☒ |
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
|
• |
Are senior obligations secured solely by a pledge of all outstanding equity securities of our two primary operating subsidiaries;
|
• |
Were issued in an aggregate principal amount of $3,000,000, in denominations of $100;
|
• |
Are represented by one or more registered notes in global form, but in certain limited circumstances may be represented by notes in definitive form;
|
• |
Bear interest from the date of issuance at an annual rate of 4.0% payable annually in arrears on February 15 of each year, commencing February 15, 2018;
|
• |
Mature on February 15, 2022, unless earlier converted or redeemed by us;
|
• |
Are convertible to common stock effective on the 15th day of any month, unless we sooner elect to redeem the notes;
|
• |
Are redeemable by us at 110% of par plus any accrued unpaid interest at any time on or after February 15, 2018, and prior to maturity; and
|
• |
Are subject to repurchase by us at the option of the holders following a fundamental change (as defined below), at 100% of par plus accrued unpaid interest.
|
(1) |
A “person” or “group” within the meaning of Section 13(d) of the Exchange Act (other than us, our direct and indirect subsidiaries and their respective employee benefit plans, and
Newcastle Partners L.P. and its affiliates), files a Schedule 13D, Schedule 13G or Schedule TO (or any successor schedule, form or report) pursuant to the Exchange Act disclosing that such person or group, as the case may be, has become the
direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of shares of our common equity representing more than 50% of the voting power of our common equity;
|
(2) |
The consummation of any binding share exchange, exchange offer, tender offer, consolidation or merger pursuant to which all or substantially all shares of our common stock will be
converted into cash, securities or other property, or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of our consolidated assets (including our direct and indirect subsidiaries),
taken as a whole, to any person other than us or one or more of our direct or indirect subsidiaries; provided, however, that a transaction in which the holders of all classes of our common equity immediately prior to such transaction own, directly or indirectly, more than 50% of the
voting power of the continuing or surviving corporation or transferee or the parent thereof immediately after such transaction in substantially the same proportions as such ownership immediately prior to such transaction shall not be a
fundamental change pursuant to this clause;
|
(3) |
Our shareholders approve any plan or proposal for our liquidation or dissolution; or
|
(4) |
Our common stock ceases to be listed or quoted on any U.S. national securities exchange.
|
• |
The events causing a fundamental change;
|
• |
The date of the fundamental change;
|
• |
Whether the fundamental change is a make whole fundamental change, which means the conversion price will be adjusted;
|
• |
The last date on which a holder may exercise the repurchase right;
|
• |
The fundamental change repurchase price;
|
• |
The fundamental change repurchase date;
|
• |
If applicable, the conversion rate and any adjustments to the conversion rate;
|
• |
If applicable, that the notes with respect to which a fundamental change repurchase notice has been delivered by a holder may be converted only if the holder withdraws the
fundamental change repurchase notice in accordance with the terms of the indenture; and
|
• |
The procedures that holders must follow to require us to repurchase their notes.
|
(1) |
Default in any payment of interest on any convertible note when due and payable and the default continues for a period of 60 days;
|
(2) |
Default in the payment of principal of any convertible note at its maturity, upon required repurchase, upon declaration of acceleration, or otherwise;
|
(3) |
Material breach of the indenture, other than payment of interest or principal when due, which remains uncured for 90 days following notice thereof by the trustee; or
|
(4) |
Certain events of bankruptcy, insolvency, or reorganization.
|
• |
To cure any ambiguity, inconsistency or omission in the indenture or the convertible notes in a manner that does not adversely affect the rights of any holder;
|
• |
To cure any defect or error in the indenture or the convertible notes or to conform the terms of the indenture or the convertible notes to the description thereof in the prospectus
pursuant to which the convertible notes were offered;
|
• |
To provide for the assumption of our obligations by a permitted successor company;
|
• |
To add guarantees with respect to the convertible notes;
|
• |
To further secure the convertible notes;
|
• |
To add to the note covenants such further covenants, restrictions or conditions for the benefit of the holders or surrender any right or power conferred us;
|
• |
To make any change that does not materially adversely affect the rights of any holder of convertible notes; or
|
• |
To appoint a successor trustee under the indenture with respect to the convertible notes.
|
• |
Reduce the percentage in aggregate principal amount of convertible notes whose holders must consent to an amendment of the indenture or waive any past event of default;
|
• |
Reduce the rate of or extend the stated time for payment of interest on any convertible note;
|
• |
Reduce the principal amount or extend the maturity date of any convertible note;
|
• |
Make any change that impairs or otherwise adversely affects the conversion rights of any notes;
|
• |
Reduce the redemption price or the fundamental change repurchase price of any convertible note or amend or modify in any manner adverse to the holders of convertible notes our
obligation to make such payments whether through an amendment or waiver of provisions in the covenants, definitions or otherwise;
|
• |
Make any note payable in a currency other than U.S. dollars;
|
• |
Make any change which releases any security or otherwise adversely affects the ranking of the convertible notes;
|
• |
Impair the right of any holder to receive payment of principal of and interest on the convertible notes on or after the due dates thereof or to institute suit for the enforcement
of any payment on or with respect to such holder’s convertible notes; or
|
• |
Make any change in the amendment or waiver provisions of the indenture.
|
• |
Upon deposit of a global note with DTC's custodian, DTC will credit portions of the principal amount of the global note to the accounts of the DTC participants designated by the
subscription agent; and
|
• |
Ownership of beneficial interests in a global note will be shown on, and transfer of ownership of those interests will be effected only through, records maintained by DTC (with
respect to interests of DTC participants) and the records of DTC participants (with respect to other owners of beneficial interests in the global note).
|
• |
Will not be entitled to have notes represented by the global note registered in their names;
|
• |
Will not receive or be entitled to receive physical, certificated notes; and
|
• |
Will not be considered the owners or holders of the convertible notes under the indenture for any purpose, including with respect to the giving of any direction, instruction or
approval to the trustee under the indenture.
|
Months
|
Base Rental
per Rentable
Square Foot
|
Monthly
Base Rental
(Original
Premises)
|
One-Half Monthly
Base Rental
(Original Premises)
|
Monthly
Base Rental
(Test Kitchen)
|
One-Half Monthly
Base Rental
(Test Kitchen)
|
Full Monthly
Base Rental
During Deferral
Period
|
||||||||||||||||||
June 1, 2020-
December 31,
|
$
|
18.00
|
$
|
28,164.00
|
$
|
14,082.00
|
*
|
$
|
1,200.00
|
$
|
600.00
|
$
|
14,682.00
|
|||||||||||
January 1, 2021-
May 31, 2021
|
$
|
18.50
|
$
|
28,946.33
|
$
|
14,473.17
|
$
|
1,233.33
|
$
|
616.67
|
$
|
15,089.84
|
By:
|
||
Ali Khoshgowari
|
||
Authorized Signatory
|
By:
|
|||
Name:
|
Title:
|
Name of Subsidiary
|
Jurisdiction of Organization
|
|
Pizza Inn, Inc.*
|
Missouri
|
|
(d/b/a Pizza Inn)
|
||
Pie Five Pizza Company, Inc.*
|
Texas
|
|
(d/b/a Pie Five Pizza Company or Pie Five)
|
||
Pie Five Restaurants, Inc.*
|
Texas
|
|
PIBC Holding, Inc.*
|
Texas
|
|
Pizza Inn Beverage Corp.*
|
Texas
|
|
Pie Five Beverage Corp.*
|
Texas
|
* |
Does business under its corporate name as well as any referenced assumed name.
|
1. |
I have reviewed this Annual Report on Form 10-K of Rave Restaurant Group, Inc. (“the Registrant”);
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and
for, the periods presented in this report;
|
4. |
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c. |
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
|
d. |
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5. |
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors
(or persons performing the equivalent functions):
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report
financial information; and
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
Date: September 28th, 2020
|
By:
|
/s/ Brandon L. Solano
|
Brandon L. Solano
|
||
Chief Executive Officer
|
||
(principal executive officer)
|
1. |
I have reviewed this Annual Report on Form 10-K of Rave Restaurant Group, Inc. (“the Registrant”);
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and
for, the periods presented in this report;
|
4. |
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c. |
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
|
d. |
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5. |
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors
(or persons performing the equivalent functions):
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report
financial information; and
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
Date: September 28, 2020
|
By:
|
/s/ Clinton D. Fendley
|
Clinton D. Fendley
|
||
Vice President of Finance
|
||
(principal financial officer)
|
Date: September 28, 2020
|
By:
|
/s/ Brandon L. Solano
|
Brandon L. Solano
|
||
Chief Executive Officer
|
||
(principal executive officer)
|
Date: September 28, 2020
|
By:
|
/s/ Clinton D. Fendley
|
Clinton D. Fendley
|
||
Vice President of Finance
|
||
(principal financial officer)
|
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ACCRUED EXPENSES |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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ACCRUED EXPENSES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES | NOTE C - ACCRUED EXPENSES: Accrued expenses consist of the following (in thousands):
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PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS |
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PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS | NOTE B – PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS: Property, and plant and equipment consist of the following (in thousands):
Depreciation and amortization expense was approximately $0.2 million and $0.5 million for the fiscal years ended June 28, 2020 and June 30, 2019, respectively. Intangible assets consist of the following (in thousands):
Amortization expense for intangible assets was approximately $41 thousand and $43 thousand for the fiscal years ended June 28, 2020 and June 30, 2019, respectively. |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Jun. 28, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Description of Business: Rave Restaurant Group, Inc. and its subsidiaries (collectively referred to as the “Company”, or in the first person notations of “we”, “us” and “our”) franchise pizza buffet, delivery/carry-out and express restaurants domestically and internationally under the trademark “Pizza Inn” and operate and franchise domestic fast casual restaurants under the trademarks “Pie Five Pizza Company” or “Pie Five”. The Company also licenses pizza kiosks under the "Pizza Inn" trademark. We facilitate the procurement and distribution of food, equipment and supplies to our domestic and international system of restaurants through agreements with third party distributors. As of June 28, 2020, we had 42 franchised Pie Five Units, 176 franchised Pizza Inn restaurants, and 13 licensed Pizza Inn Express, or PIE, kiosks (“PIE Units”). The 138 domestic franchised Pizza Inn restaurants were comprised of 83 pizza buffet restaurants (“Buffet Units”), 10 delivery/carry-out restaurants (“Delco Units”), and 45 express restaurants (“Express Units”). As of June 28, 2020, there were 38 international franchised Pizza Inn restaurants. 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%, 19%, 17% and 9%, respectively, of the total number of domestic units. Principles of Consolidation: The consolidated financial statements include the accounts of Rave Restaurant Group, Inc. and its subsidiaries, all of which are wholly owned. All appropriate inter-company balances and transactions have been eliminated. Cash and Cash Equivalents: The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Restricted cash of $0.2 million at June 28, 2020 and June 30, 2019 is omitted from cash and cash equivalents and is included in other long term assets. The restricted cash is held in an interest-bearing money market account and is restricted pursuant to a letter of credit for an insurance claim dating back to the mid-1980’s. Concentration of Credit Risk: Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. At June 28, 2020 and June 30, 2019, and at various times during the fiscal years then ended, cash and cash equivalents were in excess of Federal Depository Insurance Corporation insured limits. We do not believe we are exposed to any significant credit risk on cash and cash equivalents. Notes receivable, which potentially subject the Company to concentrations of credit risk, consist primarily of promissory notes from franchise agreements and structured Company-financed sales of assets. At June 28, 2020 and June 30, 2019, and at various times during the fiscal years then ended, the Company had concentrations of credit risk with four franchisees on notes receivables with both short and long term maturities. As of June 28, 2020, the Company had one short term note receivable with one franchisee and the Company had five notes receivable with three franchisees totaling $1.1 million. The financed asset sales were executed with a weighted average interest rate of 4.6%. Principal and interest payments are due monthly and a balloon payment is due after 24 months. Inventories: Inventory consists primarily of food, paper products and supplies stored in and used by Company restaurants and is stated at lower of first-in, first-out (“FIFO”) or market. Closed Restaurants and Discontinued Operations: In April, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which modifies the definition of discontinued operations to include only disposals of an entity that represent strategic shifts that have or will have a major effect on an entity’s operation and requires entities to disclose information about disposals of individually significant components that do not meet the definition of discontinued operations. The standard was effective prospectively for annual and interim periods beginning after December 15, 2014, with early adoption permitted. The authoritative guidance on “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires that discontinued operations that meet certain criteria be reflected in the statement of operations after results of continuing operations as a net amount. This guidance also requires that the operations of closed restaurants, including any impairment charges, be reclassified to discontinued operations for all periods presented. The authoritative guidance on “Accounting for Costs Associated with Exit or Disposal Activities,” requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. This authoritative guidance also establishes that fair value is the objective for initial measurement of the liability. Property, Plant and Equipment: Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Repairs and maintenance are charged to operations as incurred while major renewals and betterments are capitalized. Upon the sale or disposition of a fixed asset, the asset and the related accumulated depreciation or amortization are removed from the accounts and the gain or loss is included in operations. The Company capitalizes interest on borrowings during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying asset and amortized over the estimated useful life of the asset. Depreciation and amortization are computed on the straight-line method over the estimated useful lives of the assets or, in the case of leasehold improvements, over the term of the lease including any reasonably assured renewal periods, if shorter. The useful lives of the assets range from three to ten years. Impairment of Long-Lived Asset and other Lease Charges: The Company reviews long-lived assets for impairment when events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from use and eventual disposition of the assets compared to their carrying value. If impairment is recognized, the carrying value of an impaired asset is reduced to its fair value, based on discounted estimated future cash flows. During fiscal year 2020, the Company tested its long-lived assets for impairment and recognized pre-tax, non-cash impairment charges of $0.2 million primarily related to assets held for sale. The Company also had lease charges related to closed units of $0.7 million. Accounts Receivable: Accounts receivable consist primarily of receivables generated from franchise royalties. The Company records a provision for doubtful receivables to allow for any amounts that may be unrecoverable based upon an analysis of the Company's prior collection experience, customer creditworthiness and current economic trends. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Finance charges may be accrued at a rate of 18% per year, or up to the maximum amount allowed by law, on past due receivables. The interest income recorded from finance charges is immaterial. Notes Receivable: Notes receivable primarily consist of promissory notes arising from franchisee agreements and structured Company-financed sales of assets. The majority of amounts and terms are evidenced by formal promissory notes and personal guarantees. All notes allow for early payment without penalty. Fixed principle and interest payments are due monthly. Interest income is recognized monthly. Notes receivable mature at various dates through 2022 and bear interest at a weighted average rate of 4.6% at June 28, 2020. Management evaluates the creditworthiness of franchisees by considering credit history and sales to evaluate credit risk. Management determines interest rates based on credit risk of the underlining franchisee. The Company monitors payment history to determine whether or not a loan should be placed on a nonaccrual status or impaired. The Company charges off notes receivable based on an account-by-account analysis of the borrower’s current economic conditions, monthly payments history and historical loss experience. The allowance for doubtful notes receivable is netted within notes receivable. The expected principal collections on notes receivable for the next three years were as follows as of June 28, 2020 (in thousands):
Income Taxes: Income taxes are accounted for using the asset and liability method pursuant to the authoritative guidance on Accounting for Income Taxes. Deferred taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statement and carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes for a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes future tax benefits to the extent that realization of such benefits is more likely than not. The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies. In assessing the need for a 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. During the quarter ending March 29, 2020, it was determined that the valuation allowance on deferred tax assets should be increased by $4.3 million resulting in a full valuation allowance. The Company has maintained the full valuation allowance for the year ended June 28, 2020. For the year ended, June 28, 2020, the Company recorded an income tax expense of $4.1 million including federal deferred tax expense of $4.1 million and current state tax expense of $20 thousand. As of June 28, 2020, the Company had net operating loss carryforwards totaling $23.6 million that are available to reduce future taxable income and will begin to expire in 2032. Under the Tax Cuts and Jobs Act, approximately $0.8 million of the loss carryforwards are limited to 80% and do not expire. Under ASC 740, we recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. From time to time, the Company may be assessed interest and penalties by taxing authorities. In those cases, the charges are recorded as income tax expense, as incurred, in the Consolidated Statements of Operations. There were no such charges or accruals for the years ended June 28, 2020 and June 30, 2019. Adoption of ASC 842, “Leases” In February 2016, FASB issued Accounting Standards Codification 842, Leases (“ASC 842”) which requires an entity to recognize a right of use asset and lease liability for all leases. Classification of leases as either a finance or operating lease determines the recognition, measurement and presentation of expenses. The new standard became effective for the Company in the first quarter of fiscal 2020 and was adopted using a modified retrospective approach with the date of initial application on July 1, 2019. Consequently, upon transition, the Company recognized an operating lease right of use asset and an operating lease liability. The Company applied the following practical expedients as provided in the standards update which provide elections to:
Through the implementation process, the Company evaluated each of its lease arrangements and enhanced its systems to track and calculate additional information required upon adoption of this standards update. The adoption had an impact to the Condensed Consolidated Balance Sheet as of July 1, 2019 relating to the recognition of operating lease right of use assets and operating lease liabilities which represented approximately a 30% change to total assets and a 64% change to total liabilities. The impact of adoption of this new standards update was as follows (in thousands):
(1) As of June 30, 2019, the Company had $132 thousand recorded within deferred rent for lease incentives incurred at the inception of the affected leases and $302 thousand in deferred rent tenant improvements. Upon adoption of the new standards update, these lease incentives were included within the operating lease liability. Certain balances have been reclassified. These reclassifications had no effect on net income or stockholders' equity. Revenue Recognition: Revenue is measured based on consideration specified in contracts with customers and excludes incentives and amounts collected on behalf of third parties, primarily sales tax. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. The following describes principal activities, separated by major product or service, from which the Company generates its revenues: Restaurant Sales Revenue from restaurant sales is recognized when food and beverage products are sold in Company-owned restaurants. The Company reports revenue net of sales taxes collected from customers and remitted to governmental taxing authorities. Franchise Revenues Franchise revenues consist of 1) franchise royalties, 2) supplier and distributor incentive revenues, 3) franchise license fees, 4) area development exclusivity fees and foreign master license fees, 5) advertising funds, and 6) supplier convention funds. Franchise royalties, which are based on a percentage of franchise restaurant sales, are recognized as sales occur. Supplier and distributor incentive revenues are recognized when title to the underlying commodities transfer. Franchise license fees are typically billed upon execution of the franchise agreement and amortized over the term of the franchise agreement which can range from five to 20 years. Fees received for renewal periods are amortized over the life of the renewal period. Area development exclusivity fees and foreign master license fees are typically billed upon execution of the area development and foreign master license agreements. Area development exclusivity fees are included in deferred revenue in the Consolidated Balance Sheets and allocated on a pro rata basis to all stores opened under that specific development agreement. Area development exclusivity fees that include rights to sub-franchise are amortized as revenue over the term of the contract. Advertising fund contributions for Pie Five units represent contributions collected where we have control over the activities of the fund. Contributions are based on a percentage of net retail sales. We have determined that we are the principal in these arrangements, and advertising fund contributions and expenditures are, therefore, reported on a gross basis in the Consolidated Statements of Income. In general, we expect such advertising fund contributions and expenditures to be largely offsetting and, therefore, do not expect a significant impact on our reported income before income taxes. Our obligation related to these funds is to develop and conduct advertising activities. Pie Five marketing fund contributions are billed and collected weekly. Supplier convention funds are deferred until the obligations of the agreement are met and the event takes place. Total revenues consist of the following (in thousands):
Stock-Based Compensation: The Company accounts for stock options using the fair value recognition provisions of the authoritative guidance on share-based payments. The Company uses the Black-Scholes formula to estimate the value of stock-based compensation for options granted to employees and directors and expects to continue to use this acceptable option valuation model in the future. The authoritative guidance also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow. Restricted stock units (“RSU’s”) represent the right to receive shares of common stock upon the satisfaction of vesting requirements, performance criteria and other terms and conditions. Compensation cost for RSU’s is measured as an amount equal to the fair value of the RSU’s on the date of grant and is expensed over the vesting period if achievement of the performance criteria is deemed probable, with the amount of the expense recognized based on the best estimate of the ultimate achievement level. Fair Value of Financial Instruments: The carrying amounts of accounts receivable and accounts payable approximate fair value because of the short maturity of these instruments. Contingencies: Provisions for legal settlements are accrued when payment is considered probable and the amount of loss is reasonably estimable in accordance with the authoritative guidance on Accounting for Contingencies. If the best estimate of cost can only be identified within a range and no specific amount within that range can be determined more likely than any other amount within the range, and the loss is considered probable, the minimum of the range is accrued. Legal and related professional services costs to defend litigation are expensed as incurred. Use of Management Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company’s management to make estimates and assumptions that affect its reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. The Company bases its estimates on historical experience and other various assumptions that it believes are reasonable under the circumstances. Estimates and assumptions are reviewed periodically. Actual results could differ materially from estimates. Fiscal Year: The Company's fiscal year ends on the last Sunday in June. The fiscal year ended June 28, 2020 contained 52 weeks and the fiscal year ended June 30, 2019 contained 53 weeks. |
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Jun. 28, 2020 |
Jun. 30, 2019 |
Mar. 03, 2017 |
|
Earnings Per Share [Abstract] | |||
Loss from continuing operations | $ (4,233) | $ (750) | |
Interest saved on convertible notes at 4% | 65 | 63 | |
Adjusted net loss | $ (4,168) | $ (687) | |
BASIC [Abstract] | |||
Weighted average common shares (in shares) | 15,144,000 | 15,070,000 | |
Net income/(loss) per common share (in dollars per share) | $ (0.28) | $ (0.05) | |
DILUTED [Abstract] | |||
Weighted average common shares (in shares) | 15,144,000 | 15,070,000 | |
Convertible notes (in shares) | 0 | 0 | |
Dilutive stock options (in shares) | 0 | 0 | |
Weighted average common shares outstanding (in shares) | 15,144,000 | 15,070,000 | |
Income/(loss) from continuing operations per common share (in dollars per share) | $ (0.28) | $ (0.05) | |
Convertible Senior Notes [Member] | |||
DILUTED [Abstract] | |||
Interest rate | 4.00% | 4.00% | |
Stock Options [Member] | |||
Antidilutive Securities Excluded from Computation of Earnings per Share [Abstract] | |||
Options to purchase shares of common stock excluded from computation of diluted EPS (in shares) | 206,750 | 261,550 |
COMMITMENTS AND CONTINGENCIES (Details) - Restaurant |
1 Months Ended | 3 Months Ended |
---|---|---|
Jan. 31, 2020 |
Jun. 28, 2020 |
|
COMMITMENTS AND CONTINGENCIES [Abstract] | ||
Number of Company-owned restaurants | 1 | |
Percentage reduction of employees base salary | 20.00% |
SHAREHOLDERS' EQUITY (Details) - USD ($) |
12 Months Ended | |||
---|---|---|---|---|
Dec. 05, 2017 |
Jun. 28, 2020 |
Jun. 30, 2019 |
Apr. 22, 2009 |
|
Treasury Stock, Shares [Abstract] | ||||
Repurchase of shares (in shares) | 0 | |||
Number of common stock shares available to be repurchased (in shares) | 848,425 | |||
Sale of Stock [Abstract] | ||||
Proceeds from sale of common stock in ATM offering | $ 357,000 | $ 88,000 | ||
Amended 2007 Stock Purchase Plan [Member] | ||||
Treasury Stock, Shares [Abstract] | ||||
Number of common stock shares authorized to purchase (in shares) | 3,016,000 | |||
2017 ATM Offering [Member] | ||||
Sale of Stock [Abstract] | ||||
Aggregate offering price | $ 5,000,000 | |||
Sale of common stock in ATM offering (in shares) | 524,660 | |||
Proceeds from sale of common stock in ATM offering | $ 700,000 | |||
Percentage of offering fee in gross sales | 3.00% | |||
Expenses associated with ATM Offering | $ 15,000 |
STOCK BASED COMPENSATION PLANS, Restricted Stock Units (Details) - Restricted Stock Units [Member] - shares |
12 Months Ended | |
---|---|---|
Jun. 28, 2020 |
Jun. 30, 2019 |
|
Summary of Restricted Stock Units [Roll forward] | ||
Unvested Beginning Balance (in shares) | 155,106 | 908,293 |
Vested (in shares) | (9,053) | 0 |
Forfeited (in shares) | (146,053) | (753,187) |
Unvested Ending Balance (in shares) | 0 | 155,106 |
Minimum [Member] | ||
Information of Restricted Stock Units Award [Abstract] | ||
Percentage of stock granted based on performance | 50.00% | |
Maximum [Member] | ||
Information of Restricted Stock Units Award [Abstract] | ||
Percentage of stock granted based on performance | 150.00% |
STOCK BASED COMPENSATION PLANS, Information on Options Outstanding and Options Exercisable (Details) - Stock Options [Member] - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 28, 2020 |
Jun. 30, 2019 |
|
Options Outstanding [Abstract] | ||
Options outstanding (in shares) | 206,750 | |
Weighted-average remaining contractual life | 3 years 4 months 24 days | |
Weighted-average exercise price (in dollars per share) | $ 4.96 | |
Options Exercisable [Abstract] | ||
Shares exercisable (in shares) | 206,750 | |
Weighted-average exercise price (in dollars per share) | $ 4.96 | |
Unvested options (in shares) | 0 | |
Stock compensation expense | $ 0 | $ 35 |
$2.36 - 2.75 [Member] | ||
Options Outstanding [Abstract] | ||
Range of exercise prices, lower range (in dollars per shares) | $ 2.36 | |
Range of exercise prices, upper range (in dollars per shares) | $ 2.75 | |
Options outstanding (in shares) | 40,000 | |
Weighted-average remaining contractual life | 1 year | |
Weighted-average exercise price (in dollars per share) | $ 2.71 | |
Options Exercisable [Abstract] | ||
Shares exercisable (in shares) | 40,000 | |
Weighted-average exercise price (in dollars per share) | $ 2.71 | |
$2.76 - 3.30 [Member] | ||
Options Outstanding [Abstract] | ||
Range of exercise prices, lower range (in dollars per shares) | 2.76 | |
Range of exercise prices, upper range (in dollars per shares) | $ 3.30 | |
Options outstanding (in shares) | 55,000 | |
Weighted-average remaining contractual life | 2 years | |
Weighted-average exercise price (in dollars per share) | $ 3.11 | |
Options Exercisable [Abstract] | ||
Shares exercisable (in shares) | 55,000 | |
Weighted-average exercise price (in dollars per share) | $ 3.11 | |
$3.31 - 3.95 [Member] | ||
Options Outstanding [Abstract] | ||
Range of exercise prices, lower range (in dollars per shares) | 3.31 | |
Range of exercise prices, upper range (in dollars per shares) | $ 3.95 | |
Options outstanding (in shares) | 50,000 | |
Weighted-average remaining contractual life | 6 years | |
Weighted-average exercise price (in dollars per share) | $ 3.95 | |
Options Exercisable [Abstract] | ||
Shares exercisable (in shares) | 50,000 | |
Weighted-average exercise price (in dollars per share) | $ 3.95 | |
$5.51 - 5.74 [Member] | ||
Options Outstanding [Abstract] | ||
Range of exercise prices, lower range (in dollars per shares) | 5.51 | |
Range of exercise prices, upper range (in dollars per shares) | $ 5.74 | |
Options outstanding (in shares) | 8,664 | |
Weighted-average remaining contractual life | 3 years | |
Weighted-average exercise price (in dollars per share) | $ 5.74 | |
Options Exercisable [Abstract] | ||
Shares exercisable (in shares) | 8,664 | |
Weighted-average exercise price (in dollars per share) | $ 5.74 | |
$5.95 - 6.25 [Member] | ||
Options Outstanding [Abstract] | ||
Range of exercise prices, lower range (in dollars per shares) | 5.95 | |
Range of exercise prices, upper range (in dollars per shares) | $ 6.25 | |
Options outstanding (in shares) | 28,800 | |
Weighted-average remaining contractual life | 4 years | |
Weighted-average exercise price (in dollars per share) | $ 6.23 | |
Options Exercisable [Abstract] | ||
Shares exercisable (in shares) | 28,800 | |
Weighted-average exercise price (in dollars per share) | $ 6.23 | |
$6.26 - 13.11 [Member] | ||
Options Outstanding [Abstract] | ||
Range of exercise prices, lower range (in dollars per shares) | 6.26 | |
Range of exercise prices, upper range (in dollars per shares) | $ 13.11 | |
Options outstanding (in shares) | 24,286 | |
Weighted-average remaining contractual life | 5 years | |
Weighted-average exercise price (in dollars per share) | $ 13.11 | |
Options Exercisable [Abstract] | ||
Shares exercisable (in shares) | 24,286 | |
Weighted-average exercise price (in dollars per share) | $ 13.11 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Jun. 28, 2020 |
Jun. 30, 2019 |
---|---|---|
CURRENT ASSETS | ||
Accounts receivable, allowance for bad debts | $ 269 | $ 209 |
Notes receivable, allowance for bad debts | $ 0 | $ 916 |
SHAREHOLDERS' EQUITY | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 26,000,000 | 26,000,000 |
Common stock, shares issued (in shares) | 22,550,376 | 22,208,141 |
Common stock, shares outstanding (in shares) | 15,465,222 | 15,090,837 |
Treasury stock at cost (in shares) | 7,085,154 | 7,117,304 |
STOCK BASED COMPENSATION PLANS, Summary of Stock Options (Details) - Stock Options [Member] - USD ($) $ / shares in Units, $ in Millions |
12 Months Ended | |
---|---|---|
Jun. 28, 2020 |
Jun. 30, 2019 |
|
Shares [Roll Forward] | ||
Outstanding at beginning of year (in shares) | 216,550 | 478,056 |
Granted (in shares) | 0 | 0 |
Exercised (in shares) | 0 | 0 |
Forfeited/Canceled/Expired (in shares) | (9,800) | (261,506) |
Outstanding at end of period (in shares) | 206,750 | 216,550 |
Exercisable at end of period (in shares) | 206,750 | 216,550 |
Weighted Average Exercise Price [Roll Forward] | ||
Outstanding at beginning of year (in dollars per share) | $ 4.82 | $ 4.16 |
Granted (in dollars per share) | 0 | 0 |
Exercised (in dollars per share) | 0 | 0 |
Forfeited/Canceled/Expired (in dollars per share) | 1.87 | 4.27 |
Outstanding at end of period (in dollars per share) | 4.96 | 4.82 |
Exercisable at end of year (in dollars per share) | $ 4.96 | $ 4.82 |
Intrinsic value of options outstanding | $ 0 |
STOCK BASED COMPENSATION PLANS, Stock Option Award Plan (Details) - shares |
1 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2015 |
Jun. 28, 2020 |
Jun. 24, 2018 |
Jun. 02, 2015 |
|
2005 Employee Plan [Member] | ||||
Share-based Arrangements [Abstract] | ||||
Number of shares authorized (in shares) | 1,000,000 | |||
2005 Directors Plan [Member] | ||||
Share-based Arrangements [Abstract] | ||||
Number of shares authorized (in shares) | 650,000 | |||
Number of shares granted (in shares) | 40,000 | |||
2005 Directors Plan [Member] | Minimum [Member] | ||||
Share-based Arrangements [Abstract] | ||||
Vesting period | 6 months | |||
2005 Directors Plan [Member] | Maximum [Member] | ||||
Share-based Arrangements [Abstract] | ||||
Vesting period | 10 years | |||
2015 LTIP [Member] | ||||
Share-based Arrangements [Abstract] | ||||
Number of shares authorized (in shares) | 1,200,000 | |||
Number of shares granted (in shares) | 40,000 | |||
Vesting period | 6 months | |||
Expiration period | 10 years |
EMPLOYEE BENEFITS (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 28, 2020 |
Jun. 30, 2019 |
|
Defined Contribution Plan Disclosure [Line Items] | ||
Service required for employees to be eligible to participate in employee benefits plan | 3 months | |
Defined contribution plan, minimum age limit for eligibility to participate in plan | 21 years | |
Total matching contributions | $ 0 | $ 39 |
Minimum [Member] | ||
Defined Contribution Plan Disclosure [Line Items] | ||
Percentage of compensation deferred and contributed to employee benefits plan by employee | 1.00% | |
Maximum [Member] | ||
Defined Contribution Plan Disclosure [Line Items] | ||
Percentage of compensation deferred and contributed to employee benefits plan by employee | 15.00% |
LEASES (Details) |
12 Months Ended | ||
---|---|---|---|
Jun. 28, 2020
USD ($)
ft²
Lease
|
Jun. 30, 2019
USD ($)
|
Jan. 02, 2017 |
|
Lease [Abstract] | |||
Area available for lease | ft² | 19,576 | ||
Lease payment per square foot | $ 18.00 | ||
Percentage of monthly base rent elected to defer under lease agreement | 50.00% | ||
Operating Lease, Description [Abstract] | |||
Number of subleases | Lease | 2 | ||
Components of Total Lease Expense [Abstract] | |||
Operating lease cost | $ 670,000 | ||
Sublease income | (195,000) | ||
Total lease expense, net of sublease income | 475,000 | ||
Supplemental Cash Flow Information Related to Operating Leases [Abstract] | |||
Cash paid for amounts included in the measurement of lease liabilities | $ 684,000 | ||
Weighted Average Remaining Lease Term and Discount Rate [Abstract] | |||
Weighted average remaining lease term | 5 years 3 months 18 days | ||
Weighted average discount rate | 4.00% | ||
Maturities of Operating Lease Liabilities [Abstract] | |||
2021 | $ 785,000 | ||
2022 | 804,000 | ||
2023 | 813,000 | ||
2024 | 766,000 | ||
Thereafter | 1,448,000 | ||
Total operating lease payments | 4,616,000 | ||
Less imputed interest | (513,000) | ||
Total operating lease liability | 4,103,000 | ||
Future Minimum Operating Lease Liabilities [Abstract] | |||
2021 | 1,629,000 | ||
2022 | 1,592,000 | ||
2023 | 1,444,000 | ||
2024 | 1,182,000 | ||
2025 | 1,030,000 | ||
Thereafter | 1,027,000 | ||
Total operating lease payments | 7,904,000 | ||
Sublease Rental Income [Abstract] | |||
2021 | 174,000 | ||
2022 | 175,000 | ||
2023 | 177,000 | ||
2024 | 128,000 | ||
2025 | 53,000 | ||
Total | 707,000 | ||
Rental Expense [Abstract] | |||
Minimum rentals | 676,000 | $ 757,000 | |
Sublease rentals | (168,000) | (149,000) | |
Rental expense | $ 508,000 | $ 608,000 | |
Maximum [Member] | |||
Lease [Abstract] | |||
Lease term | 10 years | ||
Information Technology Equipment [Member] | Minimum [Member] | |||
Operating Lease, Description [Abstract] | |||
Term of contract | 1 year | ||
Information Technology Equipment [Member] | Maximum [Member] | |||
Operating Lease, Description [Abstract] | |||
Term of contract | 5 years | ||
Office Agreements [Member] | Minimum [Member] | |||
Operating Lease, Description [Abstract] | |||
Term of contract | 1 year | ||
Office Agreements [Member] | Maximum [Member] | |||
Operating Lease, Description [Abstract] | |||
Term of contract | 10 years | ||
Restaurant Space Agreements [Member] | Minimum [Member] | |||
Operating Lease, Description [Abstract] | |||
Term of contract | 1 year | ||
Restaurant Space Agreements [Member] | Maximum [Member] | |||
Operating Lease, Description [Abstract] | |||
Term of contract | 10 years | ||
Company Owned Restaurants [Member] | Minimum [Member] | |||
Lease [Abstract] | |||
Lease term | 5 years | ||
Company Owned Restaurants [Member] | Maximum [Member] | |||
Lease [Abstract] | |||
Lease term | 10 years |
INCOME TAXES (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 29, 2020 |
Jun. 28, 2020 |
Jun. 30, 2019 |
|
Provision for Income Taxes [Abstract] | |||
Current - Federal | $ 0 | $ 0 | |
Current - Foreign | 18 | 131 | |
Current - State | 0 | 15 | |
Deferred - Federal | 4,053 | (189) | |
Deferred - State | 7 | (8) | |
Provision for income taxes | 4,078 | (51) | |
Effective Income Tax Rate [Abstract] | |||
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 | 0 | 15 | |
Permanent adjustments | 4 | 8 | |
Change in valuation allowance | 4,081 | 0 | |
Other | 6 | 1 | |
Provision for income taxes | 4,078 | (51) | |
Net Deferred Tax Assets [Abstract] | |||
Reserve for bad debt | 61 | 48 | |
Deferred fees | 0 | 17 | |
Other reserves and accruals | 568 | 795 | |
Operating lease liabilities | 937 | 0 | |
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) | 0 | |
Other deferred tax liabilities | (84) | 0 | |
Total deferred tax liabilities | (899) | 0 | |
Net deferred tax asset | $ 0 | $ 4,060 | |
Federal statutory rate | 21.00% | 21.00% | |
Current state tax expense | $ 20 | $ 93 | |
Net operating loss carryforwards | $ 23,600 | ||
Operating loss carryforwards, expiry date | Dec. 31, 2032 | ||
Amount of operating loss carryforwards limited with no expiration | $ 800 | ||
Operating loss carryforward, percentage limitation on use | 80.00% | ||
Increase in valuation allowance on deferred tax assets | $ 4,300 | $ 4,300 |
PPP LOAN (Details) - USD ($) |
12 Months Ended | ||
---|---|---|---|
Apr. 13, 2020 |
Jun. 28, 2020 |
Jun. 30, 2019 |
|
Debt Instrument [Abstract] | |||
Proceeds from loans | $ 657,000 | $ 0 | |
PPP Loan [Member] | |||
Debt Instrument [Abstract] | |||
Proceeds from loans | $ 656,830 | ||
Maturity date | Apr. 10, 2022 | ||
Interest rate | 0.98% |
CONVERTIBLE NOTES (Details) |
12 Months Ended | ||
---|---|---|---|
Mar. 03, 2017
USD ($)
Notes
|
Jun. 28, 2020
USD ($)
Subsidiary
$ / shares
|
Jun. 30, 2019
USD ($)
|
|
Convertible Notes [Abstract] | |||
Notes converted to common shares | $ 64,000 | $ 4,000 | |
4% Convertible Senior Notes due 2022 [Member] | |||
Convertible Notes [Abstract] | |||
Shareholders exercised subscription rights | Notes | 30,000 | ||
Par value of shares exercised per note | $ 100 | ||
Proceeds from issuance of convertible notes | $ 3,000,000 | ||
Interest on convertible notes | 4.00% | 4.00% | |
Maturity date of notes | Feb. 15, 2022 | ||
Number of direct operating subsidiaries | Subsidiary | 2 | ||
Conversion rate of common stock (in dollars per share) | $ / shares | $ 2.00 | ||
Beneficial conversion feature | $ 100,000 | ||
Aggregate beneficial conversion feature and issuance costs of notes | 200,000 | ||
Notes converted to common shares | 64,000 | ||
Notes outstanding | 1,600,000 | ||
Unamortized debt issue costs and unamortized debt discounts | $ 48,000 |
ACCRUED EXPENSES (Details) - USD ($) $ in Thousands |
Jun. 28, 2020 |
Jun. 30, 2019 |
---|---|---|
ACCRUED EXPENSES [Abstract] | ||
Compensation | $ 451 | $ 265 |
Other | 236 | 478 |
Professional fees | 80 | 83 |
Insurance loss reserves | 8 | 8 |
Accrued expenses | $ 775 | $ 834 |
PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS, Intangible Assets (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 28, 2020 |
Jun. 30, 2019 |
|
Finite-Lived Intangible Assets, Net [Abstract] | ||
Acquisition cost | $ 578 | $ 578 |
Accumulated amortization | (423) | (382) |
Net value | 155 | 196 |
Amortization expense for intangible assets | $ 41 | 43 |
Trademarks and Trade Names [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful lives | 10 years | |
Acquisition cost | $ 278 | 278 |
Accumulated amortization | (181) | (153) |
Net value | $ 97 | 125 |
Name Change [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful lives | 15 years | |
Acquisition cost | $ 70 | 70 |
Accumulated amortization | (25) | (21) |
Net value | $ 45 | 49 |
Prototypes [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful lives | 5 years | |
Acquisition cost | $ 230 | 230 |
Accumulated amortization | (217) | (208) |
Net value | $ 13 | $ 22 |
PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS, Property, and Plant and Equipment (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 28, 2020 |
Jun. 30, 2019 |
|
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property, and plant and equipment, gross | $ 2,089 | $ 2,111 |
Less: accumulated depreciation/amortization | (1,723) | (1,611) |
Property, and plant and equipment, net | 366 | 500 |
Depreciation and amortization expense | $ 145 | 423 |
Minimum [Member] | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Estimated Useful Lives | 3 years | |
Maximum [Member] | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Estimated Useful Lives | 10 years | |
Equipment, Furniture and Fixtures [Member] | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property, and plant and equipment, gross | $ 808 | 867 |
Equipment, Furniture and Fixtures [Member] | Minimum [Member] | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Estimated Useful Lives | 3 years | |
Equipment, Furniture and Fixtures [Member] | Maximum [Member] | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Estimated Useful Lives | 7 years | |
Software [Member] | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Estimated Useful Lives | 5 years | |
Property, and plant and equipment, gross | $ 809 | 810 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Estimated Useful Lives | 10 years | |
Property, and plant and equipment, gross | $ 472 | $ 434 |
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands |
Jun. 28, 2020 |
Jun. 30, 2019 |
---|---|---|
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 | 0 | 7 |
Income tax receivable | 0 | 4 |
Property held for sale | 0 | 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 | 0 |
Intangible assets definite-lived, net | 155 | 196 |
Long-term notes receivable | 449 | 735 |
Deferred tax asset, net | 0 | 4,060 |
Long-term deferred contract charges | 231 | 232 |
Deposits and other | 5 | 0 |
Total assets | 9,705 | 10,426 |
CURRENT LIABILITIES | ||
Accounts payable - trade | 446 | 400 |
Accounts payable - lease termination impairments | 407 | 832 |
Accrued expenses | 775 | 834 |
Deferred rent | 0 | 37 |
Operating lease liability, current | 632 | 0 |
Deferred revenues | 254 | 275 |
Total current liabilities | 2,514 | 2,378 |
LONG-TERM LIABILITIES | ||
Convertible notes | 1,549 | 1,584 |
PPP loan | 657 | 0 |
Deferred rent, net of current portion | 0 | 397 |
Operating lease liability, net of current portion | 3,471 | 0 |
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 |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Revenue Recognition (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 28, 2020 |
Jun. 30, 2019 |
|
Revenues [Abstract] | ||
Revenues | $ 10,028 | $ 12,319 |
Restaurant Sales [Member] | ||
Revenues [Abstract] | ||
Revenues | 240 | 889 |
Franchise Royalties [Member] | ||
Revenues [Abstract] | ||
Revenues | 3,697 | 4,814 |
Supplier and Distributor Incentive Revenues [Member] | ||
Revenues [Abstract] | ||
Revenues | 3,906 | 4,519 |
Franchise License Fees [Member] | ||
Revenues [Abstract] | ||
Revenues | 853 | 1,031 |
Area Development Fees and Foreign Master License Fees [Member] | ||
Revenues [Abstract] | ||
Revenues | 20 | 41 |
Advertising Funds [Member] | ||
Revenues [Abstract] | ||
Revenues | 799 | 684 |
Supplier Convention Funds [Member] | ||
Revenues [Abstract] | ||
Revenues | 278 | 294 |
Rental Income [Member] | ||
Revenues [Abstract] | ||
Revenues | 195 | 0 |
Interest Income and Other [Member] | ||
Revenues [Abstract] | ||
Revenues | $ 40 | $ 47 |
Minimum [Member] | ||
Franchise Revenues [Abstract] | ||
Amortization term of franchise license fees | 5 years | |
Maximum [Member] | ||
Franchise Revenues [Abstract] | ||
Amortization term of franchise license fees | 20 years |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Adoption of ASC 842, "Leases" (Details) - USD ($) $ in Thousands |
Jun. 28, 2020 |
Jun. 30, 2019 |
||
---|---|---|---|---|
Balance Sheet [Abstract] | ||||
Operating lease right of use asset, net | $ 3,567 | $ 0 | ||
Operating lease liabilities, current | 632 | 0 | ||
Operating lease liabilities, net of current portion | 3,471 | $ 0 | ||
ASU 2016-02 [Member] | ||||
Operating Leases [Abstract] | ||||
Percentage of change to total assets under operating leases | 30.00% | |||
Percentage of change to total liabilities under operating leases | 64.00% | |||
Balance Sheet [Abstract] | ||||
Operating lease right of use asset, net | 3,567 | $ 3,862 | ||
Operating lease liabilities, current | 632 | 528 | ||
Operating lease liabilities, net of current portion | $ 3,471 | 3,347 | ||
Deferred rent recorded for lease incentives | 132 | |||
Deferred rent tenant improvements | 302 | |||
ASU 2016-02 [Member] | Adoption [Member] | ||||
Balance Sheet [Abstract] | ||||
Operating lease right of use asset, net | 3,428 | |||
Operating lease liabilities, current | 528 | |||
Operating lease liabilities, net of current portion | 3,347 | |||
ASU 2016-02 [Member] | Reclassification [Member] | ||||
Balance Sheet [Abstract] | ||||
Operating lease right of use asset, net | [1] | $ 434 | ||
|
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 29, 2020 |
Jun. 28, 2020 |
Jun. 30, 2019 |
|
Income Taxes [Abstract] | |||
Increase in valuation allowance on deferred tax assets | $ 4,300 | $ 4,300 | |
Income tax expense | 4,078 | $ (51) | |
Federal deferred tax expense | 4,053 | (189) | |
Current state tax expense | 20 | $ 93 | |
Net operating loss carryforwards | $ 23,600 | ||
Operating loss carryforwards, expiry date | Dec. 31, 2032 | ||
Amount of operating loss carryforwards limited with no expiration | $ 800 | ||
Operating loss carryforward, percentage limitation on use | 80.00% |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Notes Receivable (Details) $ in Thousands |
Jun. 28, 2020
USD ($)
|
---|---|
Notes Receivable [Abstract] | |
Weighted average interest rate | 4.60% |
Maturities of Notes Receivable [Abstract] | |
2021 | $ 546 |
2022 | 449 |
2023 | 0 |
Total | $ 995 |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Accounts Receivable (Details) |
12 Months Ended |
---|---|
Jun. 28, 2020 | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |
Finance charges rate | 18.00% |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Impairment of Long-Lived Asset and other Lease Charges (Details) $ in Millions |
12 Months Ended |
---|---|
Jun. 28, 2020
USD ($)
| |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |
Pre-tax, non-cash impairment charges on long lived assets | $ 0.2 |
Lease charges related to close units | $ 0.7 |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Property, Plant and Equipment (Details) |
12 Months Ended |
---|---|
Jun. 28, 2020 | |
Minimum [Member] | |
Property, Plant and Equipment [Abstract] | |
Estimated useful lives of assets | 3 years |
Maximum [Member] | |
Property, Plant and Equipment [Abstract] | |
Estimated useful lives of assets | 10 years |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Concentration of Credit Risk (Details) - Concentration of Credit Risk [Member] $ in Millions |
12 Months Ended | |
---|---|---|
Jun. 28, 2020
USD ($)
Franchise
Notes
|
Jun. 30, 2019
Franchise
|
|
Concentration of Credit Risk [Abstract] | ||
Number of franchisees had credit risk on notes receivable | Franchise | 4 | 4 |
Number of short term notes receivables | Notes | 1 | |
Number of notes receivable | Notes | 5 | |
Number of franchises | Franchise | 3 | |
Note receivables from franchisees | $ | $ 1.1 | |
Weighted average interest rate of financed assets sale | 4.60% | |
Period to start balloon payment | 24 months |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Cash and Cash Equivalents (Details) - USD ($) $ in Millions |
Jun. 28, 2020 |
Jun. 30, 2019 |
---|---|---|
Cash and Cash Equivalents [Abstract] | ||
Restricted cash | $ 0.2 | $ 0.2 |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Description of Business (Details) |
12 Months Ended |
---|---|
Jun. 28, 2020
Restaurant
| |
Texas [Member] | |
Description of Business [Abstract] | |
Percentage of total number of domestic units | 23.00% |
Arkansas [Member] | |
Description of Business [Abstract] | |
Percentage of total number of domestic units | 19.00% |
North Carolina [Member] | |
Description of Business [Abstract] | |
Percentage of total number of domestic units | 17.00% |
Mississippi [Member] | |
Description of Business [Abstract] | |
Percentage of total number of domestic units | 9.00% |
Pie Five Units [Member] | |
Description of Business [Abstract] | |
Number of restaurants franchised | 42 |
Pizza Inn Restaurants [Member] | |
Description of Business [Abstract] | |
Number of restaurants franchised | 176 |
Pizza Inn Restaurants [Member] | US [Member] | |
Description of Business [Abstract] | |
Number of restaurants franchised | 138 |
Pizza Inn Restaurants [Member] | International [Member] | |
Description of Business [Abstract] | |
Number of restaurants franchised | 38 |
Pizza Inn Express [Member] | |
Description of Business [Abstract] | |
Number of restaurants franchised | 13 |
Pizza Buffet Restaurants [Member] | US [Member] | |
Description of Business [Abstract] | |
Number of restaurants franchised | 83 |
Delivery/Carry-Out Restaurants [Member] | US [Member] | |
Description of Business [Abstract] | |
Number of restaurants franchised | 10 |
Express Restaurants [Member] | US [Member] | |
Description of Business [Abstract] | |
Number of restaurants franchised | 45 |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 28, 2020 |
Jun. 30, 2019 |
|
CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract] | ||
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: (in dollars per share) | $ (0.28) | $ (0.05) |
LOSS PER SHARE OF COMMON STOCK - DILUTED: (in dollars per share) | $ (0.28) | $ (0.05) |
Weighted average common shares outstanding - basic (in shares) | 15,144 | 15,070 |
Weighted average common and potential dilutive common shares outstanding (in shares) | 15,144 | 15,070 |
SEGMENT REPORTING (Tables) |
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SEGMENT REPORTING [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Information | Summarized in the following tables are net sales and operating revenues, depreciation and amortization expense, income from continuing operations before taxes, capital expenditures and assets for the Company's reportable segments as of and for the fiscal years ended June 28, 2020 and June 30, 2019 (in thousands):
Notes:
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Revenue by Geographic Areas | The following table provides information on our foreign and domestic revenues:
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EARNINGS PER SHARE (Tables) |
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EARNINGS PER SHARE [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share Basic and Diluted | The following table shows the reconciliation of the numerator and denominator of the basic EPS calculation to the numerator and denominator of the diluted EPS calculation (in thousands, except per share amounts).
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STOCK BASED COMPENSATION PLANS (Tables) |
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STOCK BASED COMPENSATION PLANS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock Options | A summary of stock option transactions under all of the Company’s stock option plans and information about fixed-price stock options is as follows:
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Information on Options Outstanding and Options Exercisable | The following table provides information on options outstanding and options exercisable as of June 28, 2020:
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Summary of Restricted Stock Units | A summary of the status of restricted stock units as of June 28, 2020 and June 30, 2019, and changes during the fiscal years then ended is presented below:
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LEASES (Tables) |
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LEASES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Components of Total Lease Expense | The components of total lease expense for the fiscal year ended June 28, 2020, the majority of which is included in general and administrative expense, are as follows (in thousands):
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Supplemental Cash Flow Information Related to Operating Leases | Supplemental cash flow information related to operating leases is included in the table below (in thousands):
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Supplemental Balance Sheet Information Related to Operating Leases | Supplemental balance sheet information related to operating leases is included in the table below (in thousands):
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Weighted Average Remaining Lease Term and Weighted Average Discount Rate | Weighted average remaining lease term and weighted average discount rate for operating leases are as follows:
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Maturities of Operating Lease Liabilities | Operating lease liabilities with enforceable contract terms that are greater than one year mature as follows (in thousands):
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Future Minimum Rental Payments For Operating Leases | Future minimum rental payments under active non-cancelable leases with inital or remaining terms of one year or more at June 28, 2020 were as follows (in thousands):
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Future Minimum Sublease Rental Income | Future minimum sublease rental income under active non-cancelable leases with initial or remaining terms of one year or more at June 28, 2020 were as follows (in thousands):
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Components of Rental Expense | Rental expense consisted of the following (in thousands):
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INCOME TAXES (Tables) |
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INCOME TAXES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for Income Taxes | Provision for income taxes from continuing operations consists of the following (in thousands):
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Effective Income Tax Rate Reconciliation | The effective income tax rate varied from the statutory rate for the fiscal years ended June 28, 2020 and June 30, 2019 as reflected below (in thousands):
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Deferred Tax Assets | The tax effects of temporary differences that give rise to the net deferred tax assets consisted of the following (in thousands):
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ACCRUED EXPENSES (Tables) |
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ACCRUED EXPENSES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses | Accrued expenses consist of the following (in thousands):
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PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS (Tables) |
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PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, and Plant and Equipment | Property, and plant and equipment consist of the following (in thousands):
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Intangible Assets | Intangible assets consist of the following (in thousands):
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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Receivable | The expected principal collections on notes receivable for the next three years were as follows as of June 28, 2020 (in thousands):
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Impact of Adoption of New Standards Update Related to Operating Lease | The impact of adoption of this new standards update was as follows (in thousands):
(1) As of June 30, 2019, the Company had $132 thousand recorded within deferred rent for lease incentives incurred at the inception of the affected leases and $302 thousand in deferred rent tenant improvements. Upon adoption of the new standards update, these lease incentives were included within the operating lease liability. |
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Total Revenues | Total revenues consist of the following (in thousands):
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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Description of Business | Description of Business: Rave Restaurant Group, Inc. and its subsidiaries (collectively referred to as the “Company”, or in the first person notations of “we”, “us” and “our”) franchise pizza buffet, delivery/carry-out and express restaurants domestically and internationally under the trademark “Pizza Inn” and operate and franchise domestic fast casual restaurants under the trademarks “Pie Five Pizza Company” or “Pie Five”. The Company also licenses pizza kiosks under the "Pizza Inn" trademark. We facilitate the procurement and distribution of food, equipment and supplies to our domestic and international system of restaurants through agreements with third party distributors. As of June 28, 2020, we had 42 franchised Pie Five Units, 176 franchised Pizza Inn restaurants, and 13 licensed Pizza Inn Express, or PIE, kiosks (“PIE Units”). The 138 domestic franchised Pizza Inn restaurants were comprised of 83 pizza buffet restaurants (“Buffet Units”), 10 delivery/carry-out restaurants (“Delco Units”), and 45 express restaurants (“Express Units”). As of June 28, 2020, there were 38 international franchised Pizza Inn restaurants. 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%, 19%, 17% and 9%, respectively, of the total number of domestic units. |
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Principles of Consolidation | Principles of Consolidation: The consolidated financial statements include the accounts of Rave Restaurant Group, Inc. and its subsidiaries, all of which are wholly owned. All appropriate inter-company balances and transactions have been eliminated. |
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Cash and Cash Equivalents | Cash and Cash Equivalents: The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Restricted cash of $0.2 million at June 28, 2020 and June 30, 2019 is omitted from cash and cash equivalents and is included in other long term assets. The restricted cash is held in an interest-bearing money market account and is restricted pursuant to a letter of credit for an insurance claim dating back to the mid-1980’s. |
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Concentration of Credit Risk | Concentration of Credit Risk: Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. At June 28, 2020 and June 30, 2019, and at various times during the fiscal years then ended, cash and cash equivalents were in excess of Federal Depository Insurance Corporation insured limits. We do not believe we are exposed to any significant credit risk on cash and cash equivalents. Notes receivable, which potentially subject the Company to concentrations of credit risk, consist primarily of promissory notes from franchise agreements and structured Company-financed sales of assets. At June 28, 2020 and June 30, 2019, and at various times during the fiscal years then ended, the Company had concentrations of credit risk with four franchisees on notes receivables with both short and long term maturities. As of June 28, 2020, the Company had one short term note receivable with one franchisee and the Company had five notes receivable with three franchisees totaling $1.1 million. The financed asset sales were executed with a weighted average interest rate of 4.6%. Principal and interest payments are due monthly and a balloon payment is due after 24 months. |
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Inventories | Inventories: Inventory consists primarily of food, paper products and supplies stored in and used by Company restaurants and is stated at lower of first-in, first-out (“FIFO”) or market. |
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Closed Restaurants and Discontinued Operations | Closed Restaurants and Discontinued Operations: In April, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which modifies the definition of discontinued operations to include only disposals of an entity that represent strategic shifts that have or will have a major effect on an entity’s operation and requires entities to disclose information about disposals of individually significant components that do not meet the definition of discontinued operations. The standard was effective prospectively for annual and interim periods beginning after December 15, 2014, with early adoption permitted. The authoritative guidance on “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires that discontinued operations that meet certain criteria be reflected in the statement of operations after results of continuing operations as a net amount. This guidance also requires that the operations of closed restaurants, including any impairment charges, be reclassified to discontinued operations for all periods presented. The authoritative guidance on “Accounting for Costs Associated with Exit or Disposal Activities,” requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. This authoritative guidance also establishes that fair value is the objective for initial measurement of the liability. |
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Property, Plant and Equipment | Property, Plant and Equipment: Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Repairs and maintenance are charged to operations as incurred while major renewals and betterments are capitalized. Upon the sale or disposition of a fixed asset, the asset and the related accumulated depreciation or amortization are removed from the accounts and the gain or loss is included in operations. The Company capitalizes interest on borrowings during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying asset and amortized over the estimated useful life of the asset. Depreciation and amortization are computed on the straight-line method over the estimated useful lives of the assets or, in the case of leasehold improvements, over the term of the lease including any reasonably assured renewal periods, if shorter. The useful lives of the assets range from three to ten years. |
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Impairment of Long-Lived Asset and other Lease Charges | Impairment of Long-Lived Asset and other Lease Charges: The Company reviews long-lived assets for impairment when events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from use and eventual disposition of the assets compared to their carrying value. If impairment is recognized, the carrying value of an impaired asset is reduced to its fair value, based on discounted estimated future cash flows. During fiscal year 2020, the Company tested its long-lived assets for impairment and recognized pre-tax, non-cash impairment charges of $0.2 million primarily related to assets held for sale. The Company also had lease charges related to closed units of $0.7 million. |
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Accounts Receivable | Accounts Receivable: Accounts receivable consist primarily of receivables generated from franchise royalties. The Company records a provision for doubtful receivables to allow for any amounts that may be unrecoverable based upon an analysis of the Company's prior collection experience, customer creditworthiness and current economic trends. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Finance charges may be accrued at a rate of 18% per year, or up to the maximum amount allowed by law, on past due receivables. The interest income recorded from finance charges is immaterial. |
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Notes Receivable | Notes Receivable: Notes receivable primarily consist of promissory notes arising from franchisee agreements and structured Company-financed sales of assets. The majority of amounts and terms are evidenced by formal promissory notes and personal guarantees. All notes allow for early payment without penalty. Fixed principle and interest payments are due monthly. Interest income is recognized monthly. Notes receivable mature at various dates through 2022 and bear interest at a weighted average rate of 4.6% at June 28, 2020. Management evaluates the creditworthiness of franchisees by considering credit history and sales to evaluate credit risk. Management determines interest rates based on credit risk of the underlining franchisee. The Company monitors payment history to determine whether or not a loan should be placed on a nonaccrual status or impaired. The Company charges off notes receivable based on an account-by-account analysis of the borrower’s current economic conditions, monthly payments history and historical loss experience. The allowance for doubtful notes receivable is netted within notes receivable. The expected principal collections on notes receivable for the next three years were as follows as of June 28, 2020 (in thousands):
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Income Taxes | Income Taxes: Income taxes are accounted for using the asset and liability method pursuant to the authoritative guidance on Accounting for Income Taxes. Deferred taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statement and carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes for a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes future tax benefits to the extent that realization of such benefits is more likely than not. The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies. In assessing the need for a 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. During the quarter ending March 29, 2020, it was determined that the valuation allowance on deferred tax assets should be increased by $4.3 million resulting in a full valuation allowance. The Company has maintained the full valuation allowance for the year ended June 28, 2020. For the year ended, June 28, 2020, the Company recorded an income tax expense of $4.1 million including federal deferred tax expense of $4.1 million and current state tax expense of $20 thousand. As of June 28, 2020, the Company had net operating loss carryforwards totaling $23.6 million that are available to reduce future taxable income and will begin to expire in 2032. Under the Tax Cuts and Jobs Act, approximately $0.8 million of the loss carryforwards are limited to 80% and do not expire. Under ASC 740, we recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. From time to time, the Company may be assessed interest and penalties by taxing authorities. In those cases, the charges are recorded as income tax expense, as incurred, in the Consolidated Statements of Operations. There were no such charges or accruals for the years ended June 28, 2020 and June 30, 2019. |
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Adoption of ASC 842, Leases | Adoption of ASC 842, “Leases” In February 2016, FASB issued Accounting Standards Codification 842, Leases (“ASC 842”) which requires an entity to recognize a right of use asset and lease liability for all leases. Classification of leases as either a finance or operating lease determines the recognition, measurement and presentation of expenses. The new standard became effective for the Company in the first quarter of fiscal 2020 and was adopted using a modified retrospective approach with the date of initial application on July 1, 2019. Consequently, upon transition, the Company recognized an operating lease right of use asset and an operating lease liability. The Company applied the following practical expedients as provided in the standards update which provide elections to:
Through the implementation process, the Company evaluated each of its lease arrangements and enhanced its systems to track and calculate additional information required upon adoption of this standards update. The adoption had an impact to the Condensed Consolidated Balance Sheet as of July 1, 2019 relating to the recognition of operating lease right of use assets and operating lease liabilities which represented approximately a 30% change to total assets and a 64% change to total liabilities. The impact of adoption of this new standards update was as follows (in thousands):
(1) As of June 30, 2019, the Company had $132 thousand recorded within deferred rent for lease incentives incurred at the inception of the affected leases and $302 thousand in deferred rent tenant improvements. Upon adoption of the new standards update, these lease incentives were included within the operating lease liability. Certain balances have been reclassified. These reclassifications had no effect on net income or stockholders' equity. |
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Revenue Recognition | Revenue Recognition: Revenue is measured based on consideration specified in contracts with customers and excludes incentives and amounts collected on behalf of third parties, primarily sales tax. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. The following describes principal activities, separated by major product or service, from which the Company generates its revenues: Restaurant Sales Revenue from restaurant sales is recognized when food and beverage products are sold in Company-owned restaurants. The Company reports revenue net of sales taxes collected from customers and remitted to governmental taxing authorities. Franchise Revenues Franchise revenues consist of 1) franchise royalties, 2) supplier and distributor incentive revenues, 3) franchise license fees, 4) area development exclusivity fees and foreign master license fees, 5) advertising funds, and 6) supplier convention funds. Franchise royalties, which are based on a percentage of franchise restaurant sales, are recognized as sales occur. Supplier and distributor incentive revenues are recognized when title to the underlying commodities transfer. Franchise license fees are typically billed upon execution of the franchise agreement and amortized over the term of the franchise agreement which can range from five to 20 years. Fees received for renewal periods are amortized over the life of the renewal period. Area development exclusivity fees and foreign master license fees are typically billed upon execution of the area development and foreign master license agreements. Area development exclusivity fees are included in deferred revenue in the Consolidated Balance Sheets and allocated on a pro rata basis to all stores opened under that specific development agreement. Area development exclusivity fees that include rights to sub-franchise are amortized as revenue over the term of the contract. Advertising fund contributions for Pie Five units represent contributions collected where we have control over the activities of the fund. Contributions are based on a percentage of net retail sales. We have determined that we are the principal in these arrangements, and advertising fund contributions and expenditures are, therefore, reported on a gross basis in the Consolidated Statements of Income. In general, we expect such advertising fund contributions and expenditures to be largely offsetting and, therefore, do not expect a significant impact on our reported income before income taxes. Our obligation related to these funds is to develop and conduct advertising activities. Pie Five marketing fund contributions are billed and collected weekly. Supplier convention funds are deferred until the obligations of the agreement are met and the event takes place. Total revenues consist of the following (in thousands):
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Stock-Based Compensation | Stock-Based Compensation: The Company accounts for stock options using the fair value recognition provisions of the authoritative guidance on share-based payments. The Company uses the Black-Scholes formula to estimate the value of stock-based compensation for options granted to employees and directors and expects to continue to use this acceptable option valuation model in the future. The authoritative guidance also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow. Restricted stock units (“RSU’s”) represent the right to receive shares of common stock upon the satisfaction of vesting requirements, performance criteria and other terms and conditions. Compensation cost for RSU’s is measured as an amount equal to the fair value of the RSU’s on the date of grant and is expensed over the vesting period if achievement of the performance criteria is deemed probable, with the amount of the expense recognized based on the best estimate of the ultimate achievement level. |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments: The carrying amounts of accounts receivable and accounts payable approximate fair value because of the short maturity of these instruments. |
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Contingencies | Contingencies: Provisions for legal settlements are accrued when payment is considered probable and the amount of loss is reasonably estimable in accordance with the authoritative guidance on Accounting for Contingencies. If the best estimate of cost can only be identified within a range and no specific amount within that range can be determined more likely than any other amount within the range, and the loss is considered probable, the minimum of the range is accrued. Legal and related professional services costs to defend litigation are expensed as incurred. |
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Use of Management Estimates | Use of Management Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company’s management to make estimates and assumptions that affect its reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. The Company bases its estimates on historical experience and other various assumptions that it believes are reasonable under the circumstances. Estimates and assumptions are reviewed periodically. Actual results could differ materially from estimates. |
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Fiscal Year | Fiscal Year: The Company's fiscal year ends on the last Sunday in June. The fiscal year ended June 28, 2020 contained 52 weeks and the fiscal year ended June 30, 2019 contained 53 weeks. |
SUBSEQUENT EVENTS |
12 Months Ended |
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Jun. 28, 2020 | |
SUBSEQUENT EVENTS [Abstract] | |
SUBSEQUENT EVENTS | NOTE N - SUBSEQUENT EVENTS: In preparation of its financial statements, the Company considered subsequent events through September 28, 2020 which was the date the Company's financial statements were available to be issued. |
Document and Entity Information - USD ($) $ in Millions |
12 Months Ended | ||
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Sep. 23, 2020 |
Dec. 29, 2019 |
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Cover [Abstract] | |||
Entity Registrant Name | RAVE RESTAURANT GROUP, INC. | ||
Entity Central Index Key | 0000718332 | ||
Current Fiscal Year End Date | --06-28 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Shell Company | false | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Public Float | $ 14.1 | ||
Entity Common Stock, Shares Outstanding | 15,465,222 | ||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Jun. 28, 2020 | ||
Document Fiscal Year Focus | 2020 | ||
Document Fiscal Period Focus | FY | ||
Entity Address, State or Province | TX |
SEGMENT REPORTING |
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SEGMENT REPORTING [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT REPORTING | NOTE M– SEGMENT REPORTING: The Company has three reportable operating segments as determined by management using the “management approach” as defined by the authoritative guidance on Disclosures about Segments of an Enterprise and Related Information: (1) Pizza Inn Franchising, (2) Pie Five Franchising and (3) Company-Owned Restaurants. These segments are a result of differences in the nature of the products and services sold. Corporate administration costs, which include, but are not limited to, general accounting, human resources, legal and credit and collections, are partially allocated to the three operating segments. Other revenue consists of nonrecurring items. The Pizza Inn and Pie Five Franchising segments establish franchisees, licensees and territorial rights. Revenue for this segment is derived from franchise royalties, franchise fees, sale of area development and foreign master license rights and incentive payments from third party suppliers and distributors. Assets for these segments include equipment, furniture and fixtures. The Company-Owned Restaurants segment includes sales and operating results for all Company-owned restaurants. Assets for this segment include equipment, furniture and fixtures for the Company-owned restaurants. Corporate administration and other assets primarily include cash and short-term investments, as well as furniture and fixtures located at the corporate office and trademarks and other intangible assets. All assets are located within the United States. Summarized in the following tables are net sales and operating revenues, depreciation and amortization expense, income from continuing operations before taxes, capital expenditures and assets for the Company's reportable segments as of and for the fiscal years ended June 28, 2020 and June 30, 2019 (in thousands):
Notes:
The following table provides information on our foreign and domestic revenues:
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EARNINGS PER SHARE |
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EARNINGS PER SHARE [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE | NOTE L - EARNINGS PER SHARE: The Company computes and presents earnings per share (“EPS”) in accordance with the authoritative guidance on Earnings Per Share. Basic EPS excludes the effect of potentially dilutive securities while diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised, converted or resulted in the issuance of common stock that then shared in the earnings of the Company. The following table shows the reconciliation of the numerator and denominator of the basic EPS calculation to the numerator and denominator of the diluted EPS calculation (in thousands, except per share amounts).
We had 206,750 and 261,550 shares of common stock potentially issuable upon exercise of employee stock options for years ended June 28, 2020 and June 30, 2019, respectively, that were excluded from the weighted average number of shares outstanding on a diluted basis because the effect of such options would be anti-dilutive. These instruments expire at varying times from fiscal 2020 through fiscal 2026. |
COMMITMENTS AND CONTINGENCIES |
12 Months Ended |
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Jun. 28, 2020 | |
COMMITMENTS AND CONTINGENCIES [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE K - COMMITMENTS AND CONTINGENCIES: The Company is subject to various claims and contingencies related to employment agreements, franchise disputes, lawsuits, taxes, food product purchase contracts and other matters arising out of the normal course of business. Management believes that any such claims and actions currently pending are either covered by insurance or would not have a material adverse effect on the Company's annual results of operations or financial condition if decided in a manner that is unfavorable to the Company. On March 11, 2020, the World Health Organization declared the outbreak of novel coronavirus (COVID-19) as a pandemic, and the disease has spread rapidly throughout the United States and the world. Federal, state and local responses to the COVID-19 pandemic, as well as our internal efforts to protect customers, franchisees and employees, have severely disrupted our business operations. 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. In most cases, in-store dining has now resumed subject to seating capacity limitations, social distancing protocols, and enhanced cleaning and disinfecting practices. Further, the COVID-19 pandemic has precipitated significant job losses and a national economic downturn that typically impacts the demand for restaurant food service. Although most of our domestic restaurants have continued to operate under these conditions, we have experienced temporary closures from time to time during the pandemic. The closure of one Company-owned Pie Five restaurant in January 2020 was unrelated to the COVID-19 outbreak but the quick closure of a Pie Five Unit recently acquired from a franchisee was accelerated by the pandemic. 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. The decreased aggregate retail sales have correspondingly decreased supplier rebates and franchise royalties payable to the Company. During the fourth quarter of fiscal 2020, we participated in a government-sponsored loan program. (See, "Note E--PPP Loan.") We also furloughed certain employees, reduced base salary by 20% for all remaining employees and reduced expenses. While the Company will remain focused on controlling expenses, future results of operations are likely to be materially adversely impacted. 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. 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. 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 following social distancing protocols. Any of these changes could materially adversely affect the Company’s future financial performance. However, the ultimate impact of COVID-19 on our future results of operations and liquidity cannot presently be predicted. |
SHAREHOLDERS' EQUITY |
12 Months Ended |
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Jun. 28, 2020 | |
SHAREHOLDERS' EQUITY [Abstract] | |
SHAREHOLDERS' EQUITY | NOTE J - SHAREHOLDERS’ EQUITY: On April 22, 2009, the board of directors of the Company amended the stock repurchase plan first authorized on May 23, 2007, and previously amended on June 2, 2008, by increasing the aggregate number of shares of common stock the Company may repurchase under the plan to a total of 3,016,000 shares. No shares were repurchased during fiscal 2020 and, as of June 28, 2020, there were 848,425 shares available to be repurchased under the plan. On December 5, 2017, the Company entered into an At Market Issuance Sales Agreement with B. 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 $5,000,000 from time to time through B. Riley FBR acting as agent (the “2017 ATM Offering”). The 2017 ATM Offering is being 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 28, 2020, the Company had sold an aggregate of 524,660 shares in the 2017 ATM Offering, realizing aggregate gross proceeds of $0.7 million. The Company pays to B. Riley FBR a fee equal to 3% of the gross sales price in addition to reimbursing certain costs. The Company had $15 thousand in expenses associated with the 2017 ATM Offering in fiscal 2020. |
STOCK BASED COMPENSATION PLANS |
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STOCK BASED COMPENSATION PLANS | NOTE I - STOCK BASED COMPENSATION PLANS: In June 2005, the 2005 Employee Incentive Stock Option Award Plan (the “2005 Employee Plan”) was approved by the Company’s shareholders with a plan effective date of June 23, 2005. Under the 2005 Employee Plan, officers and employees of the Company were eligible to receive options to purchase shares of the Company’s common stock. Options were granted at market value of the stock on the date of grant, were subject to various vesting and exercise periods as determined by the Compensation Committee of the board of directors and could be designated as non-qualified or incentive stock options. A total of 1,000,000 shares of common stock were authorized for issuance under the 2005 Employee Plan. The 2005 Employee Plan expired by its terms on June 23, 2015. The shareholders also approved the 2005 Non-Employee Directors Stock Award Plan (the “2005 Directors Plan”) in June 2005, to be effective as of June 23, 2005. Directors not employed by the Company were eligible to receive stock options under the 2005 Directors Plan. Options for common stock equal to twice the number of shares of common stock acquired during the previous fiscal year, up to 40,000 shares per year, were automatically granted to each non-employee director on the first day of each fiscal year. Options were granted at market value of the stock on the first day of each fiscal year, with vesting periods beginning at a minimum of six months and with exercise periods up to ten years. A total of 650,000 shares of Company common stock were authorized for issuance pursuant to the 2005 Directors Plan. The 2005 Directors Plan expired by its terms on June 23, 2015. The 2015 Long Term Incentive Plan (the “2015 LTIP”) was approved by the Company’s shareholders on November 18, 2014 and became effective June 1, 2015. Officers, employees and non-employee directors of the Company are eligible to receive awards under the 2015 LTIP. A total of 1,200,000 shares of common stock are authorized for issuance under the 2015 LTIP. Awards authorized under the 2015 LTIP include incentive stock options, non-qualified stock options, restricted shares, restricted stock units and rights (either with or without accompanying options). The 2015 LTIP provides for options to be granted at market value of the stock on the date of grant and have exercise periods determined by the Compensation Committee of the board of directors. The Compensation Committee may also determine the vesting periods, performance criteria and other terms and conditions of all awards under the 2015 LTIP. The Compensation Committee has adopted resolutions under the 2015 LTIP automatically granting to each non-employee director on the first day of each fiscal year options to purchase twice the number of shares of common stock acquired during the previous fiscal year, up to a maximum of 40,000 shares. Such options are exercisable at the market value of the stock on the first day of the fiscal year, vest six months from the date of grant and expire 10 years from the date of grant. Share based compensation expense is included in general and administrative expense in the consolidated statement of operations. Stock Options: A summary of stock option transactions under all of the Company’s stock option plans and information about fixed-price stock options is as follows:
The intrinsic value of options outstanding at June 28, 2020 was zero. The following table provides information on options outstanding and options exercisable as of June 28, 2020:
We determine fair value following the authoritative guidance as follows: Valuation and Amortization Method. We estimate the fair value of share-based awards granted using the Black-Scholes option valuation model. We amortize the fair value of all awards on a straight-line basis over the requisite service periods, which are generally the vesting periods. Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. Unless a life is specifically stated, we determine the expected life using the “simplified method” in accordance with Staff Accounting Bulletin No. 110 since we do not have sufficient historical share option exercise experience. Expected Volatility. Using the Black-Scholes option valuation model, we estimate the volatility of our common stock at the date of grant based on the historical volatility of our common stock. Risk-Free Interest Rate. We base the risk-free interest rate used in the Black-Scholes option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. Expected Dividend Yield. We have not paid any cash dividends on our common stock in the last ten years and we do not anticipate paying any cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero in the Black-Scholes option valuation model. Expected Forfeitures. We use historical data to estimate pre-vesting option forfeitures. We record stock-based compensation only for those awards that are expected to vest. At June 28, 2020, the Company had no unvested options. Stock compensation expense related to stock options of zero and $35 thousand was recognized in fiscal years 2020 and 2019, respectively. Restricted Stock Units: Restricted stock units awarded under the 2015 LTIP represent the right to receive shares of common stock upon the satisfaction of vesting requirements, performance criteria and other terms and conditions. During fiscal 2020 and 2019, there were no grants of performance-based restricted stock units. The restricted stock units granted to each recipient are allocated among performance criteria pertaining to various aspects of the Company’s business, as well as its overall operations, measured based on the second fiscal year following the date of grant. Achievement of the various performance criteria entitles the recipient to receive shares of common stock in amounts ranging from 50% to 150% of the number of restricted stock units granted. Grantees of restricted stock units do not have any rights of a stockholder, and do not participate in any distributions on our common stock, until the award fully vests upon satisfaction of the vesting schedule, performance criteria and other conditions set forth in their award agreement. Therefore, unvested restricted stock units are not considered participating securities under ASC 260, “Earnings Per Share,” and are not included in the calculation of basic or diluted earnings per share. Compensation cost is measured as an amount equal to the fair value of the restricted stock units on the date of grant and is expensed over the vesting period if achievement of the performance criteria is deemed probable, with the amount of the expense recognized based on the best estimate of the ultimate achievement level. A summary of the status of restricted stock units as of June 28, 2020 and June 30, 2019, and changes during the fiscal years then ended is presented below:
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EMPLOYEE BENEFITS |
12 Months Ended |
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Jun. 28, 2020 | |
EMPLOYEE BENEFITS [Abstract] | |
EMPLOYEE BENEFITS | NOTE H - EMPLOYEE BENEFITS: The Company has a tax advantaged savings plan that is designed to meet the requirements of Section 401(k) of the Internal Revenue Code (the “Code”). The current plan is a modified continuation of a similar savings plan established by the Company in 1985. Employees who have completed three months of service and are at least 21 years of age are eligible to participate in the plan. The plan provides that participating employees may elect to have between 1% and 15% of their compensation deferred and contributed to the plan subject to certain IRS limitations. Effective June 27, 2005, the Company has a discretionary matching contribution. Separate accounts are maintained with respect to contributions made on behalf of each participating employee. Employer matching contributions and earnings thereon are invested in the same investments as each participant’s employee deferral. The plan is subject to the provisions of the Employee Retirement Income Security Act, as amended, and is a profit-sharing plan as defined in Section 401(k) of the Code. For the fiscal year ended June 28, 2020, no matching contributions were made to the tax advantage savings plan by the Company. For the fiscal year ended June 30, 2019, total matching contributions to the tax advantaged savings plan by the Company on behalf of participating employees were approximately $39 thousand. |
LEASES |
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LEASES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES | NOTE G - LEASES: The Company leases its 19,576 square foot corporate office facility with average annual lease payments of approximately $18.00 per square foot. This lease began on January 2, 2017 and has a ten-year term. 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. The Company determines if an arrangement is a lease at inception of the arrangement. To the extent that it can be determined that an arrangement represents a lease, it is classified as either an operating lease or a finance lease. The Company does not currently have any finance leases. The Company capitalizes operating leases on the Condensed Consolidated Balance Sheets through a right of use asset and a corresponding lease liability. Right of use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Short-term leases that have an initial term of one year or less are not capitalized but are disclosed below. Short-term lease costs exclude expenses related to leases with a lease term of one month or less. Operating lease right of use assets and liabilities are recognized at the commencement date of an arrangement based on the present value of lease payments over the lease term. In addition to the present value of lease payments, the operating lease right of use asset also includes any lease payments made to the lessor prior to lease commencement less any lease incentives and initial direct costs incurred. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. 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. 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. Restaurant Space Agreements The Company rents restaurant space from third parties for its Company-owned restaurants. Restaurant space agreements are typically structured with non-cancelable terms of one to 10 years. The Company has concluded that its restaurant agreements represent operating leases with a lease term that equals the primary non-cancelable contract term. Upon completion of the primary term, both parties have substantive rights to terminate the lease. As a result, enforceable rights and obligations do not exist under the rental agreements subsequent to the primary term. The Company also subleases some of its restaurant space to third parties. The Company’s two subleases have terms that end in 2023 and 2025. The sublease agreements are noncancelable through the end of the term and both parties have substantive rights to terminate the lease when the term is complete. Sublease agreements are not capitalized and are recorded as rental income in the period that rent is received. As of June 28, 2020, the Company had no Company-owned restaurants. Information Technology Equipment The Company rents information technology equipment, primarily printers and copiers, from a third party for its corporate office location. Information technology equipment agreements are typically structured with non-cancelable terms of one to five years. The Company has concluded that its information technology equipment commitments are operating leases. Discount Rate Leases typically do not provide an implicit interest rate. Accordingly, the Company is required to use its incremental borrowing rate in determining the present value of lease payments based on the information available at the lease commencement date. The Company’s incremental borrowing rate reflects the estimated rate of interest that it would pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. The Company uses the implicit rate in the limited circumstances in which that rate is readily determinable. Lease Guarantees The Company has guaranteed the financial responsibilities of certain franchised store leases. These guaranteed leases are not considered operating leases because the Company does not have the right to control the underlying asset. If the franchisee abandons the lease and fails to meet the lease’s financial obligations, the lessor may assign the lease to the Company for the remainder of the term. If the Company does not expect to assign the abandoned lease to a new franchisee within 12 months, the lease will be considered an operating lease and a right-of-use asset and liability will be recognized. Practical Expedients and Accounting Policy Elections Certain lease agreements include lease and non-lease components. For all existing asset classes with multiple component types, the Company has utilized the practical expedient that exempts it from separating lease components from non-lease components. Accordingly, the Company accounts for the lease and non-lease components in an arrangement as a single lease component. In addition, for all existing asset classes, the Company has made an accounting policy election not to apply the lease recognition requirements to short-term leases (that is, a lease that, at commencement, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise). Accordingly, we recognize lease payments related to our short-term leases in our statement of operations on a straight-line basis over the lease term which has not changed from our prior recognition. To the extent that there are variable lease payments, we recognize those payments in our statement of operations in the period in which the obligation for those payments is incurred. The components of total lease expense for the fiscal year ended June 28, 2020, the majority of which is included in general and administrative expense, are as follows (in thousands):
Supplemental cash flow information related to operating leases is included in the table below (in thousands):
Supplemental balance sheet information related to operating leases is included in the table below (in thousands):
Weighted average remaining lease term and weighted average discount rate for operating leases are as follows:
Operating lease liabilities with enforceable contract terms that are greater than one year mature as follows (in thousands):
Premises occupied by Company-owned restaurants were leased for initial terms of five to ten years, and each has multiple renewal terms. Certain lease agreements contain either a provision requiring additional rent if sales exceed specified amounts or an escalation clause based upon a predetermined multiple. Future minimum rental payments under active non-cancelable leases with inital or remaining terms of one year or more at June 28, 2020 were as follows (in thousands):
Future minimum sublease rental income under active non-cancelable leases with initial or remaining terms of one year or more at June 28, 2020 were as follows (in thousands):
Rental expense consisted of the following (in thousands):
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INCOME TAXES |
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INCOME TAXES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | NOTE F - INCOME TAXES: Provision for income taxes from continuing operations consists of the following (in thousands):
The effective income tax rate varied from the statutory rate for the fiscal years ended June 28, 2020 and June 30, 2019 as reflected below (in thousands):
The tax effects of temporary differences that give rise to the net deferred tax assets consisted of the following (in thousands):
For the year ended June 28, 2020, the Company recorded an income tax expense of $4.1 million including federal deferred tax expense of $4.1 million and current state tax expense of $20 thousand. As of June 28, 2020, the Company had net operating loss carryforwards totaling $23.6 million that are available to reduce future taxable income and will begin to expire in 2032. Under the Tax Cuts and Jobs Act, approximately $0.8 million of the loss carryforwards are limited to 80% and do not expire. The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies. In assessing the need for a 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. During the quarter ending March 29, 2020, it was determined that the valuation allowance on deferred tax assets should be increased by $4.3 million resulting in a full valuation allowance. The Company has maintained the full valuation allowance for the year ended June 28, 2020. On March 27, 2020, President Trump signed into law the CARES Act. The legislation enacts various measures to assist companies affected by the COVID-19 pandemic. Key income tax-related provisions of the bill include temporary modifications to net operating loss utilization and carryback limitations, allowance of refundable alternative minimum tax credits, reduced limitation of charitable contributions, reduced limitations of business interest expense, and technical corrections to depreciation of qualified improvement property. |
PPP LOAN |
12 Months Ended |
---|---|
Jun. 28, 2020 | |
PPP LOAN [Abstract] | |
PPP LOAN | NOTE E - PPP LOAN: On April 13, 2020, the Company received the proceeds from a loan in the amount of $656,830 (the “PPP Loan”) from JPMorgan Chase Bank, N.A. (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 matures on April 10, 2022 and bears interest at a rate of 0.98% per annum. Commencing November 10, 2020, we are required to pay the Lender equal monthly payments of principal and interest as necessary to fully amortize by April 10, 2022 the principal amount outstanding on the PPP Loan as of October 10, 2020. We may prepay the PPP Loan at any time prior to maturity with no prepayment penalties. The PPP Loan is evidenced by a promissory note dated April 10, 2020, which contains various certifications and agreements related to the PPP, as well customary default and other provisions. The PPP Loan is unsecured by the Company and is guaranteed by the SBA. All or a portion of the PPP Loan may be forgiven by the SBA upon application by the Company accompanied by documentation of expenditures in accordance with SBA requirements under the PPP. In the event all or any portion of the PPP Loan is forgiven, the amount forgiven will be applied to outstanding principal. |
CONVERTIBLE NOTES |
12 Months Ended |
---|---|
Jun. 28, 2020 | |
CONVERTIBLE NOTES [Abstract] | |
CONVERTIBLE NOTES | NOTE D - CONVERTIBLE NOTES: On March 3, 2017, the Company completed a registered shareholder rights offering of its 4% Convertible Senior Notes due 2022 (“Notes”). Shareholders exercised subscription rights to purchase all 30,000 of the Notes at the par value of $100 per Note, resulting in gross offering proceeds to the Company of $3.0 million. The Notes bear interest at the rate of 4% per annum on the principal or par value of $100 per note, payable annually in arrears on February 15 of each year, commencing February 15, 2018. Interest is payable in cash or, at the Company’s discretion, in shares of Company common stock. The Notes mature on February 15, 2022, at which time all principal and unpaid interest will be payable in cash or, at the Company’s discretion, in shares of Company common stock. The Notes are secured by a pledge of all outstanding equity securities of our two primary direct operating subsidiaries. Noteholders may convert their Notes to common stock as of the 15th day of any calendar month, unless the Company sooner elects to redeem the Notes. The conversion price is $2.00 per share of common stock. Accrued interest will be paid through the effective date of the conversion in cash or, at the Company’s sole discretion, in shares of Company common stock. The Company determined that the Notes contained a beneficial conversion feature of $0.1 million since the market price of the Company’s common stock was higher than the effective conversion price of the Notes when issued. The beneficial conversion feature and the issuance costs of the notes aggregated $0.2 million and were considered a debt discount and are accreted into interest expense using the effective interest method over the debt maturity period. During fiscal 2020, $64 thousand of the Notes were converted to common shares. As of June 28, 2020, $1.6 million of the Notes was outstanding, offset by $48 thousand of unamortized debt issue costs and unamortized debt discounts. |
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