RAVE RESTAURANT GROUP, INC. - FORM 10-Q

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EX-31.1 - RAVE RESTAURANT GROUP, INC.	pzza10qex311122913.htm
EX-31.2 - RAVE RESTAURANT GROUP, INC.	pzza10qex312122913.htm
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EX-32.2 - RAVE RESTAURANT GROUP, INC.	pzza10qex322122913.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 29, 2013

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 0-12919

PIZZA INN HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Missouri	45-3189287
(State or other jurisdiction of	(I.R.S. Employer
Incorporation or organization)	Identification No.)

3551 Plano Parkway

The Colony, Texas 75056

(Address of principal executive offices)

(469) 384-5000

(Registrant's telephone number,

including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One)

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of February 12, 2014 8,645,288 shares of the issuer’s common stock were outstanding.

PIZZA INN HOLDINGS, INC.

Index

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements	Page

	Condensed Consolidated Statements of Operations for the three months and six months ended December 29, 2013 and December 23, 2012 (unaudited)	4

	Condensed Consolidated Balance Sheets at December 29, 2013 (unaudited) and June 30, 2013	5

	Condensed Consolidated Statements of Cash Flows for the six months ended December 29, 2013 and December 23, 2012 (unaudited)	6

	Supplemental Disclosure of Cash Flow Information for the six months ended December 29, 2013 and December 23, 2012 (unaudited)	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20

Item 4.	Controls and Procedures	20

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	21

Item 1A.	Risk Factors	21

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21

Item 3.	Defaults Upon Senior Securities	21

Item 4 .	Mine Safety Disclosures	21

Item 5.	Other Information	21

Item 6.	Exhibits	22

	Signatures	23

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PIZZA INN HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)



	Three Months Ended						Six Months Ended
	December 29,			December 23,			December 29,			December 23,
	2013			2012			2013			2012


REVENUES:	$	10,157		$	10,548		$	20,369		$	20,986

COSTS AND EXPENSES:
Cost of sales		8,610			8,875			17,458			17,667
General and administrative expenses		1,154			1,153			2,184			2,158
Franchise expenses		806			566			1,473			1,067
Pre-opening expenses		70			85			156			164
Bad debt		65			45			110			90
Interest expense		36			35			79			139
		10,741			10,759			21,460			21,285

LOSS FROM CONTINUING OPERATIONS BEFORE TAXES		(584	)		(211	)		(1,091	)		(299	)
Income tax benefit		(199	)		(103	)		(368	)		(148	)
LOSS FROM CONTINUING OPERATIONS		(385	)		(108	)		(723	)		(151	)

Loss from discontinued operations, net of taxes		(12	)		(12	)		(25	)		(27	)
NET LOSS	$	(397	)	$	(120	)	$	(748	)	$	(178	)

EARNINGS PER SHARE OF COMMON STOCK - BASIC:
Loss from continuing operations	$	(0.04	)	$	(0.01	)	$	(0.08	)	$	(0.02	)
Loss from discontinued operations		(0.01	)		-			(0.01	)		-
Net loss	$	(0.05	)	$	(0.01	)	$	(0.09	)	$	(0.02	)

EARNINGS PER SHARE OF COMMON STOCK - DILUTED:

Loss from continuing operations	$	(0.04	)	$	(0.01	)	$	(0.08	)	$	(0.02	)
Loss from discontinued operations		-			-			-			-
Net loss	$	(0.04	)	$	(0.01	)	$	(0.08	)	$	(0.02	)

Weighted average common shares outstanding - basic		8,615			8,021			8,510			8,021

Weighted average common and
potential dilutive common shares outstanding		9,246			8,184			9,115			8,172

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

PIZZA INN HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)

	December 29,			June 30,
ASSETS	2013 (unaudited)			2013

CURRENT ASSETS
Cash and cash equivalents	$	879		$	919
Accounts receivable, less allowance for bad debts
of $338 and $228, respectively		3,663			3,139
Notes receivable		212			292
Inventories		1,366			1,615
Income tax receivable		343			343
Deferred income tax assets		889			882
Prepaid expenses and other		448			307
Total current assets		7,800			7,497

LONG-TERM ASSETS
Property, plant and equipment, net		5,901			4,711
Long-term notes receivable		12			40
Long-term deferred tax asset		549			168
Deposits and other		-			119
	$	14,262		$	12,535
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade	$	2,037		$	1,572
Accrued expenses		1,817			1,749
Deferred revenues		162			169
Bank debt		250			669
Total current liabilities		4,266			4,159

LONG-TERM LIABILITIES
Bank debt, net of current portion		1,256			1,856
Deferred revenues, net of current portion		653			370
Deferred gain on sale of property		46			59
Other long-term liabilities		65			22
Total liabilities		6,286			6,466

COMMITMENTS AND CONTINGENCIES (See Note 3)

SHAREHOLDERS' EQUITY
Common stock, $.01 par value; authorized 26,000,000
shares; issued 15,711,033 and 15,312,680 shares, respectively;
outstanding 8,591,633 and 8,193,280 shares, respectively		157			153
Additional paid-in capital		12,825			10,174
Retained earnings		19,630			20,378
Treasury stock at cost
Shares in treasury: 7,119,400		(24,636	)		(24,636	)
Total shareholders' equity		7,976			6,069
	$	14,262		$	12,535

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

PIZZA INN HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Six Months Ended
	December 29,			December 23,
	2013			2012

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss	$	(748	)	$	(178	)
Adjustments to reconcile net loss to
cash provided by operating activities:
Depreciation and amortization		687			627
Gain on sale of assets		(40	)		-
Stock compensation expense		30			90
Deferred taxes		(388	)		(138	)
Provision for bad debts		110			1
Changes in operating assets and liabilities:
Notes and accounts receivable		(526	)		(319	)
Inventories		249			321
Accounts payable - trade		465			(140	)
Accrued expenses		111			100
Deferred revenue		263			(103	)
Prepaid expenses and other		(26	)		(26	)
Cash provided by operating activities		187			235

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets		40			-
Capital expenditures		(1,873	)		(1,324	)
Cash used for investing activities		(1,833	)		(1,324	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock		2,625			-
Borrowings of bank debt		-			3,160
Repayments of bank debt		(1,019	)		(2,127	)
Cash provided by financing activities		1,606			1,033

Net decrease in cash and cash equivalents		(40	)		(56	)
Cash and cash equivalents, beginning of period		919			590
Cash and cash equivalents, end of period	$	879		$	534



SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION


CASH PAYMENTS FOR:

Interest	$	79		$	141
Income taxes - net	$	1		$	-

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

PIZZA INN HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying condensed consolidated financial statements of Pizza Inn Holdings, Inc. (the "Company") have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the financial statements have been omitted pursuant to such rules and regulations. The unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company's financial position and results of operations for the interim periods reflected. Except as noted, all adjustments are of a normal recurring nature. Results of operations for the fiscal periods presented are not necessarily indicative of fiscal year-end results.

(1)	Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All appropriate intercompany 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.

Fiscal Quarters

The three month periods ended December 29, 2013 and December 23, 2012, each contained 13 weeks. The six month periods ended December 29, 2013 and December 23, 2012, each contained 26 weeks.

Revenue Recognition

The Company recognizes revenue when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. The Company's Norco division sells food and supplies to franchisees on trade accounts under terms common in the industry. Food and supply sales revenues, including shipping and handling costs, are recognized upon delivery of the product. Revenue from restaurant sales is recognized when food and beverage products are sold. The Company reports revenue net of sales taxes collected from customers and remitted to governmental taxing authorities.

Franchise revenue consists of income from license fees, royalties, and area development and foreign master license fees. License fees are recognized as income when there has been substantial performance under the agreement by the Company. Domestic license fees are generally recognized at the time the restaurant is opened. Foreign master license fees are generally recognized upon execution of the agreement as all material services relating to the sale have been substantially performed by the Company and the fee has been collected. Royalties are recognized as income when earned.

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.

Use of Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) 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 and actual results could differ materially from estimates.

Reclassification

Certain items have been reclassified in the prior year financial statements to conform to current year presentation.

(2)	Long-Term Debt

On August 28, 2012, the Company entered into a Loan and Security Agreement (the “F&M Loan Agreement”) with The F&M Bank & Trust Company (“F&M”) providing for a $2.0 million revolving credit facility (with a $500 thousand letter of credit subfacility), a $2.0 million fully funded term loan facility and a $6.0 million advancing term loan facility. An origination fee of 0.5% of the total credit facilities was paid at closing. At closing, F&M funded a $2.0 million term loan payable in 48 equal monthly installments of principal plus accrued interest at a fixed rate of 4.574% per annum. Amounts repaid under this fully funded term loan may not be reborrowed. Initial proceeds from the F&M Loan Agreement were used to repay amounts borrowed under a previous credit facility that subsequently was canceled.

On June 13, 2013 the Company entered into a First Amendment to the F&M Loan Agreement that revised certain financial covenants to address proceeds from the Company’s at-the-market offering of common stock. On September 10, 2013 the Company entered into a Second Amendment to the F&M Loan Agreement that specified the application of prepayments to the loan amortization schedule and revised certain definitions.

The Company may borrow, repay and reborrow under the revolving credit facility through August 28, 2014, at which time all amounts outstanding under the revolving credit facility mature. Availability under the revolving credit facility is limited by advance rates on eligible inventory and accounts receivable. Per annum interest on indebtedness from time to time outstanding under the revolving credit facility is computed at the Wall Street Journal prime rate plus 1.00% and is payable monthly. An unused commitment fee of 0.50% per annum is payable quarterly on the average unused portion of the revolving credit facility.

Through August 28, 2014, F&M has agreed to make up to $6.0 million in additional term loans to the Company. Advances for such additional term loans are limited by a percentage of the costs of equipment, leasehold improvements and other opening costs for new Company-owned Pie Five Units and may not be reborrowed after repayment. Interest only is payable monthly on all additional term loan advances during an annual borrowing period. At the end of each annual borrowing period, all additional term loan advances during such borrowing period become payable in 48 equal monthly installments of principal plus accrued interest. Interest on each term loan accrues at the Wall Street Journal prime rate plus 1.00% or, at the Company’s option, a fixed rate equal to the Bloomberg 4-year LIBOR swap rate plus 3.90%.

As security for the credit facilities, the Company has pledged substantially all of its assets including, but not limited to, accounts receivable, inventory and equipment. The F&M Loan Agreement contains various affirmative covenants which, among other things, require the Company to provide F&M with certain financial statements, compliance statements, reports and other information. The F&M Loan Agreement also contains various negative covenants which, among other things, require the Company to maintain certain financial ratios and restrict the ability of the Company to engage in certain activities. If an event of default occurs under the F&M Loan Agreement and any cure periods have expired, F&M may terminate all commitments under the credit facilities and declare all unpaid principal, interest and other amounts owing under the credit facilities to be immediately due and payable.

The Company was in compliance with all covenants under the F&M Loan Agreement as of December 29, 2013. As of December 29, 2013, the balance on the initial term loan facility was $1.1 million with an interest rate of 4.574%, the balance on the advancing term loan facility was $0.4 million with an interest rate of 4.25%, the balance on the revolving credit facility was zero with an interest rate of 4.25% and the Company had an outstanding letter of credit of $0.2 million.

(3)	Commitments and Contingencies

On April 22, 2009, the Company’s board of directors amended the stock purchase plan first adopted on May 23, 2007, and previously amended on June 2, 2008, to increase the number of shares of common stock the Company may repurchase to a total of 3,016,000 shares. As of December 29, 2013, up to an additional 848,425 shares could be purchased under the plan.

The Company is subject to various claims and legal actions in the ordinary course of its business. The Company believes that all such claims and actions currently pending against it are either adequately covered by insurance or would not have a material adverse effect on the Company’s annual results of operations, cash flows or financial condition if decided in a manner that is unfavorable to the Company.

(4) Stock-Based Compensation

For the three months and six months ended December 29, 2013, the Company recognized stock-based compensation expense of $15,000 and $30,000, respectively. As of December 29, 2013, unamortized stock-based compensation expense was $0.2 million.

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

	Six Months Ended
	December 29, 2013		December 23, 2012

Outstanding at beginning of year		851,306		486,506

Granted		70,392		414,800
Exercised		-		-
Forfeited/Canceled/Expired		-		-

Outstanding at end of period		921,698		901,306

Exercisable at end of period		502,506		380,706

(5)	Earnings per Share (EPS)

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).

	Three Months Ended						Six Months Ended
	December 29,			December 23,			December 29,			December 23,
	2013			2012			2013			2012
Loss from continuing operations	$	(385	)	$	(108	)	$	(723	)	$	(151	)
Discontinued operations		(12	)		(12	)		(25	)		(27	)
Net loss available to common stockholders	$	(397	)	$	(120	)	$	(748	)	$	(178	)

BASIC:
Weighted average common shares		8,615			8,021			8,510			8,021

Loss from continuing operations per share	$	(0.04	)	$	(0.01	)	$	(0.08	)	$	(0.02	)
Discontinued operations per common share		(0.01	)		-			(0.01	)		-
Net loss per common share	$	(0.05	)	$	(0.01	)	$	(0.09	)	$	(0.02	)

DILUTED:
Weighted average common shares		8,615			8,021			8,510			8,021
Dilutive stock options		631			163			605			151
Weighted average common shares outstanding		9,246			8,184			9,115			8,172


Loss from continuing operations per share	$	(0.04	)	$	(0.01	)	$	(0.08	)	$	(0.02	)
Discontinued operations per common share		-			-			-			-
Loss per common share	$	(0.04	)	$	(0.01	)	$	(0.08	)	$	(0.02	)

For the three months and six months ended December 29, 2013, no options to purchase shares of common stock were excluded from the computation of diluted EPS because the options’ exercise prices exceeded the average market price of the common shares for the period.

(6) Closed restaurants and discontinued operations

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 the 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.

Loss from discontinued operations reflects costs associated with a former Company-owned restaurant in Texas that was closed during the quarter ended September 23, 2007. This property is on the market for sub-lease. Because we believe that the property will sub-lease at or above the contracted lease rates, we have not reserved any additional costs related to our obligations under this non-cancelable lease.

(7) Income Taxes

For the three and six month period ended December 29, 2013, income tax benefit of $0.2 million and $0.4 million, respectively, was calculated on an effective income tax rate that is consistent with the statutory U.S. federal income tax rate of 34% adjusted for state income tax effects and permanent difference items. Management believes that future operations will generate sufficient taxable income, along with the reversal of temporary differences, to fully realize the net deferred tax asset of $1.4 million.

(8)	Segment Reporting

Summarized in the following tables are net sales and operating revenues, operating income and geographic information (revenues) for the Company’s reportable segments for the three month and six month periods ended December 29, 2013 and December 23, 2012 (in thousands). Operating income reported below excludes income tax provision and discontinued operations.

	Three Months Ended						Six Months Ended
	December 29,			December 23,			December 29,			December 23,
	2013			2012			2013			2012
Net sales and operating revenues:
Franchising and food and supply distribution	$	7,764		$	8,591		$	15,563		$	17,203
Company-owned restaurants (1)		2,393			1,957			4,806			3,783
Consolidated revenues	$	10,157		$	10,548		$	20,369		$	20,986

Depreciation and amortization:
Franchising and food and supply distribution	$	5		$	-		$	7		$	-
Company-owned restaurants (1)		286			259			592			483
Combined		291			259			599			483
Corporate administration and other		31			67			88			144
Depreciation and amortization	$	322		$	326		$	687		$	627

Income (loss) from continuing operations before taxes:
Franchising and food and supply distribution (2)	$	328		$	605		$	620		$	1,281
Company-owned restaurants (1) (2)		(362	)		(337	)		(803	)		(599	)
Combined		(34	)		268			(183	)		682
Corporate administration and other (2)		(550	)		(479	)		(908	)		(981	)
Operating loss	$	(584	)	$	(211	)	$	(1,091	)	$	(299	)

Geographic information (revenues):
United States	$	9,907		$	10,298		$	19,895		$	20,430
Foreign countries		250			250			474			556
Consolidated total	$	10,157		$	10,548		$	20,369		$	20,986

(1)	Company stores that were closed are included in discontinued
	operations in the accompanying Condensed Consolidated Statement
	of Operations.

(2)	Portions of corporate administration and other have been allocated to segments.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes appearing elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended June 30, 2013, and may contain certain forward-looking statements that are based on current management expectations. Generally, verbs in the future tense and the words “believe,” “expect,” “anticipate,” “estimate,” “intend,” “opinion,” “potential” and similar expressions identify forward-looking statements. Forward-looking statements in this report include, without limitation, statements relating to our business objectives, our customers and franchisees, our liquidity and capital resources, and the impact of our historical and potential business strategies on our business, financial condition, and operating results. Our actual results could differ materially from our expectations. Further information concerning our business, including additional factors that could cause actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q, are set forth in our Annual Report on Form 10-K for the year ended June 30, 2013. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The forward-looking statements contained herein speak only as of the date of this Quarterly Report on Form 10-Q and, except as may be required by applicable law, we do not undertake, and specifically disclaim any obligation to, publicly update or revise such statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Results of Operations

Overview

The Company operates and franchises pizza buffet (“Buffet Units”), delivery/carry-out (“Delco Units”) and express (“Express Units”) restaurants domestically and internationally under the trademark “Pizza Inn” and operates and franchises domestic fast casual pizza restaurants (“Pie Five Units”) under the trademarks “Pie Five Pizza Company” or “Pie Five”. We provide or facilitate food, equipment and supply distribution to our domestic and international system of restaurants through our Norco Restaurant Services Company (“Norco”) division and through agreements with third party distributors. At December 29, 2013, Company and franchised restaurants consisted of the following:

	Buffet Units		Delco Units		Express Units		Pie Five Units		Total Units
Company Owned		3		-		-		13		16

Domestic Franchise		106		27		46		5		184
International Franchise		24		52		10		-		86
Total Franchise		130		79		56		5		270

Total Units		133		79		56		18		286

Domestic restaurants are located predominantly in the southern half of the United States, with Texas, North Carolina, Arkansas and Mississippi accounting for approximately 34%, 16%, 10% and 7%, respectively, of the total number of domestic restaurants. International restaurants are located in eleven foreign countries.

Basic and diluted loss per common share increased $0.04 and $0.03, respectively, to a loss of $0.05 and $0.04, respectively, for the three month period ended December 29, 2013 compared to a loss of $0.01 in the comparable period in the prior fiscal year. The Company had a net loss for the three month period ended December 29, 2013 of $0.4 million compared to a net loss of $0.1 million for the comparable period in the prior fiscal year, on revenues of $10.2 million for the three month period ended December 29, 2013 compared to $10.5 million in the comparable period in the prior fiscal year. Earnings before interest, taxes, depreciation, amortization, and stock compensation expense (“Adjusted EBITDA”) for the three month period ended December 29, 2013 decreased $0.4 million to a loss of $0.2 million compared to earnings of $0.2 million for the comparable period in the prior fiscal year.

The increase in net loss from prior year was primarily due to lower revenue earned from franchising and food and supply distribution, partially offset by higher revenue from Company-owned restaurants, as well as by higher costs related to the continued development of the Pie Five concept. The total increased costs associated with the Pie Five development were approximately $0.3 million for the three months ended December 29, 2013.

Management believes that key performance indicators in evaluating financial results include domestic and international franchisee retail sales and the number and type of operating restaurants. The following tables summarize these key performance indicators for all franchise locations. All amounts are in thousands except the average number of units.

Franchise Stores - Total Stores	Three Months Ended				Six Months Ended
(in thousands, except average data)	December 29,		December 23,		December 29,		December 23,
	2013		2012		2013		2012
Domestic retail sales of Buffet Units	$	19,707	$	21,387	$	40,382	$	44,278
Domestic retail sales of Delco Units		1,310		1,606		2,678		3,257
Domestic retail sales of Express Units		634		840		1,319		1,753
Domestic retail sales of Pie Five Units		515		-		789		-
Total domestic retail sales	$	22,166	$	23,833	$	45,168	$	49,288

Average number of domestic Buffet Units		107		122		108		125
Average number of domestic Delco Units		26		29		26		29
Average number of domestic Express Units		44		47		43		47
Average number of domestic Pie Five Units		4		-		3		-

	Three Months Ended				Six Months Ended
	December 29,		December 23,		December 29,		December 23,
		2013		2012		2013		2012
International retail sales of Buffet Units	$	1,894	$	1,337	$	3,504	$	2,499
International retail sales of Delco Units		2,577		4,258		4,797		7,553
International retail sales of Express Units		638		291		1,021		557
Total International retail sales	$	5,109	$	5,886	$	9,322	$	10,609

Average number of International Buffet Units		23		15		22		15
Average number of International Delco Units		47		53		46		53
Average number of International Express Units		7		8		7		8

Total domestic chain-wide franchisee retail sales decreased $1.7 million, or 7.0%, and international chain-wide retail sales decreased $0.8 million, or 13.2%, for the three months ended December 29, 2013 when compared to the same period of the prior year. Total domestic chain-wide franchisee retail sales decreased $4.1 million, or 8.4%, and international chain-wide retail sales decreased $1.3 million, or 12.1%, for the six months ended December 29, 2013 when compared to the same period of the prior year.

Management also believes that a comparison of period-to-period retail sales by restaurants open throughout both periods is an important performance measure in evaluating financial results. The calculation of “comparable store sales” includes the sales results for restaurants which 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. The following tables summarize franchisee comparable store retail sales for the periods presented:

Franchise Stores - Comparable Stores	Three Months Ended				Six Months Ended
(in thousands)	December 29,		December 23,		December 29,		December 23,
	2013		2012		2013		2012
Domestic retail sales of same store Buffet Units	$	18,937	$	19,599	$	38,754	$	40,071
Domestic retail sales of same store Delco Units		1,128		1,252		2,317		2,550
Domestic retail sales of same store Express Units		571		662		1,164		1,358
Total domestic same store retail sales	$	20,636	$	21,513	$	42,235	$	43,979

International retail sales of same store Buffet Units	$	1,350	$	2,020	$	2,489	$	3,220
International retail sales of same store Delco Units		2,475		2,920		4,675		5,470
International retail sales of same store Express Units		475		262		857		514
Total International same store retail sales	$	4,300	$	5,202	$	8,021	$	9,204

Domestic comparable store franchisee retail sales decreased $0.9 million, or 4.1%, for the three months ended December 29, 2013 when compared to the same period of the prior year. International same store franchisee retail sales decreased $0.9 million, or 17.3%, for the three months ended December 29, 2013 when compared to the same period of the prior year. Domestic comparable store franchisee retail sales decreased $1.7 million, or 4.0%, for the six months ended December 29, 2013 when compared to the same period of the prior year. International same store franchisee retail sales decreased $1.2 million, or 12.9%, for the six months ended December 29, 2013 when compared to the same period of the prior year.

The following table summarizes the results and key performance indicators for the Pie Five and Pizza Inn Company-owned restaurants. We believe this information is useful to management and investors to measure the performance of the Company-owned restaurants. These indicators provide performance trend information as well as the cash flow of the restaurants before pre-opening costs and allocated corporate administration and other expenses. This information is important in evaluating the effectiveness of our business strategies and for planning and budgeting purposes. These non-GAAP financial measures should not be viewed as an alternative or substitute for our reported GAAP results. All amounts are in thousands except the store weeks, average weekly sales and the average number of units.

Pie Five - Company-Owned Restaurants	Three Months Ended						Six Months Ended
(in thousands, except store weeks and average data)	December 29,			December 23,			December 29,			December 23,
	2013			2012			2013			2012
Store weeks		156			101			296			183
Average weekly per store sales		11,805			11,408			11,820			11,553
Average number of units		12			8			11			7

Restaurant sales		1,844			1,152			3,503			2,114

Restaurant operating cash flow		69			95			150			157
Depreciation/amortization expense		(237	)		(157	)		(493	)		(279	)
Pre-opening expenses		(70	)		(85	)		(156	)		(164	)
Allocated corporate administration and other expenses		(59	)		(51	)		(100	)		(77	)
Deferred rent adjustment net of store closure/relocation costs		3			-			3			-
Loss from continuing operations before taxes		(294	)		(198	)		(596	)		(363	)


Pizza Inn - Company-Owned Restaurants	Three Months Ended						Six Months Ended
(in thousands, except store weeks and average data)	December 29,			December 23,			December 29,			December 23,
		2013			2012			2013			2012
Store weeks		42			52			94			104
Average weekly per store sales		12,839			15,483			13,733			16,047
Average number of units		3			4			4			4

Restaurant sales		549			805			1,303			1,669

Restaurant operating cash flow		(79	)		1			(138	)		37
Depreciation/amortization expense		(49	)		(102	)		(99	)		(204	)
Pre-opening expenses		-			-			-			-
Allocated corporate administration and other expenses		(29	)		(38	)		(59	)		(69	)
Deferred rent adjustment net of store closure/relocation costs		89			-			89			-
Loss from continuing operations before taxes		(68	)		(139	)		(207	)		(236	)

Store weeks represent the total number of weeks Company-owned restaurants were open during the period. Average weekly per store sales represents the average weekly revenues earned by the Company-owned restaurants that were open during the period. Restaurant operating cash flow represents the income earned by Company-owned restaurants adjusted for (1) depreciation and amortization, (2) pre-opening expenses, (3) allocated corporate administration and other expenses and (4) deferred rent adjustment net of other costs related to store closures and relocations. Pre-opening expenses consist primarily of certain costs incurred prior to the opening of a restaurant, including: (a) marketing and promotional expenses, (b) accrued rent, and (c) manager salaries, employee payroll and related training costs.

For Pie Five Company-owned restaurants, the year over year increase in average weekly per store sales in the quarter ended December 29, 2013 was primarily a result of the opening of 5 new restaurants in the prior twelve months that collectively generated higher average weekly per store sales than the existing restaurants. Pie Five Company-owned comparable store sales declined by 0.3% as compared to the same quarter in the prior fiscal year. However, excluding four days of icy weather in the Dallas/Ft. Worth market where all Company-owned Pie Five Units are located, comparable store sales for the quarter increased by 2.5% when compared to the same quarter in the prior fiscal year.

Revenues

Revenues are derived from (1) sales of food, paper products and supplies from Norco to franchisees, (2) franchise royalties and franchise fees, and (3) Company-owned restaurant operations. Financial results are dependent in large part upon the volume, pricing and cost of the products and supplies sold to franchisees. The volume of products sold by Norco to franchisees is dependent on the level of franchisee chain-wide retail sales, which are impacted by changes in comparable store sales and restaurant count, and the products sold to franchisees through Norco rather than through third-party food distributors.

Total revenues for the three month period ended December 29, 2013 and for the same period in the prior fiscal year were $10.2 million and $10.5 million, respectively. Total revenues for the six month period ended December 29, 2013 and for the same period in the prior fiscal year were $20.4 million and $21.0 million, respectively. Revenue consisted of the following:

	Three Months Ended				Six Months Ended
	December 29,		December 23,		December 29,		December 23,
	2013		2012		2013		2012
Food and supply sales	$	6,903	$	7,701	$	13,864	$	15,411
Franchise revenue		861		890		1,699		1,792
Restaurant sales		2,393		1,957		4,806		3,783
Total reveune	$	10,157	$	10,548	$	20,369	$	20,986

Food and Supply Sales

Food and supply sales by Norco include food and paper products and other distribution revenues. For the three month period ended December 29, 2013, food and supply sales decreased to $6.9 million compared to $7.7 million the same period in the prior fiscal year due primarily to a decrease in sales to franchisees as a result of a $1.7 million, or 7.0%, decrease in domestic franchisee retail sales primarily attributable to a reduction in the average number of stores open and a decrease in comparable store sales. For the six month period ended December 29, 2013, food and supply sales decreased to $13.9 million compared to $15.4 million the same period in the prior fiscal year for the same reasons.

Franchise Revenue

Franchise revenue, which includes income from domestic and international royalties and license fees, remained relatively stable for the three month period ended December 29, 2013 compared to the same period in the prior fiscal year. Decreased royalties resulting from lower Pizza Inn franchisee retail sales were largely offset by increased royalties and franchise fees from new Pie Five franchisees. Franchise revenue decreased by $0.1 million for the six month period ended December 29, 2013 compared to the same period in the prior fiscal year for the same reasons.

Restaurant Sales

Restaurant sales, which consist of revenue generated by Company-owned restaurants, increased 22.3%, or $0.4 million, to $2.4 million for the three month period ended December 29, 2013, compared to $2.0 million for the comparable period in the prior year. This increase was primarily due to the opening of two new Company-owned restaurants in the second half of fiscal 2013 and four new Company-owned restaurants in fiscal 2014, partially offset by the closing of one Company-owned restaurant in fiscal 2014. Similarly, restaurant sales increased 27.0%, or $1.0 million, to $4.8 million for the six month period ended December 29, 2013, compared to $3.8 million for the comparable period in the prior year.

Costs and Expenses

Cost of Sales

Cost of sales, which primarily includes food and supply costs, distribution fees, and labor, occupancy and general and administrative expenses directly related to restaurant sales, decreased $0.3 million or 3.0% for the three month period ended December 29, 2013 compared to the comparable period in the prior fiscal year. The decrease in costs was primarily the result of lower food and supply sales and was offset slightly by costs associated with new Company-owned restaurants. Cost of sales decreased 1.2%, or $0.2 million, for the six month period ended December 29, 2013 compared to the comparable period in the prior year. The three month and six month periods ended December 29, 2013 included a net reduction to cost of sales of $0.1 million related to the net impact of adjustments to deferred rent net of costs related to the closure of one Company-owned Pizza Inn restaurant and the relocation of one Company-owned Pie Five restaurant.

General and Administrative Expenses

General and administrative expenses remained relatively stable at $1.2 million for the three month periods ended December 29, 2013 and December 23, 2012. Additional operating expenses associated with new Company-owned Pie Five Units were largely offset by reduced stock compensation expense and recruiting fees. General and administrative expenses increased $0.1 million for the six month period ended December 29, 2013 for the same reasons.

Franchise Expenses

Franchise expenses include selling, general and administrative expenses directly related to the sale and continuing service of domestic and international franchises. These expenses increased $0.2 million for the three month period ended December 29, 2013 compared to the comparable period in the prior fiscal year primarily due to higher employee costs and franchise marketing expenses associated with the Company’s Pie Five franchising efforts. Franchise expenses increased $0.4 million for the six month period ended December 29, 2013 compared to the comparable period in the prior year for the same reasons.

Pre-Opening Expenses

Pre-opening expenses consist primarily of certain costs incurred prior to the opening of a restaurant, including: (1) marketing and promotional expenses, (2) accrued rent, and (3) manager salaries, employee payroll and related training costs. Pre-opening expenses for the three month period ended December 29, 2013, were similar to the prior year comparable period, with one new Company-owned Pie Five Unit opened and one Company-owned Pie Five Unit relocated during the current year period. Pre-opening expenses also remained stable for the six month period ended December 29, 2013 compared to the comparable period in the prior year.

Bad Debt Expense

The Company monitors franchisee retail sales and receivable balances and adjusts credit terms when necessary to minimize the Company’s exposure to high risk accounts receivable. Bad debt expense increased slightly for the three month and six month periods ended December 29, 2013 as compared to the comparable periods in the prior fiscal year.

Interest Expense

Interest expense remained relatively flat for the three month period ended December 29, 2013 as compared to the comparable period in the prior fiscal year. Interest expense decreased slightly for the six month period ended December 29, 2013 as compared to the comparable period in the prior fiscal year due to a lower average debt balance.

Provision for Income Tax

For the three month period ended December 29, 2013, an income tax benefit of $0.2 million was calculated on an effective income tax rate that is consistent with the statutory U.S. federal income tax rate of 34% adjusted for state income tax effects and permanent difference items. Management believes that future operations will generate sufficient taxable income, along with the reversal of temporary differences, to fully realize the net deferred tax asset of $1.4 million.

Discontinued Operations

Discontinued operations include losses from a leased building associated with a Company-owned restaurant in Texas that was closed during fiscal 2008.

Restaurant Openings and Closings

The following charts summarize restaurant activity for the three month and six month periods ended December 29, 2013 and December 23, 2012:

Three months ended December 29, 2013

	Beginning						End of
	of Period		Opened		Closed		Period
Pizza Inn Domestic:
Buffet Units		114		-		5		109
Delco Units		27		1		1		27
Express Units		42		5		1		46
Pizza International Units		83		3		-		86

Pie Five Units		15		3		-		18

Total		281		12		7		286

Three months ended December 23, 2012

	Beginning						End of
	of Period		Opened		Closed		Period
Domestic:
Buffet Units		130		-		4		126
Delco Units		30		1		-		31
Express Units		46		-		1		45
International Units		85		1		6		80

Pie Five Units		7		1		-		8

Total		298		3		11		290


Six months ended December 29, 2013

	Beginning						End of
	of Period		Opened		Closed		Period
Domestic:
Buffet Units		114		1		6		109
Delco Units		27		1		1		27
Express Units		43		6		3		46
International Units		81		5		-		86

Pie Five Units		11		7		-		18

Total		276		20		10		286


Six months ended December 23, 2012

	Beginning						End of
	of Period		Opened		Closed		Period
Domestic:
Buffet Units		135		-		9		126
Delco Units		29		2		-		31
Express Units		47		-		2		45
International Units		81		5		6		80

Pie Five Units		6		2		-		8

Total		298		9		17		290

We believe that the net decrease of one domestic Pizza Inn unit during the second quarter of fiscal 2014 reflects a return to an improving trend in net domestic store closures that was interrupted by the expiration of an abnormally high number of domestic franchise agreements in fiscal 2013. The addition of three new international Pizza Inn units during the second quarter of fiscal 2014 continues the trend of gradual growth in the international unit experience over the last several years. We believe that the addition of three Pie Five Units during the second quarter of fiscal 2014 reflects the beginning of an accelerated pace of growth in the opening of Pie Five Units as franchised stores begin to open pursuant to previously executed franchise development agreements and the Company continues to develop its own stores in the Dallas-Fort Worth and Houston metropolitan areas.

Non-GAAP Financial Measures

We report and discuss our operating results using financial measures consistent with GAAP. From time to time we disclose certain non-GAAP financial measures such as Adjusted EBITDA. We believe Adjusted EBITDA is useful to investors as a measure of operating performance without regard to items that can vary substantially depending upon financing and accounting methods, book value of assets, capital structures and methods by which assets have been acquired. In addition, our management uses Adjusted EBITDA in evaluating the effectiveness of our business strategies and for planning and budgeting purposes. However, this non-GAAP financial measure should not be viewed as an alternative or substitute for our reported GAAP results.

The following table sets forth a reconciliation of net income to Adjusted EBITDA for the periods shown (in thousands):

	Three Months Ended						Six Months Ended
	December 29,			December 23,			December 29,			December 23,
	2013			2012			2013			2012
Net loss	$	(397	)	$	(120	)	$	(748	)	$	(178	)
Interest expense		36			35			79			139
Income Taxes - Continuing Operations		(199	)		(103	)		(368	)		(148	)
Income Taxes - Discontinued Operations		(6	)		(6	)		(13	)		(13	)
Stock compensation expense		15			45			30			90
Depreciation and amortization		322			326			687			627
Adjusted EBITDA	$	(229	)	$	177		$	(333	)	$	517

Liquidity and Capital Resources

Our primary sources of liquidity are cash flow from operating activities, borrowings under our credit facilities and, beginning in the fourth quarter of fiscal 2013, proceeds from the sale of common stock.

Cash flows from operating activities generally reflect net income adjusted for certain non-cash items including depreciation and amortization, changes in deferred tax assets, share based compensation, and changes in working capital. Cash provided by operating activities remained relatively flat at $0.2 million for the three months ended December 29, 2013 compared to the three months ended December 23, 2012.

Cash flows from investing activities generally reflect capital expenditures for the purchase of Company assets. The Company used cash of $1.8 million for the six month period ended December 29, 2013, primarily for new Company-owned restaurants that opened or will open in the Dallas/Fort Worth, Texas area. This compares to cash used by investing activities of $1.3 million during the same period in the prior fiscal year attributable to Company-owned restaurants that opened in the Dallas/Fort Worth, Texas area.

Cash flows from financing activities generally reflect changes in the Company's borrowings and stock activity during the period. Net cash provided by financing activities was $1.6 million for the six month period ended December 29, 2013, which reflected proceeds from the sale of stock partially offset by the repayment of bank debt. Net cash provided of $1.0 million for the comparable period in the prior fiscal year reflected a net increase in borrowing.

On May 20, 2013, the Company entered into an At-the-Market Issuance Sales Agreement with MLV & Co. LLC (“MLV”) pursuant to which the Company could offer and sell shares of its common stock having an aggregate offering price of up to $3,000,000 from time to time through MLV, acting as agent (the “ATM Offering”). The ATM Offering was undertaken pursuant to Rule 415 and a shelf Registration Statement on Form S-3 which was declared effective by the SEC on May 13, 2013. On November 20, 2013, the Company and MLV amended the At-the-Market Issuance Sales Agreement and the SEC declared effective a new shelf registration statement on Form S-3 to increase the ATM Offering by $5,000,000. Through December 29, 2013, the Company had sold an aggregate of 570,714 shares in the ATM Offering, realizing aggregate net proceeds of $3.7 million.

Management believes the cash on hand combined with cash from operations and available credit facilities is sufficient to fund operations for the next 12 months.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. The Company bases its estimates on historical experience and various other assumptions that it believes are reasonable under the circumstances. Estimates and assumptions are reviewed periodically. Actual results could differ materially from estimates.

The Company believes the following critical accounting policies require estimates about the effect of matters that are inherently uncertain, are susceptible to change, and therefore require subjective judgments. Changes in the estimates and judgments could significantly impact the Company’s results of operations and financial condition in future periods.

Accounts receivable consist primarily of receivables generated from food and supply sales to franchisees and franchise royalties. The Company records a provision for doubtful receivables to allow for any amounts which may be unrecoverable based upon an analysis of the Company’s prior collection experience, customer creditworthiness and current economic trends. Actual realization of accounts receivable could differ materially from the Company’s estimates.

Inventory, which consists primarily of food, paper products and supplies primarily warehoused by the Company’s third-party distributors, is stated at lower of cost or market, with cost determined according to the weighted average cost method. The valuation of inventory requires us to estimate the amount of obsolete and excess inventory. The determination of obsolete and excess inventory requires us to estimate the future demand for the Company’s products within specific time horizons, generally six months or less. If the Company’s demand forecast for specific products is greater than actual demand and the Company fails to reduce purchasing accordingly, the Company could be required to write down inventory, which would have a negative impact on the Company’s gross margin.

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 of the assets compared to its carrying value. If impairment is recognized, the carrying value of the impaired asset is reduced to its fair value, based on discounted estimated future cash flows. During fiscal year 2013, the Company tested its long-lived assets for impairment and recognized pre-tax, non-cash impairment charges of $0.8 million related to the carrying value of two Company-owned Buffet Units in Texas and one Company-owned Pie Five Unit in Texas that has been relocated in fiscal 2014.

The Company periodically evaluates the realizability of its deferred tax assets based upon the Company’s analysis of existing tax credits by jurisdiction and expectations of the Company’s ability to utilize these tax assets through a review of estimated future taxable income and establishment of tax strategies. These estimates could be materially impacted by changes in future taxable income, the results of tax strategies or changes in tax law.

The Company recognizes food and supply revenue when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. Franchise revenue consists of income from license fees, royalties, and area development and foreign master license sales. License fees are recognized as income when there has been substantial performance of the agreement by both the franchisee and the Company, generally at the time the restaurant is opened. Royalties are recognized as income when earned.

The Company accounts for uncertain tax positions in accordance with ASC 740-10, which prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that it has taken or expects to take on a tax return. ASC 740-10 requires that a company recognize in its financial statements the impact of tax positions that meet a “more likely than not” threshold, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. As of December 29, 2013 and December 23, 2012, the Company had no uncertain tax positions.

The Company assesses its exposures to loss contingencies from legal matters based upon factors such as the current status of the cases and consultations with external counsel and provides for the exposure by accruing an amount if it is judged to be probable and can be reasonably estimated. If the actual loss from a contingency differs from management’s estimate, operating results could be adversely impacted.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for a smaller reporting company.

Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures designed to ensure that information it is required to disclose in the reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. The Company’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management, including the Company’s principal executive officer and principal financial officer, or persons performing similar functions, have evaluated the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Company’s principal executive officer and principal financial officer, or persons performing similar functions, have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report. During the most recent fiscal quarter, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is subject to claims and legal actions in the ordinary course of its business. The Company believes that all such claims and actions currently pending against it are either adequately covered by insurance or would not have a material adverse effect on the Company’s annual results of operations, cash flows or financial condition if decided in a manner that is unfavorable to the Company.

Item 1A. Risk Factors

Not required for a smaller reporting company.

Item 2. Unregistered Sales of Equity Securities and the Use of Proceeds

On May 23, 2007, the board of directors of the Company approved a stock purchase plan (the “2007 Stock Purchase Plan”) authorizing the purchase of up to 1,016,000 shares of the Company’s common stock in the open market or in privately negotiated transactions. On June 2, 2008, the Company’s board of directors amended the 2007 Stock Purchase Plan to increase the number of shares the Company may repurchase by 1,000,000 shares to a total of 2,016,000 shares. On April 22, 2009, the board of directors further amended the 2007 Stock Purchase Plan by increasing the aggregate number of shares the Company may repurchase by 1,000,000 shares to a total of 3,016,000 shares. The 2007 Stock Purchase Plan does not have an expiration date. There were no stock purchases in the three or six month periods ending December 29, 2013. As of December 29, 2013, up to an additional 848,425 shares could be purchased under the 2007 Stock Purchase Plan.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

3.1

Articles of Incorporation (filed as Exhibit 3.1 to Form 8-K filed on September 23, 2011 and incorporated herein by reference).

3.2

By-laws (filed as Exhibit 3.1 to Form 8-K filed on September 23, 2011 and incorporated herein by reference).

10.1

Amendment No. 1 to At-the-Market Issuance Sales Agreement between Pizza Inn Holdings, Inc. and MLV & Co. LLC dated November 20, 2013 (filed as Exhibit 1.1 to Form 8-K filed on November 20, 2013 and incorporated herein by reference).

31.1

Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.

31.2

Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.

32.1

Section 1350 Certification of Principal Executive Officer.

32.2

Section 1350 Certification of Principal Financial Officer.

101

Interactive data files pursuant to Rule 405 of Regulation S-T

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PIZZA INN HOLDINGS, INC.

(Registrant)

By: /s/ Randall E. Gier

Randall E. Gier

President and Chief Executive Officer

By: /s/ Christi Key

Christi Key

Controller

Dated: February 12, 2014

RAVE RESTAURANT GROUP, INC. - FORM 10-Q - February 12, 2014

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RAVE RESTAURANT GROUP, INC. Reports