☒ |
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended June 28, 2020.
|
☐ |
For the transition period from _____ to _____.
|
Missouri
|
45-3189287
|
|
(State or jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
3551 Plano Parkway
|
||
The Colony, Texas
|
75056
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
Common Stock, $0.01 par value
|
RAVE
|
Nasdaq Capital Market
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
Non-accelerated filer ☒
|
Smaller reporting company ☒
|
Emerging growth company ☐
|
ITEM 1. |
BUSINESS.
|
Pizza Inn
|
Pie Five
|
|||||||||||
Buffet Unit
|
Express Unit
|
Pie Five Unit
|
||||||||||
Development fee per unit
|
$
|
–
|
$
|
–
|
$
|
5,000
|
||||||
Franchise fee per unit
|
$
|
30,000
|
$
|
5,000
|
$
|
20,000
|
||||||
Initial franchise term
|
20 years
|
5 years
|
10 years
|
|||||||||
Renewal period
|
10 years
|
5 years
|
5 years
|
|||||||||
Royalty rate % of sales
|
4
|
%
|
5
|
%
|
6
|
%
|
||||||
National ad fund % of sales
|
1
|
%
|
2
|
%
|
2
|
%
|
||||||
Required total ad spending % of sales
|
5
|
%
|
2
|
%
|
5
|
%
|
ITEM 1A. |
RISK FACTORS.
|
ITEM 1B. |
UNRESOLVED STAFF COMMENTS.
|
ITEM 2. |
PROPERTIES.
|
ITEM 3. |
LEGAL PROCEEDINGS.
|
ITEM 4. |
MINE SAFETY DISCLOSURES.
|
ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
|
High
|
Low
|
|||||||
Fiscal 2020:
|
||||||||
Fourth Quarter Ended 6/28/2020
|
$
|
1.23
|
$
|
0.52
|
||||
Third Quarter Ended 3/29/2020
|
1.83
|
0.69
|
||||||
Second Quarter Ended 12/29/2019
|
2.85
|
1.44
|
||||||
First Quarter Ended 9/29/2019
|
3.21
|
2.04
|
||||||
Fiscal 2019:
|
||||||||
Fourth Quarter Ended 06/30/2019
|
$
|
3.60
|
$
|
1.05
|
||||
Third Quarter Ended 3/24/2019
|
2.05
|
0.64
|
||||||
Second Quarter Ended 12/23/2018
|
1.74
|
0.91
|
||||||
First Quarter Ended 9/23/2018
|
1.60
|
1.20
|
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
|
|||||||||
Stock option compensation plans approved by security holders
|
206,750
|
$
|
4.96
|
2,916,661
|
||||||||
Stock option compensation plans not approved by security holders
|
–
|
–
|
–
|
|||||||||
Total
|
206,750
|
$
|
4.96
|
2,916,661
|
ITEM 6. |
SELECTED FINANCIAL DATA
|
ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
Pizza Inn
|
Pie Five
|
All Concepts
|
||||||||||||||||||||||
Ending
Units
|
Retail
Sales
|
Ending
Units
|
Retail
Sales
|
Ending
Units
|
Retail
Sales
|
|||||||||||||||||||
Domestic Franchised/Licensed
|
151
|
$
|
75,973
|
42
|
$
|
24,779
|
193
|
$
|
100,752
|
|||||||||||||||
Company-Owned
|
–
|
–
|
–
|
240
|
–
|
240
|
||||||||||||||||||
Total Domestic Units
|
151
|
$
|
75,973
|
42
|
$
|
25,019
|
193
|
$
|
100,992
|
|||||||||||||||
International Franchised
|
38
|
–
|
38
|
53 Weeks Ended
|
||||||||
June 28,
2020
|
June 30, 2019
|
|||||||
(in thousands)
|
||||||||
Pizza Inn Domestic Comparable Store Retail Sales
|
$
|
74,767
|
$
|
81,986
|
||||
Pie Five Domestic Comparable Store Retail Sales
|
22,694
|
26,905
|
||||||
Total Rave Comparable Store Retail Sales
|
$
|
97,461
|
$
|
108,891
|
Fiscal Year Ended
|
||||||||
June 28,
2020
|
June 30,
2019
|
|||||||
Net loss
|
$
|
(4,233
|
)
|
$
|
(750
|
)
|
||
Interest expense
|
95
|
104
|
||||||
Income taxes
|
4,078
|
(51
|
)
|
|||||
Depreciation and amortization
|
186
|
466
|
||||||
EBITDA
|
$
|
126
|
$
|
(231
|
)
|
|||
Stock compensation expense
|
(104
|
)
|
36
|
|||||
Severance
|
157
|
—
|
||||||
Loss (gain) on sale/disposal of assets
|
(24
|
)
|
(551
|
)
|
||||
Impairment of long-lived assets and other lease charges
|
880
|
1,664
|
||||||
Franchisee default and closed store revenue
|
(606
|
)
|
(777
|
)
|
||||
Closed and non-operating store costs
|
137
|
238
|
||||||
Adjusted EBITDA
|
$
|
566
|
$
|
379
|
53 Weeks Ended
|
||||||||
June 28,
2020
|
June 30,
2019
|
|||||||
Pizza Inn Retail Sales - Total Domestic Units
|
(in thousands, except unit data)
|
|||||||
Domestic Units
|
||||||||
Buffet Units - Franchised
|
$
|
71,267
|
$
|
82,950
|
||||
Delco/Express Units - Franchised
|
6,200
|
6,981
|
||||||
PIE Units - Licensed
|
289
|
204
|
||||||
Total Domestic Retail Sales
|
$
|
77,756
|
$
|
90,135
|
||||
Pizza Inn Comparable Store Retail Sales - Total Domestic
|
$
|
74,767
|
$
|
81,986
|
||||
Pizza Inn Average Units Open in Period
|
||||||||
Domestic Units
|
||||||||
Buffet Units - Franchised
|
85
|
88
|
||||||
Delco/Express Units - Franchised
|
57
|
60
|
||||||
PIE Units - Licensed
|
10
|
7
|
||||||
Total Domestic Units
|
153
|
154
|
Fiscal Year Ended June 28, 2020
|
||||||||||||||||
Beginning
Units
|
Opened
|
Closed
|
Ending
Units
|
|||||||||||||
Domestic Units:
|
||||||||||||||||
Buffet Units - Franchised
|
87
|
2
|
6
|
83
|
||||||||||||
Delco/Express Units - Franchised
|
59
|
2
|
6
|
55
|
||||||||||||
PIE Units - Licensed
|
9
|
4
|
–
|
13
|
||||||||||||
Total Domestic Units
|
155
|
8
|
12
|
151
|
||||||||||||
International Units (all types)
|
48
|
5
|
15
|
38
|
||||||||||||
Total Units
|
203
|
13
|
27
|
189
|
53 Weeks Ended
|
||||||||
June 28,
2020
|
June 30,
2019
|
|||||||
(in thousands, except unit data)
|
||||||||
Pie Five Retail Sales - Total Units
|
||||||||
Domestic Units - Franchised
|
$
|
25,771
|
$
|
40,681
|
||||
Domestic Units - Company-owned
|
240
|
887
|
||||||
Total Domestic Retail Sales
|
$
|
26,011
|
$
|
41,568
|
||||
Pie Five Comparable Store Retail Sales - Total
|
$
|
22,694
|
$
|
26,905
|
||||
Pie Five Average Units Open in Period
|
||||||||
Domestic Units - Franchised
|
53
|
65
|
||||||
Domestic Units - Company-owned
|
1
|
2
|
||||||
Total Domestic Units
|
54
|
67
|
Fiscal Year Ended June 28, 2020
|
||||||||||||||||
Beginning
Units
|
Opened
|
Closed
|
Ending
Units
|
|||||||||||||
Domestic - Franchised
|
57
|
3
|
18
|
42
|
||||||||||||
Domestic - Company-owned
|
1
|
1
|
2
|
–
|
||||||||||||
Total Domestic Units
|
58
|
4
|
20
|
42
|
Pie Five - Company-Owned Restaurants
|
Fiscal Year Ended
|
|||||||
(in thousands, except store weeks and average data)
|
June 28,
|
June 30,
|
||||||
2020
|
2019
|
|||||||
Store weeks (excluding partial weeks)
|
30
|
79
|
||||||
Average weekly sales
|
8,108
|
11,253
|
||||||
Average number of units
|
1
|
2
|
||||||
Restaurant sales (excluding partial weeks)
|
240
|
887
|
||||||
Restaurant sales
|
240
|
887
|
||||||
Loss from continuing operations before taxes
|
(1,006
|
)
|
(2,001
|
)
|
||||
Allocated marketing and advertising expenses
|
12
|
44
|
||||||
Depreciation/amortization expense
|
–
|
123
|
||||||
Impairment, other lease charges and non-operating store costs
|
810
|
1,135
|
||||||
Restaurant operating cash flow
|
(184
|
)
|
(699
|
)
|
• |
“EBITDA” represents earnings before interest, taxes, depreciation and amortization.
|
• |
“Adjusted EBITDA” represents earnings before interest, taxes, depreciation and amortization, stock compensation expense, severance costs, gain/loss on sale of assets, costs related to impairment, closed and
non-operating store costs, and franchisee default and closed store revenues.
|
• |
“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.
|
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 28,
2020
|
June 30,
2019
|
June 28,
2020
|
June 30,
2019
|
June 28,
2020
|
June 30,
2019
|
June 28,
2020
|
June 30, 2019
|
June 28,
2020
|
June 30,
2019
|
|||||||||||||||||||||||||||||||
REVENUES:
|
||||||||||||||||||||||||||||||||||||||||
Franchise and license revenues
|
$
|
6,662
|
$
|
7,192
|
$
|
2,891
|
$
|
4,191
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
9,553
|
$
|
11,383
|
||||||||||||||||||||
Restaurant sales
|
–
|
–
|
–
|
–
|
240
|
889
|
–
|
–
|
240
|
889
|
||||||||||||||||||||||||||||||
Rental Income
|
—
|
—
|
—
|
—
|
—
|
—
|
195
|
—
|
195
|
—
|
||||||||||||||||||||||||||||||
Interest income and other
|
–
|
–
|
3
|
1
|
–
|
(2
|
)
|
37
|
48
|
40
|
47
|
|||||||||||||||||||||||||||||
Total revenues
|
6,662
|
7,192
|
2,894
|
4,192
|
240
|
887
|
232
|
48
|
10,028
|
12,319
|
||||||||||||||||||||||||||||||
COSTS AND EXPENSES:
|
||||||||||||||||||||||||||||||||||||||||
Cost of sales
|
–
|
–
|
–
|
–
|
439
|
1,120
|
–
|
–
|
439
|
1,120
|
||||||||||||||||||||||||||||||
General and administrative expenses
|
–
|
–
|
–
|
–
|
90
|
196
|
5,413
|
5,078
|
5,503
|
5,274
|
||||||||||||||||||||||||||||||
Franchise expenses
|
1,297
|
1,680
|
1,754
|
2,098
|
–
|
–
|
–
|
–
|
3,051
|
3,778
|
||||||||||||||||||||||||||||||
Gain on sale of assets
|
–
|
–
|
–
|
–
|
–
|
–
|
(24
|
)
|
(551
|
)
|
(24
|
)
|
(551
|
)
|
||||||||||||||||||||||||||
Impairment of long-lived assets
|
||||||||||||||||||||||||||||||||||||||||
and other lease charges
|
–
|
–
|
–
|
–
|
717
|
1,449
|
163
|
215
|
880
|
1,664
|
||||||||||||||||||||||||||||||
Bad debt
|
–
|
–
|
–
|
–
|
–
|
–
|
53
|
1,265
|
53
|
1,265
|
||||||||||||||||||||||||||||||
Interest expense
|
–
|
–
|
–
|
–
|
–
|
–
|
95
|
104
|
95
|
104
|
||||||||||||||||||||||||||||||
Amortization and depreciation expense
|
–
|
–
|
–
|
–
|
–
|
123
|
186
|
343
|
186
|
466
|
||||||||||||||||||||||||||||||
Total costs and expenses
|
1,297
|
1,680
|
1,754
|
2,098
|
1,246
|
2,888
|
5,886
|
6,454
|
10,183
|
13,120
|
||||||||||||||||||||||||||||||
INCOME/(LOSS) BEFORE TAXES
|
$
|
5,365
|
$
|
5,512
|
$
|
1,140
|
$
|
2,094
|
$
|
(1,006
|
)
|
$
|
(2,001
|
)
|
$
|
(5,654
|
)
|
$
|
(6,406
|
)
|
$
|
(155
|
)
|
$
|
(801
|
)
|
•
|
not apply the recognition requirements to short-term leases (a lease that at commencement date has a lease term of 12 months or less and does not contain a purchase option);
|
•
|
not reassess whether a contract contains a lease, lease classification and initial direct costs; and
|
•
|
not reassess certain land easements in existence prior to July 1, 2019.
|
Adoption
|
July 1, 2019
Reclassification (1)
|
Total
Adjustment
|
||||||||||
Balance Sheet:
|
||||||||||||
Operating lease right of use assets
|
$
|
3,428
|
$
|
434
|
$
|
3,862
|
||||||
Operating lease liabilities, current
|
528
|
528
|
||||||||||
Operating lease liabilities, net current portion
|
3,347
|
3,347
|
Fiscal Year Ended
June 28, 2020
|
||||
Operating lease cost
|
$
|
670
|
||
Sublease income
|
(195
|
)
|
||
Total lease expense, net of sublease income
|
$
|
475
|
Fiscal Year Ended
June 28, 2020
|
||||
Cash paid for amounts included in the measurement of lease liabilities
|
$
|
684
|
Fiscal Year Ended
June 28, 2020
|
||||
Operating lease right of use assets, net
|
$
|
3,567
|
||
Operating lease liabilities, current
|
632
|
|||
Operating lease liabilities, net of current portion
|
3,471
|
Fiscal Year Ended
June 28, 2020
|
||||
Weighted average remaining lease term
|
5.3 Years
|
|||
Weighted average discount rate
|
4.0
|
%
|
Operating Leases
|
||||
2021
|
$
|
785
|
||
2022
|
804
|
|||
2023
|
813
|
|||
2024
|
766
|
|||
Thereafter
|
1,448
|
|||
Total operating lease payments
|
4,616
|
)
|
||
Less: imputed interest
|
$
|
(513
|
||
Total operating lease liability
|
$
|
4,103
|
ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
ITEM 8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|
ITEM 9A. |
CONTROLS AND PROCEDURES.
|
ITEM 10. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
|
ITEM 11. |
EXECUTIVE COMPENSATION.
|
ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
|
ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
|
ITEM 14. |
PRINCIPAL ACCOUNTING FEES AND SERVICES.
|
ITEM 15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
|
1. |
The financial statements filed as part of this report are listed in the Index to Consolidated Financial Statements and Supplementary Data appearing on page F-1 of this report on Form 10-K.
|
2. |
Any financial statement schedule filed as part of this report is listed in the Index to Consolidated Financial Statements and Supplementary Data appearing on page F-1 of this report on Form 10-K.
|
3. |
Exhibits:
|
Amended and Restated Articles of Incorporation of Rave Restaurant Group, Inc. (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed January 8,
2015).
|
|
Amended and Restated Bylaws of Rave Restaurant Group, Inc. (incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed January 8, 2015).
|
|
Indenture for 4% Convertible Senior Notes due 2022 (filed as Exhibit 4.1 to Form S-3/A filed January 6, 2017 and incorporated herein by reference).
|
|
Pledge Agreement (filed as Exhibit 4.2 to Form S-3/A filed January 6, 2017 and incorporated herein by reference).
|
|
Supplemental Indenture Number 1 dated as of October 31, 2017, between Rave Restaurant Group, Inc. and Securities Transfer Corporation (filed as Exhibit 4.1 to Form 8-K filed November
9, 2017 and incorporated herein by reference).
|
|
Description of Registrant’s Securities.
|
|
2015 Long Term Incentive Plan of the Company (filed as Exhibit 10.1 to Form 8-K filed November 20, 2014 and incorporated herein by reference).*
|
|
Form of Stock Option Grant Agreement under the Company’s 2015 Long Term Incentive Plan (filed as Exhibit 10.2 to Form 8-K filed November 20, 2014 and incorporated herein by
reference).*
|
|
Form of Restricted Stock Unit Award Agreement under the Company’s 2015 Long-Term Incentive Plan (filed as Exhibit 10.1 to Form 10-Q for the fiscal quarter ended December 27, 2015 and
incorporated herein by reference).*
|
|
Lease Agreement dated November 1, 2016, between A&H Properties Partnership and Rave Restaurant Group, Inc. (filed as Exhibit 10.4 to Form 10-K for the year ended June 30, 2019 and
incorporated herein by reference).*
|
|
First Amendment to Lease and Expansion dated July 1, 2017, between A&H Properties Partnership and Rave Restaurant Group, Inc. (filed as Exhibit 10.4 to Form 10-K for the year ended June
30, 2019 and incorporated herein by reference).*
|
|
Second Amendment to Lease Agreement effective June 1, 2020, between A&H Properties Partnership and Rave Restaurant Group, Inc.
|
|
At Market Issuance Sales Agreement between the Company and B. Riley FBR, Inc. (filed as Exhibit 1.01 to Form 8-K filed December 5, 2017).*
|
|
Letter agreement dated October 18, 2019, between Rave Restaurant Group, Inc. and Brandon Solano (filed as Exhibit 10.1 to Form 8-K filed October 21, 2019 and incorporated herein by
reference).*
|
|
Letter agreement dated November 4, 2019, between Rave Restaurant Group, Inc. and Mike Burns (filed as Exhibit 10.1 to Form 8-K filed November 15, 2019 and incorporated herein by
reference).*
|
|
Letter agreement dated December 16, 2019, between Rave Restaurant Group, Inc. and Clinton Fendley (filed as Exhibit 10.1 to Form 8-K filed January 7, 2020 and incorporated herein by
reference).*
|
|
Note, dated April 10, 2020, between Rave Restaurant Group, Inc. and JPMorgan Chase Bank, N. A. (filed as Exhibit 10.1 to Form 8-K filed April 16, 2020 and incorporated herein by
reference).*
|
|
List of Subsidiaries.
|
Consent of Independent Registered Public Accounting Firm.
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.
|
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.
|
|
Section 1350 Certification of Principal Executive Officer.
|
|
Section 1350 Certification of Principal Financial Officer.
|
|
101
|
Interactive data files pursuant to Rule 405 of Regulation S-T.
|
ITEM 16. |
FORM 10-K SUMMARY.
|
Rave Restaurant Group, Inc.
|
|
Date: September 28, 2020
|
By: /s/ Brandon L. Solano
|
Brandon L. Solano
|
|
Chief Executive Officer
|
|
(principal executive officer)
|
|
By: /s/ Clinton D. Fendley
|
|
Clinton D. Fendley
|
|
Vice President of Finance
|
|
(principal financial officer)
|
Name and Position
|
Date
|
||
/s/ Brandon L. Solano
|
|||
Brandon L. Solano
|
|||
Chief Executive Officer
|
|||
(principal executive officer)
|
September 28, 2020
|
||
/s/ Clinton D. Fendley
|
|||
Clinton D. Fendley
|
|||
Vice President of Finance
|
|||
(principal financial and accounting officer)
|
September 28, 2020
|
||
/s/ Mark E. Schwarz
|
|||
Mark E. Schwarz
|
|||
Director and Chairman of the Board
|
September 28, 2020
|
||
/s/ Brian T. Bares
|
|||
Brian T. Bares
|
|||
Director
|
September 28, 2020
|
||
/s/ Robert B. Page
|
|||
Robert B. Page
|
|||
Director
|
September 28, 2020
|
||
/s/ William C. Hammett, Jr.
|
|||
William C. Hammett, Jr.
|
|||
Director
|
September 28, 2020
|
||
/s/ Clinton J. Coleman
|
|||
Clinton J. Coleman
|
|||
Director
|
September 28, 2020
|
Description
|
Page No.
|
F-2
|
|
F-4
|
|
F-5
|
|
F-6
|
|
F-7
|
|
F-7
|
|
F-8
|
/s/ ArmaninoLLP
|
|
Dallas, Texas
|
Fiscal Year Ended
|
||||||||
June 28,
2020
|
June 30,
2019
|
|||||||
REVENUES:
|
$
|
10,028
|
$
|
12,319
|
||||
COSTS AND EXPENSES:
|
||||||||
Cost of sales
|
439
|
1,120
|
||||||
General and administrative expenses
|
5,503
|
5,274
|
||||||
Franchise expenses
|
3,051
|
3,778
|
||||||
Gain on sale of assets
|
(24
|
)
|
(551
|
)
|
||||
Impairment of long-lived assets and other lease charges
|
880
|
1,664
|
||||||
Bad debt
|
53
|
1,265
|
||||||
Interest expense
|
95
|
104
|
||||||
Depreciation and amortization expense
|
186
|
466
|
||||||
Total costs and expenses
|
10,183
|
13,120
|
||||||
LOSS BEFORE TAXES
|
(155
|
)
|
(801
|
)
|
||||
Income tax expense (benefit)
|
4,078
|
(51
|
)
|
|||||
NET LOSS
|
$
|
(4,233
|
)
|
$
|
(750
|
)
|
||
LOSS PER SHARE OF COMMON STOCK - BASIC:
|
$
|
$ (0.28
|
)
|
$
|
$ (0.05
|
)
|
||
LOSS PER SHARE OF COMMON STOCK - DILUTED:
|
$
|
$ (0.28
|
)
|
$
|
$ (0.05
|
)
|
||
Weighted average common shares outstanding - basic
|
15,144
|
15,070
|
||||||
Weighted average common and potential dilutive common shares outstanding
|
15,144
|
15,070
|
June 28,
2020
|
June 30,
2019
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS
|
||||||||
Cash and cash equivalents
|
$
|
2,969
|
$
|
2,264
|
||||
Restricted Cash
|
234
|
233
|
||||||
Accounts receivable, less allowance for bad debts of $269 and $209, respectively
|
965
|
1,191
|
||||||
Notes receivable, less allowance for bad debt of $0 and $916, respectively
|
546
|
389
|
||||||
Inventories
|
—
|
7
|
||||||
Income tax receivable
|
—
|
4
|
||||||
Property held for sale
|
—
|
231
|
||||||
Deferred contract charges
|
44
|
38
|
||||||
Prepaid expenses and other
|
174
|
346
|
||||||
Total current assets
|
4,932
|
4,703
|
||||||
LONG-TERM ASSETS
|
||||||||
Property, plant and equipment, net
|
366
|
500
|
||||||
Operating lease right of use asset, net
|
3,567
|
—
|
||||||
Intangible assets definite-lived, net
|
155
|
196
|
||||||
Long-term notes receivable
|
449
|
735
|
||||||
Deferred tax asset, net
|
—
|
4,060
|
||||||
Long-term deferred contract charges
|
231
|
232
|
||||||
Deposits and other
|
5
|
—
|
||||||
Total assets
|
$
|
9,705
|
$
|
10,426
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable - trade
|
$
|
446
|
$
|
400
|
||||
Accounts payable - lease termination impairments
|
407
|
832
|
||||||
Accrued expenses
|
775
|
834
|
||||||
Deferred rent
|
—
|
37
|
||||||
Operating lease liability, current
|
632
|
—
|
||||||
Deferred revenues
|
254
|
275
|
||||||
Total current liabilities
|
2,514
|
2,378
|
||||||
LONG-TERM LIABILITIES
|
||||||||
Convertible notes
|
1,549
|
1,584
|
||||||
PPP loan
|
657
|
—
|
||||||
Deferred rent, net of current portion
|
—
|
397
|
||||||
Operating lease liability, net of current portion
|
3,471
|
—
|
||||||
Deferred revenues, net of current portion
|
960
|
1,561
|
||||||
Other long-term liabilities
|
51
|
72
|
||||||
Total liabilities
|
9,202
|
5,992
|
||||||
COMMITMENTS AND CONTINGENCIES (SEE NOTE J)
|
||||||||
SHAREHOLDERS’ EQUITY
|
||||||||
Common stock, $.01 par value; authorized 26,000,000 shares; issued 22,550,376 and 22,208,141 shares, respectively; outstanding 15,465,222 and 15,090,837 shares,
respectively
|
225
|
222
|
||||||
Additional paid-in capital
|
33,531
|
33,327
|
||||||
Accumulated deficit
|
(8,716
|
)
|
(4,483
|
)
|
||||
Treasury stock at cost
|
||||||||
Shares in treasury: 7,085,154 and 7,117,304, respectively
|
(24,537
|
)
|
(24,632
|
)
|
||||
Total shareholders’ equity
|
503
|
4,434
|
||||||
Total liabilities and shareholders’ equity
|
$
|
9,705
|
$
|
10,426
|
Common Stock
|
Additional
Paid-in
|
Accumulated
|
Treasury Stock
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||
BALANCE, June 24, 2018
|
22,167
|
$
|
222
|
$
|
33,206
|
$
|
(2,493
|
)
|
(7,119
|
)
|
$
|
(24,636
|
)
|
$
|
6,299
|
|||||||||||||
ASC 606 cumulative adjustment
|
(1,622
|
)
|
(1,622
|
)
|
||||||||||||||||||||||||
Stock compensation expense
|
—
|
—
|
36
|
382
|
—
|
—
|
418
|
|||||||||||||||||||||
Conversion of senior notes, net
|
—
|
—
|
—
|
—
|
2
|
4
|
4
|
|||||||||||||||||||||
Issuance of common stock
|
41
|
—
|
88
|
—
|
—
|
—
|
88
|
|||||||||||||||||||||
Equity issue costs - ATM offering
|
—
|
—
|
(3
|
)
|
—
|
—
|
—
|
(3
|
)
|
|||||||||||||||||||
Net income
|
—
|
—
|
—
|
(750
|
)
|
—
|
—
|
(750
|
)
|
|||||||||||||||||||
BALANCE, June 30, 2019
|
22,208
|
$
|
222
|
$
|
33,327
|
$
|
(4,483
|
)
|
(7,117
|
)
|
$
|
(24,632
|
)
|
$
|
4,434
|
Common Stock
|
Additional
Paid-in
|
Accumulated
|
Treasury Stock
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||
BALANCE, June 30, 2019
|
22,208
|
$
|
222
|
$
|
33,327
|
$
|
(4,483
|
)
|
(7,117
|
)
|
$
|
(24,632
|
)
|
$
|
4,434
|
|||||||||||||
Conversion of senior notes, net
|
—
|
—
|
(31
|
)
|
—
|
32
|
95
|
64
|
||||||||||||||||||||
Stock compensation expense
|
—
|
—
|
(104
|
)
|
—
|
—
|
—
|
(104
|
)
|
|||||||||||||||||||
Issuance of common stock
|
342
|
3
|
354
|
—
|
—
|
—
|
357
|
|||||||||||||||||||||
Equity issue costs - ATM offering
|
—
|
—
|
(15
|
)
|
—
|
—
|
—
|
(15
|
)
|
|||||||||||||||||||
Net income
|
—
|
—
|
—
|
(4,233
|
)
|
—
|
—
|
(4,233
|
)
|
|||||||||||||||||||
BALANCE, June 28, 2020
|
22,550
|
$
|
225
|
$
|
33,531
|
$
|
(8,716
|
)
|
(7,085
|
)
|
$
|
(24,537
|
)
|
$
|
503
|
Fiscal Year Ended
|
||||||||
June 28,
2020
|
June 30,
2019
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net loss
|
$
|
(4,233
|
)
|
$
|
(750
|
)
|
||
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
|
||||||||
Impairment of long-lived assets and other lease charges
|
880
|
1,664
|
||||||
Stock compensation expense
|
(104
|
)
|
36
|
|||||
Depreciation and amortization
|
145
|
423
|
||||||
Amortization of operating lease asset
|
471
|
—
|
||||||
Amortization of intangible assets definite-lived
|
41
|
43
|
||||||
Amortization of debt issue costs
|
29
|
22
|
||||||
Gain on sale of assets
|
(24
|
)
|
(551
|
)
|
||||
Provision for bad debt (accounts receivable)
|
53
|
349
|
||||||
Provision for bad debt (notes receivable)
|
—
|
916
|
||||||
Deferred income tax asset (net)
|
4,060
|
(198
|
)
|
|||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
132
|
226
|
||||||
Operating notes receivable
|
104
|
50
|
||||||
Inventories
|
7
|
(1
|
)
|
|||||
Prepaid expenses, deposits and other, net
|
167
|
(446
|
)
|
|||||
Restricted Cash
|
(1
|
)
|
—
|
|||||
Deferred revenue
|
(587
|
)
|
(409
|
)
|
||||
Accounts payable - trade
|
46
|
(21
|
)
|
|||||
Accounts payable - lease termination impairments
|
(985
|
)
|
(418
|
)
|
||||
Operating lease liability
|
(494
|
)
|
—
|
|||||
Accrued expenses, deferred rent and other
|
(67
|
)
|
(276
|
)
|
||||
Cash (used in) provided by operating activities
|
(360
|
)
|
659
|
|||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Notes receivable from fixed asset sales
|
123
|
201
|
||||||
Proceeds from sale of assets
|
—
|
11
|
||||||
Capital expenditures
|
(56
|
)
|
(81
|
)
|
||||
Cash (used in) provided by investing activities
|
67
|
131
|
||||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds from sale of stock
|
357
|
88
|
||||||
Equity issuance costs
|
(15
|
)
|
—
|
|||||
Proceeds from PPP loan
|
657
|
—
|
||||||
Cash provided by financing activities
|
999
|
88
|
||||||
Net increase in cash and cash equivalents
|
706
|
878
|
||||||
Cash, cash equivalents, and restricted cash, beginning of period
|
2,497
|
1,619
|
||||||
Cash, cash equivalents, and restricted cash, end of period
|
$
|
3,203
|
$
|
2,497
|
||||
CASH PAID FOR:
|
||||||||
Interest
|
$
|
66
|
$
|
72
|
||||
Income taxes
|
$
|
18
|
$
|
168
|
||||
Non-cash activities:
|
||||||||
Conversion of notes to common shares
|
$
|
64
|
$
|
4
|
||||
Notes receivable from sales of fixed assets
|
$
|
—
|
$
|
654
|
||||
Operating lease right of use assets at adoption
|
$
|
4,150
|
$
|
—
|
||||
Operating lease liability at adoption
|
$
|
4,894
|
$
|
—
|
Notes Receivable
|
||||
2021
|
$
|
546
|
||
2022
|
449
|
|||
2023
|
–
|
|||
$
|
995
|
•
|
not apply the recognition requirements to short-term leases (a lease that at commencement date has a lease term of 12 months or less and does not contain a purchase option);
|
•
|
not reassess whether a contract contains a lease, lease classification and initial direct costs; and
|
• |
not reassess certain land easements in existence prior to July 1, 2019.
|
Adoption
|
July 1, 2019
Reclassification (1)
|
Total
Adjustment
|
||||||||||
Balance Sheet:
|
||||||||||||
Operating lease right of use assets
|
$
|
3,428
|
$
|
434
|
$
|
3,862
|
||||||
Operating lease liabilities, current
|
528
|
528
|
||||||||||
Operating lease liabilities, net of current portion
|
3,347
|
3,347
|
Fiscal Year Ended
|
||||||||
June 28,
2020
|
June 30,
2019
|
|||||||
Restaurant sales
|
$
|
240
|
$
|
889
|
||||
Franchise royalties
|
3,697
|
4,814
|
||||||
Supplier and distributor incentive revenues
|
3,906
|
4,519
|
||||||
Franchise license fees
|
853
|
1,031
|
||||||
Area development fees and foreign master license fees
|
20
|
41
|
||||||
Advertising funds
|
799
|
684
|
||||||
Supplier convention funds
|
278
|
294
|
||||||
Rental income
|
195
|
—
|
||||||
Interest income and other
|
40
|
47
|
||||||
$
|
10,028
|
$
|
12,319
|
Estimated
Useful Lives
|
June 28
2020
|
June 30,
2019
|
|||||||
Equipment, furniture and fixtures
|
3 - 7 yrs
|
$
|
808
|
$
|
867
|
||||
Software
|
5 yrs
|
809
|
810
|
||||||
Leasehold improvements
|
10 yrs or lease term, if shorter
|
472
|
434
|
||||||
2,089
|
2,111
|
||||||||
Less: accumulated depreciation/amortization
|
(1,723
|
)
|
(1,611
|
)
|
|||||
$
|
366
|
$
|
500
|
June 28,
2020
|
June 30,
2019
|
||||||||||||||||||||||||
Estimated
Useful Lives
|
Acquisition
Cost
|
Accumulated
Amortization
|
Net
Value
|
Acquisition
Cost
|
Accumulated
Amortization
|
Net
Value
|
|||||||||||||||||||
Trademarks and tradenames
|
10 years
|
$
|
278
|
$
|
(181
|
)
|
$
|
97
|
$
|
278
|
$
|
(153
|
)
|
$
|
125
|
||||||||||
Name change
|
15 years
|
70
|
(25
|
)
|
45
|
70
|
(21
|
)
|
49
|
||||||||||||||||
Prototypes
|
5 years
|
230
|
(217
|
)
|
13
|
230
|
(208
|
)
|
22
|
||||||||||||||||
$
|
578
|
$
|
(423
|
)
|
$
|
155
|
$
|
578
|
$
|
(382
|
)
|
$
|
196
|
June 28,
2020
|
June 30,
2019
|
|||||||
Compensation
|
$
|
451
|
$
|
265
|
||||
Other
|
236
|
478
|
||||||
Professional fees
|
80
|
83
|
||||||
Insurance loss reserves
|
8
|
8
|
||||||
$
|
775
|
$
|
834
|
Fiscal Year Ended
|
||||||||
June 28,
2020
|
June 30,
2019
|
|||||||
Current - Federal
|
$
|
–
|
$
|
–
|
||||
Current - Foreign
|
18
|
131
|
||||||
Current - State
|
–
|
15
|
||||||
Deferred - Federal
|
4,053
|
(189
|
)
|
|||||
Deferred - State
|
7
|
(8
|
)
|
|||||
Provision for income taxes
|
$
|
4,078
|
$
|
(51
|
)
|
June 28,
2020
|
June 30,
2019
|
|||||||
Federal income taxes (benefit) based on a statutory rate of 21.0%
|
$
|
(33
|
)
|
$
|
(168
|
)
|
||
State income tax, net of federal effect
|
20
|
93
|
||||||
Foreign taxes
|
–
|
15
|
||||||
Permanent adjustments
|
4
|
8
|
||||||
Change in valuation allowance
|
4,081
|
–
|
||||||
Other
|
6
|
1
|
||||||
$
|
4,078
|
$
|
(51
|
)
|
June 28,
2020
|
June 30,
2019
|
|||||||
Reserve for bad debt
|
$
|
61
|
$
|
48
|
||||
Deferred fees
|
—
|
17
|
||||||
Other reserves and accruals
|
568
|
795
|
||||||
Operating lease liabilities
|
937
|
—
|
||||||
Credit carryforwards
|
171
|
156
|
||||||
Net operating loss carryforwards
|
5,371
|
5,206
|
||||||
Depreciable assets
|
306
|
263
|
||||||
Total gross deferred tax asset
|
7,414
|
6,485
|
||||||
Valuation allowance
|
(6,515
|
)
|
(2,425
|
)
|
||||
Total deferred tax asset
|
$
|
899
|
$
|
4,060
|
||||
Right-of-use asset
|
(815
|
)
|
—
|
|||||
Other deferred tax liabilities
|
(84
|
)
|
—
|
|||||
Total deferred tax liabilities
|
$
|
(899
|
)
|
$
|
—
|
|||
Net deferred tax asset
|
$
|
—
|
$
|
4,060
|
Fiscal Year Ended
June 28, 2020
|
||||
Operating lease cost
|
$
|
670
|
||
Sublease income
|
(195
|
)
|
||
Total lease expense, net of sublease income
|
$
|
475
|
Fiscal Year Ended
June 28, 2020
|
||||
Cash paid for amounts included in the measurement of lease liabilities
|
$
|
684
|
Fiscal Year Ended
June 28, 2020
|
||||
Operating lease right of use assets, net
|
$
|
3,567
|
||
Operating lease liabilities, current
|
632
|
|||
Operating lease liabilities, net of current portion
|
3,471
|
Fiscal Year Ended
June 28, 2020
|
||||
Weighted average remaining lease term
|
5.3 Years
|
|||
Weighted average discount rate
|
4.0
|
%
|
Operating Leases
|
||||
2021
|
$
|
785
|
||
2022
|
804
|
|||
2023
|
813
|
|||
2024
|
766
|
|||
Thereafter
|
1,448
|
|||
Total operating lease payments
|
|
4,616
|
|
|
Less: imputed interest
|
$ |
(513
|
) | |
Total operating lease liability
|
$
|
4,103
|
Operating Leases
|
||||
2021
|
$
|
1,629
|
||
2022
|
1,592
|
|||
2023
|
1,444
|
|||
2024
|
1,182
|
|||
2025
|
1,030
|
|||
Thereafter
|
1,027
|
|||
$
|
7,904
|
Sublease Rental Income
|
||||
2021
|
$
|
174
|
||
2022
|
175
|
|||
2023
|
177
|
|||
2024
|
128
|
|||
2025
|
53
|
|||
$
|
707
|
Fiscal Year Ended
|
||||||||
June 28,
2020
|
June 30,
2019
|
|||||||
Minimum rentals
|
$
|
676
|
$
|
757
|
||||
Sublease rentals
|
(168
|
)
|
(149
|
)
|
||||
$
|
508
|
$
|
608
|
Fiscal Year Ended
|
||||||||
June 28,
2020
|
June 30,
2019
|
|||||||
Shares
|
Shares
|
|||||||
Outstanding at beginning of year
|
216,550
|
478,056
|
||||||
Granted
|
–
|
–
|
||||||
Exercised
|
–
|
–
|
||||||
Forfeited/Canceled/Expired
|
(9,800
|
)
|
(216,506
|
)
|
||||
Outstanding at end of period
|
206,750
|
261,550
|
||||||
Exercisable at end of period
|
206,750
|
261,550
|
Fiscal Year Ended
|
||||||||
June 28,
2020
|
June 30,
2019
|
|||||||
Weighted-
Average
Exercise
Price
|
Weighted-
Average
Exercise
Price
|
|||||||
Outstanding at beginning of year
|
$
|
4.82
|
$
|
4.16
|
||||
Granted
|
–
|
–
|
||||||
Exercised
|
–
|
–
|
||||||
Forfeited/Canceled/Expired
|
1.87
|
4.27
|
||||||
Outstanding at end of period
|
$
|
4.96
|
4.82
|
|||||
Exercisable at end of year
|
$
|
4.96
|
4.82
|
Options Outstanding
|
Options Exercisable
|
|||||||||||||||||||||
Range of
Exercise Prices
|
Options
Outstanding
at June 28,2020
|
Weighted-Average
Remaining
Contractual
Life (Years)
|
Weighted-
Average
Exercise Price
|
Shares
Exercisable
at June 28, 2020
|
Weighted-
Average
Exercise Price
|
|||||||||||||||||
$
|
2.36 - 2.75
|
40,000
|
1.0
|
$
|
2.71
|
40,000
|
$
|
2.71
|
||||||||||||||
$
|
2.76 - 3.30
|
55,000
|
2.0
|
$
|
3.11
|
55,000
|
$
|
3.11
|
||||||||||||||
$
|
3.31 - 3.95
|
50,000
|
6.0
|
$
|
3.95
|
50,000
|
$
|
3.95
|
||||||||||||||
$
|
5.51 - 5.74
|
8,664
|
3.0
|
$
|
5.74
|
8,664
|
$
|
5.74
|
||||||||||||||
$
|
5.95 - 6.25
|
28,800
|
4.0
|
$
|
6.23
|
28,800
|
$
|
6.23
|
||||||||||||||
$
|
6.26 - 13.11
|
24,286
|
5.0
|
$
|
13.11
|
24,286
|
$
|
13.11
|
||||||||||||||
206,750
|
3.4
|
$
|
4.96
|
206,750
|
$
|
4.96
|
June 28,
2020
|
June 30,
2019
|
|||||||
Unvested at beginning of year
|
155,106
|
908,293
|
||||||
Vested during the year
|
(9,053
|
)
|
–
|
|||||
Forfeited during the year
|
(146,053
|
)
|
(753,187
|
)
|
||||
Unvested at end of year
|
–
|
155,106
|
Fiscal Year Ended
|
||||||||
June 28,
2020
|
June 30,
2019
|
|||||||
Loss from continuing operations
|
$
|
(4,233
|
)
|
$
|
(750
|
)
|
||
Interest saved on convertible notes at 4%
|
$
|
65
|
$
|
63
|
||||
Adjusted net loss
|
$
|
(4,168
|
)
|
$
|
(687
|
)
|
||
BASIC:
|
||||||||
Weighted average common shares
|
15,144
|
15,070
|
||||||
Net income/(loss) per common share
|
$
|
(0.28
|
)
|
$
|
(0.05
|
)
|
||
DILUTED:
|
||||||||
Weighted average common shares
|
15,144
|
15,070
|
||||||
Convertible notes
|
—
|
—
|
||||||
Dilutive stock options
|
—
|
—
|
||||||
Weighted average common shares outstanding
|
15,144
|
15,070
|
||||||
Income/(loss) from continuing operations per common share
|
$
|
(0.28
|
)
|
$
|
(0.05
|
)
|
Fiscal Year Ended
|
||||||||
June 28,
2020
|
June 30,
2019
|
|||||||
Net sales and operating revenues:
|
||||||||
Pizza Inn Franchising
|
$
|
6,662
|
$
|
7,192
|
||||
Pie Five Franchising
|
2,894
|
4,192
|
||||||
Company-Owned Restaurants
|
240
|
887
|
||||||
Corporate administration and other
|
232
|
48
|
||||||
Consolidated revenues
|
$
|
10,028
|
$
|
12,319
|
||||
Depreciation and amortization:
|
||||||||
Pizza Inn Franchising
|
$
|
–
|
$
|
–
|
||||
Pie Five Franchising
|
–
|
–
|
||||||
Company-Owned Restaurants
|
–
|
123
|
||||||
Combined
|
–
|
123
|
||||||
Corporate administration and other (1)
|
186
|
343
|
||||||
Depreciation and amortization
|
$
|
186
|
$
|
466
|
||||
Income/(Loss) before taxes:
|
||||||||
Pizza Inn Franchising
|
$
|
5,365
|
$
|
5,512
|
||||
Pie Five Franchising
|
1,140
|
2,094
|
||||||
Company-Owned Restaurants
|
(1,006
|
)
|
(2,001
|
)
|
||||
Combined
|
5,499
|
5,605
|
||||||
Corporate administration and other
|
(5,654
|
)
|
(6,406
|
)
|
||||
Income/(loss) before taxes
|
$
|
(155
|
)
|
$
|
(801
|
)
|
(1) |
Portions of corporate administration and other have been allocated to segments.
|
Geographic information (revenues):
|
||||||||
United States
|
$
|
9,847
|
$
|
12,086
|
||||
Foreign countries
|
181
|
233
|
||||||
Consolidated total
|
$
|
10,028
|
$
|
12,319
|