owned and franchised outlets, targeting consumers looking for affordable, family-friendly casual meal options.

What changed in RAVE RESTAURANT GROUP, INC.'s 10-K — 2022 vs 2023

Top changes in RAVE RESTAURANT GROUP, INC.'s 2023 10-K

107 paragraphs added · 131 removed · 93 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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ITEM 1. BUSINESS. General Rave Restaurant Group, Inc., through its subsidiaries (collectively, the “Company” or “we,” “us” or “our”) franchise 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”.
ITEM 1. BUSINESS. General 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”.
Master licensees may open restaurants that they own and operate, or they may open sub-franchised restaurants owned and operated by third parties through agreements with the master licensee, but subject to our approval. Our first franchised Pizza Inn restaurant outside of the United States opened in the late 1970s.
Master licensees may open restaurants that they own and operate, or they may open sub-franchised restaurants owned and operated by third parties through agreements with the master licensee subject to our approval. Our first franchised Pizza Inn restaurant outside of the United States opened in the late 1970s.
The area developer assisted us in local franchise service and quality control in exchange for half of the franchise fees and royalties from all restaurants within the territory during the term of the agreement. 3 Index We intend to continue developing franchised Pie Five Units domestically and internationally.
The area developer assisted us in local franchise service and quality control in exchange for half of the franchise fees and royalties from all restaurants within the territory during the term of the agreement. 3 Index We intend to continue developing franchised Pie Five Units domestically.
Initial and certain supplemental training programs are offered free of charge to franchisees, who pay their own travel and lodging expenses. New franchisees also receive on-site training from Company employees to assist with their first two restaurant openings under their development agreements. Restaurant managers train their staff through on-the-job training, utilizing video and printed materials produced by us. Standards.
Initial and certain supplemental training programs are offered free of charge to franchisees, who pay their own travel and lodging expenses. New franchisees also receive on-site training from Company employees to assist with their first two restaurant openings under their development agreements. Restaurant managers train their staff through on-the-job training using video and printed materials produced by us. Standards.
Some Buffet Units feature game rooms that offer a range of electronic game entertainment for the entire family. 2 Index Delco Units offer delivery and carryout service only and are typically located in shopping centers or other in-line retail developments. Delco Units typically offer a variety of crusts and some combination of side items.
Some Buffet Units feature game rooms that offer a range of electronic game entertainment for the entire family. Delco Units offer delivery and carryout service only and are typically located in shopping centers or other in-line retail developments. Delco Units typically offer a variety of crusts and some combination of side items.
We plan to expand our Pizza Inn branded domestic restaurant base primarily through opening new franchised restaurants with new and existing franchisees. We expect to evaluate the continued development of new Pizza Inn Buffet and Delco Units in international markets in fiscal 2023, particularly in the Middle East.
We plan to expand our Pizza Inn branded domestic restaurant base primarily through opening new franchised restaurants with new and existing franchisees. We expect to evaluate the continued development of new Pizza Inn Buffet and Delco Units in international markets in fiscal 2024, particularly in the Middle East.
In general, there is also active competition for management personnel and attractive commercial real estate sites suitable for our restaurants.
In general, there is active competition for management personnel and attractive commercial real estate sites suitable for our restaurants.
In international markets, the menu mix of toppings and side items is occasionally adapted to local tastes. Buffet Units offer dine-in, carryout and catering service and, in many cases, also offer delivery service.
In international markets, the menu mix of toppings and side items is occasionally adapted to local tastes. 2 Index Buffet Units offer dine-in, carryout, and catering service and, in many cases, also offer delivery service.
Domestic Pizza Inn restaurants and kiosks were located predominantly in the southern half of the United States, with Texas, Arkansas, North Carolina and Mississippi accounting for approximately 23%, 22%, 13% and 9%, respectively, of the total number of domestic units.
Domestic Pizza Inn restaurants and kiosks were located predominantly in the southern half of the United States, with Arkansas, Texas, North Carolina and Mississippi accounting for approximately 23%, 20%, 15% and 9%, respectively, of the total number of domestic units.
We have not experienced any significant shortages of supplies or any delays in receiving our food or beverage inventories, restaurant supplies or products, but disruption of supply chains as a result of COVID-19 or other factors could cause difficulty in obtaining inventories or supplies in the future.
We have not experienced any significant shortages of supplies or any delays in receiving our food or beverage inventories, restaurant supplies, or products, but disruption of supply chains or other factors could cause difficulty in obtaining inventories or supplies in the future.
Some foreign countries also have disclosure requirements and other laws regulating franchising and the franchisor-franchisee relationship. Employees As of June 26, 2022, we had 24 employees. None of our employees are currently covered by collective bargaining agreements.
Some foreign countries also have disclosure requirements and other laws regulating franchising and the franchisor-franchisee relationship. Employees As of June 25, 2023, we had 25 full-time employees. None of our employees are currently covered by collective bargaining agreements.
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. As of June 26, 2022, we had 150 franchised Pizza Inn restaurants, 31 franchised Pie Five Units, and 9 licensed PIE Units.
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. As of June 25, 2023, we had 152 franchised Pizza Inn restaurants, 27 franchised Pie Five Units, and 5 licensed PIE Units.
Like Delco Units, Express Units are primarily production-oriented facilities and, therefore, do not require all of the equipment, labor or square footage of the Buffet Unit. PIE Units serve customers through a non-traditional, licensed pizza-only model called Pizza Inn Express.
PIE Units serve customers through a non-traditional, licensed, pizza-only model called Pizza Inn Express. Like Delco Units and Express Units, the PIE Units are primarily production-oriented facilities and, therefore, do not require all of the equipment, labor or square footage of the Buffet Unit. The Company does not intend to open additional PIE Units in the foreseeable future.
In addition, we have obtained trademark registrations for our marks in several foreign countries and have periodically re-filed and applied for registration in others. We believe that we hold the necessary rights for protection of the trademarks essential to our business.
The duration of our trademarks is unlimited, subject to periodic renewal and continued use. In addition, we have obtained trademark registrations for our marks in several foreign countries and have periodically re-filed and applied for registration in others. We believe that we hold the necessary rights for protection of the trademarks essential to our business.
As of June 26, 2022, there were 31 Pizza Inn restaurants operating internationally. Except for three restaurants in Honduras, all of the Pizza Inn restaurants operated or sub-licensed by our international master licensees are in the United Arab Emirates, Saudi Arabia and adjoining countries.
As of June 25, 2023, there were 34 Pizza Inn restaurants operating internationally. Except for three restaurants in Honduras and one restaurant in New Zealand, all of the Pizza Inn restaurants operated or sub-licensed by our international master licensees are in the United Arab Emirates, Saudi Arabia and adjoining countries.
We provide franchised restaurants with access to an assortment of local store marketing materials, including pre-approved print, radio, and digital media marketing materials. We also provide local store marketing materials and programs specifically to support new restaurant openings.
We provide franchised restaurants with access to an assortment of local store marketing materials, including pre-approved print, radio, and digital media marketing materials.
Site Selection We consider the restaurant site selection process critical to a restaurant’s long-term success and devote significant resources to the investigation and evaluation of potential sites. The site selection process includes a review of trade area demographics using a third-party customer and site selection tool, as well as a proprietary evaluation process.
Site Selection We consider the restaurant site selection process critical to a restaurant’s long-term success and devote significant resources to the investigation and evaluation of potential sites. The site selection process includes a review of trade area demographics and an evaluation process.
Marketing and Advertising By communicating a common brand message at the regional, local market and restaurant levels, we believe we can create and reinforce a strong, consistent marketing message to consumers and increase our market share.
Marketing and Advertising By communicating a common brand message at the regional, local market, and restaurant levels, we believe we can create and reinforce a strong, consistent marketing message to consumers and increase our market share. We offer or facilitate several ways for the brand image and message to be promoted at the local and regional levels.
Customers can also get freshly prepared side salads, also made to order from our recipes or at the customer’s direction. They can also choose from several baked daily desserts like brownies, cookie pies, and cakes. A variety of soft beverages are available, as well as beer and wine in some locations.
Customers can also get freshly prepared side salads, also made to order from our recipes or at the customer’s direction. A variety of soft beverages are available, as well as beer and wine in some locations.
International Franchise Operations We also offer master license rights to develop Pizza Inn and Pie Five restaurants in certain foreign countries, with negotiated fees, development schedules and ongoing royalties.
We presently intend to open and operate Company-owned restaurants in the future. 4 Index International Franchise Operations We also offer master license rights to develop Pizza Inn and Pie Five restaurants in certain foreign countries, with negotiated fees, development schedules, and ongoing royalties.
We offer or facilitate several ways for the brand image and message to be promoted at the local and regional levels. 5 Index Pizza Inn and Pie Five franchisees contribute a specified percentage of their sales to the Company to fund the creation and production of various marketing and advertising programs and materials, which may include print and digital advertisements, direct mail materials, customer satisfaction systems, social media and e-mail marketing, television and radio commercials, in-store promotional materials, marketing and public relations services, and consumer research.
Pizza Inn and Pie Five franchisees contribute a specified percentage of their sales to the Company to fund the creation and production of various marketing and advertising programs and materials, which may include print and digital advertisements, direct mail materials, customer satisfaction systems, social media and e-mail marketing, television and radio commercials, in-store promotional materials, marketing and public relations services, and consumer research.
All licensees are required to operate their kiosks in compliance with these written policies, standards and specifications, which include matters such as menu items, ingredients, materials, supplies, services, furnishings, decor and signs.
We require licensee adherence to a variety of standards designed to ensure proper operations and to protect and enhance the Pizza Inn brand. All licensees are required to operate their kiosks in compliance with these written policies, standards, and specifications, which include matters such as menu items, ingredients, materials, supplies, services, furnishings, decor, and signs.
The 119 domestic franchised Pizza Inn restaurants were comprised of 72 Buffet Units, 10 Delco Units and 37 Express Units. As of June 26, 2022, there were 31 international franchised Pizza Inn restaurants.
The 118 domestic franchised Pizza Inn restaurants were comprised of 77 Buffet Units, 7 Delco Units and 34 Express Units. As of June 25, 2023, there were 34 international franchised Pizza Inn restaurants.
Trademarks and Quality Control We own various trademarks, including the names “Pizza Inn” and “Pie Five,” that are used in connection with the restaurants and have been registered with the United States Patent and Trademark Office. The duration of our trademarks is unlimited, subject to periodic renewal and continued use.
We also provide local store marketing materials and programs specifically to support new restaurant openings. 5 Index Trademarks and Quality Control We own various trademarks, including the names “Pizza Inn” and “Pie Five,” that are used in connection with the restaurants and have been registered with the United States Patent and Trademark Office.
We have developed a high-quality pre-prepared crust that is topped and cooked on-site, allowing this concept to offer a lower initial investment and reduced labor and operating cost s while maintaining product quality and consistency.
We have developed a high-quality, pre-prepared crust that is topped and cooked on-site, allowing this concept to offer a lower initial investment and reduced labor and operating costs while maintaining product quality and consistency. Like Delco Units, Express Units are primarily production-oriented facilities and, therefore, do not require all of the equipment, labor or square footage of the Buffet Unit.
Our efforts to maintain consistent operations may result, from time to time, in the closing of certain restaurants that have not achieved and maintained a consistent standard of quality or operations.
Our efforts to maintain consistent operations may result, from time to time, in the closing of certain restaurants that have not maintained a consistent standard of quality or operations. We also maintain adherence to our standards through ongoing support and education of our franchisees by our franchise business consultants, who are deployed locally in markets where our franchisees are located.
Our efforts to maintain consistent operations may result, from time to time, in the closing of certain kiosks that have not achieved and maintained a consistent standard of quality or operations.
Our efforts to maintain consistent operations may result, from time to time, in the closing of certain kiosks that have not maintained a consistent standard of quality or operations. We also maintain adherence to our standards through ongoing support and education of our licensees by our franchise business consultants, who are deployed locally in markets where our licensees are located.
PIE Unit licensees are not charged development fees, license fees, royalties, or advertising assessments. PIE Unit license agreements require that the licensee comply with standards of the Pizza Inn brand, including marketing, kiosk system configuration, and sales and sourcing of authorized products and services.
PIE Unit license agreements require that the licensee comply with standards of the Pizza Inn brand, including marketing, kiosk system configuration, and sales and sourcing of authorized products and services. The mandated products and sourcing provisions within the PIE Unit licensing agreement result in supplier rebates for the Company. Training.
The mandated products and sourcing provisions within the PIE Unit licensing agreement result in supplier rebates for the Company. Training. New licensees and their PIE Unit employees must attend and successfully complete our training program, which consists of a single day of training at the licensed location.
New licensees and their PIE Unit employees must attend and successfully complete our training program, which consists of a single day of training at the licensed location. PIE Unit managers train their staff through on-the-job training, using video and printed materials produced by us. Standards.
We intend to continue to focus on franchise development opportunities with experienced, well-capitalized, restaurant operators. In addition, we intend to take the brand into international markets. Domestic Franchise Operations Franchise and development agreements.
We intend to continue to focus on franchise development opportunities with experienced, well-capitalized restaurant operators. Domestic Franchise Operations Franchise and development agreements. Since the Pizza Inn concept was first franchised in 1963, industry franchising concepts and development strategies have evolved, and our present franchise relationships are evidenced by a variety of contractual forms.
We also maintain adherence to our standards through ongoing support and education of our franchisees by our franchise business consultants, who are deployed locally in markets where our franchisees are located. Domestic Kiosk License Operations Kiosk license agreements. Our PIE Units are typically offered for five-year initial license periods with options for additional five year renewals.
Domestic Kiosk License Operations Kiosk license agreements. Our PIE Units are typically offered for five-year initial license periods with options for additional five year renewals. PIE Unit licensees are not charged development fees, license fees, royalties, or advertising assessments.
Removed
Like Delco Units and Express Units, the PIE Units are primarily production-oriented facilities and, therefore, do not require all of the equipment, labor or square footage of the Buffet Unit. The Company does not intend to open additional PIE Units in the foreseeable future.
Added
Company-Owned Restaurant Operations As of June 25, 2023 and June 26, 2022, we did not operate any Company-owned restaurants.
Removed
Our current standard forms of domestic franchise agreements provide for the following basic terms: Pizza Inn Pie Five Buffet Unit Delco Unit Express Unit Pie Five Unit Franchise fee per unit $ 30,000 $ 10,000 $ 5,000 $ 30,000 Initial franchise term 20 years 10 years 5 years 10 years Renewal period 10 years 5 years 5 years 5 years Royalty rate % of sales 4 % 4 % 4 % 6 % National ad fund % of sales 3 % 3 % 3 % 2 % Required total ad spending % of sales 4 % 4 % 4 % 5 % Since the Pizza Inn concept was first franchised in 1963, industry franchising concepts and development strategies have evolved, and our present franchise relationships are evidenced by a variety of contractual forms.
Removed
PIE Unit managers train their staff through on-the-job training, utilizing video and printed materials produced by us. 4 Index Standards. We require licensee adherence to a variety of standards designed to ensure proper operations and to protect and enhance the Pizza Inn brand.
Removed
We also maintain adherence to our standards through ongoing support and education of our licensees by our franchise business consultants, who are deployed locally in markets where our licensees are located. Company-Owned Restaurant Operations As of June 26, 2022, we did not operate any Company-owned restaurants. We presently intend to open and operate Company-owned restaurants in the future.

Item 2. Properties

Properties — owned and leased real estate

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Two of the lease obligations have been subleased and seven of the lease obligations have been assigned to franchisees. These leased properties range in size from 2,025 to 3,000 square feet, have annual rental rates ranging from approximately $30.00 to $44.00 per square foot and expire between 2023 and 2028.
Two of the lease obligations have been subleased and six of the lease obligations have been assigned to franchisees. These leased properties range in size from 2,025 to 3,000 square feet, have annual rental rates ranging from approximately $30.00 to $42.00 per square foot and expire between 2023 and 2028. 6 Index
The Company amended its lease agreement in June 2020 and has elected to defer one-half of the monthly base rent for the period from June 2020 through May 2021. As of June 26, 2022, the Company had contingent and direct lease obligations for nine additional locations.
The Company amended its lease agreement in June 2020 and elected to defer one-half of the monthly base rent for the period from June 2020 through May 2021. As of June 25, 2023, the Company had contingent and direct lease obligations for eight additional restaurant locations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. LEGAL PROCEEDINGS. The Company is subject to claims and legal actions in the ordinary course of its business.
The Company is subject to other claims and legal actions in the ordinary course of its business.
Added
ITEM 3. LEGAL PROCEEDINGS. 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.
Added
In general, the suit asserted that the Company terminated Crane for the purpose of depriving him of certain equity compensation that otherwise would have been due to him on October 15, 2019. The Company asserted that Crane failed to meet the contractual qualifications for the equity, as well as other defenses.
Added
The matter proceeded to trial which resulted in a verdict in favor of Crane, and the trial court entered judgment in Crane’s favor.
Added
The Company appealed the judgment to the Fifth Circuit Court of Appeals, which on May 31, 2023 issued an opinion reversing the trial court and rendering judgment in favor of the Company on all claims brought by Crane, and returning the matter to the trial court for consideration of costs and attorney fees to be awarded to the Company as the prevailing party in the litigation.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+3 added−1 removed5 unchanged
The Company had no sales of unregistered securities during fiscal 2022 or 2021. The Company did not pay any dividends on its common stock during the fiscal years ended June 26, 2022 or June 27, 2021.
The Company had no sales of unregistered securities during fiscal 2023 or 2022. The Company did not pay any dividends on its common stock during the fiscal years ended June 25, 2023 or June 26, 2022.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. The Company’s common stock is listed on the Capital Market of the NASDAQ Stock Market, LLC (“NASDAQ”) under the symbol “RAVE”. As of September 16, 2022, there were approximately 1,891 stockholders of record of the Company’s common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. The Company’s common stock is listed on the Capital Market of the NASDAQ Stock Market, LLC (“NASDAQ”) under the symbol “RAVE”. As of September 18, 2023, there were approximately 1,888 stockholders of record of the Company’s common stock.
Equity Compensation Plan Information The following table furnishes information with respect to the Company’s stock option equity compensation plans as of June 26, 2022: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants, and rights Weighted average exercise price of outstanding options, warrants, and rights Number of securities remaining available for future issuance under equity compensation plans (1) Stock option compensation plans approved by security holders 111,750 $ 6.67 1,583,603 Stock option compensation plans not approved by security holders – – – Total 111,750 $ 6.67 1,583,603 (1) Securities remaining available for future issuance under the 2015 Long Term Incentive Program are net of a maximum of 1,328,531 shares of common stock issuable pursuant to outstanding restricted stock units, subject to applicable vesting requirements and performance criteria.
Schwarz, who is also the Executive Chairman of Hallmark, recused himself from all deliberations with respect to the Stock Purchase Agreement with Hallmark. 8 Index Equity Compensation Plan Information The following table furnishes information with respect to the Company’s stock option equity compensation plans as of June 25, 2023: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants, and rights Weighted average exercise price of outstanding options, warrants, and rights Number of securities remaining available for future issuance under equity compensation plans (1) Stock option compensation plans approved by security holders 151,750 $ 5.19 1,543,603 Stock option compensation plans not approved by security holders — — — Total 151,750 $ 5.19 1,543,603 (1) Securities remaining available for future issuance under the 2015 Long Term Incentive Program are net of a maximum of 1,328,531 shares of common stock issuable pursuant to outstanding restricted stock units, subject to applicable vesting requirements and performance criteria.
Subsequent to June 26, 2022, the Company has repurchased 1,110,891 outstanding shares for $1.4 million and may make further purchases under the 2007 Stock Purchase Plan. The Company may also purchase shares of our common stock other than pursuant to the 2007 Stock Purchase Plan or other publicly announced plans or programs.
The Company may also purchase shares of our common stock other than pursuant to the 2007 Stock Purchase Plan or other publicly announced plans or programs. On December 21, 2022, the Company entered into a Stock Purchase Agreement with Hallmark Financial Services, Inc.
The following table furnishes information for purchases made pursuant to the 2007 Stock Purchase Plan during the fourth quarter of fiscal 2022: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Maximum Number of Shares that May Yet Be Purchased Under the Plan 03/28/2022 - 04/24/2022 0 $ 0 2,167,575 848,425 04/25/2022 - 05/29/2022 0 0 2,167,575 848,425 05/30/2022 - 06/26/2022 493,474 1.04 2,661,049 354,951 Total 493,474 $ 1.04 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 following table furnishes information for purchases made pursuant to the 2007 Stock Purchase Plan during fiscal 2023: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Maximum Number of Shares that May Yet Be Purchased Under the Plan June 27, 2022 - July 31, 2022 891,350 $ 1.20 3,552,399 4,463,601 August 1, 2022 - August 28, 2022 219,541 1.35 3,771,940 4,244,060 August 29, 2022 - September 25, 2022 0 0 3,771,940 4,244,060 September 26, 2022 - October 30, 2022 0 0 3,771,940 4,244,060 October 31, 2022 - November 27, 2022 0 0 3,771,940 4,244,060 November 28, 2022 - December 25, 2022 2,246,086 1.60 6,018,026 1,997,974 December 26, 2022 - January 29, 2023 0 0 6,018,026 1,997,974 January 30, 2023 - February 26, 2023 0 0 6,018,026 1,997,974 February 27, 2023 - March 26, 2023 0 0 6,018,026 1,997,974 March 27, 2023 - April 30, 2023 0 0 6,018,026 1,997,974 May 1, 2023 - May 28, 2023 0 0 6,018,026 1,997,974 May 29, 2023 - June 25, 2023 0 0 6,018,026 1,997,974 Total 3,356,977 $ 1.48 The Company’s ability to purchase shares of our common stock is subject to various laws, regulations, and policies as well as the rules and regulations of the Securities and Exchange Commission (the “SEC”).
Removed
The 2007 Stock Purchase Plan does not have an expiration date. The Company’s ability to purchase shares of our common stock is subject to various laws, regulations and policies as well as the rules and regulations of the Securities and Exchange Commission (the “SEC”).
Added
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.
Added
(“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.
Added
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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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The following key performance indicators presented herein, some of which represent non-GAAP financial measures, have the meaning and are calculated as follows: • “EBITDA” represents earnings before interest, taxes, depreciation and amortization. • “Adjusted EBITDA” represents earnings before interest, taxes, depreciation and amortization, stock compensation expense, severance, gain/loss on sale of assets, costs related to impairment and other lease charges, franchisee default and closed store revenue/expense, and closed and non-operating store costs. • “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 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. 12 Index Financial Results The Company defines its operating segments as Pizza Inn Franchising, Pie Five Franchising and Company-Owned Restaurants.
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 Company does not currently have any finance leases. The Company capitalizes operating leases on the Condensed Consolidated Balance Sheets through a right of use asset and a corresponding lease liability.
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.
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. 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.
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.
Therefore, as of 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.
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.
Restaurant Sales We had no restaurant sales, which consist of revenue generated by Company-owned restaurants, in fiscal 2022 or fiscal 2021 because we closed our single remaining Company-owned restaurant during the third quarter of fiscal 2020.
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.
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 $5.4 million for fiscal 2022 compared to $4.7 million in the prior fiscal year.
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.
Based on budgeted and year-to-date cash flow information, we believe that we have sufficient liquidity to satisfy our cash requirements for the 2023 fiscal year and beyond.
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.
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 26, 2022 and June 27, 2021, the Company had no uncertain tax positions.
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.
Provision for Income Tax For the year ended June 26, 2022, t he 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.
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.
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 2022 and fiscal 2021 were $10.7 million and $8.6 million, respectively.
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.
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 $1 thousand for fiscal 2022 compared to $264 thousand in fiscal 2021.
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.
Total franchise expenses increased $0.9 million to $3.3 million in fiscal 2022 from $2.4 million in the prior fiscal year. Pizza Inn franchise expenses increased $0.9 million to $2.3 million in fiscal 2022 compared to $1.4 million in the prior fiscal year primarily as a result of an increase in payroll and related, advertising, and travel costs.
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.
There are no material 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.
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.
Cash provided by operations was $1.4 million in fiscal 2022 compared to cash provided by operations of $1.5 million in fiscal year 2021. Cash flows from investing activities primarily reflect net proceeds from sale of assets and capital expenditures for the purchase of Company assets.
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 flows from financing activities generally reflect changes in the Company’s borrowings and securities activity during the period. Net cash used by financing activities was $2.3 million for the fiscal year ended June 26, 2022 compared to net cash provided by financing activities of $3.9 million for the fiscal year June 27, 2021.
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 Company records a provision for doubtful receivables to allow for any amounts which may be unrecoverable based upon an analysis of the Company’s prior collection experience, customer creditworthiness and current economic trends. Actual realization of accounts receivable could differ materially from the Company’s estimates.
The Company records a provision for doubtful receivables to allow for any amounts which may be unrecoverable based upon an analysis of the Company’s prior collection experience, customer creditworthiness and current economic trends.
Net income increased $6.5 million to net income of $8.0 million for fiscal 2022 compared to a net income of $1.5 million for the prior fiscal year on revenues of $10.7 million for fiscal 2022 as compared to $8.6 million in fiscal 2021. 9 Index Adjusted EBITDA for the fiscal year ended June 26, 2022, improved to $2.8 million compared to $2.0 million for 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.
Cash provided by investing activities was $0.3 million in fiscal 2022 compared to cash used by investing activities of $0.2 million in fiscal 2021. The $0.5 million increase in cash provided by investing activities was primarily the result of payments on notes receivable from prior sales of 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.
Amortization and Depreciation Expense Amortization and depreciation expense increased $20 thousand to $187 thousand in fiscal 2022 compared to $167 thousand in fiscal 2021 primarily as a result of higher amortization of equipment. 14 Index Other Income Other income represents non-recurring income that is not derived from the operations of the Company.
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 following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown (in thousands): Fiscal Year Ended June 26, 2022 June 27, 2021 Net income $ 8,022 $ 1,520 Interest expense 61 92 Income taxes ( 5,657 ) ( 29 ) Depreciation and amortization 187 167 EBITDA $ 2,613 $ 1,750 Stock compensation expense 169 80 Severance 53 23 Gain on sale of assets — (10 ) Impairment of long-lived assets and other lease charges 6 21 Franchisee default and closed store revenue (38 ) (170 ) Closed and non-operating store costs 3 271 Adjusted EBITDA $ 2,806 $ 1,965 Results of operations for the fiscal years 2022 and 2021 both included 52 weeks.
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.
The cash used by financing activities in fiscal 2022 was primarily the result of $1.6 million used to retire all outstanding convertible notes, as well as $0.5 million used to repurchase shares of the Company’s common stock and $0.2 million used to repay a short term loan.
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.
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. ATM Offering On December 5, 2017, the Company entered into an At Market Issuance Sales Agreement with B.
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.
At June 26, 2022, Company-owned and franchised restaurants consisted of the following (in thousands, except unit data): Fiscal Year Ended June 26, 2022 (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 128 $ 87,977 31 $ 20,311 159 $ 108,288 Company-Owned – – – – – – Total Domestic Units 128 $ 87,977 31 $ 20,311 159 $ 108,288 International Franchised 31 – 31 The domestic units were located in 18 states predominately situated in the southern half of the United States.
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.
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 26, 2022 June 27, 2021 (in thousands, except unit data) Pie Five Retail Sales - Total Units Domestic Units - Franchised $ 20,311 $ 17,734 Domestic Units - Company-owned — — Total Domestic Retail Sales $ 20,311 $ 17,734 Pie Five Comparable Store Retail Sales - Total $ 19,018 $ 16,243 Pie Five Average Units Open in Period Domestic Units - Franchised 32 37 Domestic Units - Company-owned — — Total Domestic Units 32 37 Pie Five domestic total retail sales increased $2.6 million, or 14.5%, compared to the prior year despite average units open in the period decreasing to 32 from 37 the prior year.
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 following is additional business segment information for the Fiscal Years ended June 26, 2022 and June 27, 2021 (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 26, 2022 June 27, 2021 June 26, 2022 June 27, 2021 June 26, 2022 June 27, 2021 June 26, 2022 June 27, 2021 June 26, 2022 June 27, 2021 REVENUES: Franchise and license revenues $ 8,535 $ 6,582 $ 1,950 $ 1,800 $ – $ – $ – $ – $ 10,485 $ 8,382 Restaurant sales — – – – – – – – – – Rental income — – – – – – 186 200 186 200 Interest income and other — – 17 16 – – 4 (5 ) 21 11 Total revenues 8,535 6,582 1,967 1,816 – – 190 195 10,692 8,593 COSTS AND EXPENSES: Cost of sales — – – – 1 264 – – 1 264 General and administrative expenses — – – – 2 7 5,444 4,703 5,446 4,710 Franchise expenses 2,313 1,377 971 1,017 – – – – 3,284 2,394 Gain on sale of assets — – – – – – – (10 ) – (10 ) Impairment of long-lived assets and other lease charges — – – – – 21 6 – 6 21 Bad debt expense — – – – – – 46 121 46 121 Interest expense — – – – – – 61 92 61 92 Amortization and depreciation expense — – – – – – 187 167 187 167 Total costs and expenses 2,313 1,377 971 1,017 3 292 5,744 5,073 9,031 7,759 OTHER INCOME: Gain on forgiveness of PPP loan — — — — — — — 657 — 657 Employee retention credit — — — — — — 704 — 704 — Total other income — — — — — — 704 657 704 657 INCOME/(LOSS) BEFORE TAXES $ 6,222 $ 5,205 $ 996 $ 799 $ (3 ) $ (292 ) $ (4,850 ) $ (4,221 ) $ 2,365 $ 1,491 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 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.
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.
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.
Impairment of long-lived assets and other lease charges for Company-owned restaurants was zero in fiscal 2022 compared to $21 thousand in fiscal 2021 primarily due to a reduction in lease charges for closed stores. 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.
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.
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 26, 2022 June 27, 2021 Pizza Inn Retail Sales - Total Domestic Units (in thousands, except unit data) Domestic Units Buffet Units - Franchised $ 81,546 $ 63,776 Delco/Express Units - Franchised 6,198 6,053 PIE Units - Licensed 233 244 Total Domestic Retail Sales $ 87,977 $ 70,073 Pizza Inn Comparable Store Retail Sales - Total Domestic $ 83,680 $ 67,097 Pizza Inn Average Units Open in Period Domestic Units Buffet Units - Franchised 71 77 Delco/Express Units - Franchised 51 55 PIE Units - Licensed 10 12 Total Domestic Units 132 144 10 Index Pizza Inn total domestic retail sales increased by $17.9 million, or 25.6% compared to the prior year.
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.
We believe that this trend of net domestic store closures is moderating and will reverse in future periods. The net decrease of one international Pizza Inn unit was primarily due to closure of locations in Kuwait partially offset by new units in the Middle East. We believe that this represents a stabilizing of international unit count.
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.
As of June 26, 2022, the Company had net operating loss carryforwards totaling $23.1 million that are available to reduce future taxable income and will begin to expire in 2032 , of which $1.8 million are limited to 80% and do not expire.
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.
The international restaurants were located in seven foreign countries.
The international restaurants were located in eight foreign countries predominantly in the Middle East.
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 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.
The $0.7 million, or 15.6%, increase in total general and administrative expenses was primarily the result of increased employment , legal , and travel expenses. Franchise Expenses Franchise expenses include general and administrative expenses directly related to the sale and continuing service of domestic and international franchises.
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.
The following chart summarizes Pizza Inn restaurant activity for the fiscal year ended June 26, 2022: Fiscal Year Ended June 26, 2022 Beginning Units Opened Concept Change Closed Ending Units Domestic Units: Buffet Units - Franchised 70 4 1 3 72 Delco/Express Units - Franchised 54 1 (1 ) 7 47 PIE Units - Licensed 11 – – 2 9 Total Domestic Units 135 5 – 12 128 International Units (all types) 32 3 – 4 31 Total Units 167 8 – 16 159 The net decrease of seven domestic units was primarily due to declines in Delco and PIE units.
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 restaurant operating cash flow is a useful metric to investors in evaluating the ongoing operating performance of Company-owned restaurants and comparing such store operating performance from period to period. Management also uses these non-GAAP financial measures for evaluating operating performance, assessing the effectiveness of business strategies, projecting future capital needs, budgeting and other planning purposes.
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 Company had lease charges related to closed units of $0.7 million partially offset by $0.2 million in sublease income during fiscal year 2021. 16 Index 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.
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.
Additionally, an outbreak or perceived outbreak of COVID-19 connected to restaurant dining could cause negative publicity directed at any of our brands and cause customers to avoid our restaurants.
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.
The following table summarizes domestic comparable store retail sales for the Company. 52 Weeks Ended June 26, 2022 June 27, 2021 (in thousands) Pizza Inn Domestic Comparable Store Retail Sales $ 83,680 $ 67,097 Pie Five Domestic Comparable Store Retail Sales 19,018 16,243 Total Rave Comparable Store Retail Sales $ 102,698 $ 83,340 Basic and diluted net income per common share increased $0.36 to net income of $0.45 per share for fiscal 2022 compared to a net income of $0.09 per share in the prior fiscal year.
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.
Bad debt expense decreased by $75 thousand to $46 thousand in fiscal 2022 compared to $121 th ousand in fiscal 2021 primarily related to domestic accounts receivable. Interest Expense Interest expense decreased $31 thousand for fiscal 2022 to $61 thousand compared to $92 thousand in the prior year.
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.
The Company had a $0.7 million refundable employee retention tax credit during fiscal 2022 compared to $0.7 million in loan forgiveness during fiscal 2021, both of which were the result of governmental actions to mitigate the economic impacts of the COVID-19 pandemic.
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.
In making such assessment, more weight is given to evidence that can be objectively verified, including recent losses. Future sources of taxable income are also considered in determining the amount of the recorded valuation allowance. Based on this analysis, the Company reversed the full amount of the previous valuation allowance as of June 26, 2022.
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.
The 29.7% increase was primarily the result of a moderation in the impact of COVID-19. 13 Index Pie Five Franchise and License Revenues Pie Five franchise revenues increased by $0.2 million to $2.0 million for fiscal 2022 compared to $1.8 million for fiscal 2021. The 8.3% increase was primarily the result of a moderation in the impact of COVID-19.
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.
Gain on sale of assets decreased to zero in fiscal 2022 compared to $10 thousand in the prior year. Impairment Expenses Impairment of long-lived assets and other lease charges were $6 thousand for fiscal 2022 compared to $21 thousand for fiscal 2021.
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.
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.
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.
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.
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.
In most cases, in-store dining has now resumed subject to seating capacity limitations, social distancing protocols, and enhanced cleaning and disinfecting practices. The COVID-19 pandemic has resulted in dramatically reduced aggregate in-store retail sales at Buffet Units and Pie Five Units, modestly offset by increased aggregate carry-out and delivery sales.
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.
The Company assesses whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, using a “more likely than not” standard. In assessing the need for a valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization of deferred tax assets.
In 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.
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.
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.
The increase in domestic retail sales was primarily the result of a moderation in the impact of COVID-19. Pizza Inn domestic comparable store retail sales increased by $16.6 million, or 24.7%, for the same reason.
The increase in domestic retail sales was primarily the result of the diminished impact of COVID-19 and increased customer engagement.
The improvement in both total retail sales and comparable store retail sales was primarily the result of a moderation in the impact of COVID-19. 11 Index The following chart summarizes Pie Five restaurant activity for the fiscal year ended June 26, 2022: Fiscal Year Ended June 26, 2022 Beginning Units Opened Closed Ending Units Domestic - Franchised 33 2 4 31 Domestic - Company-owned – – — – Total Domestic Units 33 2 4 31 The net decrease of two Pie Five units during fiscal 2022 was primarily the result of the closure of poor-performing units, which we believe provides us a stronger foundation for future brand growth.
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”).
Comparable store retail sales increased by $2.8 million, or 17.1% during fiscal 2022 compared to 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.
We applied for and received a forgiveness decision in the fourth quarter of fiscal 2021, such that all of the PPP Loan was forgiven at that time. 15 Index On December 27, 2020, the Consolidated Appropriations Act of 2021 (the “CAA”) was signed into law.
Employee Retention Credit On December 27, 2020, the Consolidated Appropriations Act of 2021 (the “CAA”) was signed into law.
The decreased aggregate retail sales have correspondingly decreased supplier rebates and franchise royalties payable to the Company. We expect that Buffet Units and Pie Five Units will continue to be subject to capacity restrictions for some time as social distancing protocols remain in place.
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.
Removed
Most of the domestic Pizza Inn buffet restaurants and Pie Five restaurants are in areas that were for varying periods subject to “shelter-in-place” and social distancing restrictions prohibiting in-store sales and, therefore, were limited to carry-out and/or delivery orders. In some areas, these restrictions limited non-essential movement outside the home, which discouraged or even precluded carry-out orders.
Added
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.
Removed
We cannot predict how long the pandemic will last or whether it will reoccur, what additional restrictions may be enacted, to what extent off-premises dining will continue, or if individuals will be comfortable returning to our Buffet Units and Pie Five Units. Any of these changes could materially adversely affect the Company’s future financial performance.
Added
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.
Removed
However, the ultimate impact of COVID-19 on our future results of operations and liquidity cannot presently be predicted.
Added
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.
Removed
We believe that this trend of net store closures will moderate and then reverse in future periods.
Added
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.
Removed
Pie Five - Company-Owned Restaurants Fiscal Year Ended (in thousands, except store weeks and average data) June 26, 2022 June 27, 2021 Loss from continuing operations before taxes (3 ) (292 ) Impairment, other lease charges and non-operating store costs 3 291 Restaurant operating cash flow — (1 ) We closed our single remaining Company-owned Pie Five restaurant during the third quarter of fiscal 2020.
Added
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.
Removed
Loss from continuing operations before taxes for Company-owned Pie Five stores decreased to $0.3 million for the fiscal year ended June 26, 2022 compared to the same period of the prior year primarily due to the closure of all remaining Company-owned restaurants. Operating cash flow from Company-owned Pie Five restaurants remained essentially flat in fiscal 2022.
Added
Based on this analysis, the Company reversed the full amount of the established valuation allowance as of June 26, 2022.
Removed
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.
Removed
Pizza Inn Franchise and License Revenues Pizza Inn franchise revenues increased by $1.9 million to $8.5 million in fiscal 2022 compared to $6.6 million in fiscal 2021.
Removed
Pie Five franchise expenses of $1.0 million in fiscal 2022 remained essentially unchanged from the prior year. Gain on Sale of Assets The Company’s gain on sale of assets reflects the net difference between the sale price of assets and the net carrying value of the assets at the time of sale.
Removed
(See, “Liquidity and Capital Resources – Employee Retention Credit” and “- PPP Loan,” below.) Management does not presently expect similar benefits to be available in subsequent periods.
Removed
Tax returns for fiscal 2013 and after will remain open to examination by federal and state tax authorities for three to four years following the tax year in which net operating losses or tax credits are utilized. The Company was not subject to income tax examinations by any tax authority as of June 26, 2022.
Removed
Future sources of taxable income are also considered in determining the amount of the recorded valuation allowance. The Company has reversed the full amount of the valuation allowance as of June 26, 2022. The reversal of the valuation allowance resulted in a tax benefit of $5.7 million in fiscal 2022 compared to a negligible tax benefit in fiscal 2021 .
Removed
The cash provided by financing activities in fiscal 2021 was primarily attributable to proceeds from sales of stock in an at-the-market offering. PPP Loan Forgiveness and Employee Retention Credit On April 13, 2020, the Company received the proceeds from a loan in the amount of $0.7 million (the “PPP Loan”) from JPMorgan Chase Bank, N.A.
Removed
(the “Lender”) pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (“SBA”). The PPP Loan was unsecured by the Company and was guaranteed by the SBA.
Removed
Riley FBR, Inc. (“B. Riley FBR”) pursuant to which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $5.0 million from time to time through B. Riley FBR acting as agent (the “2017 ATM Offering”).
Removed
The 2017 ATM Offering was undertaken pursuant to Rule 415 and a shelf Registration Statement on Form S-3 which was declared effective by the SEC on November 6, 2017. Through June 27, 2021, the Company had sold an aggregate of 3,064,342 shares in the 2017 ATM Offering, realizing aggregate gross proceeds of $4.4 million.
Removed
The 2017 ATM Offering expired on November 6, 2020. Convertible Notes On March 3, 2017, the Company completed a registered shareholder rights offering of its 4% Convertible Senior Notes Due 2022 (“Notes”).
Removed
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 $6 thousand and $21 thousand during fiscal years 2022 and 2021, respectively. The Company had $0.2 million in sublease income during fiscal year 2022.
Removed
Nature of Leases The Company leases certain office space, restaurant space, and information technology equipment under non-cancelable leases to support its operations. A more detailed description of significant lease types is included below. Office Agreements The Company rents office space from third parties for its corporate location. Office agreements are typically structured with non-cancelable terms of one to 10 years.
Removed
The Company has concluded that its office agreements represent operating leases with a lease term that equals the primary non-cancelable contract term. Upon completion of the primary term, both parties have substantive rights to terminate the lease. As a result, enforceable rights and obligations do not exist under the rental agreements subsequent to the primary term.

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