RAVE RESTAURANT GROUP, INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - September 30, 2020

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Exhibit 99.1


September 30, 2020

RAVE Restaurant Group, Inc. Reports Fourth Quarter
and Fiscal Year 2020 Financial Results

Dallas, Texas – RAVE Restaurant Group, Inc. (NASDAQ: RAVE) today reported financial results for the fourth quarter and fiscal year ended June 28, 2020.
 
Fourth Quarter Highlights:
 

 •
Pizza Inn domestic comparable store retail sales decreased 39% in the fourth quarter of fiscal 2020 compared to the same period of the prior year.

•
Pie Five comparable store retail sales decreased 37.9% in the fourth quarter of fiscal 2020 compared to the same period of the prior year.

•
Total revenue decreased by $1.5 million to $1.6 million for the fourth quarter of fiscal 2020 compared to the same period of the prior year.

•
Income before taxes was $32 thousand for the fourth quarter of fiscal 2020 compared to a loss before taxes of $1.1 million for the same period of the prior year.

•
The Company recorded net income of $31 thousand for the fourth quarter of fiscal 2020 compared to net loss of $0.8 million for the same period of the prior year.

•
On a fully diluted basis, net income increased $0.05 per share to $0.00 per share for the fourth quarter of fiscal 2020 compared to net loss of $0.05 per share for the same period of the prior year.

•
Cash and cash equivalents increased $1.4 million during the fourth quarter of fiscal 2020 to $3.0 million at June 28, 2020.

•
Pizza Inn domestic unit count finished at 151.

•
Pizza Inn international unit count finished at 38.

•
Pie Five domestic unit count finished at 42.

Annual Highlights:
 

 •
Fiscal 2020 contained 52 weeks compared to 53 weeks in fiscal 2019.

•
RAVE total domestic comparable store retail sales decreased 10.5% for the 53 weeks ended June 28, 2020 compared to the 53 weeks ended June 30, 2019.

•
Pizza Inn domestic comparable store retail sales for the 53 weeks ended June 28, 2020 decreased 8.8% compared to the same period of the prior year, while total domestic retail sales decreased 13.7%.



•
Pie Five comparable store retail sales for the 53 weeks ended June 28, 2020 decreased 15.7% compared to the same period of the prior year, while total system-wide retail sales decreased 37.4%.

•
Total consolidated revenue decreased 18.6% in fiscal 2020 to $10.0 million.

•
Net income before tax improved by $0.6 million to a loss of $0.2 million in fiscal 2020 compared to a loss of $0.8 million in fiscal 2019.

•
Net income decreased by $3.5 million to a net loss of $4.2 million for fiscal 2020 compared to net loss of $0.7 million in the prior year.

•
On a fully diluted basis, the Company reported a net loss of $0.28 per share in fiscal 2020 compared to net loss of $0.05 per share in the prior year.

•
Adjusted EBITDA of $0.6 million for fiscal 2020 was a $0.2 million increase from the prior year.

•
Domestic Pizza Inn units decreased by four during the year bringing domestic total units open at the end of the 2020 fiscal year to 151.

•
International Pizza Inn units decreased by ten during the year bringing the total international units open at the end of the 2020 fiscal year to 38.

•
Pie Five units decreased by sixteen during the year bringing total units open at the end of the 2020 fiscal year to 42.

“The COVID-19 pandemic has presented unprecedented challenges to both of our brands but, as our recovery efforts progress, it is encouraging to see our focus on safety, convenience, quality and value resonating with our customers,” said Brandon Solano, Chief Executive Officer of Rave Restaurant Group, Inc. “I continue to be inspired by the coordinated response from our franchisees and restaurant support team to drive traffic and incremental sales through new channels and operations.”

 “At Pizza Inn, we are focusing on safely reopening dining rooms by launching the Right-Way Buffet and relying on third-party home delivery to add new revenue streams,” said Solano.  “It’s our top priority to ensure our guests feel safe inside our dining room and our New Right-Way Buffet is our way of giving them the same buffet experience with enhanced safety measures. Guest feedback has been very positive, with many customers communicating their appreciation for the option of enjoying the same Pizza Inn variety and quality that they have loved for over 60 years. For guests who feel more comfortable enjoying Pizza Inn at home, our Contactless Buffet To-Go is still available for carryout and delivery. In addition, 40% of our system is utilizing third-party home delivery and we anticipate this number to continue to increase.”

 “A majority of our Pie Five locations are also utilizing third-party delivery and we continue to leverage the Circle of Crust loyalty app as a traffic driver for the brand,” said Solano.  “In addition, we are also working on exciting new menu enhancements that should be in test later this year and focusing efforts on operational efficiency and positive guest experience.”


Clint Fendley, Vice President of Finance at RAVE, commented, “Income before taxes of $32 thousand for the fourth quarter of fiscal 2020 reflects our aggressive efforts to control costs in the face of the reduced revenue caused by the COVID-19 pandemic.  For all of fiscal 2020, the $0.2 million loss before taxes was a $0.6 million improvement over fiscal 2019 largely as the result of reduced impairment costs.  Net loss of $4.2 million for the full 2020 fiscal year was primarily the result of income tax expense of $4.1 million attributable to a valuation allowance on our deferred tax assets taken in the third quarter.  We believe that the budgetary measures we have taken during the last several months and our financial performance during this unprecedented pandemic bode well for the future of the Company.”

Non-GAAP Financial Measures
 
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 its financial statements prepared in accordance with generally accepted accounting principles.
 
The Company considers EBITDA and Adjusted EBITDA to be important supplemental measures of operating performance that are commonly used by securities analysts, investors and other parties interested in our industry. The Company believes that EBITDA is helpful to investors in evaluating its results of operations without the impact of expenses affected by financing methods, accounting methods and the tax environment. The Company believes that Adjusted EBITDA provides additional useful information to investors by excluding non-operational or non-recurring expenses to provide a measure of operating performance that is more comparable from period to period. Management also uses these non-GAAP financial measures for evaluating operating performance, assessing the effectiveness of business strategies, projecting future capital needs, budgeting and other planning purposes.
 
“EBITDA” represents earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, stock compensation expense, severance costs, gain/loss sale of assets, costs related to impairment, closed and non-operating store costs. A reconciliation of these non-GAAP financial measures to net income is included with the accompanying financial statements.
 

Note Regarding Forward Looking Statements
 
Certain statements in this press release, other than historical information, may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are intended to be covered by the safe harbors created thereby. These forward-looking statements are based on current expectations that involve numerous risks, uncertainties and assumptions. Assumptions relating to these forward-looking statements involve judgments with respect to, among other things, future economic, competitive and market conditions, regulatory framework and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of RAVE Restaurant Group, Inc. Although the assumptions underlying these forward-looking statements are believed to be reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that any forward-looking statements will prove to be accurate. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of such information should not be regarded as a representation that the objectives and plans of RAVE Restaurant Group, Inc. will be achieved.
 
About RAVE Restaurant Group, Inc.
 
Founded in 1958, Dallas-based RAVE Restaurant Group [NASDAQ: RAVE] owns, operates, franchises and/or licenses 231 Pie Five Pizza Co. and Pizza Inn restaurants and Pizza Inn Express kiosks domestically and internationally. Pizza Inn is an international chain featuring freshly made pizzas, along with salads, pastas, and desserts. Pie Five Pizza Co. is a leader in the rapidly growing fast-casual pizza space. Pizza Inn Express, or PIE, is developing unique opportunities to provide freshly made pizza from non-traditional outlets. The Company’s common stock is listed on the Nasdaq Capital Market under the symbol “RAVE”. For more information, please visit www.raverg.com.
 
Contact:
Investor Relations
RAVE Restaurant Group, Inc.
469-384-5000

RAVE RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

   
Three Months Ended
    
Fiscal Year Ended
  
   
June 28,
2020
    
June 30,
2019
    
June 28,
2020
    
June 30,
2019
  
                         
REVENUES:
  
$
1,617
    
$
3,063
    
$
10,028
    
$
12,319
  
                                 
COSTS AND EXPENSES:
                                
Cost of sales
    
86
      
405
      
439
      
1,120
  
General and administrative expenses
    
920
      
651
      
5,503
      
5,274
  
Franchise expenses
    
487
      
937
      
3,051
      
3,778
  
Pre-opening expenses
    
-
      
-
      
-
      
-
  
Gain on sale of assets
    
(31
)
    
(301
)
    
(24
)
    
(551
)
Impairment of long-lived assets and other lease charges
    
44
      
1,275
      
880
      
1,664
  
Bad debt
    
14
      
1,054
      
53
      
1,265
  
Interest expense
    
20
      
27
      
95
      
104
  
Depreciation and amortization expense
    
45
      
81
      
186
      
466
  
Total costs and expenses
    
1,585
      
4,129
      
10,183
      
13,120
  
                                 
INCOME (LOSS) BEFORE TAXES
    
32
      
(1,066
)
    
(155
)
    
(801
)
Income tax expense (benefit)
    
1
      
(239
)
    
4,078
      
(51
)
NET INCOME (LOSS)
    
31
      
(827
)
    
(4,233
)
    
(750
)
                                 
INCOME / (LOSS) PER SHARE OF COMMON STOCK - BASIC:
  
$
0.00
    
$
(0.05
)
  
$
(0.28
)
  
$
(0.05
)
                                 
INCOME / (LOSS) PER SHARE OF COMMON STOCK - DILUTED:
  
$
0.00
    
$
(0.05
)
  
$
(0.28
)
  
$
(0.05
)
                                 
Weighted average common shares outstanding - basic
    
15,194
      
15,072
      
15,144
      
15,070
  
                                 
Weighted average common and potential dilutive common shares outstanding
    
15,992
      
15,072
      
15,144
      
15,070
  

See accompanying Notes to Consolidated Financial Statements.

RAVE RESTAURANT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)

   
June 28,
2020
    
June 30,
2019
  
             
ASSETS
            
             
CURRENT ASSETS
            
Cash and cash equivalents
  
$
2,969
    
$
2,264
  
Resticted Cash
    
234
      
233
  
Accounts receivable, less allowance for bad debts of $269 and $209, respectively
    
965
      
1,191
  
Notes receivable, less allowance for bad debt of $0 and $916, respectively
    
546
      
389
  
Inventories
    
-
      
7
  
Income tax receivable
    
-
      
4
  
Property held for sale
    
-
      
231
  
Deferred contract charges
    
44
      
38
  
Prepaid expenses and other
    
174
      
346
  
Total current assets
    
4,932
      
4,703
  
                 
LONG-TERM ASSETS
                
Property, plant and equipment, net
    
366
      
500
  
Operating lease right of use asset, net
    
3,567
      
-
  
Intangible assets definite-lived, net
    
155
      
196
  
Long-term notes receivable
    
449
      
735
  
Deferred tax asset, net
    
-
      
4,060
  
Long-term deferred contract charges
    
231
      
232
  
Deposits and other
    
5
      
-
  
Total assets
  
$
9,705
    
$
10,426
  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                
CURRENT LIABILITIES
                
Accounts payable - trade
  
$
446
    
$
400
  
Accounts payable - lease termination impairments
    
407
      
832
  
Accrued expenses
    
775
      
834
  
Deferred rent
    
0
      
37
  
Operating lease liability, current
    
632
      
0
  
Deferred revenues
    
254
      
275
  
Total current liabilities
    
2,514
      
2,378
  
                 
LONG-TERM LIABILITIES
                
Convertible notes
    
1,549
      
1,584
  
PPP Loan
    
657
      
0
  
Deferred rent, net of current portion
    
0
      
397
  
Operating lease liability, net of current portion
    
3,471
      
0
  
Deferred revenues, net of current portion
    
960
      
1,561
  
Other long-term liabilities
    
51
      
72
  
Total liabilities
    
9,202
      
5,992
  
                 
COMMITMENTS AND CONTINGENCIES (SEE NOTE J)
                
                 
SHAREHOLDERS' EQUITY
                
Common stock, $.01 par value; authorized 26,000,000 shares; issued 22,550,376 and 22,208,141 shares, respectively; outstanding 15,465,222 and 15,090,837 shares, respectively
    
225
      
222
  
Additional paid-in capital
    
33,531
      
33,327
  
Accumulated deficit
    
(8,716
)
    
(4,483
)
Treasury stock at cost Shares in treasury: 7,085,154 and 7,117,304, respectively
    
(24,537
)
    
(24,632
)
Total shareholders' equity
    
503
      
4,434
  
 
                
Total liabilities and shareholders' equity
  
$
9,705
    
$
10,426
  

See accompanying Notes to Consolidated Financial Statements.

RAVE RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

   
Fiscal Year Ended
  
   
June 28,
2020
    
June 30,
2019
  
             
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net loss
  
$
(4,233
)
  
$
(750
)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
                
Impairment of long-lived assets and other lease charges
    
880
      
1,664
  
Stock compensation expense
    
(104
)
    
36
  
Depreciation and amortization
    
145
      
423
  
Amortization of operating lease asset
    
471
      
-
  
Amortization of intangible assets definite-lived
    
41
      
43
  
Amortization of debt issue costs
    
29
      
22
  
Gain on the sale of assets
    
(24
)
    
(551
)
Provision for bad debt (accounts receivable)
    
53
      
349
  
Provision for bad debt (notes receivable)
    
-
      
916
  
Deferred income tax asset (net)
    
4,060
      
(198
)
Changes in operating assets and liabilities:
                
Accounts receivable
    
132
      
226
  
Operating notes receivable
    
104
      
50
  
Inventories
    
7
      
(1
)
Prepaid expenses, deposits and other, net
    
167
      
(446
)
Restricted Cash
    
(1
)
    
-
  
Deferred revenue
    
(587
)
    
(409
)
Accounts payable - trade
    
46
      
(21
)
Accounts payable - lease termination impairments
    
(985
)
    
(418
)
Operating lease liability
    
(494
)
    
-
  
Accrued expenses, deferred rent and other
    
(67
)
    
(276
)
Cash (used in) provided by operating activities
    
(360
)
    
659
  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Notes receivable from fixed asset sales
    
123
      
201
  
Proceeds from sale of assets
    
-
      
11
  
Capital Expenditures
    
(56
)
    
(81
)
Cash provided by investing activities
    
67
      
131
  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Proceeds from sale of stock
    
357
      
88
  
Equity issuance costs
    
(15
)
    
-
  
Proceeds from PPP Loan
    
657
      
-
  
Cash provided by financing activities
    
999
      
88
  
                 
Net increase in cash and cash equivalents
    
706
      
878
  
Cash, cash equivalents and restricted cash beginning of period
    
2,497
      
1,619
  
Cash, cash equivalents and restricted cash end of period
  
$
3,203
    
$
2,497
  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
          
                 
CASH PAID FOR:
                
Interest
  
$
66
    
$
72
  
Income taxes
  
$
18
    
$
168
  
                 
Non-cash activities:
                
Conversion of notes to common shares
  
$
64
    
$
4
  
Notes receivable from sales of fixed assets
  
$
-
    
$
654
  
Operating lease right of use assets at adoption
  
$
4,150
    
$
-
  
Operating lease liability at adoption
  
$
4,636
    
$
-
  

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

RAVE RESTAURANT GROUP, INC.
ADJUSTED EBITDA
(In thousands)

   
Three Months Ended
    
Fiscal Year Ended
  
   
June 28,
2020
    
June 30,
2019
    
June 28,
2020
    
June 30,
2019
  
Net income
  
$
31
    
$
(827
)
  
$
(4,233
)
  
$
(750
)
Interest expense
    
20
      
27
      
95
      
104
  
Income taxes
    
1
      
(239
)
    
4,078
      
(51
)
Depreciation and amortization
    
45
      
81
      
186
      
466
  
EBITDA
  
$
97
    
$
(958
)
  
$
126
    
$
(231
)
Stock compensation expense (income)
    
-
      
(374
)
    
(104
)
    
36
  
Severance
    
-
      
-
      
157
      
-
  
Pre-opening costs
    
-
      
-
      
-
      
-
  
Loss (gain) on sale/disposal of assets
    
(31
)
    
(301
)
    
(24
)
    
(551
)
Impairment of long-lived assets and other lease charges
    
44
      
1,275
      
880
      
1,664
  
Franchisee default and closed store revenue
    
(19
)
    
(63
)
    
(606
)
    
(777
)
Closed and non-operating store costs
    
87
      
87
      
137
      
238
  
Adjusted EBITDA
  
$
178
    
$
(334
)
  
$
566
    
$
379
  


RAVE RESTAURANT GROUP, INC. Reports