RAVE Restaurant Group, Inc.
2016 Annual Report
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
[X]
[ ]
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended June 26, 2016.
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _____ to _____.
Commission File Number 0-12919
RAVE RESTAURANT GROUP, INC.
(Exact name of registrant as specified in its charter)
Missouri
(State or jurisdiction of
incorporation or organization)
3551 Plano Parkway
The Colony, Texas
(Address of principal executive offices)
45-3189287
(I.R.S. Employer
Identification No.)
75056
(Zip Code)
Registrant’s telephone number, including area code: (469) 384-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of class
Common stock, par value $.01 each
Name of each exchange on which registered
NASDAQ Capital Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Act. Yes No
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. []
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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 definitions of “large accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act.
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 Act).
Yes ___ No
As of December 27, 2015, the last business day of the registrant’s most recently completed second fiscal
quarter, the aggregate market value of the voting and non-voting common equity held by non-affiliates was
approximately $43.7 million computed by reference to the price at which the common equity was last sold on the
NASDAQ Capital Market.
As of September 20, 2016, there were 10,656,551 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement, to be filed pursuant to Section 14(a) of the Securities
Exchange Act in connection with the registrant’s annual meeting of shareholders scheduled for November 15, 2016,
have been incorporated by reference in Part III of this report.
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Forward-Looking Statements
This Form 10-K contains certain forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995, which are intended to be covered by the safe harbors created thereby. Forward-
looking statements include statements which are predictive in nature, which depend upon or refer to future events or
conditions, or which include words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate” or similar
expressions. These statements include the plans and objectives of management for future operations, including
plans and objectives relating to future growth of our business activities and availability of funds. Statements that
address business and growth strategies, performance goals, projected financial condition and operating results, our
understanding of our competition, industry and market trends, and any other statements or assumptions that are not
historical facts are forward-looking statements.
The forward-looking statements included in this Form 10-K are based on current expectations that
involve numerous risks and uncertainties. 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 our control. Although we believe that the assumptions underlying
these forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore,
there can be no assurance that the forward-looking statements included in this Form 10-K 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 our objectives and plans will be achieved.
PART I
ITEM 1. BUSINESS.
General
Rave Restaurant Group, Inc. and its subsidiaries (collectively referred to as the “Company” or in the first
person notations of “we”, “us” and “our”) operate and franchise pizza buffet, delivery/carry-out and express
restaurants domestically and internationally under the trademark “Pizza Inn” and operate and franchise domestic fast
casual restaurants under the trademarks “Pie Five Pizza Company” or “Pie Five”. We provide or facilitate the
procurement and distribution of food, equipment and supplies to our domestic and international system of
restaurants through our Norco Restaurant Services Company (“Norco”) division and through agreements with third
party distributors.
As of June 26, 2016, we owned and operated 32 restaurants comprised of 31 Pie Five restaurants (“Pie Five
Units”) and one Pizza Inn buffet restaurant (“Buffet Unit”). As of that date, we also had 57 franchised Pie Five
Units and 221 franchised Pizza Inn restaurants. The 161 domestic franchised Pizza Inn restaurants were comprised
of 95 Buffet Units, 15 delivery/carry-out restaurants (“Delco Units”) and 51 express restaurants (“Express Units”).
The 60 international franchised Pizza Inn restaurants were comprised of 12 Buffet Units, 40 Delco Units and eight
Express Units. Domestic restaurants were located predominantly in the southern half of the United States, with
Texas, North Carolina, Arkansas and Kansas accounting for approximately 33%, 12%, 10% and 6%, respectively, of
the total number of domestic restaurants.
Our History
The Company has offered consumers affordable, high quality pizza since 1958, when the first Pizza Inn
restaurant opened in Dallas, Texas. We awarded our first franchise in 1963 and opened our first buffet restaurant in
1969. We began franchising the Pizza Inn brand internationally in the late 1970s. In 1993, our stock began trading
on the NASDAQ Stock Market, and presently trades on the NASDAQ Capital Market under the ticker symbol
“RAVE.” In June 2011, we opened the first Pie Five restaurant in Ft. Worth, Texas. In November 2012, we signed
our first franchise development agreement for Pie Five.
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Our Concepts
We operate and franchise restaurant concepts under two distinct brands: Pie Five and Pizza Inn.
Pie Five
Pie Five is a fast-casual pizza concept that creates individualized pizzas which are baked in 140 seconds in
our specially designed oven. Pizzas are created at the direction of our customers who choose from a variety of
freshly prepared and displayed toppings, cheeses, sauces and doughs and complete their purchase process in less
than five minutes. Customers can also get freshly prepared entrée and side salads, also made to order from our
recipes or at the customer's direction. They can also choose from several baked daily desserts like brownies, cookie
pies, and cakes. A variety of soft beverages are available, as well as beer and wine in some locations. Pie Five
restaurants offer items at prices from $5.99 to $11.99, and the average ticket price per meal, including a drink, was
approximately $7.75 per person for fiscal year 2016. The average per person ticket is slightly higher in restaurants
offering beer and wine.
Pie Five restaurants typically occupy leased, in-line or end-cap space of between 1,800 and 2,400 square
feet in retail strip or multi-unit retail space. The restaurants typically are located in high traffic, high visibility urban
or suburban sites in mid- to large-size metropolitan areas. With seating for 65 to 85 customers in most units, and
patio seating where available, Pie Five restaurants primarily serve lunch and dinner to families, adults and kids of all
ages. Sales are predominantly on-premise though carry out is offered as well. Future sales growth initiatives may
include expanded text ordering and catering services. Due to the relatively compact footprint of the restaurants, and
other operating advantages, we also believe Pie Five is well suited for non-traditional locations such as airports.
Pizza Inn
We operate Buffet Units, Delco Units and Express Units under the Pizza Inn brand. Buffet Units and
Delco Units feature crusts that are hand-made from dough made fresh in the restaurant each day. Our pizzas are
made with a proprietary all-in-one flour mixture, real mozzarella cheese and a proprietary mix of classic pizza
spices. In international markets, the menu mix of toppings and side items is occasionally adapted to local tastes.
Buffet Units offer dine-in, carryout and catering service and, in many cases, also offer delivery service.
Buffet Units offer a variety of pizza crusts with standard toppings and special combinations of toppings in addition
to pasta, salad, sandwiches, appetizers, desserts and beverages, including beer and wine in some locations, in an
informal, family-oriented atmosphere. We occasionally offer other items on a limited promotional basis. Buffet
Units are generally located in free standing buildings or strip center locations in retail developments in close
proximity to offices, shopping centers and residential areas. The current standard Buffet Units are between 2,100
and 4,500 square feet in size and seat 120 to 185 customers. The interior decor is designed to promote a casual,
lively, contemporary, family-style atmosphere. Some Buffet Units feature game rooms that offer a range of
electronic game entertainment for the entire family. The buffet is typically offered at prices from $6.49 to $8.49,
and the average ticket price, including a drink, was approximately $9.70 per person for fiscal year 2016. The
average per person ticket is slightly higher in restaurants offering beer and wine.
Delco Units offer delivery and carryout service only and are typically located in shopping centers or other
in-line retail developments. Delco Units typically offer a variety of crusts and some combination of side items.
Delco Units occupy approximately 1,200 square feet, are primarily production facilities and, in most instances, do
not offer seating. The decor of the Delco Unit is designed to be bright and highly visible and feature neon lighted
displays and awnings. We have attempted to locate Delco Units strategically to facilitate timely delivery service and
to provide easy access for carryout service.
Express Units serve our customers through a variety of non-traditional points of sale. Express Units are
typically located in a convenience store, food court, college campus, airport terminal, travel plaza, athletic facility or
other commercial facility. They have limited or no seating and solely offer quick carryout service of a limited menu
of pizza and other foods and beverages. An Express Unit typically occupies approximately 200 to 400 square feet
and is commonly operated by the operator or food service licensee of the commercial host facility. We have
developed a high-quality pre-prepared crust that is topped and cooked on-site, allowing this concept to offer a lower
initial investment and reduced labor and operating costs while maintaining product quality and consistency. Like
Delco Units, Express Units are primarily production-oriented facilities and, therefore, do not require all of the
equipment, labor or square footage of the Buffet Unit.
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Site Selection
We consider the restaurant site selection process critical to a restaurant’s long-term success and devote
significant resources to the investigation and evaluation of potential sites. The site selection process includes a
review of trade area demographics through the use of a third party customer and site selection tool, as well as a
proprietary evaluation process. We may also rely on a franchisee’s knowledge of the trade area and market
characteristics when selecting a location for a franchised restaurant. A member of our development team visits each
potential domestic restaurant location.
Development and Operations
New Unit Development
We intend to expand the Pizza Inn system domestically and internationally in markets with significant
long-term growth potential and where we believe we can use our competitive strengths to establish brand
recognition and gain local market share. While we plan to expand our Pizza Inn branded domestic restaurant base
primarily through opening new franchised restaurants with new and existing franchisees, we will continue to
evaluate our mix of Company-owned and franchised restaurants. We will evaluate the development of new Pizza
Inn Buffet and Delco Units in international markets in fiscal 2017, particularly in the Middle East.
In appropriate circumstances, we grant area developer rights for Pizza Inn restaurants in new and existing
domestic markets. A Pizza Inn area developer typically pays a negotiated fee to purchase the right to operate or
develop restaurants within a defined territory and, typically, agrees to a multi-restaurant development schedule. The
area developer assists us in local franchise service and quality control in exchange for half of the franchise fees and
royalties from all restaurants within the territory during the term of the agreement.
In fiscal 2017, we intend to continue developing franchised Pie Five Units. As of September 12, 2016, we
had 62 franchised units open and had executed multi-year development agreements with 23 franchisees for up to an
additional 347 Pie Five Units to be located in the U.S., including Arizona, Arkansas, Colorado, Delaware, Florida,
Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Missouri, Nebraska, New Jersey, New
Mexico, North Carolina, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Virginia, Wisconsin and Washington
D.C. The number of Pie Five Units subject to a development agreement is scaled relative to the estimated
development potential of the specified geographic area and requires the franchisee to achieve specified unit
development milestones over a period of time, typically five years, to maintain their development rights in the area.
The rate at which we will be able to continue to expand the Pie Five concept through franchise development is
determined in part by our success at selecting qualified franchisees, by our ability to identify satisfactory sites in
appropriate markets and by our ability to continue training and monitoring our franchisees. We intend to continue to
focus on franchise development opportunities with experienced, well-capitalized, multi-restaurant operators.
In fiscal 2017, we also intend to continue to develop Company-owned Pie Five Units in selected
metropolitan areas throughout the United States. Our ability to open new Company-owned Pie Five Units is largely
dependent on our ability to identify and secure suitable locations, to manage and fund the development of such
locations and to train and staff the restaurants.
Domestic Franchise Operations
Franchise and development agreements. We discontinued offering new Delco Franchises during fiscal
2014. Our current standard forms of franchise agreements provide for the following basic terms:
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Since the Pizza Inn concept was first franchised in 1963, industry franchising concepts and development
strategies have evolved, and our present franchise relationships are evidenced by a variety of contractual forms.
Common to those forms are provisions that: (i) require the franchisee to follow the Pizza Inn system of restaurant
operation and management, (ii) require the franchisee to pay a franchise fee and continuing royalties, and (iii) except
for Express Units, prohibit the development of one restaurant within a specified distance from another.
We launched the franchise program for Pie Five in fiscal 2013. Based on the Pie Five development
agreements currently in effect, we anticipate allocating significant internal resources to the growth of our Pie Five
franchise and development operation in fiscal 2017. Our Pie Five franchise agreement requires that the franchisees:
(i) follow the Pie Five system of restaurant operation and management, (ii) pay a franchise fee and continuing
royalties, (iii) contribute a specified percentage of sales to a marketing fund managed by the Company, and (iv) only
open restaurants that comply with site and design standards determined by the Company.
Training. We offer numerous training programs for the benefit of franchisees and their restaurant crew
managers. The training programs, taught by experienced Company employees, focus on food preparation, service,
cost control, sanitation, safety, local store marketing, personnel management and other aspects of restaurant
operation. The training programs include group classes, supervised work in Company-owned restaurants and
special field seminars. Initial and certain supplemental training programs are offered free of charge to franchisees,
who pay their own travel and lodging expenses. New franchisees also receive on-site training from Company
employees to assist with their first two restaurant openings under their development agreements. Restaurant
managers train their staff through on-the-job training, utilizing video and printed materials produced by us.
Standards. We require franchisee adherence to a variety of standards designed to ensure proper operations
and to protect and enhance the Pie Five and Pizza Inn brands. All franchisees are required to operate their
restaurants in compliance with these written policies, standards and specifications, which include matters such as
menu items, ingredients, materials, supplies, services, furnishings, decor and signs. Our efforts to maintain
consistent operations may result, from time to time, in the closing of certain restaurants that have not achieved and
maintained a consistent standard of quality or operations. We also maintain adherence to our standards through
ongoing support and education of our franchisees by our franchise business consultants, who are deployed locally in
markets where our franchisees are located.
Company-Owned Restaurant Operations
As of June 26, 2016, we operated one Buffet Unit and 31 Pie Five Units, in the Dallas/Fort Worth,
Houston, Atlanta, Minneapolis and Chicago metropolitan areas. We do not currently intend to operate any Delco
Units or Express Units. Our ability to open Company-owned restaurants is affected by a number of factors,
including the terms of available financing and our ability to locate suitable sites, negotiate acceptable lease or
purchase terms, secure appropriate local governmental permits and approvals, supervise construction and recruit and
train management personnel. In addition to generating revenues and earnings, we use domestic Company-owned
restaurants as test sites for new products and promotions as well as restaurant operational improvements and as a
forum for training new managers and franchisees.
Developing Company-owned Pie Five Units in multiple metropolitan areas is a key component of our
strategic plan. In addition to providing the Company with an attractive economic return, we believe that developing
a domestic network of Company-owned Pie Five Units is an important aspect of our strategy for growing the Pie
Five system. Growth in both the franchised and Company-owned Pie Five Units in operation improves the system’s
overall economies of scale for advertising, marketing, information systems, distribution and procurement of food
products, and other costs.
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Buffet UnitExpress UnitPie Five UnitDevelopment fee per unit- - 5,000 Franchise fee per unit25,000 5,000 20,000 Initial franchise term20 years5 years10 yearsRenewal period10 years5 years5 yearsRoyalty rate % of sales4%5%6%National Ad fund % of sales1%2%2%Require total ad spending % of sales5%2%5%Pizza Inn
International Franchise Operations
We also offer master license rights to develop Pizza Inn restaurants in certain foreign countries, with
negotiated fees, development schedules and ongoing royalties. A master licensee for a foreign country pays a
negotiated fee to purchase the right to develop and operate Pizza Inn restaurants within a defined territory, typically
for a term of 20 years, plus a ten-year renewal option. The master licensee agrees to a multi-restaurant development
schedule and we train the master licensee to monitor and assist franchisees in their territory with local service and
quality control, with support from us. In return, the master licensee typically retains half the franchise fees and half
the royalties on all restaurants within the territory during the term of the agreement. Master licensees may open
restaurants that they own and operate, or they may open sub-franchised restaurants owned and operated by third
parties through agreements with the master licensee, but subject to our approval.
Our first franchised restaurant outside of the United States opened in the late 1970s. As of June 26, 2016,
there were 60 Pizza Inn restaurants operating internationally. With the exception of two restaurants in Honduras and
one in Bangladesh, all of the restaurants operated or sub-licensed by our international master licensees are in the
United Arab Emirates, Saudi Arabia and adjoining countries. Our ability to continue to develop select international
markets is affected by a number of factors, including our ability to locate experienced, well-capitalized developers
who can commit to an aggressive multi-restaurant development schedule and achieve maximum initial market
penetration with minimal supervision by us. In the future, we may also pursue international opportunities for the
development of Pie Five franchisees.
Food and Supply Distribution
Our Norco division provides product sourcing, purchasing, quality assurance, research and development,
franchisee order and billing services, and logistics support functions for both the Pizza Inn and Pie Five restaurant
systems. We outsource our warehousing and distribution services to reputable and experienced restaurant
distribution companies, including Performance Food Group, Inc. and its affiliates. The distributors make deliveries
to all domestic restaurants from several distribution centers, with delivery territories and responsibilities for each
determined according to geographical region. We believe this division of responsibilities for our purchasing,
franchisee support and distribution systems has resulted in lower operating costs and logistical efficiencies. Norco
also arranges for the distribution of certain products and equipment to some international franchisees.
Effective in the third quarter of fiscal 2015, we changed our distribution arrangements to shift the
responsibility for maintaining system-wide inventory from Norco to third party distributors. As a result, as of June
26, 2016 and June 28, 2015, inventory consisted primarily of food, paper products and supplies stored in and used
by Company restaurants.
Norco is able to leverage the advantages of direct vendor negotiations and volume purchasing of food,
equipment and supplies for the franchisees’ benefit in the form of a concentrated, one-truck delivery system,
competitive pricing and product consistency. Franchisees are able to purchase all products and ingredients from
Norco and have them delivered by experienced and efficient distributors. In order to assure product quality and
consistency, our franchisees are required to purchase from Norco certain food products that are proprietary to the
Pizza Inn and Pie Five systems, including cheese, pizza sauce, flour mixture, certain meats and spice blend. In
addition, franchisees purchase other non-proprietary food products and supplies from Norco. Alternatively,
franchisees may also purchase non-proprietary products and supplies from other suppliers who meet our
requirements for quality and reliability.
Non-proprietary food and ingredients, equipment and other supplies sold by Norco are generally available
from several qualified sources. With the exception of several proprietary food products, such as cheese and dough
flour, we are not dependent upon any one supplier or a limited group of suppliers. We contract with established
food processors for the production of our proprietary products according to our specifications.
We have not experienced any significant shortages of supplies or any delays in receiving our food or
beverage inventories, restaurant supplies or products, and do not anticipate any difficulty in obtaining inventories or
supplies in the foreseeable future. Prices charged to us by our suppliers are subject to fluctuation, and we typically
pass increased costs or savings on to our franchisees through changes in product pricing. We do not engage in
commodity hedging but enter into pricing arrangements for up to a year in advance for certain high volume
products.
Marketing and Advertising
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By communicating a common brand message at the regional, local market and restaurant levels, we believe
we can create and reinforce a strong, consistent marketing message to consumers and increase our market share. We
offer or facilitate a number of ways for the brand image and message to be promoted at the local and regional levels.
The Pizza Inn Advertising Plan Cooperative (“PIAP Cooperative”) is a Texas cooperative association that
is responsible for creating and producing various marketing programs and materials, which may include print and
digital advertisements, direct mail materials, social media and e-mail marketing, television and radio commercials,
in-store promotional materials, and related marketing and public relations services. Each operator of a domestic
Buffet Unit or Delco Unit is entitled to membership in PIAP Cooperative. Nearly all of our existing Pizza Inn
franchise agreements for Buffet Units and Delco Units require the franchisees to become members of PIAP
Cooperative. Members contribute 1% of their sales to PIAP Cooperative. PIAP Cooperative is managed by a board
of trustees comprised of franchisee representatives who are elected by the members each year. We do not have any
ownership interest in PIAP Cooperative. We provide certain administrative, marketing and other services to PIAP
Cooperative and are paid by PIAP Cooperative for such services. As of June 26, 2016, the Company-owned Buffet
Unit and substantially all of our domestic franchisees were members of PIAP Cooperative. Operators of Express
Units do not participate in PIAP Cooperative. However, they contribute up to 1% of their sales directly to us to help
fund purchases of Express Unit marketing materials and similar expenditures. International franchisees do not
participate in PIAP Cooperative.
In the past year we have allocated additional resources to the development and execution of marketing
programs for the Pie Five restaurant system to benefit Pie Five franchisees and Company-owned restaurants in
different metropolitan areas. Pie Five franchisees contribute a specified percentage of their sales to the Company to
fund the creation and production of various marketing and advertising programs and materials, which may include
print and digital advertisements, direct mail materials, customer satisfaction systems, social media and e-mail
marketing, television and radio commercials, in-store promotional materials, and related marketing and public
relations services. We anticipate continuing to expand Pie Five marketing activities commensurate with the growth
of the Pie Five system.
Pizza Inn and Pie Five franchisees are required to conduct independent marketing efforts in addition to
their participation in the national marketing programs for each brand. We provide Company-owned and franchised
restaurants with access to an assortment of local store marketing materials, including pre-approved print, radio, and
digital media marketing materials. We also provide local store marketing materials and programs specifically to
support new restaurant openings.
Trademarks and Quality Control
We own various trademarks, including the names “Pizza Inn” and “Pie Five,” that are used in connection
with the restaurants and have been registered with the United States Patent and Trademark Office. The duration of
our trademarks is unlimited, subject to periodic renewal and continued use. In addition, we have obtained trademark
registrations for our marks in several foreign countries and have periodically re-filed and applied for registration in
others. We believe that we hold the necessary rights for protection of the trademarks essential to our business.
Government Regulation
We and our franchisees are subject to various federal, state and local laws affecting the operation of our
restaurants. Each restaurant is subject to licensing and regulation by a number of governmental authorities, which
include health, safety, sanitation, wage and hour, alcoholic beverage, building and fire agencies in the state or
municipality in which the restaurant is located. Difficulties in obtaining, or the failure to obtain, required licenses or
approvals could delay or prevent the opening of a new restaurant or require the temporary or permanent closing of
existing restaurants in a particular area.
We are subject to Federal Trade Commission (“FTC”) regulation and to various state laws regulating the
offer and sale of franchises. The FTC requires us to furnish to prospective franchisees a franchise disclosure
document containing prescribed information. Substantive state laws that regulate the franchisor-franchisee
relationship presently exist in a number of states, and bills have been introduced in Congress from time to time that
would provide for further federal regulation of the franchisor-franchisee relationship in certain respects. Some
foreign countries also have disclosure requirements and other laws regulating franchising and the franchisor-
franchisee relationship.
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Employees
As of September 12, 2016, we had 558 employees, including 48 in our corporate office and 44 full-time
and 466 part-time employees at the Company-owned restaurants. None of our employees are currently covered by
collective bargaining agreements.
Industry and Competition
The restaurant industry is intensely competitive with respect to price, service, location and food quality,
and there are many well-established competitors with substantially greater brand recognition and financial and other
resources than the Company. Competitors include a large number of international, national and regional restaurant
and pizza chains, as well as local restaurants and pizza operators. Some of our competitors may be better
established in the markets where our restaurants are or may be located. Within the pizza segment of the restaurant
industry, we believe that our primary competitors are national pizza chains and several regional chains, including
chains executing a “take and bake” concept. We also compete against the frozen pizza products available at grocery
stores and large superstore retailers. In recent years several competitors have developed fast-casual pizza concepts
that compete with Pie Five in certain metropolitan areas. A change in the pricing or other market strategies of one
or more of our competitors could have an adverse impact on our sales and earnings.
With respect to the sale of franchises, we compete with many franchisors of restaurants and other business
concepts. We believe that the principal competitive factors affecting the sale of franchises are product quality, price,
value, consumer acceptance, franchisor experience and support, and the quality of the relationship maintained
between the franchisor and its franchisees. In general, there is also active competition for management personnel
and attractive commercial real estate sites suitable for our restaurants.
Our Norco division competes with both national and local distributors of food and other restaurant
suppliers. The distribution industry is very competitive. We believe that the principal competitive factors in the
distribution industry are product quality, customer service and price. Norco or its designees are the sole authorized
suppliers of certain proprietary products that all Pizza Inn or Pie Five restaurants are required to use.
ITEM 1A. RISK FACTORS.
Not required for a smaller reporting company.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 2. PROPERTIES.
The Company leases its 38,130 square foot corporate office facility pursuant to a sale-leaseback transaction
with average annual lease payments of approximately $11.00 per square foot. This lease began on December 19,
2006 and has a ten year term. The Company is in discussions with the landlord to extend the lease, and is also
evaluating alternative options.
As of June 26, 2016, the Company also operated one Pizza Inn Buffet Unit and 31 Pie Five Units from
leased locations. The operating leases cover premises from 1,765 to 4,634 square feet and have initial terms of from
five to ten years at base rental rates of $18.00 to $42.00 per square foot and contain provisions permitting renewal
for one or more specified terms.
The Company has lease obligations for six non-operating locations. These leased properties range in size
from 2,022 to 4,000 square feet, have annual rental rates ranging from approximately $33.00 to $57.00 per square
foot and expire between 2020 and 2026. The Company is currently pursuing alternatives for subleasing or
terminating the unexpired leases.
ITEM 3. LEGAL PROCEEDINGS.
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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 4. MINE SAFETY DISCLOSURES.
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
As of August 19, 2016, there were approximately 1,918 stockholders of record of the Company's common
stock.
The Company had no sales of unregistered securities during fiscal 2016 or 2015.
The Company's common stock is listed on the Capital Market of the NASDAQ Stock Market, LLC
(“NASDAQ”) under the symbol “RAVE”. The following table shows the highest and lowest price per share of the
common stock during each quarterly period within the two most recent fiscal years, as reported by NASDAQ. Such
prices reflect inter-dealer quotations, without adjustment for any retail markup, markdown or commission.
The Company did not pay any dividends on its common stock during the fiscal years ended June 26, 2016
or June 28, 2015. Any determination to pay cash dividends in the future will be at the discretion of the Company’s
board of directors and will be dependent upon the Company’s results of operations, financial condition, capital
requirements, contractual restrictions and other factors deemed relevant. Currently, there is no intention to pay any
dividends on our common stock.
2007 Stock Purchase Plan
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 purchases in the fiscal year ended June 26, 2016.
The Company’s ability to purchase 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 (the “SEC”). Subsequent
to June 26, 2016, the Company has not repurchased any outstanding shares but may make further purchases under
the 2007 Stock Purchase Plan. The Company may also purchase shares of our common stock other than pursuant to
the 2007 Stock Purchase Plan or other publicly announced plans or programs.
12
HighLowFiscal 2016:Fourth Quarter Ended 6/26/20165.57$ 3.88$ Third Quarter Ended 3/27/20167.74 4.50 Second Quarter Ended 12/27/20159.70 5.40 First Quarter Ended 9/27/201514.47 8.88 Fiscal 2015:Fourth Quarter Ended 6/28/201515.93$ 10.72$ Third Quarter Ended 3/29/201516.20 6.96 Second Quarter Ended 12/28/20148.23 6.12 First Quarter Ended 9/28/20148.63 5.96
Equity Compensation Plan Information
The following table furnishes information with respect to the Company’s equity compensation plans as of
June 26, 2016:
Additional information regarding equity compensation can be found in the notes to the consolidated
financial statements.
ITEM 6. SELECTED FINANCIAL DATA
Not required for a smaller reporting company.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements and
accompanying notes appearing elsewhere in this Annual Report on Form 10-K and may contain certain forward-
looking statements. See “Forward-Looking Statements.”
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
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 June 26, 2016, Company-owned and franchised restaurants consisted of the following (in
thousands, except unit data):
13
Number of securities toWeighted-averageNumber of securitiesbe issued upon exerciseexercise price of remaining available for Planof outstanding options, outstanding options, future issuance underCategorywarrants, and rightswarrants, and rightsequity compensation plansEquity compensationplans approved bysecurity holders847,556 $3.771,056,284 Equity compensationplans not approved bysecurity holders- $ - - Total847,556 $3.771,056,284 EndingRetailEndingRetailEndingRetailUnitsSalesUnitsSalesUnitsSalesCompany-Owned1 858$ 31 19,629$ 32 20,487$ Domestic Franchised161 87,804 57 33,681 218 121,485 Total Domestic Units162 88,662$ 88 53,310$ 250 141,972$ International Franchised60 - 60 Pizza InnPie FiveAll Concepts
The domestic restaurants were located in 26 states predominately situated in the southern half of the United
States. The international restaurants were located in seven foreign countries.
Basic and diluted loss per common share increased $0.67 and $0.65, respectively, to a loss of $0.86 and
$0.83 per share, respectively, for fiscal 2016, compared to $0.19 and $0.18 per share, respectively, in the prior fiscal
year. Net loss increased $7.0 million to a loss of $8.9 million for fiscal 2016 compared to a loss of $1.8 million for
the prior fiscal year on revenues of $60.8 million for fiscal 2016 as compared to $48.2 million in fiscal 2015. The
increased net loss over the prior year was primarily due to impairment expense of $1.7 million and a full valuation
allowance of $4.9 million against all net deferred tax assets, as well as decreased income from the Pizza Inn
international franchisee in the Middle East, increased pre-opening expenses, higher general and administrative and
franchise costs related to additional personnel, and other resources to support the growth of the Pie Five franchising
and opening of Company-owned restaurants. We also experienced lower sales and financial performance by
Company-owned Pie Five stores in newer markets.
Adjusted EBITDA for the fiscal year ended June 26, 2016, decreased to a loss of $0.3 million compared to
a gain of $0.6 million for the comparable period of the prior fiscal year. The following table sets forth a
reconciliation of net income to Adjusted EBITDA for the periods shown (in thousands):
Results of operations for fiscal 2016 and 2015 both included 52 weeks.
14
June 26,June 28,20162015Net loss(8,886)$ (1,839)$ Interest expense4 113 Income taxes2,713 (670) Income taxes--discontinued operations(58) (86) Depreciation and amortization2,722 1,617 EBITDA(3,505)$ (865)$ Stock compensation expense213 128 Pre-opening costs883 721 Impairment charges, non-operating store costs and discontinued operations2,121 586 Adjusted EBITDA(288)$ 570$ Fiscal Year Ended
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.
Pie Five system-wide retail sales increased $28.0 million, or 110.4%, for the fiscal year ended June 26,
2016 when compared to the prior year. System-wide average weekly sales decreased by $1,491, or 10.0%, to
$13,417 in fiscal year 2016 from $14,907 for fiscal year 2015. Compared to the fiscal year 2015, average units open
in the period increased from 32 to 76. Comparable store retail sales decreased by 5.1% during fiscal 2016 compared
to fiscal 2015.
The following chart summarizes Pie Five restaurant activity for the fiscal year ended June 26, 2016:
We believe that the net addition of 34 Pie Five Units during fiscal 2016 reflects the continued growth in the
opening of Pie Five Units as franchised stores opened pursuant to previously executed franchise development
agreements and the Company continued to develop its own stores in selected metropolitan areas.
15
June 26,June 28,20162015Pie Five Retail Sales - Total Stores Domestic - Franchised33,681$ 13,940$ Domestic - Company-owned19,629 11,398 Total domestic retail sales53,310$ 25,338$ Pie Five Comparable Store Retail Sales - Total14,417$ 15,185$ Pie Five Average Units Open in Period Domestic - Franchised45 16 Domestic - Company-owned31 16 Total domestic Units76 32 Fiscal Year EndedBeginningEndingUnitsOpenedClosedTransferUnitsDomestic - Franchised30 29 3 1 57 Domestic - Company-owned24 12 4 (1) 31 Total domestic Units54 41 7 - 88 Fiscal Year Ended June 26, 2016
As a result of increased store count, total retail sales of Company-owned Pie Five restaurants increased
$8.2 million, or 72.2%, to $19.6 million for fiscal 2016 compared to $11.4 million for fiscal 2015. Average weekly
sales for Company-owned Pie Five restaurants decreased $1,598, or 11.7%, to $12,093 for the fiscal year ended June
26, 2016 compared to $13,691 for the same period of prior year. Company-owned Pie Five restaurant operating cash
flow decreased $0.7 million, or 40.4%, during the fiscal year 2016 compared to the same period of prior year. The
decline in average weekly sales and operating cash flow for Company-owned Pie Five restaurants was primarily
attributable to lower sales and weaker financial performance by stores in newer markets. Loss from continuing
operations before taxes for Company-owned Pie Five stores increased $4.8 million the fiscal year ended June 26,
2016 compared to the same period of the prior year. The higher loss from continuing operations before taxes for
Company-owned Pie Five restaurants was primarily the result of $1.7 million in impairment charges and non-
operating store costs, increased pre-opening expenses in connection with new stores, and increased marketing and
depreciation expenses associated with the expanded store count, as well as the decline in average weekly sales.
16
Pie Five - Company-Owned Restaurants(in thousands, except store weeks and average data)Fiscal Year EndedSept 27,Dec 27,March 27,June 26,June 26,20152015201620162016Store weeks327 414 452 422 1,615 Average weekly sales13,297 11,725 11,645 12,005 12,093 Average number of units25 32 35 33 31 Restaurant sales (excluding partial weeks)4,348 4,854 5,263 5,066 19,531 Restaurant sales4,393 4,876 5,294 5,066 19,629 Restaurant operating cash flow627 241 135 51 1,054 Allocated marketing and advertising expenses(220) (243) (264) (406) (1,133) Depreciation/amortization expense (430) (568) (749) (669) (2,416) Pre-opening costs (424) (264) (115) (80) (883) Operations management and extraordinary expenses(164) (172) (162) (150) (648) Impairment and non-operating store costs- (1,010) 23 (964) (1,951) Loss from continuing operations before taxes (611) (2,016) (1,132) (2,218) (5,977) Fiscal Year EndedSept 28,Dec 28,March 29,June 28,June 28,20142014201520152015Store weeks169 182 212 264 827 Average weekly sales14,199 13,336 13,425 13,826 13,691 Average number of units13 14 16 20 16 Restaurant sales (excluding partial weeks)2,400 2,427 2,846 3,650 11,323 Restaurant sales2,405 2,438 2,855 3,700 11,398 Restaurant operating cash flow413 346 439 571 1,769 Allocated marketing and advertising expenses(120) (122) (143) (185) (570) Depreciation/amortization expense (274) (267) (319) (384) (1,244) Pre-opening costs (35) (137) (195) (354) (721) Operations management and extraordinary expenses(41) (100) (51) (229) (421) Impairment and non-operating store costs- - - - - Loss from continuing operations before taxes (57) (280) (269) (581) (1,187) Three Months EndedThree Months Ended
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.
Total domestic Pizza Inn retail sales decreased $4.3 million, or 4.6% compared to the prior year. The
decrease in domestic retail sales was primarily due to a decrease in store count combined with 1.0% lower
comparable store retail sales. Loss from continuing operations before taxes for Pizza Inn Company-owned
restaurants was $0.2 million for the fiscal year 2016 and $0.5 million for the fiscal year 2015. The fiscal year 2015
loss includes a $0.3 million impairment charge for a Company-owned Pizza Inn restaurant with insufficient
projected future cash flows to recover the value of its long-lived assets.
The following chart summarizes Pizza Inn restaurant activity for the fiscal year ended June 26, 2016:
There was a net decrease of 17 domestic Pizza Inn units during the fiscal year ending June 26, 2016. We
believe this is consistent with the recent trend of modest domestic store closures. The number of international Pizza
Inn units declined by 11 units. International store closures were driven by economic weakness in the Middle East
while domestic closures were primarily lower volume Delco/Express units.
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Pizza Inn Retail Sales - Total Domestic StoresJune 26,June 28,Domestic Units20162015 Buffet - Franchised80,592$ 83,539$ Delco/Express - Franchised7,212 7,941 Buffet - Company-owned858 1,471 Total domestic retail sales88,662$ 92,951$ Pizza Inn Comparable Store Retail Sales - Total Domestic86,672$ 87,547$ Pizza Inn Average Units Open in PeriodDomestic Units Buffet - Franchised95 100 Delco/Express - Franchised68 75 Buffet - Company-owned1 2 Total domestic units164 177 Fiscal Year EndedBeginningConceptEndingUnitsOpenedClosedChangeUnitsDomestic UnitsBuffet - Franchised99 2 8 2 95 Delco/Express - Franchised78 2 12 (2) 66 Buffet - Company-owned2 - 1 - 1 Total domestic Units179 4 21 - 162 International Units (all types)71 - 11 - 60 Total Units250 4 32 - 222 Fiscal Year Ended June 26, 2016
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, costs related to impairment, 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 charges, and (6) non-
operating store costs.
“Non-operating store costs” represent gain or loss on asset disposal, store closure expenses, lease
termination expenses and expenses related to abandoned store sites.
“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 chain-wide retail sales,
which are impacted by changes in comparable store sales and restaurant count, and the mix of products sold to
franchisees through Norco rather than through third-party food distributors.
Total revenues for fiscal 2016 and for the same period in the prior fiscal year were $60.8 million and $48.2
million, respectively. Revenue for these periods consisted of the following:
18
Food and Supply Sales
Food and supply sales by Norco include food and paper products and other distribution revenues. For fiscal
2016, food and supply sales increased 13.3% to $34.9 million compared to $30.8 million for the prior fiscal year due
to an increase in sales to franchisees. This increase was driven by a $16.1 million, or 15.2%, increase in domestic
franchisee retail sales attributable to an increase in the average number of stores open in the current year when
compared to prior year.
Franchise Revenue
Franchise revenue, which includes income from domestic and international royalties and license fees,
increased to $5.4 million for fiscal 2016 compared to $4.5 million for the prior fiscal year as the result of higher
domestic and international royalties resulting from increased franchisee retail sales and an increase in franchise and
development fees due to Pie Five store openings.
Restaurant Sales
Restaurant sales, which consist of revenue generated by Company-owned restaurants, increased 59.2%, or
$7.6 million, to $20.5 million for fiscal 2016 compared to $12.9 million for the prior fiscal year. This increase was
due to a net of seven new Company-owned Pie Five Units in fiscal 2016.
Costs and Expenses:
Cost of Sales
Cost of sales primarily includes food and supply costs, distribution fees, labor and general and
administrative expenses directly related to restaurant sales. These costs increased 29.0%, or $12.0 million, to $53.3
million for fiscal 2016 compared to $41.3 million for the prior fiscal year. The increase in cost of sales was
primarily due to the increased number of Company-owned Pie Five restaurants and increased food and supply sales
by Norco compared to the prior year.
General and Administrative Expenses
General and administrative expenses increased $2.5 million to $7.2 million for fiscal 2016 compared to
$4.8 million for the prior fiscal year primarily due to operating expenses associated with new Company-owned Pie
Five restaurants and future growth plans.
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 to $3.6 million in fiscal 2016
from $3.2 million in the prior fiscal year primarily due to higher payroll, travel and marketing costs during fiscal
2016 as a result of the addition of personnel to develop and grow the Pie Five franchise system.
Pre-Opening Expense
The Company's pre-opening costs are expensed as incurred and generally include payroll and other direct
costs associated with training new managers and employees prior to opening a new restaurant, rent and other unit
operating expenses incurred prior to opening, and promotional costs associated with the opening of Company-owned
19
June 26,June 28,20162015Food and supply sales34,879$ 30,787$ Franchise revenue5,445 4,543 Restaurant sales20,487 12,869 Total revenue60,811$ 48,199$
restaurants. Pre-opening expenses increased to $0.9 million from $0.7 million in the prior year primarily due to the
accelerating rate of Pie Five store openings.
Impairment Expenses
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 an asset 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 2016, the Company tested its long-lived assets for impairment and
recognized pre-tax, non-cash impairment charges of $1.7 million related to the carrying value Pie Five restaurants.
During fiscal 2015, the Company recognized a $0.3 million pre-tax impairment charge on a Company-owned Pizza
Inn restaurant.
Provision for Bad Debt
Bad debt provision related to accounts receivable from franchisees decreased to $0.1 million in fiscal 2016
compared to $0.2 million in the prior year. The Company believes that this provision and related allowance for
doubtful accounts adequately reserves for outstanding receivables due from franchisees whose restaurants closed
and for outstanding receivables due from continuing franchisees. For restaurants that are anticipated to close or are
exhibiting signs of financial distress, credit terms are typically restricted, weekly food orders are required to be paid
prior to delivery and royalty and advertising fees are collected as add-ons to the delivered price of weekly food
orders.
Interest Expense
Interest expense decreased for the fiscal year ended June 26, 2016, compared to the prior year due primarily
to lower average borrowings on the Company’s credit facilities in the current year which were paid in full in the
second quarter of fiscal 2015.
Provision for Income Tax
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.
Income tax expense of $2.7 million for fiscal 2016 represents the $4.9 million valuation allowance partially
offset by current year tax benefit of $2.1 million as compared to $0.7 million tax benefit for fiscal 2015, each
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. As of tax year ended June 26, 2016, the
Company had net operating loss carryforwards totaling $7.5 million that are available to reduce future taxable
income and will begin to expire 2033.
Discontinued Operations
Discontinued operations include losses from two Pizza Inn locations in Texas. One is a leased building
associated with a Company-owned restaurant closed during fiscal 2008. The other is results of operations for a
Company-owned restaurant that was closed in the fourth quarter of fiscal 2014 due to declining sales.
20
Sources and Uses of Funds
Liquidity and Capital Resources
Our primary sources of liquidity are cash flows 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 provided by operations was $1.9 million in fiscal 2016 compared to $2.0 million in fiscal
year 2015.
Cash flows from investing activities reflect proceeds from sale of assets and capital expenditures for the
purchase of Company assets. The Company used cash of $7.7 million for the fiscal year ended June 26, 2016,
primarily for new Company-owned Pie Five restaurants. This compares to cash used by investing activities of $6.7
million during the fiscal year ended June 28, 2015 primarily attributable to Company-owned Pie Five restaurants
that opened during the period.
Cash flows from financing activities generally reflect changes in the Company's net borrowings, stock
options exercised and proceeds from the sale of stock during the period. During fiscal 2016, the Company had no
change in bank debt. During fiscal 2015, the Company had a net decrease of $0.8 million in bank debt. During
fiscal 2016, the Company had proceeds from the sale of stock of $0.8 million compared to $8.3 million in the prior
fiscal year. During fiscal 2016, the Company had proceeds from the exercise of stock options of $0.1 million
compared to $0.4 million in the prior fiscal year.
ATM Offerings
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 June 26, 2016, the Company had sold an
aggregate of 825,763 shares in the 2014 ATM Offering, realizing aggregate gross proceeds of $8.1 million.
Credit Facilities
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 could 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.
21
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 offerings 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 could borrow, repay and reborrow under the revolving credit facility through August 28,
2014, at which time all amounts outstanding under the revolving credit facility would mature. The Company did not
draw borrowings on the revolving credit facility during fiscal 2016 and allowed it to expire. An unused commitment
fee of 0.50% per annum was payable quarterly on the average unused portion of the revolving credit facility.
Through August 28, 2014, F&M had agreed to make up to $6.0 million in additional term loans to the
Company. However, no amounts were outstanding on the advancing term loan facility at the expiration of the
advance period. As of September 26, 2014, the balance on the initial term loan facility was also paid in full. As a
result, the F&M Loan Agreement expired by its terms.
Liquidity
We expect to fund continuing operations and planned capital expenditures for the next fiscal year primarily
from cash on hand and operating cash flow, with additional potential funding from the 2014 ATM Offering and debt
borrowings. Based on budgeted and year-to-date cash flow information, we believe that we have sufficient liquidity
to satisfy our cash requirements for the 2017 fiscal year.
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.
Prior to January 5, 2015, inventory consisted primarily of food, paper products and supplies primarily
warehoused by the Company’s third-party distributors for distribution system-wide and was stated at lower of cost
or market, with cost determined according to the weighted average cost method. The valuation of such inventory
required us to estimate the amount of obsolete and excess inventory based on estimates of future demand for our
products within specific time horizons, generally nine months or less. The possibility of overestimating demand
subjected us to risk of inventory write-down which could have had a negative impact on the Company’s gross
margin.
Effective in the third quarter of fiscal 2015, we changed our distribution arrangements to shift the
responsibility for maintaining system-wide distribution inventory from Norco to third party distributors. As a result,
as of June 26, 2016 and June 28, 2015, inventory consisted primarily of food, paper products and supplies stored in
and used by Company restaurants and was 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.
22
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 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 an asset 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 2016, the Company tested its long-lived assets for impairment and
recognized pre-tax, non-cash impairment charges of $1.7 million related to the carrying value of several Pie Five
units. During fiscal year 2015, the Company tested its long-lived assets for impairment and recognized pre-tax, non-
cash impairment charges of $0.3 million related to the carrying value of a Pizza Inn unit.
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.
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 June 26, 2016 and June 28, 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for a smaller reporting company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See information set forth on Index to Consolidated Financial Statements and Supplementary Data
appearing on page F-1 of this report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
23
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s principal executive officer and
principal financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the
end of the period covered by this report. Based on that evaluation, the principal executive officer and principal
financial officer concluded that the Company’s disclosure controls and procedures, as of the end of the period
covered by this report, were effective in assuring that the information required to be disclosed by the Company in
reports filed under the Securities Exchange Act of 1934 is (i) accumulated and communicated to management,
including the principal executive officer and principal financial officer, as appropriate to allow timely decisions
regarding disclosure, and (ii) recorded, processed, summarized and reported within the time periods specified in the
SEC’s rules and forms.
Management Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate “internal control
over financial reporting” (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Under the
supervision and with the participation of management, including our principal executive officer and principal
financial officer, the Company has conducted an evaluation of the effectiveness of its internal control over financial
reporting. The Company’s management based it’s evaluation on criteria set forth in the framework in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based upon that evaluation, management has concluded that our internal control over financial reporting was
effective as of June 26, 2016. 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,
its internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
There is no information required to be disclosed under this Item.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required by this Item is incorporated by reference from the Company’s definitive proxy
statement to be filed with the SEC pursuant to Regulation 14A not later than 120 days after the end of the fiscal year
covered by this report.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated by reference from the Company’s definitive proxy
statement to be filed with the SEC pursuant to Regulation 14A not later than 120 days after the end of the fiscal year
covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The information required by this Item is incorporated by reference from the Company’s definitive proxy
statement to be filed with the SEC pursuant to Regulation 14A not later than 120 days after the end of the fiscal year
covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE.
The information required by this Item is incorporated by reference from the Company’s definitive proxy
statement to be filed with the SEC pursuant to Regulation 14A not later than 120 days after the end of the fiscal year
covered by this report.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
24
The information required by this Item is incorporated by reference from the Company’s definitive proxy
statement to be filed with the SEC pursuant to Regulation 14A not later than 120 days after the end of the fiscal year
covered by this report.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
PART IV
(a) 1. The financial statements filed as part of this report are listed in the Index to Consolidated Financial Statements
and Supplementary Data appearing on page F-1 of this report on Form 10-K.
2. Any financial statement schedule filed as part of this report is listed in the Index to Consolidated Financial
Statements and Supplementary Data appearing on page F-1 of this report on Form 10-K.
3. Exhibits:
3.1
3.2
10.1
10.2
10.3
10.4
10.5
Amended and Restated Articles of Incorporation of Rave Restaurant Group, Inc. (filed as Exhibit
3.1 to Form 8-K filed January 8, 2015 and incorporated herein by reference).
Amended and Restated Bylaws of Rave Restaurant Group, Inc. (filed as Exhibit 3.2 to Form 8-K
filed January 8, 2015 and incorporated herein by reference).
2005 Non-Employee Directors Stock Award Plan of the Company and form of Stock Option Award
Agreement (filed as Exhibit 10.25 to Form 10-K for the fiscal year ended June 26, 2005 and
incorporated herein by reference).*
2005 Employee Incentive Stock Option Award Plan of the Company and form of Stock Option
Award Agreement (filed as Exhibit 10.26 to Form 10-K for the fiscal year ended June 26, 2005 and
incorporated herein by reference).*
2015 Long Term Incentive Plan of the Company (filed as Exhibit 10.1 to Form 8-K filed November
20, 2014 and incorporated herein by reference).*
Form of Stock Option Grant Agreement under the Company’s 2015 Long Term Incentive Plan
(filed as Exhibit 10.2 to Form 8-K filed November 20, 2014 and incorporated herein by reference).*
Form of Restricted Stock Unit Award Agreement under the Company’s 2015 Long-Term Incentive
Plan (filed as Exhibit 10.1 to Form 10-Q for the fiscal quarter ended December 27, 2015, and
incorporated herein by reference).*
10.6
Employment letter dated April 7, 2014, between the Company and Tim Mullany (filed as Exhibit
10.1 to Form 8-K filed April 30, 2014, and incorporated herein by reference).*
10.7
10.8
At Market Issuance Sales Agreement between the Company and MLV & Co. LLC dated October 1,
2014 (filed as Exhibit 1.1 to Form 8-K filed October 1, 2014, and incorporated herein by reference).
Advisory Services Agreement between the Company and NCM Services, Inc. dated February 20,
2014 (filed as Exhibit 10.1 to Form 8-K filed February 24, 2014, and incorporated herein by
reference).*
21.1
List of Subsidiaries.
23.1
Consent of Independent Registered Public Accounting Firm.
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.
25
32.2
Section 1350 Certification of Principal Financial Officer.
101
Interactive data files pursuant to Rule 405 of Regulation S-T.
* Management contract or compensatory plan or arrangement.
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: September 23, 2016
Rave Restaurant Group, Inc.
By: /s/ Clinton J. Coleman
Clinton J. Coleman
Interim President and Chief Executive
Officer
By: /s/ Timothy E. Mullany
Timothy E. Mullany
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Name and Position
/s/ Clinton J. Coleman
Clinton J. Coleman
Interim President and Chief Executive
Officer
(Principal Executive Officer)
Date
September 23, 2016
/s/Timothy E. Mullany
Tim Mullany
Chief Financial Officer
(Principal Financial and Accounting
Officer)
September 23, 2016
September 23, 2016
/s/Mark E. Schwarz
Mark E. Schwarz
Director and Chairman of the Board
/s/Ramon D. Phillips
Ramon D. Phillips
Director and Vice Chairman of the
Board
/s/ Steven M. Johnson
Steven M. Johnson
Director
/s/Robert B. Page
Robert B. Page
Director
/s/ William C. Hammett, Jr.
William Hammett
Director
/s/ Clinton J. Coleman
Clinton J. Coleman
Director
September 23, 2016
September 23, 2016
September 23, 2016
September 23, 2016
September 23, 2016
27
Exhibit 21.1
SUBSIDIARIES OF RAVE RESTAURANT GROUP, INC.
Name of Subsidiary
Jurisdiction of Organization
Pizza Inn, Inc.*
(d/b/a Pizza Inn)
Pie Five Pizza Company, Inc.*
(d/b/a Pie Five Pizza Company or Pie Five)
Pie Five Restaurants, Inc.*
PIBC Holding, Inc.*
Pizza Inn Beverage Corp.*
Pie Five Beverage Corp.*
Missouri
Texas
Texas
Texas
Texas
Texas
* Does business under its corporate name as well as any referenced assumed name.
28
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Rave Restaurant Group, Inc.
The Colony, Texas
We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (Nos. 033-71700,
333-77617, 333-76296 and 333-177436) and Forms S-3 (Nos. 333-188344, 333-191559 and 333-197507) of Rave
Restaurant Group, Inc. of our report dated September 23, 2016, relating to the consolidated financial statement,
which appears in this Form 10-K.
Montgomery Coscia Greilich LLP
Plano, Texas
September 23, 2016
29
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to section 3.02 of the Sarbanes-Oxley Act of 2002
I, Clinton J. Coleman, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Rave Restaurant Group, Inc. (“the Registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and
have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
Registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the Registrant’s internal control over financial reporting that
occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the Registrant’s auditors and the audit committee of the
Registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a
significant role in the Registrant’s internal control over financial reporting.
Date: September 23, 2016
By: /s/ Clinton J. Coleman
Clinton J. Coleman
Interim President and Chief Executive Officer
(Principal Executive Officer)
30
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Pursuant to Section 3.02 of the Sarbanes-Oxley Act of 2002
I, Timothy E. Mullany, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Rave Restaurant Group, Inc. (“the Registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and
have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
Registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the Registrant’s internal control over financial reporting that
occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the Registrant’s auditors and the audit committee of the
Registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a
significant role in the Registrant’s internal control over financial reporting.
Date: September 23, 2016
By: /s/ Timothy E. Mullany
Timothy E. Mullany
Chief Financial Officer
(Principal Financial Officer)
31
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The undersigned officer of Rave Restaurant Group, Inc. (the “Company”), does hereby certify, to such
officer’s knowledge, that the accompanying Annual Report on Form 10-K for the fiscal year ended June 26, 2016,
and filed with the Securities and Exchange Commission on the date hereof (the “Form 10-K”) fully complies with
the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and the
information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: September 23, 2016
By: /s/ Clinton J. Coleman
Interim President and Chief Executive Officer
(Principal Executive Officer)
32
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The undersigned officer of Rave Restaurant Group, Inc. (the “Company”), does hereby certify, to such
officer’s knowledge, that the accompanying Annual Report on Form 10-K for the fiscal year ended June 26, 2016,
and filed with the Securities and Exchange Commission on the date hereof (the “Form 10-K”) fully complies with
the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and the
information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: September 23, 2016
By: /s/ Timothy E. Mullany
Timothy E. Mullany
Chief Financial Officer
(Principal Financial Officer)
33
RAVE RESTAURANT GROUP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Description
Page No.
Report of Independent Registered Public Accounting Firm – Montgomery Coscia Greilich LLP
Consolidated Statements of Operations for the years ended June 26, 2016 and June 28, 2015.
Consolidated Balance Sheets at June 26, 2016 and June 28, 2015.
Consolidated Statements of Shareholders' Equity for the years ended June 26, 2016 and June
28, 2015.
Consolidated Statements of Cash Flows for the years ended June 26, 2016 and June 28, 2015.
Supplemental Disclosures of Cash Flow Information for the years ended June 26, 2016 and
June 28, 2015.
Notes to Consolidated Financial Statements.
F-2
F-3
F-4
F-5
F-6
F-6
F-7
F
1
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Rave Restaurant Group, Inc.
The Colony, Texas
We have audited the accompanying consolidated balance sheets of Rave Restaurant Group, Inc. as of June 26, 2016
and June 28, 2015 and the related consolidated statements of operations, shareholders’ equity, and cash flows for the
fiscal years then ended. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company is not required to have an audit of
its internal control over financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Rave Restaurant Group, Inc. as of June 26, 2016 and June 28, 2015, and the results of its
operations and cash flows for the fiscal years then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Montgomery Coscia Greilich LLP
Plano, Texas
September 23, 2016
F 2
F 3
June 26,June 28,20162015REVENUES:60,811$ 48,199$ COSTS AND EXPENSES:Cost of sales53,303 41,307 General and administrative expenses7,247 4,792 Franchise expenses3,636 3,154 Pre-opening expenses883 721 Impairment of long-lived assets and other lease charges1,698 300 Bad debt101 153 Interest expense4 113 66,872 50,540 LOSS FROM CONTINUINGOPERATIONS BEFORE TAXES(6,061) (2,341) Income tax expense (benefit)2,713 (670) LOSS FROMCONTINUING OPERATIONS(8,774) (1,671) Loss from discontinued operations, net of taxes(112) (168) NET LOSS(8,886)$ (1,839)$ LOSS PER SHARE OF COMMON STOCK - BASIC:Loss from continuing operations(0.85)$ (0.17)$ Loss from discontinued operations(0.01)$ (0.02)$ Net loss(0.86)$ (0.19)$ LOSS PER SHARE OF COMMONSTOCK - DILUTED:Loss from continuing operations(0.82)$ (0.16)$ Loss from discontinued operations(0.01)$ (0.02)$ Net loss(0.83)$ (0.18)$ Weighted average commonshares outstanding - basic10,3179,744Weighted average commonshares outstanding - diluted10,74910,306See accompanying Report of Independent Registered PublicAccounting Firm and Notes to Consolidated Financial Statements.RAVE RESTAURANT GROUP, INCCONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share amounts)Fiscal Year Ended
F 4
RAVE RESTAURANT GROUP, INC.CONSOLIDATED BALANCE SHEETS(In thousands, except share amounts)June 26,June 28,ASSETS20162015CURRENT ASSETSCash and cash equivalents$1,104 $5,958 Accounts receivable, less allowance for doubtfulaccounts of $198 and $193, respectively2,974 3,437 Notes receivable167 24 Inventories197 180 Income tax receivable- 492 Deferred income tax assets- 729 Prepaid expenses and other430 872 Total current assets4,872 11,692 LONG-TERM ASSETSProperty, plant and equipment, net12,979 10,020 Long-term notes receivable382 119 Long-term deferred tax asset- 1,864 Deposits and other272 276 Total assets$18,505 $23,971 LIABILITIES AND SHAREHOLDERS' EQUITYCURRENT LIABILITIESAccounts payable - trade$3,815 $2,875 Accrued expenses1,220 1,267 Deferred rent160 155 Deferred revenues304 374 Total current liabilities5,499 4,671 LONG-TERM LIABILITIESDeferred rent, net of current portion2,133 893 Deferred revenues, net of current portion1,440 1,166 Deferred gain on sale of property- 9 Other long-term liabilities30 22 Total liabilities9,102 6,761 COMMITMENTS AND CONTINGENCIES (See Notes F and J)SHAREHOLDERS' EQUITYCommon stock, $.01 par value; authorized 26,000,000shares; issued 17,460,951 and 17,374,735 shares, respectively;outstanding 10,341,551 and 10,255,335 shares, respectively175 174 Additional paid-in capital25,778 24,700 Retained earnings8,086 16,972 Treasury stock at cost7,119,400 shares(24,636) (24,636) Total shareholders' equity 9,403 17,210 Total liabilities and shareholders' equity $18,505 $23,971 See accompanying Report of Independent Registered PublicAccounting Firm and Notes to Consolidated Financial Statements.
F 5
Paid-inRetainedSharesAmountCapitalEarningsSharesAmountTotal BALANCE, JUNE 29, 20149,121 162$ 15,905$ 18,811$ (7,119) (24,636)$ 10,242$ Stock compensation expense- - 128 - - - 128 Stock options exercised170 2 424 - - - 426 Sale of Stock964 10 8,243 - - - 8,253 Net loss- - - (1,839) - - (1,839) BALANCE, JUNE 28, 201510,255 174$ 24,700$ 16,972$ (7,119) (24,636)$ 17,210$ Stock compensation expense- - 213 - - - 213 Stock options exercised28 - 102 - - - 102 Sale of stock59 1 763 - - - 764 Net loss- - - (8,886) - - (8,886) BALANCE, JUNE 26, 201610,342 175$ 25,778$ 8,086$ (7,119) (24,636)$ 9,403$ Accounting Firm and Notes to Consolidated Financial Statements.Common StockAdditionalRAVE RESTAURANT GROUP, INC.CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(In thousands)See accompanying Report of Independent Registered PublicTreasury Stock
F 6
June 26,June 28,20162015CASH FLOWS FROM OPERATING ACTIVITIES:Net loss(8,886)$ (1,839)$ Adjustments to reconcile net loss to cash provided by operating activities:Impairment of fixed assets and other assets1,698 300 Stock compensation expense213 128 Deferred income taxes2,593 (703) Depreciation and amortization2,722 1,617 Loss on the sale of assets432 49 Provision for bad debt101 153 Changes in operating assets and liabilities:Notes and accounts receivable(44) (240) Inventories(17) 1,523 Income tax receivable492 (107) Prepaid expenses and other419 (705) Deferred revenue195 545 Accounts payable - trade940 852 Accrued expenses1,088 404 Cash provided by operating activities1,946 1,977 CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sale of assets444 - Capital expenditures(8,110) (6,727) Cash used for investing activities(7,666) (6,727) CASH FLOWS FROM FINANCING ACTIVITIES:Repayments of bank debt- (767) Proceeds from sale of stock764 8,253 Proceeds from exercise of stock options102 426 Cash provided by financing activities866 7,912 Net increase in cash and cash equivalents(4,854) 3,162 Cash and cash equivalents, beginning of year5,958 2,796 Cash and cash equivalents, end of year1,104$ 5,958$ CASH PAID FOR:Interest4$ 113$ Income taxes-$ 19$ Accounting Firm and Notes to Consolidated Financial Statements.Fiscal Year EndedRAVE RESTAURANT GROUP, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)See accompanying Report of Independent Registered PublicSUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
RAVE RESTAURANT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business:
Rave Restaurant Group, Inc. and its subsidiaries (collectively referred to as the “Company”, or in the first
person notations of “we”, “us” and “our”) operate and franchise pizza buffet, delivery/carry-out and express
restaurants domestically and internationally under the trademark “Pizza Inn” and operate and franchise domestic fast
casual restaurants under the trademarks “Pie Five Pizza Company” or “Pie Five”. We provide or facilitate the
procurement and distribution of food, equipment and supplies to our domestic and international system of
restaurants through our Norco Restaurant Services Company (“Norco”) division and through agreements with third
party distributors.
As of June 26, 2016, we owned and operated 32 restaurants comprised of 31 Pie Five restaurants (“Pie Five
Units”) and one Pizza Inn buffet restaurant (“Buffet Unit”). As of that date, we also had 57 franchised Pie Five
Units and 221 franchised Pizza Inn restaurants. The 161 domestic franchised Pizza Inn restaurants were comprised
of 95 Buffet Units, 15 delivery/carry-out restaurants (“Delco Units”) and 51 express restaurants (“Express Units”).
The 60 international franchised Pizza Inn restaurants were comprised of 12 Buffet Units, 40 Delco Units and eight
Express Units. Domestic restaurants were located predominantly in the southern half of the United States, with
Texas, North Carolina, Arkansas and Kansas accounting for approximately 33%, 12%, 10% and 6%, respectively, of
the total number of domestic restaurants.
Principles of Consolidation:
The consolidated financial statements include the accounts of Rave Restaurant Group, Inc. and its
subsidiaries, all of which are wholly owned. All appropriate inter-company balances and transactions have been
eliminated.
Reclassifications:
Certain reclassifications have been made to prior period amounts to conform to the current period
presentation.
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.
Concentration of Credit Risk:
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist
primarily of cash and cash equivalents. At June 26, 2016 and June 28, 2015 and at various times during the fiscal
years then ended, cash and cash equivalents were in excess of Federal Depository Insurance Corporation insured
limits. We do not believe we are exposed to any significant credit risk on cash and cash equivalents.
Inventories:
Inventory consists primarily of food, paper products and supplies stored in and used by Company
restaurants and was 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.
F 7
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.
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 two Pizza Inn locations in Texas. One is a leased building
associated with a Company-owned restaurant closed during fiscal 2008. The other is results of operations for a
Company-owned restaurant that was closed in the fourth quarter of fiscal 2014 due to declining sales.
Property, Plant and Equipment:
Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Repairs
and maintenance are charged to operations as incurred while major renewals and betterments are capitalized. Upon
the sale or disposition of a fixed asset, the asset and the related accumulated depreciation or amortization are
removed from the accounts and the gain or loss is included in operations. The Company capitalizes interest on
borrowings during the active construction period of major capital projects. Capitalized interest is added to the cost
of the underlying asset and amortized over the estimated useful life of the asset.
Depreciation and amortization are computed on the straight-line method over the estimated useful lives of
the assets or, in the case of leasehold improvements, over the term of the lease including any reasonably assured
renewal periods, if shorter. The useful lives of the assets range from three to ten years.
Impairment of Long-Lived Asset and other Lease Charges:
The Company reviews long-lived assets for impairment when events or circumstances indicate that the
carrying value of such assets may not be fully recoverable. Impairment is evaluated based on the sum of
undiscounted estimated future cash flows expected to result from use of an asset 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 2016 and 2015, the Company tested its long-lived assets for
impairment and recognized pre-tax, non-cash impairment charges of $1.7 million and $0.3 million, respectively,
related to the carrying value of several Pie Five and Pizza Inn units.
Accounts Receivable:
Accounts receivable consist primarily of receivables from food and supply sales and franchise royalties.
The Company records a provision for doubtful receivables to allow for any amounts that may be unrecoverable
based upon an analysis of the Company's prior collection experience, customer creditworthiness and current
economic trends. After all attempts to collect a receivable have failed, the receivable is written off against the
allowance. Finance charges may be accrued at a rate of 18% per year, or up to the maximum amount allowed by
law, on past due receivables. The interest income recorded from finance charges is immaterial.
F 8
Notes Receivable:
Notes receivable primarily consist of accounts receivable from franchisees converted into notes. The
majority of amounts and terms are contained under formal promissory and personal guarantee agreements. All notes
allow for early payment without penalty. Fixed principle and interest payments are due weekly or monthly. Interest
income is recognized monthly. Notes receivable mature at various dates through 2024 and bear interest at rates that
range from 5% to 7% (6% average rate at June 26, 2016).
Management evaluates the creditworthiness of franchisees by considering credit history and sales to
evaluate credit risk. Management determines interest rates based on credit risk of the underlining franchisee. The
Company monitors payment history to determine whether or not a loan should be placed on a nonaccrual status or
impaired.
The Company charges off notes receivable based on an account-by-account analysis of the borrower’s
current economic conditions, monthly payments history and historical loss experience. The allowance for doubtful
notes receivable is included with the allowance for doubtful accounts. Notes receivable as of June 26, 2016
consisted of $0.2 million in current assets and $0.4 million in long-term assets.
The principal balance outstanding on the notes receivable and expected principal collections for the next
five years and thereafter were as follows as of June 26, 2016 (in thousands):
One note totaling $15 thousand was charged off for the fiscal year ended June 26, 2016.
Income Taxes:
Income taxes are accounted for using the asset and liability method pursuant to the authoritative guidance
on Accounting for Income Taxes. Deferred taxes are recognized for the tax consequences of "temporary differences"
by applying enacted statutory tax rates applicable to future years to differences between the financial statement and
carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes for a change in tax
rates is recognized in income in the period that includes the enactment date. The Company recognizes future tax
benefits to the extent that realization of such benefits is more likely than not.
The Company continually reviews the realizability of its deferred tax assets, including an analysis of
factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies.
In 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 $4.9 million. The Company assessed whether a
valuation allowance should be established against its deferred tax assets based on consideration of all available
evidence, using a “more likely than not” standard. In assessing the need for a valuation allowance, the Company
considered both positive and negative evidence related to the likelihood of realization of deferred tax assets. In
making such assessment, more weight was given to evidence that could be objectively verified, including recent
cumulative losses. Future sources of taxable income were also considered in determining the amount of the recorded
valuation allowance. Based on the Company’s review of this evidence, management determined that a full valuation
allowance against all of the Company’s deferred tax assets was appropriate.
The Company follows authoritative guidance that prescribes a comprehensive model for how a company
should recognize, measure, present, and disclose in its financial statements uncertain tax positions that it has taken
F 9
NotesReceivable20171672018862019812020872021 and thereafter128549$
or expects to take on a tax return. This authoritative guidance 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 June 26, 2016 and June 28, 2015, the Company had no uncertain tax positions. Federal returns for tax years 2012
through 2015 remained open for examination as of June 26, 2016.
Pre-Opening Expense:
The Company's pre-opening costs are expensed as incurred and generally include payroll and other direct
costs associated with training new managers and employees prior to opening a new restaurant, rent and other unit
operating expenses incurred prior to opening, and promotional costs associated with the opening.
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 provides 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. As of June 26, 2016, the accrued liability relating to services performed by NCMS was $100,003.
Revenue Recognition:
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. The Company's Norco division sells food and
supplies to franchisees on trade accounts under terms common in the industry. Shipping and handling costs billed to
customers are recognized as revenue and the associated costs are included in cost of sales.
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. For the fiscal years ended June 26, 2016 and June 28, 2015, 82.8% and 82.2%, respectively, of
franchise revenue was comprised of recurring royalties.
We recognize restaurant sales when food and beverage products are sold. The Company reports revenue
net of sales and use taxes collected from customers and remitted to governmental taxing authorities.
Stock Options:
We account 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.
The Company’s stock-based compensation plans are described more fully in Note H. Stock options under
these plans are granted at exercise prices equal to the fair market value of the Company’s stock at the dates of grant.
Generally those options vest ratably over various vesting periods.
Restricted Stock Units:
F 10
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.
Fair Value of Financial Instruments:
The carrying amounts of accounts receivable and accounts payable approximate fair value because of the
short maturity of these instruments. The Company had no bank debt at June 26, 2016.
Advertising and Marketing Costs:
Advertising and marketing costs are expensed as incurred and totaled $1.2 million for fiscal year ended
June 26, 2016 and $0.7 million for fiscal year ended June 28, 2015. Advertising and marketing costs are included in
cost of sales and general and administrative expenses in the consolidated statements of operations.
Contingencies:
Provisions for legal settlements are accrued when payment is considered probable and the amount of loss is
reasonably estimable in accordance with the authoritative guidance on Accounting for Contingencies. If the best
estimate of cost can only be identified within a range and no specific amount within that range can be determined
more likely than any other amount within the range, and the loss is considered probable, the minimum of the range
is accrued. Legal and related professional services costs to defend litigation are expensed as incurred.
Use of Management Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires the Company’s management to make estimates and assumptions that affect its
reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. The
Company bases its estimates on historical experience and other various assumptions that it believes are reasonable
under the circumstances. Estimates and assumptions are reviewed periodically. Actual results could differ
materially from estimates.
Fiscal Year:
The Company's fiscal year ends on the last Sunday in June. The fiscal year ended June 26, 2016 and the
fiscal year ended June 28, 2015 both contained 52 weeks.
NOTE B – PROPERTY, PLANT AND EQUIPMENT:
Property, and plant and equipment consist of the following (in thousands):
Depreciation and amortization expense was approximately $2.7 million and $1.6 million for the fiscal years
ended June 26, 2016 and June 28, 2015, respectively.
NOTE C - ACCRUED EXPENSES:
F 11
Estimated UsefulJune 26,June 28,Lives20162015Equipment, furniture and fixtures3 - 7 yrs$9,697 $6,927 Software5 yrs872 637 Vehicle2 - 3 yrs- 19 Leasehold improvements 10 yrs or lease term, if shorter13,290 9,134 23,859 16,717 Less: accumulated depreciation/amortization(10,880) (6,697) $12,979 $10,020
Accrued expenses consist of the following (in thousands):
NOTE D - 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 could 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 offerings 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 could borrow, repay and reborrow under the revolving credit facility through August 28,
2014, at which time all amounts outstanding under the revolving credit facility would mature. The Company did not
draw borrowings on the revolving credit facility during fiscal 2015 and allowed it to expire. An unused commitment
fee of 0.50% per annum was payable quarterly on the average unused portion of the revolving credit facility.
Through August 28, 2014, F&M had agreed to make up to $6.0 million in additional term loans to the
Company. However, no amounts were outstanding on the advancing term loan facility at the expiration of the
advance period. As of September 26, 2014, the balance on the initial term loan facility was also paid in full. As a
result, the F&M Loan Agreement expired by its terms.
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.
NOTE E - INCOME TAXES:
Provision for income taxes from continuing operations consists of the following (in thousands):
F 12
June 26,June 28,20162015Compensation$728 $587 Other447 506 Professional fees37 79 Insurance loss reserves8 95 $1,220 $1,267 June 26,June 28,20162015Current - Federal$- $- Current - Foreign- 24 Current - State4 29 Deferred - Federal2,823 (674) Deferred - State(114) (49) Provision for income taxes$2,713 $(670)
Fiscal Year Ended
Included in loss from discontinued operations is $58,000 and $86,000 of tax benefit for the fiscal years
ended June 26, 2016 and June 28, 2015, respectively.
The effective income tax rate varied from the statutory rate for the fiscal years ended June 26, 2016 and
June 28, 2015 as reflected below (in thousands):
The tax effects of temporary differences that give rise to the net deferred tax assets consisted of the
following (in thousands):
At the end of tax year ended June 26, 2016, the Company had net operating loss carryforwards totaling
$7.5 million that are available to reduce future taxable income and will begin to expire in 2032.
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 $4.9 million. The Company assessed whether a
valuation allowance should be established against its deferred tax assets based on consideration of all available
evidence, using a “more likely than not” standard. In assessing the need for a valuation allowance, the Company
considered both positive and negative evidence related to the likelihood of realization of deferred tax assets. In
making such assessment, more weight was given to evidence that could be objectively verified, including recent
cumulative losses. Future sources of taxable income were also considered in determining the amount of the recorded
F 13
June 26,June 28,20162015Federal income taxes based on 34%of pre-tax loss$(2,060) $(796) State income tax, net of federal effect(45) (13) Permanent adjustments19 44 Valuation allowance4,891 - Foreign tax credits- 24 Other(92) 71 $2,713 $(670) June 26,June 28,20162015CurrentReserve for bad debt$70 $69 Deferred fees105 124 Other reserves and accruals1,246 536 1,421 729 Non CurrentCredit carryforwards747 180 Net operating loss carryforwards197 1,633 Depreciable assets2,526 51 Total gross deferred tax asset4,891 2,593 Valuation allowance(4,891) - Net deferred tax asset$- $2,593
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.
NOTE F - LEASES:
Premises occupied by Company-owned restaurants are leased for initial terms of five to ten years, and each
has multiple renewal terms. Certain lease agreements contain either a provision requiring additional rent if sales
exceed specified amounts or an escalation clause based upon a predetermined multiple.
In fiscal 2007, the Company sold its corporate office building and distribution facility located at 3551 Plano
Parkway, The Colony, Texas, and entered into a ten-year lease agreement for the corporate office building. This
lease expires December 19, 2016. The Company is in discussion with the landlord to extend its lease, and is also
evaluating alternative options.
Future minimum rental payments under non-cancelable leases, net of subleases, with initial or remaining
terms of one year or more at June 26, 2016 were as follows (in thousands):
Rental expense consisted of the following (in thousands):
NOTE G - EMPLOYEE BENEFITS:
The Company has a tax advantaged savings plan that is designed to meet the requirements of Section
401(k) of the Internal Revenue Code (the “Code”). The current plan is a modified continuation of a similar savings
plan established by the Company in 1985. Employees who have completed six months of service and are at least 21
years of age are eligible to participate in the plan. The plan provides that participating employees may elect to have
between 1% and 15% of their compensation deferred and contributed to the plan subject to certain IRS limitations.
Effective June 27, 2005, the Company contributes on behalf of each participating employee an amount equal to 50%
of the employee’s contributions up to 4% of compensation. Separate accounts are maintained with respect to
contributions made on behalf of each participating employee. Employer matching contributions and earnings
thereon are invested in the same investments as each participant’s employee deferral. The plan is subject to the
provisions of the Employee Retirement Income Security Act, as amended, and is a profit sharing plan as defined in
Section 401(k) of the Code.
For the fiscal years ended June 26, 2016 and June 28, 2015, total matching contributions to the tax
advantaged savings plan by the Company on behalf of participating employees were approximately $53,000 and
$39,000, respectively.
F 14
OperatingLeases2017$3,34620183,05020192,95120202,89920212,892Thereafter10,296$25,434June 26,June 28,20162015Minimum rentals$3,090 $1,666 Sublease rentals(257) (221) $2,833 $1,445 Fiscal Year Ended
NOTE H - STOCK BASED COMPENSATION PLANS:
In June 2005, the 2005 Employee Incentive Stock Option Award Plan (the “2005 Employee Plan”) was
approved by the Company’s shareholders with a plan effective date of June 23, 2005. Under the 2005 Employee
Plan, officers and employees of the Company were eligible to receive options to purchase shares of the Company’s
common stock. Options were granted at market value of the stock on the date of grant, were subject to various
vesting and exercise periods as determined by the Compensation Committee of the board of directors, and could be
designated as non-qualified or incentive stock options. A total of 1,000,000 shares of common stock were
authorized for issuance under the 2005 Employee Plan. During the 2015 fiscal year, options to purchase 92,000
shares were granted under the 2005 Employee Plan. Also during the 2015 fiscal year, 3,000 shares of common
stock were issued upon the exercise of options granted under the 2005 Employee Plan. The 2005 Employee Plan
expired by its terms on June 23, 2015. During fiscal 2016, contingencies were satisfied with respect to options to
purchase 18,500 shares of common stock previously conditionally granted under the 2005 Employee Plan.
The shareholders also approved the 2005 Non-Employee Directors Stock Award Plan (the “2005 Directors
Plan”) in June 2005, to be effective as of June 23, 2005. Directors not employed by the Company were eligible to
receive stock options under the 2005 Directors Plan. Options for common stock equal to twice the number of shares
of common stock acquired during the previous fiscal year, up to 40,000 shares per year, were automatically granted
to each non-employee director on the first day of each fiscal year. Options were granted at market value of the stock
on the first day of each fiscal year, with vesting periods beginning at a minimum of six months and with exercise
periods up to ten years. A total of 650,000 shares of Company common stock were authorized for issuance pursuant
to the 2005 Directors Plan. During the 2015 fiscal year, 28,800 options were granted under the 2005 Directors Plan.
Also during the 2015 fiscal year, 167,200 shares of common stock were issued upon the exercise of options granted
under the 2005 Directors Plan. The 2005 Directors Plan expired by its terms on June 23, 2015.
The 2015 Long Term Incentive Plan (the “2015 LTIP”) was approved by the Company’s shareholders on
November 18, 2014, and became effective June 1, 2015. Officers, employees and non-employee directors of the
Company are eligible to receive awards under the 2015 LTIP. A total of 1,200,000 shares of common stock are
authorized for issuance under the 2015 LTIP. Awards authorized under the 2015 LTIP include incentive stock
options, non-qualified stock options, restricted shares, restricted stock units and rights (either with or without
accompanying options). The 2015 LTIP provides for options to be granted at market value of the stock on the date
of grant and have exercise periods determined by the Compensation Committee of the board of directors. The
Compensation Committee may also determine the vesting periods, performance criteria and other terms and
conditions of all awards under the 2015 LTIP. The Compensation Committee has adopted resolutions under the
2015 LTIP automatically granting to each non-employee director on the first day of each fiscal year options to
purchase twice the number of shares of common stock acquired during the previous fiscal year, up to a maximum of
40,000 shares. Such options are exercisable at the market value of the stock on the first day of the fiscal year, vest
six months from the date of grant and expire 10 years from the date of grant. During fiscal 2016, options to
purchase 24,286 shares of common stock and 100,190 restricted stock units (representing the right to receive up to
150,285 shares of common stock) were granted under the 2015 LTIP and represent the only awards outstanding
thereunder.
Share based compensation expense is included in general and administrative expense in the statement of
operations.
Stock Options:
A summary of stock option transactions under all of the Company’s stock option plans and information
about fixed-price stock options is as follows:
F 15
At June 26, 2016, the total intrinsic value of options outstanding was $8.2 million and of options
exercisable was $5.8 million.
The following table provides information on options outstanding and options exercisable as of June 26,
2016:
We determine fair value following the authoritative guidance as follows:
F 16
Weighted-Weighted-AverageAverageExerciseExerciseSharesPriceSharesPriceOutstanding at beginningof year871,798 3.51$ 921,198 2.92$ Granted42,786 10.92$ 120,800 6.57$ Exercised(27,916) 3.65$ (170,200) 2.50$ Forfeited/Canceled/Expired(39,112) 5.67$ - -$ Outstanding at end of year847,556 3.77$ 871,798 3.51$ Exercisable at end of year558,620 2.71$ 406,378 2.63$ Weighted-average fair value ofoptions granted during the year4.24$ 3.16$ Total intrinsic value of options exercised102,010$ 425,944$
June 26, 2016 June 28, 2015Fiscal Year EndedWeighted-AverageOptionsRemainingWeighted-OptionsWeighted-Range ofOutstandingContractualAverageExercisableAverageExercise Pricesat June 26, 2016Life (Years)Exercise Priceat June 26, 2016Exercise Price$1.55 - 1.9581,3063.1$1.9081,306$1.90$1.96 - 2.3590,0002.0$2.3290,000$2.32$2.36 - 2.75390,0006.2$2.58250,000$2.58$2.76 - 3.3055,0006.0$3.1155,000$3.11$5.51 - 5.748,6647.0$5.748,664$5.74$5.95 - 6.25153,3007.9$6.0666,150$3.40$6.26 - 8.1669,2868.3$9.857,500$8.12847,5565.9$3.77558,620$2.71Options OutstandingOptions Exercisable
Valuation and Amortization Method. We estimate the fair value of share-based awards granted using the
Black-Scholes option valuation model. We amortize the fair value of all awards on a straight-line basis over the
requisite service periods, which are generally the vesting periods.
Expected Life. The expected life of awards granted represents the period of time that they are expected to
be outstanding. Unless a life is specifically stated, we determine the expected life using the “simplified method” in
accordance with Staff Accounting Bulletin No. 110 since we do not have sufficient historical share option exercise
experience.
Expected Volatility. Using the Black-Scholes option valuation model, we estimate the volatility of our
common stock at the date of grant based on the historical volatility of our common stock.
Risk-Free Interest Rate. We base the risk-free interest rate used in the Black-Scholes option valuation
model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining
term equal to the expected life of the award.
Expected Dividend Yield. We have not paid any cash dividends on our common stock in the last ten years
and we do not anticipate paying any cash dividends in the foreseeable future. Consequently, we use an expected
dividend yield of zero in the Black-Scholes option valuation model.
Expected Forfeitures. We use historical data to estimate pre-vesting option forfeitures. We record stock-
based compensation only for those awards that are expected to vest.
The following weighted average assumptions were used for options granted in the last two fiscal years:
At June 26, 2016, the Company had unvested options to purchase 288,936 shares with a weighted average
grant date fair value of $4.47. The total remaining unrecognized compensation cost related to unvested stock
options amounted to approximately $0.2 million at June 26, 2016. The weighted average remaining requisite service
period of the unvested awards was 9.3 months. Stock compensation expense related to stock options of $0.2 million
and $0.1 million was recognized in fiscal years 2016 and 2015, respectively.
Restricted Stock Units:
Restricted stock units awarded under the 2015 LTIP represent the right to receive shares of common stock
upon the satisfaction of vesting requirements, performance criteria and other terms and conditions. During the third
quarter of fiscal 2016, an aggregate of 100,190 restricted stock units were granted to certain employees.
The restricted stock units granted to each recipient are allocated among performance criteria pertaining to
various aspects of the Company’s business, as well as its overall operations, measured based on its fiscal year
ending June 24, 2018. Achievement of the various performance criteria entitles the recipient to receive shares of
common stock in amounts ranging from 50% to 150% of the number of restricted stock units granted. Grantees of
restricted stock units do not have any rights of a stockholder, and do not participate in any distributions on our
common stock, until the award fully vests upon satisfaction of the vesting schedule, performance criteria and other
conditions set forth in their award agreement. Therefore, unvested restricted stock units are not considered
participating securities under ASC 260, “Earnings Per Share,” and are not included in the calculation of basic or
diluted earnings per share.
Compensation cost is measured as an amount equal to the fair value of the restricted stock units on the date
of grant and is expensed over the vesting period if achievement of the performance criteria is deemed probable, with
the amount of the expense recognized based on the best estimate of the ultimate achievement level. The grant date
F 17
June 26,June 28,Fiscal Year Ended20162015Expected life (in years)5.7 5.9 Expected volatility36.0%39.1%Risk-free interest rate1.6%1.9%Expected forfeiture rate61.8%47.1%
fair value of the restricted stock units granted in fiscal 2016 is $5.99 per unit. The Company incurred compensation
expense of $33 thousand and recorded no income tax benefit due to a full valuation allowance.
A summary of the status of restricted stock units as of June 26, 2016, and changes during the fiscal year
then ended is presented below:
As of June 26, 2016, there was $0.2 million of total unrecognized compensation cost related to unvested
restricted stock units granted under the 2015 LTIP, of which $79 thousand is expected to be recognized in each of
fiscal 2017 and fiscal 2018, and $23 thousand is expected to be recognized in fiscal 2019.
NOTE I - SHAREHOLDERS’ EQUITY:
On April 22, 2009, the board of directors of the Company amended the stock repurchase plan first
authorized on May 23, 2007, and previously amended on June 2, 2008, by increasing the aggregate number of shares
of common stock the Company may repurchase under the plan to a total of 3,016,000 shares. No shares were
repurchased during fiscal 2016 and, as of June 26, 2016, there were 848,425 shares available to repurchase under the
plan.
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 June 26, 2016, the Company had sold an
aggregate of 825,763 shares in the 2014 ATM Offering, realizing aggregate gross proceeds of $8.1 million.
The Company pays to MLV a fee equal to 3% of the gross sales price in addition to reimbursing certain
costs. Expenses associated with the 2013 ATM Offering and 2014 ATM Offering were $21,000 and $42,000 in
fiscal 2016 and fiscal 2015, respectively, which includes fees and expense reimbursement to MLV and legal and
other offering expenses incurred by the Company.
NOTE J - COMMITMENTS AND CONTINGENCIES:
The Company is subject to various claims and contingencies related to employment agreements, franchise
disputes, lawsuits, taxes, food product purchase contracts and other matters arising out of the normal course of
business. Management believes that any such claims and actions currently pending are either covered by insurance
or would not have a material adverse effect on the Company's annual results of operations or financial condition if
decided in a manner that is unfavorable to us.
F 18
Number of Restricted Stock UnitsVested at June 28, 2015 - Granted100,190 Vested- Forfeited20,570 Unvested at June 26, 2016 79,620
NOTE K - EARNINGS PER SHARE:
The Company computes and presents earnings per share (“EPS”) in accordance with the authoritative
guidance on Earnings Per Share. Basic EPS excludes the effect of potentially dilutive securities while diluted EPS
reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised,
converted or resulted in the issuance of common stock that then shared in the earnings of the Company.
The following table shows the reconciliation of the numerator and denominator of the basic EPS
calculation to the numerator and denominator of the diluted EPS calculation (in thousands, except per share
amounts).
NOTE L– SEGMENT REPORTING:
The Company has two reportable operating segments as determined by management using the
“management approach” as defined by the authoritative guidance on Disclosures about Segments of an Enterprise
and Related Information: (1) Franchising and Food and Supply Distribution, and (2) Company-owned Restaurants.
These segments are a result of differences in the nature of the products and services sold. Corporate administration
costs, which include, but are not limited to, general accounting, human resources, legal and credit and collections,
are partially allocated to the two operating segments. Other revenue consists of nonrecurring items.
The Franchising and Food and Supply Distribution segment establishes franchisees and franchise territorial
rights and sells and distributes proprietary and non-proprietary food and other items to franchisees. Revenue for this
segment is derived from the sale of distributed products and franchise royalties, franchise fees and sale of area
development and foreign master license rights. Assets for this segment include equipment, furniture and fixtures.
The Company-owned Restaurant segment includes sales and operating results for all Company-owned
restaurants. Assets for this segment include equipment, furniture and fixtures for the Company-owned restaurants.
Corporate administration and other assets primarily include cash and short-term investments, as well as
furniture and fixtures located at the corporate office and trademarks and other intangible assets. All assets are
located within the United States.
F 19
June 26,June 28,20162015Loss from continuing operations(8,774)$ (1,671)$ Discontinued operations(112) (168) Net loss available to common stockholders(8,886)$ (1,839)$ BASIC:Weighted average common shares10,3179,744Loss from continuing operations per common share(0.85)$ (0.17)$ Discontinued operations per common share(0.01) (0.02) Net loss per common share(0.86)$ (0.19)$ DILUTED:Weighted average common shares10,3179,744Stock options432562Weighted average common shares outstanding10,74910,306Loss from continuing operations per common share(0.82)$ (0.16)$ Discontinued operations per common share(0.01) (0.02) Net loss per common share(0.83)$ (0.18)$ Fiscal Year Ended
Summarized in the following tables are net sales and operating revenues, depreciation and amortization
expense, income from continuing operations before taxes, capital expenditures and assets for the Company's
reportable segments as of and for the fiscal years ended June 26, 2016 and June 28, 2015 (in thousands):
The following table provides information on our foreign and domestic revenues:
F 20
June 26,June 28,20162015Net sales and operating revenues:Franchising and food and supply distribution40,324$ 35,330$ Company-owned restaurants (1)20,487 12,869 Consolidated revenues60,811$ 48,199$ Depreciation and amortization:Franchising and food and supply distribution23$ 24$ Company-owned restaurants (1)2,458 1,374 Combined2,481 1,398 Corporate administration and other241 219 Depreciation and amortization2,722$ 1,617$ Loss from continuing operations before taxesFranchising and food and supply distribution (2)2,694$ 1,492$ Company-owned restaurants (1) (2)(6,183) (1,729) Combined(3,489) (237) Corporate administration and other (2)(2,572) (2,104) Loss from continuing operations before taxes(6,061)$ (2,341)$ Capital Expenditures:Franchising and food and supply distribution-$ -$ Company-owned restaurants7,497 6,443 Corporate administration613 284 Combined capital expenditures8,110$ 6,727$ Assets:Franchising and food and supply distribution3,187$ 4,314$ Company-owned restaurants12,817 11,088 Corporate administration2,501 8,569 Combined assets18,505$ 23,971$ (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.Fiscal Year EndedUnited States60,260$ 47,509$ Foreign countries551 690 Consolidated total60,811$ 48,199$
CORPORATE INFORMATION
OFFICERS
Clinton J. Coleman
Interim President & Chief Executive Officer
Timothy E. Mullany
Chief Financial Officer/Secretary
DIRECTORS
Mark E. Schwarz
Chairman of the Board
Chairman and Chief Executive Officer
of Newcastle Capital Management, L.P.
Ramon D. Phillips
Former Chairman of the Board
and Chief Executive Officer of
Hallmark Financial Services, Inc.
Robert B. Page
Restaurant Consultant
Former Chief Executive Officer of
Backyard Burgers, Inc.
William C. Hammett, Jr.
Former Chief Executive Officer of iH3, LLC
Clinton J. Coleman
Managing Director of
Newcastle Capital Management, L.P.
Steven M. Johnson
Jimmy John’s Franchisee
Former Chief Executive
Officer of F&H Acquisition
Corp
CORPORATE OFFICE
RAVE Restaurant Group, Inc.
3551 Plano Parkway
The Colony, TX 75056
(469) 384-5000
Internet: http://www.raverg.com
NORCO DISTRIBUTION CENTER
Norco Restaurant Services Company
3551 Plano Parkway
The Colony, TX 75056
(469) 384-5050
STOCK EXCHANGE
AND TRADING SYMBOL
RAVE Restaurant Group, Inc. common stock is traded on
the NASDAQ Market System under the symbol “RAVE”.
STOCK TRANSFER AGENT
Securities Transfer Corporation
2591 Dallas Parkway, Suite 102
Frisco, TX 75034
LOCATIONS
DOMESTIC
Alabama
Georgia
Kentucky
Missouri
Oklahoma
Tennessee
Illinois
Nebraska
Arizona
Indiana
Kansas
Florida
Mississippi
North Carolina
Arkansas
Maryland
Louisiana
New Mexico
South Carolina South Dakota
Texas
Indiana
Utah
Colorado
Kansas
Virginia
Minnesota
Washington DC
Delaware
INTERNATIONAL
Bahrain
Bangladesh
Honduras
Kuwait
Oman
Saudi Arabia
United Arab Emirates
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Montgomery, Coscia and Greilich, LLP
Plano, TX
INVESTOR INFORMATION
For further information about the company’s common stock, please
write to the Investor Relations Department
at the company’s corporate office.
OUTSIDE LEGAL COUNSEL
McGuire, Craddock & Strother, P.C.
Dallas, TX
ANNUAL MEETING
The Annual Meeting of Shareholders will take place on Tuesday,
November 15, 2016 at 10:00 a.m. at
Holiday Inn Plano – The Colony
Meeting Room A
4301 Paige Rd.
The Colony, TX 75056
F 21