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EX-32.2 - RAVE RESTAURANT GROUP, INC.ex322.htm
EX-32.1 - RAVE RESTAURANT GROUP, INC.ex321.htm
EX-31.2 - RAVE RESTAURANT GROUP, INC.ex312.htm
EX-31.1 - RAVE RESTAURANT GROUP, INC.ex311.htm
 



SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.  20549

FORM 10-Q
(Mark One)

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

    For the quarterly period ended September 25, 2016

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

Commission File Number:   0-12919

RAVE RESTAURANT GROUP, 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   No 

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   No 

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 Accelerated filer Non-accelerated filer Smaller reporting company

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

As of November 3, 2016, 10,656,551 shares of the issuer's common stock were outstanding.






 
 
 
 
 
2

RAVE RESTAURANT GROUP, INC.

Index

PART I.    FINANCIAL INFORMATION
     
Item 1.
Financial Statements
Page
     
 
Condensed Consolidated Statements of Operations for the three months
ended September 25, 2016 and September 27, 2015 (unaudited)

4
     
 
Condensed Consolidated Balance Sheets at September 25, 2016 (unaudited)
and June 26, 2016
 
5
     
 
Condensed Consolidated Statements of Cash Flows for the three months ended
September 25, 2016 and September 27, 2015 (unaudited)

6
     
 
Supplemental Disclosure of Cash Flow Information for the three months ended
September 25, 2016 and September 27, 2015 (unaudited)
 
6
     
 
Notes to Unaudited Condensed Consolidated Financial Statements
7
     
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations

11
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
18
     
Item 4.
Controls and Procedures
18

PART II.   OTHER INFORMATION

Item 1.
Legal Proceedings
 
18
Item 1A.
Risk Factors
 
19
Item 2.
 
Unregistered Sales of Equity Securities and Use of Proceeds
 
19
Item 3.
Defaults Upon Senior Securities
 
19
Item 4.
Mine Safety Disclosures
 
19
Item 5.
Other Information
 
19
Item 6.
Exhibits
20
     
Signatures
 
21

3

PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

RAVE RESTAURANT GROUP, INC.     
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
 
(In thousands, except per share amounts)     
 
(Unaudited)     
 
             
             
             
     
Three Months Ended
 
     
September 25,
   
September 27,
 
   
2016
   
2015
 
             
             
REVENUES:
 
$
15,456
   
$
14,536
 
                 
COSTS AND EXPENSES:
               
Cost of sales
   
13,882
     
12,350
 
General and administrative expenses
   
1,903
     
1,569
 
Franchise expenses
   
852
     
859
 
Pre-opening expenses
   
19
     
432
 
Loss on sale of assets
   
43
     
-
 
Other lease charges
   
169
     
-
 
Bad debt
   
53
     
103
 
Interest expense
   
-
     
1
 
Total costs and expenses
   
16,921
     
15,314
 
                 
LOSS FROM CONTINUING OPERATIONS BEFORE TAXES
   
(1,465
)
   
(778
)
Income tax expense (benefit)
   
14
     
(258
)
LOSS FROM CONTINUING OPERATIONS
   
(1,479
)
   
(520
)
                 
Loss from discontinued operations, net of taxes
   
(17
)
   
(37
)
NET LOSS
 
$
(1,496
)
 
$
(557
)
                 
LOSS PER SHARE OF COMMON STOCK - BASIC:
               
Loss from continuing operations
 
$
(0.14
)
 
$
(0.05
)
Loss from discontinued operations
   
-
     
-
 
Net loss
 
$
(0.14
)
 
$
(0.05
)
                 
LOSS PER SHARE OF COMMON STOCK - DILUTED:
               
                 
Loss from continuing operations
 
$
(0.14
)
 
$
(0.05
)
Loss from discontinued operations
   
-
     
-
 
Net loss
 
$
(0.14
)
 
$
(0.05
)
                 
Weighted average common shares outstanding - basic
   
10,469
     
10,342
 
                 
Weighted average common and
               
potential dilutive common shares outstanding
   
10,569
     
10,954
 
                 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
 

4

RAVE RESTAURANT GROUP, INC.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(In thousands, except share amounts)
 
             
   
September 25,
   
June 26,
 
ASSETS
 
2016 (unaudited)
   
2016
 
             
CURRENT ASSETS
           
Cash and cash equivalents
 
$
285
     
1,104
 
Accounts receivable, less allowance for bad debts
               
accounts of $252 and $198, respectively
   
2,714
     
2,780
 
Notes receivable
   
143
     
167
 
Inventories
   
192
     
197
 
Income tax receivable
   
194
     
194
 
Prepaid expenses and other
   
471
     
430
 
Total current assets
   
3,999
     
4,872
 
                 
LONG-TERM ASSETS
               
Property, plant and equipment, net
   
12,306
     
12,979
 
Long-term notes receivable
   
353
     
382
 
Deposits and other
   
279
     
272
 
Total assets
 
$
16,937
   
$
18,505
 
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
               
CURRENT LIABILITIES
               
Accounts payable - trade
 
$
3,239
     
3,815
 
Accrued expenses
   
1,012
     
1,220
 
Deferred rent
   
152
     
160
 
Deferred revenues
   
258
     
304
 
Total current liabilities
   
4,661
     
5,499
 
                 
LONG-TERM LIABILITIES
               
Deferred rent, net of current portion
   
1,564
     
1,710
 
Deferred revenues, net of current portion
   
1,475
     
1,440
 
Other long-term liabilities
   
479
     
453
 
Total liabilities
   
8,179
     
9,102
 
                 
COMMITMENTS AND CONTINGENCIES  (See Note 2)
               
                 
SHAREHOLDERS' EQUITY
               
Common stock, $.01 par value; authorized 26,000,000
               
shares; issued 17,775,951 and 17,460,951 shares, respectively;
               
outstanding 10,656,551 and 10,341,551 shares, respectively
   
178
     
175
 
Additional paid-in capital
   
26,626
     
25,778
 
Retained earnings
   
6,590
     
8,086
 
Treasury stock at cost
               
7,119,400 shares
   
(24,636
)
   
(24,636
)
Total shareholders' equity
   
8,758
     
9,403
 
Total liabilities and shareholders' equity
 
$
16,937
   
$
18,505
 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
 

5

RAVE RESTAURANT GROUP, INC.     
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
 
(In thousands)     
 
(Unaudited)     
 
             
     
Three Months Ended
 
     
September 25,
   
September 27,
 
   
2016
   
2015
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
             
    Net loss
 
$
(1,496
)
 
$
(557
)
Adjustments to reconcile net loss to
               
Cash provided by (used in) operating activities:
               
Depreciation and amortization
   
790
     
517
 
Stock compensation expense
   
45
     
45
 
Deferred income taxes
   
-
     
(281
)
Loss on sale of assets
   
43
     
-
 
Provision for bad debt
   
53
     
103
 
Changes in operating assets and liabilities:
               
Notes and accounts receivable
   
66
     
258
 
Inventories
   
5
     
(33
)
Accounts payable - trade
   
(577
)
   
414
 
Accrued expenses
   
(182
)
   
151
 
Deferred rent
   
(154
)
   
-
 
Deferred revenue
   
(11
)
   
116
 
Prepaid expenses and other
   
(50
)
   
10
 
Cash (used in) provided by operating activities
   
(1,468
)
   
743
 
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Proceeds from sale of assets
   
5
     
-
 
Capital expenditures
   
(162
)
   
(3,564
)
Cash used in investing activities
   
(157
)
   
(3,564
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from sale of stock
   
-
     
779
 
Proceeds from stock options
   
806
     
-
 
Cash provided by financing activities
   
806
     
779
 
                 
Net decrease in cash and cash equivalents
   
(819
)
   
(2,042
)
Cash and cash equivalents, beginning of period
   
1,104
     
5,958
 
Cash and cash equivalents, end of period
 
$
285
   
$
3,916
 
                 
                 
 
               
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION        
                 
                 
CASH PAYMENTS FOR:
               
                 
    Interest
 
$
-
   
$
1
 
Income taxes - net
 
$
25
   
$
5
 
 
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

6

RAVE RESTAURANT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying condensed consolidated financial statements of Rave Restaurant Group, 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 26, 2016.

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 September 25, 2016 and September 27, 2015, each contained 13 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.

Restricted Stock Units
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.

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.
 
 
7


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

(2) Commitments and Contingencies

On April 22, 2009 the Company's board of directors amended the 2007 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 shares to a total of 3,016,000 shares. The 2007 Stock Purchase Plan does not have an expiration date.  There were no stock repurchases in the first quarter of fiscal 2017.  As of September 25, 2016, up to an additional 848,425 shares could be repurchased under the 2007 Stock Purchase Plan.

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.

(3) Stock-Based Compensation

Stock Options:

For the three months ended September 25, 2016, and September 27, 2015, the Company recognized stock-based compensation expense related to stock options of $25 thousand and $45 thousand, respectively.  As of September 25, 2016, unamortized stock-based compensation expense related to stock options was $0.1 million.

The following table summarizes the number of shares of the Company's common stock subject to outstanding stock options:
 
 
 
<BTB>
 
Three Months Ended
 
<BTB>
 
September 25, 2016
   
September 27, 2015
 
             
Outstanding at beginning of year
 
 
847,556
     
871,798
 
                 
Granted
   
50,000
     
42,786
 
Exercised
   
(315,000
)
   
-
 
Forfeited/Canceled/Expired
   
(80,000
)
   
-
 
                 
Outstanding at end of period
   
502,556
     
914,584
 
                 
Exercisable at end of period
   
365,406
     
443,028
 

 
Restricted Stock Units:
 
For the three months ended September 25, 2016, and September 27, 2015, the Company recognized stock-based compensation expense related to restricted stock units in the amount of $20 thousand and $0.  As of September 25, 2016, unamortized stock-based compensation expense related to restricted stock units was $0.2 million.

A summary of the status of restricted stock units as of September 25, 2016, and changes during the fiscal quarter then ended is presented below:
 

8

 
Number of Restricted Stock Units
 
       
Unvested at June 26, 2016
 
 
79,620
 
Granted
   
-
 
Vested
   
-
 
Forfeited
   
(43,750
)
Unvested at September 25, 2016
   
35,870
 

 
(4) 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
 
   
September 25,
   
September 27,
 
   
2016
   
2015
 
Loss from continuing operations
 
$
(1,479
)
 
$
(520
)
Loss from discontinued operations
   
(17
)
   
(37
)
Net loss available to common stockholders
 
$
(1,496
)
 
$
(557
)
                 
BASIC:
               
Weighted average common shares
   
10,469
     
10,342
 
                 
Loss from continuing operations per common share
 
$
(0.14
)
 
$
(0.05
)
Loss from discontinued operations per common share
   
-
     
-
 
Net loss per common share
 
$
(0.14
)
 
$
(0.05
)
                 
DILUTED:
               
Weighted average common shares
   
10,469
     
10,342
 
Stock options
   
100
     
612
 
Weighted average common shares outstanding
   
10,569
     
10,954
 
                 
                 
Loss from continuing operations per common share
 
$
(0.14
)
 
$
(0.05
)
Loss from discontinued operations per common share
   
-
     
-
 
Net loss per common share
 
$
(0.14
)
 
$
(0.05
)

For the three months ended September 25, 2016, options to purchase 236,250 shares of common stock at an exercise prices ranging from $3.95 to $13.11 were excluded from the computation of diluted EPS because the options' exercise price exceeded the average market price of the common shares for the period.

(5) 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.  This pronouncement did not have a material impact on our condensed consolidated financial statements.

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.
 
 
9


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.

Discontinued operations include losses from leased buildings associated with Company-owned restaurants closed in prior years.
 

(6)            Income Taxes

For the three months ended September 25, 2016, income tax expense represents an income tax benefit of $510 thousand calculated at a rate consistent with the 34% statutory U.S. federal rate offset by an income tax expense of $515 thousand related to a valuation allowance for deferred tax assets of $510 thousand and state taxes of $5 thousand.  For the three months ended September 27, 2015, income tax expense was $.03 million.

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. The Company continues to record a full valuation allowance against its net deferred tax assets. The Company assessed whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, using a "more likely than not" standard. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of deferred tax assets. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses. Future sources of taxable income were also considered in determining the amount of the recorded valuation allowance.  Based on the Company's review of this evidence at September 25, 2016, management determined that a valuation allowance against all of the Company's deferred tax assets accruing during the first quarter of fiscal 2017 was appropriate.  There was approximately $5.4 million of deferred tax assets at September 25, 2016.

(7)            Related Party Transactions

On February 20, 2014, the Company entered into an Advisory Services Agreement (the "Agreement") with NCM Services, Inc. ("NCMS") pursuant to which NCMS will provide certain advisory and consulting services to the Company.  NCMS is indirectly owned and controlled by Mark E. Schwarz, the Chairman of the Company.  The term of the Agreement commenced December 30, 2013, and continues quarterly thereafter until terminated by either party.  Pursuant to the Agreement, NCMS was paid an initial fee of $150,000 and earns quarterly fees of $50,000 and an additional fee of up to $50,000 per quarter (not to exceed an aggregate of $100,000 in additional fees).  The quarterly and additional fees are waived if the Company is not in compliance with all financial covenants under its primary credit facility or to the extent that payment of those fees would result in non-compliance with such financial covenants.
 
(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 periods ended September 25, 2016 and September 27, 2015 (in thousands).  Operating income reported below excludes income tax provision and discontinued operations.
 
 
10


      
Three Months Ended
 
 <BTB>
 
September 25,
   
September 27,
 
     
2016
   
2015
 
 Net sales and operating revenues:
           
 Franchising and food and supply distribution
 
$
10,557
   
$
9,912
 
 Company-owned restaurants (1)
   
4,899
     
4,624
 
 Consolidated revenues
 
$
15,456
   
$
14,536
 
                   
 Depreciation and amortization:
               
 Franchising and food and supply distribution
 
$
6
   
$
6
 
 Company-owned restaurants (1)
   
687
     
443
 
 Combined
   
693
     
449
 
 Corporate administration and other
   
97
     
68
 
 Depreciation and amortization
 
$
790
   
$
517
 
                   
 Income (loss) from continuing operations before taxes:
               
 Franchising and food and supply distribution (2)
 
$
876
   
$
633
 
 Company-owned restaurants (1) (2)
   
(1,566
)
   
(663
)
 Combined
   
(690
)
   
(30
)
 Corporate administration and other (2)
   
(775
)
   
(748
)
 Loss from continuing operations before taxes
 
$
(1,465
)
 
$
(778
)
                   
 Geographic information (revenues):
               
 United States
 
$
15,261
   
$
14,335
 
 Foreign countries
   
195
     
201
 
 Consolidated total
 
$
15,456
   
$
14,536
 
 
 
               
   (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.
         

11

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 26, 2016, and may contain certain forward-looking statements that are based on current management expectations.  Generally, verbs in the future tense and the words "believe," "expect," "anticipate," "estimate," "intends," "opinion," "potential" and similar expressions identify forward-looking statements.  Forward-looking statements in this report include, without limitation, statements relating to our business objectives, our customers and franchisees, our liquidity and capital resources, and the impact of our historical and potential business strategies on our business, financial condition, and operating results.  Our actual results could differ materially from our expectations.  Further information concerning our business, including additional factors  that could cause actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q, are set forth in our Annual Report on Form 10-K for the year ended June 26, 2016.  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

Rave Restaurant Group, Inc., through its subsidiaries (collectively, the "Company" or "we,", "us" or "our") 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 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. The following chart presents information concerning Company-owned and franchised restaurants as of and for the three months ended September 25, 2016:

Three Months Ended September 25, 2016
                         
(in thousands, except unit data)
                                   
   
Pizza Inn   
   
Pie Five   
   
All Concepts
 
   
Ending
   
Retail
   
Ending
   
Retail
   
Ending
   
Retail
 
   
Units
   
Sales
   
Units
   
Sales
   
Units
   
Sales
 
                                     
 Company-Owned
   
1
   
$
192
     
30
   
$
4,707
     
31
     
4,899
 
 Domestic Franchised
   
161
     
21,911
     
62
     
10,340
     
223
     
32,251
 
 Total Domestic Units
   
162
   
$
22,103
     
92
   
$
15,047
     
254
   
$
37,150
 
                                                 
 International Franchised
   
60
                             
60
         
 
Domestic restaurants are located in 25 states predominantly situated in the southern half of the United States.  International restaurants are located in seven foreign countries.

 Basic and diluted income per common share declined $0.09 per share to a loss of $0.14 per share for the three month period ended September 25, 2016, compared to a loss of $0.05 per share in the comparable period in the prior fiscal year.  The Company had a net loss of $1.5 million for the three month period ended September 25, 2016, and net loss of $0.6 million in the comparable period in the prior fiscal year, on revenues of $15.5 million for the three month period ended September 25, 2016 compared to $14.5 million in the comparable period in the prior fiscal year.  The increase in net loss from prior year was primarily due to closed store expenses, lease termination costs and weaker sales and financial performance by Company-owned Pie Five stores.

Adjusted EBITDA for the fiscal quarter ended September 25, 2016, declined by $0.4 million compared to the prior fiscal year.  The following table sets forth a reconciliation of net income to Adjusted EBITDA for the periods shown (in thousands):
 
 
12


   
Three Months Ended
 
   
September 25,
   
September 27,
 
   
2016
   
2015
 
 Net loss
 
$
(1,496
)
 
$
(557
)
 Interest expense
   
-
     
1
 
 Income Taxes
   
14
     
(258
)
 Income Taxes--Discontinued Operations
   
(9
)
   
(19
)
 Depreciation and amortization
   
790
     
517
 
 EBITDA
 
$
(701
)
 
$
(316
)
 Stock compensation expense
   
45
     
45
 
 Pre-opening costs
   
19
     
432
 
 Loss on sale of assets
   
43
     
-
 
 Impairment charges, non-operating store costs and discontinued operations
   
410
     
67
 
 Adjusted EBITDA
 
$
(184
)
 
$
228
 

Pie Five Brand Summary

The following tables summarize certain key indicators for the Pie Five franchised and Company-owned restaurants that management believes are useful in evaluating performance.

   
Three Months Ended
 
   
September 25,
   
September 27,
 
   
2016
   
2015
 
   
(in thousands, except unit data)
 
Pie Five Retail Sales - Total Stores
           
   Domestic - Franchised
 
$
10,340
   
$
6,712
 
   Domestic - Company-owned
   
4,707
     
4,393
 
Total domestic retail sales
 
$
15,047
   
$
11,105
 
                 
Pie Five Comparable Store Retail Sales - Total
 
$
5,077
   
$
5,954
 
                 
Pie Five Average Units Open in Period
               
   Domestic - Franchised
   
59
     
32
 
   Domestic - Company-owned
   
31
     
25
 
Total domestic Units
   
90
     
57
 
Pie Five system-wide retail sales increased $3.9 million, or 35.5%, for the three month period ended September 25, 2016 when compared to the same period of the prior year.  Compared to the same fiscal quarter of the prior year, average units open in the period increased from 57 to 90.  Comparable store retail sales decreased by $0.9 million, or 14.7%, during the first quarter of fiscal 2017 compared to the same period of the prior year.

The following chart summarizes Pie Five restaurant activity for the three month period ended September 25, 2016:

   
Three Months Ended September 25, 2016
 
   
Beginning
               
Ending
 
   
Units
   
Opened
   
Closed
   
Units
 
                         
Domestic - Franchised
 
 
57
     
6
     
1
     
62
 
Domestic - Company-owned
   
31
     
-
     
1
     
30
 
Total domestic Units
   
88
     
6
     
2
     
92
 

We believe that the net addition of four Pie Five Units during the first quarter of fiscal 2017 reflects continued 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, Houston, and other metropolitan areas.
 
 
13


Pie Five - Company-Owned Restaurants
 
Three Months Ended
 
 (in thousands, except store weeks and average data)
 
September 25,
   
September 27,
 
   
2016
   
2015
 
 Store weeks
 
 
400
     
327
 
 Average weekly sales
   
11,764
     
13,297
 
 Average number of units
   
31
     
25
 
                 
 Restaurant sales (excluding partial weeks)
   
4,705
     
4,348
 
 Restaurant sales
   
4,707
     
4,393
 
                 
 Restaurant operating cash flow
   
36
     
627
 
 Allocated marketing and advertising expenses
   
(234
)
   
(220
)
 Depreciation/amortization expense
   
(676
)
   
(430
)
 Pre-opening costs
   
(19
)
   
(424
)
 Operations management and extraordinary expenses
   
(227
)
   
(164
)
 Impairment, other lease charges and non-operating store costs
   
(385
)
   
-
 
 Loss from continuing operations before taxes
   
(1,505
)
   
(611
)

Average weekly sales for Company-owned Pie Five restaurants decreased $1,533, or 11.5%, to $11,764 for the three month period ended September 25, 2016 compared to $13,297 for the same period of prior year.  Company-owned Pie Five restaurant operating cash flow decreased $0.6 million, or 94.3%, during the first quarter of fiscal 2017 compared to the same period of prior year.  Loss from continuing operations before taxes for Company-owned Pie Five stores increased $0.9 million for the three months ended September 25, 2016 compared to the same period of the prior year.  For the Pie Five Company-owned restaurants, the increase in sales was due to an increase in store count.

Pizza Inn Brand Summary 

The following tables summarize certain key indicators for the Pizza Inn franchised and Company-owned domestic restaurants that management believes are useful in evaluating performance.

   
Three Months Ended
 
   
September 25,
   
September 27,
 
   
2016
   
2015
 
Pizza Inn Retail Sales - Total Domestic Stores
 
(in thousands, except unit data)
 
Domestic Units
           
   Buffet - Franchised
 
$
20,207
   
$
20,269
 
   Delco/Express - Franchised
   
1,704
     
1,959
 
   Buffet - Company-owned
   
192
     
231
 
Total domestic retail sales
 
$
22,103
   
$
22,459
 
                 
Pizza Inn Comparable Store Retail Sales - Total Domestic
 
$
21,230
   
$
21,194
 
                 
Pizza Inn Average Units Open in Period
               
Domestic Units
               
   Buffet - Franchised
   
94
     
98
 
   Delco/Express - Franchised
   
63
     
71
 
   Buffet - Company-owned
   
1
     
1
 
Total domestic Units
   
158
     
170
 

14


Total Pizza Inn domestic retail sales decreased $0.4 million, or 1.6%, for the three months ended September 25, 2016 when compared to the same period of the prior year.  Pizza Inn domestic comparable store retail sales increased 0.2%, for the three months ended September 25, 2016 when compared to the same period of the prior year.  Loss from continuing operations before taxes for Pizza Inn Company-owned restaurants was $61 thousand for the three months ended September 25, 2016 and $52 thousand for the three months ended September 27, 2015.

The following chart summarizes Pizza Inn restaurant activity for the three month period ended September 25, 2016:

   
Three Months Ended September 25, 2016
 
   
Beginning
               
Ending
 
   
Units
   
Opened
   
Closed
   
Units
 
Domestic Units
                       
Buffet - Franchised
 
 
95
     
1
     
-
     
96
 
Delco/Express - Franchised
   
66
     
-
     
1
     
65
 
Buffet - Company-owned
   
1
     
-
     
-
     
1
 
Total domestic Units
   
162
     
1
     
1
     
162
 
                                 
International Units (all types)
   
60
     
-
     
-
     
60
 
                                 
Total Units
   
222
     
1
     
1
     
222
 

There was no change in the total domestic Pizza Inn units during the three months ended September 25, 2016.  The number of international Pizza Inn units continues to remain steady.


Non-GAAP Financial Measures and Other Terms

The Company's financial statements are prepared in accordance with United States generally accepted accounting principles ("GAAP").  However, the Company also presents and discusses certain non-GAAP financial measures that it believes are useful to investors as measures of operating performance. Management may also use such non-GAAP financial measures in evaluating the effectiveness of business strategies and for planning and budgeting purposes.  However, these non-GAAP financial measures should not be viewed as an alternative or substitute for the results reflected in the Company's GAAP financial statements.

The following key performance indicators presented herein, some of which represent non-GAAP financial measures, have the meaning and are calculated as follows:

·
"EBITDA" represents earnings before interest, taxes, depreciation and amortization.
·
 "Adjusted EBITDA" represents earnings before interest, taxes, depreciation and amortization, stock compensation expense, pre-opening expense, gain/loss on sale of assets, costs related to impairment, other lease charges, non-operating store costs and discontinued operations.
·
"Retail sales" represents the restaurant sales reported by our franchisees and Company-owned restaurants, which may be segmented by brand or domestic/international locations.
·
"System-wide retail sales" represents combined retail sales for franchisee and Company-owned restaurants for a specified brand.
·
"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) pre-opening expenses, (4) operations management and extraordinary expenses,  (5) impairment and other lease charges, and (6) non-operating store costs.
 
 
15

 
·
"Non-operating store costs" represent gain or loss on asset disposal, store closure expenses, lease termination expenses and expenses related to abandoned store sites.
·
"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.


Financial Results

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 system-wide retail sales, which are impacted by changes in comparable store sales and restaurant count, as well as the products sold to franchisees through Norco rather than through third-party food distributors.

Total revenues for the three month period ended September 25, 2016 and for the same period in the prior fiscal year were $15.5 million and $14.5 million, respectively.  Revenue consisted of the following:

   
Three Months Ended
 
   
September 25,
   
September 27,
 
   
2016
   
2015
 
Food and supply sales
 
$
9,144
   
$
8,639
 
Franchise revenue
   
1,413
     
1,273
 
Restaurant sales
   
4,899
     
4,624
 
Total revenue
 
$
15,456
   
$
14,536
 
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 September 25, 2016, food and supply sales increased to $9.1 million compared to $8.6 million the same period in the prior fiscal year due primarily to a $3.3 million, or 11.4%, increase in total domestic franchisee retail sales driven by an increase in the number of Pie Five franchisee stores.

Franchise Revenue

Franchise revenue, which includes income from domestic and international royalties and license fees, increased by $0.1 million for the three month period ended September 25, 2016 compared to the same period in the prior fiscal year.  This increase was primarily the result of higher royalties resulting from increased Pie Five franchisee retail sales.

Restaurant Sales

Restaurant sales, which consist of revenue generated by Company-owned restaurants, increased 5.9%, or $0.3 million, to $4.9 million for the three month period ended September 25, 2016, compared to $4.6 million for the comparable period in the prior year, primarily as a result of an increase store count.

Costs and Expenses:

Cost of Sales

Cost of sales, which primarily includes food and supply costs, distribution fees, and labor and general and administrative expenses directly related to restaurant sales, increased to $13.9 million for the three month periods ended September 25, 2016 compared to $12.4 million in September 27, 2015.  The increase in cost of sales was primarily the result of the addition of new Company-owned restaurants and increased food and supply sales by Norco.

General and Administrative Expenses

General and administrative expenses increased to $1.9 million for the three month period ended September 25, 2016 compared to $1.6 million for the quarter ended September 27, 2015.
 
 
16


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 remained consistent at $0.9 million for the three month periods ended September 25, 2016 and September 27, 2015.

Pre-Opening Expenses

Pre-opening expenses decreased to $19 thousand for the first quarter of fiscal 2017 compared to $0.4 million for the same quarter of fiscal 2016 due primarily to a decrease in the number of Company-owned Pie Five stores under development.

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 decreased $50 thousand for the three month period ended September 25, 2016 as compared to the comparable period in the prior fiscal year.

Interest Expense

Interest expense decreased to zero for the three month period ended September 25, 2016 as compared to $1 thousand in the comparable period in the prior fiscal year as a result of the payoff of the Company's bank credit facilities in the first quarter of fiscal 2016.

Provision for Income Tax

For the three months ended September 25, 2016, income tax expense represents an income tax benefit of $510 thousand calculated at a rate consistent with the 34% statutory U.S. federal rate offset by an income tax expense of $515 thousand related to recording a valuation allowance for deferred tax assets of $510 thousand and state taxes of $5 thousand.  For the three months ended September 27, 2015, income tax expense was $.03 million.

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. The Company continues to record a full valuation allowance against its net deferred tax assets. The Company assessed whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, using a "more likely than not" standard. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of deferred tax assets. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses. Future sources of taxable income were also considered in determining the amount of the recorded valuation allowance.  Based on the Company's review of this evidence at September 25, 2016, management determined that a valuation allowance against all of the Company's deferred tax assets accruing during the first quarter of fiscal 2017 was appropriate.  There was approximately $5.4 million of deferred tax assets at September 25, 2016.

Discontinued Operations

Discontinued operations include losses from leased buildings associated with Company-owned restaurants closed in prior years.


Liquidity and Capital Resources

Our primary sources of liquidity are cash flow from operating activities and 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 used by operating activities increased $2.2 million to cash used of $1.5 million for the period ended September 25, 2016 compared to cash provided of $0.7 million for the three months ended September 27, 2015.  This was partially the result of an increased net loss.

Cash flows from investing activities primarily reflect capital expenditures for the purchase of Company assets.  The Company used cash of $0.2 million for the three month period ended September 25, 2016, primarily for new computer upgrades.  This compares to cash used by investing activities of $3.6 million during the same period in the prior fiscal year attributable to Company-owned Pie Five restaurants that were under development during the period.
 
 
17


Cash flows from financing activities generally reflect changes in the Company's stock activity during the period.  Net cash provided by financing activities was $0.8 million for the three month periods ended September 25, 2016 and September 27, 2015.

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 "2013 ATM Offering"). The 2013 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 2013 ATM Offering by $5,000,000.  The Company ultimately sold an aggregate of 1,257,609 shares in the 2013 ATM Offering, realizing aggregate gross proceeds of $8.0 million.

On October 1, 2014, the Company entered into a new At Market Issuance Sales Agreement with MLV pursuant to which the Company could initially offer and sell shares of its common stock having an aggregate offering price of up to $5,000,000 from time to time through MLV, acting as agent (the "2014 ATM Offering").  On February 13, 2015, the aggregate offering amount of the 2014 ATM Offering was increased to $10,000,000.  The 2014 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 August 8, 2014. Through September 25, 2016, the Company had sold an aggregate of 825,763 shares in the 2014 ATM Offering, realizing aggregate gross proceeds of $8.1 million.

Management believes the cash on hand combined with cash from operations and proceeds from the 2014 ATM Offering will be 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.

Under the Company's distribution arrangements, third party distributors are responsible for maintaining system-wide distribution inventory. As a result, 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.  The valuation of such restaurant inventory requires us to estimate the amount of obsolete and excess inventory based on estimates of future retail sales by Company-owned restaurants.  Overestimating retail sales by Company-owned restaurants could result in the write-down of inventory which would have a negative impact on the gross margin of such Company-owned restaurants.

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 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.
 
 
18


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 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 the second quarter of fiscal year 2016, the Company recorded a $3.5 million valuation allowance against its net deferred tax assets. The valuation allowance was increased by $0.5 million in the third quarter of fiscal year 2016 to $4.0 million and again in the fourth quarter by $0.9 million to $4.9 million.  The Company assessed whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, using a "more likely than not" standard. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of deferred tax assets. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses. Future sources of taxable income were also considered in determining the amount of the recorded valuation allowance.  Based on the Company's review of this evidence, management determined that a full valuation allowance against all of the Company's deferred tax assets was appropriate.  Accordingly, management determined that a $0.5 million valuation allowance against the Company's deferred tax assets accruing during the first quarter of fiscal 2017 was appropriate.  There was approximately $5.4 million of deferred tax assets at September 25, 2016.


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 September 25, 2016 and September 27, 2015, 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.
 
 
19


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 Company's board of directors approved a stock purchase plan (the "2007 Stock Purchase Plan") authorizing the purchase on our behalf of up to 1,016,000 shares of our 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 of common stock the Company may repurchase by 1,000,000 shares to a total of 2,016,000 shares. On April 22, 2009 the Company's board of directors amended the 2007 Stock Purchase Plan again to increase the number of shares of common stock the Company may repurchase by 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 repurchases in the fiscal quarter ended September 25, 2016.

The Company's ability to repurchase shares of our common stock is subject to various laws, regulations and policies as well as the rules and regulations of the Securities and Exchange Commission.  Subsequent to September 25, 2016, the Company has not repurchased any outstanding shares but may make further repurchases under the 2007 Stock Purchase Plan.  The Company may also repurchase shares of our common stock other than pursuant to the 2007 Stock Purchase Plan or other publicly announced plans or programs.


Item 3. Defaults upon Senior Securities

Not applicable.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

Not applicable.

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Item 6.  Exhibits


3.1 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).

3.2 Amended and Restated By-laws 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).

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


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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.

 
RAVE RESTAURANT GROUP, INC.
(Registrant)




By: /s/ Clinton J. Coleman
Clinton J. Coleman
Interim President and Chief Executive Officer
(Principal Executive Officer)





By: /s/ Timothy E. Mullany
Timothy E. Mullany
Chief Financial Officer
(Principal Financial Officer)


 


Dated:  November 9, 2016


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