Rave Restaurant Group, Inc.
Annual Report 2018

Plain-text annual report

Rave Restaurant Group, Inc. 2018 Annual Report                                SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D. C. 20549FORM 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 24, 2018.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 0-12919RAVE RESTAURANT GROUP, INC.(Exact name of registrant as specified in its charter)Missouri 45-3189287(State or jurisdiction of (I.R.S. Employerincorporation or organization)Identification No.)3551 Plano ParkwayThe Colony, Texas 75056(Address of principal executive offices)(Zip Code)Registrant’s telephone number, including area code: (469) 384-5000Securities registered pursuant to Section 12(b) of the Act:Title of className of each exchange on which registeredCommon stock, par value $.01 eachNASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate 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 of1934 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 filingrequirements 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 Filerequired 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 wasrequired 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 amendmentto this Form 10-K. □ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company oran emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company”in Rule 12b-2 of the Exchange Act. Large accelerated filer__ Accelerated filer__ Non-accelerated filer__ Smaller reporting company Emerging growth company___ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying withany new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. □ 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 24, 2017, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of thevoting and non-voting common equity held by non-affiliates was approximately $11.3 million computed by reference to the price at which the commonequity was last sold on the NASDAQ Capital Market. As of September 21, 2018, there were 15,047,470 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 theregistrant’s annual meeting of shareholders scheduled for December 4, 2018, have been incorporated by reference in Part III of this report. 2 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 areintended to be covered by the safe harbors created thereby. Forward-looking statements include statements which are predictive in nature, which dependupon or refer to future events or conditions, or which include words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate” or similarexpressions. These statements include the plans and objectives of management for future operations, including plans and objectives relating to future growthof our business activities and availability of funds. Statements that address business and growth strategies, performance goals, projected financial conditionand operating results, our understanding of our competition, industry and market trends, and any other statements or assumptions that are not historical factsare 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 andmarket conditions, regulatory framework and future business decisions, all of which are difficult or impossible to predict accurately and many of whichare beyond our control. Although we believe that the assumptions underlying these forward-looking statements are reasonable, any of the assumptionscould 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 arepresentation 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”)franchise pizza buffet, delivery/carry-out and express restaurants under the trademark “Pizza Inn” and operate and franchise fast casual restaurants under thetrademarks “Pie Five Pizza Company” or “Pie Five”. We facilitate food, equipment and supply distribution to our domestic and international system ofrestaurants through agreements with third party suppliers and distributors. As of June 24, 2018, we owned and operated one Pie Five restaurant (“Pie Five Units”). As of that date, we also had 72 franchised Pie Five Units, 208franchised Pizza Inn restaurants and three licensed Pizza Inn Express, or PIE, kiosks (“PIE Units”). The 150 domestic franchised Pizza Inn restaurants werecomprised of 90 pizza buffet restaurants (“Buffet Units”), eight delivery/carry-out restaurants (“Delco Units”) and 52 express restaurants (“Express Units”). Asof June 24, 2018, there were 58 international franchised Pizza Inn restaurants. Domestic Pizza Inn restaurants and kiosks were located predominantly in thesouthern half of the United States, with Texas, Arkansas, North Carolina and Tennessee accounting for approximately 24%, 13%, 13% and 7%, respectively,of the total number of domestic units. Our History The Company has offered consumers affordable, high quality pizza since 1958, when the first Pizza Inn restaurant opened in Dallas, Texas. Weawarded 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.” InJune 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.In 2018, we launched the PIE kiosk and convenience store solution to meet the consumer demand for tasty and high-quality pizzas within a grab-and-godelivery model. 3 Our Concepts We operate and franchise restaurant concepts and license PIE kiosks under two distinct brands: Pizza Inn and Pie Five. Pizza Inn We franchise Buffet Units, Delco Units and Express Units under the Pizza Inn brand. Additionally, we license PIE kiosks 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 isoccasionally 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 crustswith standard toppings and special combinations of toppings in addition to pasta, salad, sandwiches, appetizers, desserts and beverages, including beer andwine in some locations, in an informal, family-oriented atmosphere. We occasionally offer other items on a limited promotional basis. Buffet Units aregenerally located in free standing buildings or strip center locations in retail developments in close proximity to offices, shopping centers and residentialareas. 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 topromote a casual, lively, contemporary, family-style atmosphere. Some Buffet Units feature game rooms that offer a range of electronic game entertainmentfor the entire family. The buffet is typically offered at prices from $6.99 to $9.99, and the average ticket price, including a drink, was approximately $10.50per person for fiscal year 2018. 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 Unitstypically offer a variety of crusts and some combination of side items. Delco Units occupy approximately 1,200 square feet, are primarily production facilitiesand, 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 andawnings. 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, foodcourt, college campus, airport terminal, travel plaza, athletic facility or other commercial facility. They have limited or no seating and solely offer quickcarryout service of a limited menu of pizza and other foods and beverages. An Express Unit typically occupies approximately 200 to 400 square feet and iscommonly operated by the operator or food service licensee of the commercial host facility. We have developed a high-quality pre-prepared crust that istopped and cooked on-site, allowing this concept to offer a lower initial investment and reduced labor and operating costs while maintaining product qualityand consistency. Like Delco Units, Express Units are primarily production-oriented facilities and, therefore, do not require all of the equipment, labor orsquare footage of the Buffet Unit. PIE Units serve customers through a non-traditional, licensed pizza-only model called Pizza Inn Express. PIE Units provide a nimble andstreamlined pizza preparation and sales model at a minimal investment. PIE Units provide customers with a fast, seamless experience when picking up theirfavorite hot pizza. Geared towards convenience stores, but also an airport or entertainment venue option, PIE Units allow customers to order and pay at akiosk for grab-and-go or pick up their food at a designated spot. A PIE Unit typically occupies approximately 52 square feet and is simple to configure andmove to meet licensee retail sales traffic needs. For PIE Units, 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. LikeDelco Units and Express Units, PIE Units are primarily production-oriented facilities and, therefore, do not require all of the equipment, labor or squarefootage of the Buffet Unit. 4 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 arecreated at the direction of our customers who choose from a variety of freshly prepared and displayed proprietary and non-proprietary toppings, cheeses,sauces and doughs and complete their purchase process in less than five minutes. Customers can also get freshly prepared side salads, also made to order fromour 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 softbeverages are available, as well as beer and wine in some locations. Pie Five restaurants offer items at prices from $5.99 to $12.99, and the average ticket priceper meal, including a drink, was approximately $9.50 per person for fiscal year 2018. The average per person ticket is slightly higher in restaurants offeringbeer and wine. Traditional 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-unitretail space. With seating for 65 to 85 customers in most units, and patio seating where available, Pie Five restaurants primarily serve lunch and dinner tofamilies, adults and kids of all ages. During fiscal 2018, an alternative prototype Pie Five was developed to minimize retail space needs with only 1,400square feet and seating for 20 to 25 customers. Pie Five restaurants typically are located in high traffic, high visibility urban or suburban sites in mid to large-size metropolitan areas. Sales are predominantly on-premise though carry out and delivery is offered as well. The majority of Pie Five restaurants also sellwings, sandwiches, and large pizzas. Future sales growth initiatives may include expanded text ordering, additional “limited time offer” pizza recipes andadditional menu offerings. Due to the relatively compact footprint of the restaurants, and other operating advantages, we believe Pie Five is also well suitedfor non-traditional locations such as airports. Site Selection We consider the restaurant site selection process critical to a restaurant’s long-term success and devote significant resources to the investigation andevaluation of potential sites. The site selection process includes a review of trade area demographics through the use of a third party customer and siteselection tool, as well as a proprietary evaluation process. We may also rely on a franchisee’s knowledge of the trade area and market characteristics whenselecting 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 webelieve we can use our competitive strengths to establish brand recognition and gain local market share. We plan to expand our Pizza Inn branded domesticrestaurant base primarily through opening new franchised restaurants with new and existing franchisees. We also plan to seek new domestic licensees for PIEkiosks. We expect to evaluate the continued development of new Pizza Inn Buffet and Delco Units in international markets in fiscal 2019, particularly in theMiddle East. In appropriate circumstances, we may grant area developer rights for Pizza Inn restaurants in new and existing domestic markets. A Pizza Inn areadeveloper 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 androyalties from all restaurants within the territory during the term of the agreement. In fiscal 2019, we intend to continue developing franchised Pie Five Units domestically and internationally. As of June 24, 2018, we had 72franchised units open and had executed multi-year development agreements with 19 franchisees for up to an additional 151 domestic and 40 internationalPie Five Units. The number of Pie Five Units subject to a development agreement is scaled relative to the estimated development potential of the specifiedgeographic area and requires the franchisee to achieve specified unit development milestones over a period of time, typically five years, to maintain theirdevelopment 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 inpart by our success at selecting qualified franchisees, by our ability to identify satisfactory sites in appropriate markets and by our ability to continue trainingand monitoring our franchisees. We intend to continue to focus on franchise development opportunities with experienced, well-capitalized, multi-restaurantoperators. In addition we intend to take the brand into international markets, starting with Pakistan.5 Domestic Franchise Operations Franchise and development agreements. We discontinued offering new Delco Unit franchises during fiscal 2014. Our current standard forms offranchise agreements provide for the following basic terms: Pizza Inn Buffet Unit Express Unit Pie Five Unit Development fee per unit — — 5,000 Franchise fee per unit 30,000 5,000 20,000 Initial franchise term 20 years 5 years 10 years Renewal period 10 years 5 years 5 years Royalty rate % of sales 4% 5% 6%National ad fund % of sales 1% 2% 2%Required total ad spending % of sales 5% 2% 5% Since the Pizza Inn concept was first franchised in 1963, industry franchising concepts and development strategies have evolved, and our presentfranchise relationships are evidenced by a variety of contractual forms. Common to those forms are provisions that: (i) require the franchisee to follow thePizza Inn system of restaurant operation and management, (ii) require the franchisee to pay a franchise fee and continuing royalties, and (iii) except forExpress 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 anticipateallocating significant internal resources to the growth of our Pie Five franchise and development operation in fiscal 2019. Our Pie Five franchise agreementrequires 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 designstandards determined by the Company. Training. We offer numerous training programs for the benefit of franchisees and their restaurant crew managers. The training programs, taught byexperienced Company employees, focus on food preparation, service, cost control, sanitation, safety, local store marketing, personnel management and otheraspects of restaurant operation. The training programs include group classes, supervised work in restaurants and special field seminars. Initial and certainsupplemental training programs are offered free of charge to franchisees, who pay their own travel and lodging expenses. New franchisees also receive on-sitetraining from Company employees to assist with their first two restaurant openings under their development agreements. Restaurant managers train their staffthrough 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 Fiveand Pizza Inn brands. All franchisees are required to operate their restaurants in compliance with these written policies, standards and specifications, whichinclude matters such as menu items, ingredients, materials, supplies, services, furnishings, decor and signs. Our efforts to maintain consistent operations mayresult, from time to time, in the closing of certain restaurants that have not achieved and maintained a consistent standard of quality or operations. We alsomaintain adherence to our standards through ongoing support and education of our franchisees by our franchise business consultants, who are deployedlocally in markets where our franchisees are located. 6 Domestic Kiosk License Agreements Kiosk license agreements. Our PIE Units are typically offered for five year initial license periods with options for additional five year renewals. PIEUnit licensees are not charged development fees, license fees, royalties, or advertising assessments. PIE Unit license agreements require that the licenseecomply with standards of the Pizza Inn brand, including marketing, kiosk system configuration, and sales and sourcing of authorized products and services.The mandated products and sourcing provisions within the PIE Unit licensing agreement result in supplier rebates for the Company. Training. New licensees and their PIE Unit employees must attend and successfully complete our training program, which consists of a single day oftraining at the licensed location. PIE Unit managers train their staff through on-the-job training, utilizing video and printed materials produced by us. Standards. We require licensee adherence to a variety of standards designed to ensure proper operations and to protect and enhance the Pizza Innbrand. All licensees are required to operate their kiosks in compliance with these written policies, standards and specifications, which include matters such asmenu 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 kiosks that have not achieved and maintained a consistent standard of quality or operations. We also maintain adherence to ourstandards through ongoing support and education of our licensees by our franchise business consultants, who are deployed locally in markets where ourlicensees are located. Company-Owned Restaurant Operations As of June 24, 2018, we operated one Pie Five Unit in the Dallas/Fort Worth metropolitan area. We do not currently intend to operate any BuffetUnits, Delco Units, Express Units or PIE Units. In addition to generating revenues, we use the domestic Company-owned restaurant as a test site for newproducts and promotions as well as restaurant operational improvements and as a forum for training new managers and franchisees. We do not presentlyanticipate opening additional Company-owned restaurants during fiscal 2019. International Franchise Operations We also offer master license rights to develop Pizza Inn and Pie Five restaurants in certain foreign countries, with negotiated fees, developmentschedules and ongoing royalties. A master licensee for a foreign country pays a negotiated fee to purchase the right to develop and operate restaurants withina 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 andwe 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 masterlicensee typically retains half the franchise fees and half the royalties on all restaurants within the territory during the term of the agreement. Master licenseesmay open restaurants that they own and operate, or they may open sub-franchised restaurants owned and operated by third parties through agreements withthe master licensee, but subject to our approval. Our first franchised Pizza Inn restaurant outside of the United States opened in the late 1970s. As of June 24, 2018, there were 58 Pizza Innrestaurants operating internationally. With the exception of two restaurants in Honduras, all of the Pizza Inn restaurants operated or sub-licensed by ourinternational master licensees are in the United Arab Emirates, Saudi Arabia and adjoining countries. Our ability to continue to develop select internationalmarkets 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. We expect the first internationalfranchised Pie Five Unit to open in fiscal 2019 in Pakistan. 7 Food and Supply Distribution During the fiscal quarter ended December 24, 2017, the Company discontinued its Norco distribution division and revised its arrangements withthird party suppliers and distributors of food, equipment and supplies. The discontinuation of the Norco food and supply distribution entity was a strategicshift for the Company, releasing the Company from the credit risk, overhead expense, and delivery responsibilities of directly supplying franchisedrestaurants and PIE kiosks. As a result of the revised arrangements, franchisees and licensees began purchasing food and supplies directly from authorized,reputable and experienced supply and distribution companies. Also as a result of the strategic shift, the sale of food, equipment and supplies is no longerrecognized as revenue and the cost of such items is no longer included in cost of sales. Prior to the discontinuation of the Norco distribution division, supplier incentive funds were included in the margin of the Norco business unit. As aresult of the Norco strategic shift, the Company reports incentive revenues received from third party suppliers and distributors as revenue. The Company provides sourcing, quality assurance, and research and development for both the Pizza Inn and Pie Five systems. The authorizeddistributors make deliveries to all domestic units from several distribution centers, with delivery territories and responsibilities for each determined accordingto geographical region. As a franchisor, the Company is able to leverage the advantages of direct vendor negotiations and volume purchasing of food,equipment and supplies for the franchisees’ and licensees’ benefit in the form of a concentrated, one-truck delivery system, competitive pricing and productconsistency. Franchisees and licensees are able to source all products and ingredients from authorized distributors. In order to assure product quality andconsistency, our franchisees and licensees are required to purchase from authorized distributors certain food products that are proprietary to the Pizza Inn andPie Five systems, including cheese, pizza sauce, flour mixture, certain meats and spice blend. Franchisees and licensees may purchase other non-proprietaryfood products and supplies either from authorized distributors or from other suppliers who meet our requirements for quality and reliability. Non-proprietary food and ingredients, equipment and other supplies are generally available from several qualified sources. With the exception ofseveral proprietary food products, such as cheese and dough flour, we are not dependent upon any one supplier or a limited group of suppliers. We contractwith 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 orproducts, and do not anticipate any difficulty in obtaining inventories or supplies in the foreseeable future. Prices charged by our suppliers are subject tofluctuation, and franchisees and licensees bear increased costs or benefit from savings through changes in product pricing. We do not engage in commodityhedging but enter into pricing arrangements for up to a year in advance for certain high volume products. Marketing and Advertising 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 bepromoted at the local and regional levels. The Pizza Inn Advertising Plan Cooperative (“PIAP Cooperative”) is a cooperative association that is responsible for creating and producing variousmarketing programs and materials, which may include print and digital advertisements, direct mail materials, social media and e-mail marketing, televisionand radio commercials, in-store promotional materials, and related marketing and public relations services. Each operator of a domestic Buffet Unit or DelcoUnit is entitled to membership in PIAP Cooperative. Nearly all of our existing Pizza Inn franchise agreements for Buffet Units and Delco Units require thefranchisees to become members of PIAP Cooperative. Members contribute 1% of their sales to PIAP Cooperative. PIAP Cooperative is managed by a board oftrustees comprised of franchisee representatives who are elected by the members each year. We do not have any ownership interest in PIAP Cooperative. Weprovide certain administrative, marketing and other services to PIAP Cooperative and are paid by PIAP Cooperative for such services. As of June 24, 2018,substantially all of our domestic franchisees were members of PIAP Cooperative. Operators of Express Units do not participate in PIAP Cooperative. However,they contribute directly to a Pizza Inn Express Fund (“PIEF”) to help fund purchases of Express Unit marketing materials and similar expenditures.International franchisees and PIE Unit licensees do not participate in the PIAP Cooperative or the PIEF. 8 In the past year we have allocated additional resources to the development and execution of marketing programs for the Pie Five restaurant system tobenefit Pie Five franchisees in different metropolitan areas as well as the Company-owned restaurant. Pie Five franchisees contribute a specified percentage oftheir sales to the Company to fund the creation and production of various marketing and advertising programs and materials, which may include print anddigital advertisements, direct mail materials, customer satisfaction systems, social media and e-mail marketing, television and radio commercials, in-storepromotional materials, and related marketing and public relations services. We anticipate continuing to optimize Pie Five marketing activities commensuratewith the contributions 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 marketingprograms for each brand. We provide Company-owned and franchised restaurants with access to an assortment of local store marketing materials, includingpre-approved print, radio, and digital media marketing materials. We also provide local store marketing materials and programs specifically to support newrestaurant 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 beenregistered with the United States Patent and Trademark Office. The duration of our trademarks is unlimited, subject to periodic renewal and continued use. Inaddition, we have obtained trademark registrations for our marks in several foreign countries and have periodically re-filed and applied for registration inothers. 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 tolicensing and regulation by a number of governmental authorities, which include health, safety, sanitation, wage and hour, alcoholic beverage, building andfire agencies in the state and municipality in which the restaurant is located. Difficulties in obtaining, or the failure to obtain, required licenses or approvalscould delay or prevent the opening of a new restaurant or require the temporary or permanent closing of an existing restaurant 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 FTCrequires us to furnish to prospective franchisees a franchise disclosure document containing prescribed information. Substantive state laws that regulate thefranchisor-franchisee relationship presently exist in a number of states, and bills have been introduced in Congress from time to time that would provide forfurther federal regulation of the franchisor-franchisee relationship in certain respects. Some foreign countries also have disclosure requirements and other lawsregulating franchising and the franchisor-franchisee relationship. Employees As of June 24, 2018, we had 51 employees, including 35 in our corporate office and one full-time and 15 part-time employees at the Company-owned restaurant. 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-establishedcompetitors with substantially greater brand recognition and financial and other resources than the Company. Competitors include a large number ofinternational, national and regional restaurant and pizza chains, as well as local restaurants and pizza operators. Some of our competitors may be betterestablished in the markets where our restaurants are or may be located. Within the pizza segment of the restaurant industry, we believe that our primarycompetitors are national pizza chains and several regional chains, including chains executing a “take and bake” concept. We also compete against the frozenpizza products available at grocery stores and large superstore retailers. In recent years several competitors have developed fast-casual pizza concepts thatcompete 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 anadverse impact on our sales and earnings. 9 With respect to the sale of franchises and licenses, we compete with many franchisors of restaurants and other business concepts. We believe that theprincipal competitive factors affecting the sale of franchises are product quality, price, value, consumer acceptance, franchisor experience and support, andthe quality of the relationship maintained between the franchisor and its franchisees. In general, there is also active competition for management personneland attractive commercial real estate sites suitable for our restaurants. 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 19,576 square foot corporate office facility with average annual lease payments of approximately $17.50 per square foot. This lease began on January 2, 2017 and has a ten year term. As of June 24, 2018, the Company also operated one Pie Five Unit from a leased location. The operating lease covers 2,400 square feet and has aninitial term of ten years at a base rental rate of $40.00 per square foot in the first five years and $44.00 per square foot in the last five years. The lease containsprovisions permitting renewal for an additional term of five years. As of June 24, 2018, the Company had contingent and direct lease obligations for twenty-one additional locations. Two of the lease obligationshave been subleased, sixteen of the lease obligations have been assigned to franchisees, and three of the lease obligations are direct lease obligations for non-operating locations. These leased properties range in size from 2,021 to 2,850 square feet, have annual rental rates ranging from approximately $28.00 to$44.00 per square foot and expire between 2019 and 2028. The Company has settled one of the non-operating leases and is currently pursuing alternativesfor subleasing or terminating the remaining two non-operating unexpired leases. ITEM 3. LEGAL PROCEEDINGS. The Company is subject to claims and legal actions in the ordinary course of its business. The Company believes that all such claims and actionscurrently pending against it are either adequately covered by insurance or would not have a material adverse effect on the Company’s annual results ofoperations, cash flows or financial condition if decided in a manner that is unfavorable to the Company. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable.10 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERSAND ISSUER PURCHASES OF EQUITY SECURITIES. As of September 19, 2018, there were approximately 1,903 stockholders of record of the Company's common stock. The Company had no sales of unregistered securities during fiscal 2018 or 2017. The Company's common stock is listed on the Capital Market of the NASDAQ Stock Market, LLC (“NASDAQ”) under the symbol “RAVE”. Thefollowing table shows the highest and lowest price per share of the common stock during each quarterly period within the two most recent fiscal years, asreported by NASDAQ. Such prices reflect inter-dealer quotations, without adjustment for any retail markup, markdown or commission. Fiscal 2018:HighLow Fourth Quarter Ended 6/24/2018 $ 1.50 $ 1.09 Third Quarter Ended 3/25/2018 2.33 1.20 Second Quarter Ended 12/24/2017 1.95 1.36 First Quarter Ended 9/24/2017 2.31 1.27 Fiscal 2017:HighLow Fourth Quarter Ended 6/25/2017 $ 2.29 $ 1.83 Third Quarter Ended 3/26/2017 3.01 1.75 Second Quarter Ended 12/25/2016 3.28 1.66 First Quarter Ended 9/25/2016 4.75 3.02 The Company did not pay any dividends on its common stock during the fiscal years ended June 24, 2018 or June 25, 2017. Any determination topay 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 ofoperations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant. Currently, there is no intention to pay anydividends 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 onour 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 boardof 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 atotal 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 sharesof 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 expirationdate. There were no stock purchases in the fiscal year ended June 24, 2018. The Company’s ability to purchase shares of our common stock is subject to various laws, regulations and policies as well as the rules andregulations of the Securities and Exchange Commission (the “SEC”). Subsequent to June 24, 2018, the Company has not repurchased any outstanding sharesbut may make further purchases under the 2007 Stock Purchase Plan. The Company may also purchase shares of our common stock other than pursuant tothe 2007 Stock Purchase Plan or other publicly announced plans or programs. 11 Equity Compensation Plan Information The following table furnishes information with respect to the Company’s stock option equity compensation plans as of June 24, 2018: Number of securities Number of securities to Weighted-average remaining available for be issued upon exercise exercise price of future issuance underPlanCategory of outstanding options,warrants, and rights outstanding options, warrants, and rights equity compensation plans(1)Stock option compensation plans approved by security holders 478,056$4.16 -0- Stock option compensation plans not approved by security holders - - - Total 478,056$4.16 - (1)Securities remaining available for future issuance are net of a maximum of 1,362,450 shares of common stock issuable pursuant to outstandingrestricted stock units, subject to applicable vesting requirements and performance criteria. See note H to the audited consolidated financial statementsincluded in this report. 12 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 elsewherein this Annual Report on Form 10-K and may contain certain forward-looking statements. See “Forward-Looking Statements.” Overview The Company franchises pizza buffet (“Buffet Units”), delivery/carry-out (“Delco Units”) and express (“Express Units”) restaurants under thetrademark “Pizza Inn” and operates and franchises fast casual pizza restaurants (“Pie Five Units”) under the trademarks “Pie Five Pizza Company” or “PieFive”. The Company also licenses PIE Units under the trademark “Pizza Inn”. We facilitate food, equipment and supply distribution to our domestic andinternational system of restaurants through agreements with third party distributors. At June 24, 2018, Company-owned and franchised restaurants consistedof the following (in thousands, except unit data): Pizza Inn Pie Five All Concepts Ending Retail Ending Retail Ending Retail Units Sales Units Sales Units Sales Domestic Franchised/Licensed 153 $ 86,801 72 $ 43,377 225 $ 130,178 Company-Owned - - 1 4,254 1 4,254 Total Domestic Units 153 $ 86,801 73 $ 47,631 226 $ 134,432 International Franchised 58 - 58 The domestic units were located in 23 states predominately situated in the southern half of the United States. The international restaurants werelocated in six foreign countries. Rave Domestic Comparable Store Sales The following table summarizes domestic comparable store retail sales for the Company. Fiscal Year Ended June 24, June 25, 2018 2017 (in thousands) Pizza Inn Comparable Store Retail Sales - Domestic $82,747 $81,271 Pie Five Comparable Store Retail Sales 25,646 29,453 Total Rave Comparable Store Retail Sales $108,393 $110,724 Total domestic retail sales decreased by $2.3 million, or 2.1% compared to the prior year. The net decrease was attributable to a decline in Pie Fivecomparable store retail sales partially offset by an increase in Pizza Inn comparable store retail sales. 13 Basic income per common share improved $1.32 to income per share of $0.14 for fiscal 2018 compared to a loss of $1.18 per share in the prior fiscalyear. Net income improved $14.4 million to $1.9 million for fiscal 2018 compared to a loss of $12.5 million for the prior fiscal year on revenues of $15.1million for fiscal 2018 as compared to $26.1 million in fiscal 2017. The improved net income over the prior year was due to a $7.9 million improvement inour Company-owned stores segment related primarily to reductions in closed and non-operating store expenses, a $1.0 million improvement in gains on saleof assets, a $1.0 million reduction in Corporate general and administrative expenses, a $1.1 million net improvement in other operations and a $3.4 millionbenefit from an adjustment to the deferred tax valuation allowance. Diluted income per common share improved $1.31, to income per share of $0.13 for fiscal 2018, compared to a loss of $1.18 per share in the priorfiscal year. Weighted average common and potential dilutive common shares outstanding include equivalent shares for convertible notes and acorresponding net income adjustment for interest on the notes. Adjusted EBITDA for the fiscal year ended June 24, 2018, improved to $0.6 million compared to a loss of $1.7 million for the comparable period ofthe prior fiscal year. The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown (in thousands): Twelve Months Ended June 24, June 25, 2018 2017 Net income (loss) $1,912 $(12,491) Interest expense 183 106 Income taxes (3,322) 53 Income taxes - discontinued ops (60) — Depreciation and amortization 874 2,434 Depreciation and amortization - discontinued ops — 22 EBITDA $(413) $(9,876) Stock compensation expense 115 58 Pre-opening costs 114 162 (Gain)/Loss on sale/disposal of assets (144) 882 Impairment of long-lived assets and other lease charges 894 5,877 Discontinued operations excl taxes 422 1,226 Closed and non-operating store costs (369) (75) Adjusted EBITDA $619 $(1,746) Results of operations for fiscal 2018 and 2017 both included 52 weeks. 14 Pizza Inn Brand Summary The following tables summarize certain key indicators for the Pizza Inn franchised, licensed and Company-owned domestic restaurants thatmanagement believes are useful in evaluating performance. Fiscal Year Ended June 24, June 25, 2018 2017Pizza Inn Retail Sales - Total Domestic Units(in thousands, except unit data)Domestic Units Buffet Units- Franchised $ 80,128 $ 81,283 Delco/Express Units- Franchised 6,663 6,597 Buffet Units- Company-owned - 568 Pie Units- Licensed 10 -Total domestic retail sales $ 86,801 $ 88,448 Pizza Inn Comparable Store Retail Sales - Total Domestic $ 82,747 $ 81,271 Pizza Inn Average Units Open in Period Domestic Units Buffet Units- Franchised 90 94 Delco/Express Units- Franchised 65 63 Buffet Units- Company-owned - 1 Pie Units- Licensed - - Total domestic Units 155 158Total domestic Pizza Inn total retail sales decreased $1.6 million, or 1.9% compared to the prior year. The decrease in domestic retail sales wasprimarily due to a net decrease in store count. Comparable Pizza Inn retail sales increased by 1.8%. The following chart summarizes Pizza Inn restaurant activity for the fiscal year ended June 24, 2018: Fiscal Year Ended June 24, 2018 Beginning Concept Ending Units Opened Change Closed UnitsDomestic Units Buffet Units- Franchised 93 1 — 4 90 Delco/Express Units- Franchised 68 3 (1) 10 60 Pie Units Licensed — 2 1 — 3 Total domestic Units 161 6 — 14 153 International Units (all types) 60 3 — 5 58 Total Units 221 9 — 19 211 We believe the net decrease of eight domestic Pizza Inn units during the fiscal year ending June 24, 2018 is consistent with the recent trend ofmodest domestic store closures. We believe the net decrease of two international Pizza Inn units represents a normal variation in the number of stores open. 15 Pie Five Brand Summary The following tables summarize certain key indicators for the Pie Five franchised and Company-owned restaurants that management believes areuseful in evaluating performance. Fiscal Year Ended June 24, June 25, 2018 2017 (in thousands, except unit data)Pie Five Retail Sales - Total Units Domestic Units- Franchised $43,377 $41,929 Domestic Units- Company-owned 4,254 15,233 Total domestic retail sales $47,631 $57,162 Pie Five Comparable Store Retail Sales - Total $25,646 $29,453 Pie Five Average Units Open in Period Domestic Units- Franchised 74 67 Domestic Units- Company-owned 7 26 Total domestic Units 81 93 Pie Five system-wide retail sales decreased $9.5 million, or 16.7%, for the fiscal year ended June 24, 2018 when compared to the prior year.Compared to fiscal 2017, average units open in the period decreased from 93 to 81. Comparable store retail sales decreased by 12.9% during fiscal 2018compared to fiscal 2017. The following chart summarizes Pie Five restaurant activity for the fiscal year ended June 24, 2018: Fiscal Year Ended June 24, 2018 Beginning Ending Units Opened Transfer Closed Units Domestic - Franchised 71 7 12 18 72Domestic - Company-owned 13 1 (12) 1 1Total domestic Units 84 8 - 19 73 The net decrease of 11 Pie Five Units during fiscal 2018 was primarily the result of the closure of poor-performing units, which we believe providesus a stronger foundation for future brand growth. We believe that this trend of net store closures will moderate and then reverse in future periods. The transferof 12 Company-owned Pie Five Units to franchisees during fiscal 2018 represents the implementation of our strategic shift away from the ownership andoperation of restaurants. 16 Pie Five - Company-Owned Restaurants Twelve Months Ended(in thousands, except store weeks and average data) June 24, June 25, 2018 2017 Store weeks (excluding partial weeks) 358 1,369 Average weekly sales $11,707 $11,122 Average number of units 7 26 Restaurant sales (excluding partial weeks) $4,191 $15,226 Restaurant sales $4,254 $15,233 Loss from continuing operations before taxes $(1,763) $(9,674) Allocated marketing and advertising expenses 214 762 Depreciation/amortization expense 459 1,964 Pre-opening costs 114 162 Operations management and extraordinary expenses 96 735 Impairment, other lease charges and non-operating store costs 526 5,801 Restaurant operating cash flow $(354) $(250) Primarily as a result of decreased store count, total retail sales of Company-owned Pie Five restaurants decreased $10.9 million, or 72.1%, to $4.3million for fiscal 2018 compared to $15.2 million for fiscal 2017. Average weekly sales for Company-owned Pie Five restaurants increased $585, or 5.3%, to$11,707 for the fiscal year ended June 24, 2018 compared to $11,122 for the same period of prior year. Company-owned Pie Five restaurant operating cashflow decreased $0.1 million, or 41.6%, during the fiscal year 2018 compared to the same period of prior year. The increase in average weekly sales was attributable to closures of lower-performing Company-owned stores. The decrease in operating cash flowfor Company-owned Pie Five restaurants was primarily attributable to weaker financial performance by select stores. Loss from continuing operations beforetaxes for Company-owned Pie Five stores improved $7.9 million for the fiscal year ended June 24, 2018 compared to the same period of the prior year. Theimproved loss from continuing operations before taxes for Company-owned Pie Five restaurants was primarily the result of decrease in $5.0 million inimpairment charges and non-operating store costs and a decline pre-opening expenses, cost of sales, and general and administrative expenses. 17 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 financialstatements. We consider EBITDA and Adjusted EBITDA to be important supplemental measures of operating performance that are commonly used by securitiesanalysts, investors and other parties interested in our industry. We believe that EBITDA is helpful to investors in evaluating our results of operations withoutthe impact of expenses affected by financing methods, accounting methods and the tax environment. We believe that Adjusted EBITDA provides additionaluseful information to investors by excluding non-operational or non-recurring expenses to provide a measure of operating performance that is morecomparable from period to period. We believe that restaurant operating cash flow is a useful metric to investors in evaluating the ongoing operatingperformance of Company-owned restaurants and comparing such store operating performance from period to period. Management also uses these non-GAAPfinancial measures for evaluating operating performance, assessing the effectiveness of business strategies, projecting future capital needs, budgeting andother planning purposes. The following key performance indicators presented herein, some of which represent non-GAAP financial measures, have the meaning and are calculatedas 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, gain/loss on scrap or sale of assets, 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 ordomestic/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 each reportingperiod. The sales results for a restaurant that was closed temporarily for remodeling or relocation within the same trade area are included in thecalculation 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 reportingperiod 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 andadvertising expenses, (2) depreciation and amortization, (3) pre-opening expenses, (4) operations management and extraordinary expenses, (5)impairment and other lease charges, and (6) non-operating store costs.·“Non-operating store costs” represent gain or loss on asset disposal, store closure expenses, lease termination expenses and expenses related toabandoned store sites.·“Pre-opening expenses” consist primarily of certain costs incurred prior to the opening of a Company-owned restaurant, including: (1) marketingand promotional expenses, (2) accrued rent, and (3) manager salaries, employee payroll and related training costs. 18 Financial Results Pizza Inn Pie Five Company-Owned Franchising Franchising Stores Corporate Total Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended Jun 24, Jun 25, Jun 24, Jun 25, Jun 24, Jun 25, Jun 24, Jun 25, Jun 24, Jun 25, 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 REVENUES: Franchise revenues $ 6,892 $ 7,307 $ 3,970 $ 3,521 $ - $ - $ - $ - $ 10,862 $ 10,828 Restaurant sales - - - - 4,254 15,233 - - 4,254 15,233 Interest income - - - - - - 4 16 4 16 Total revenues 6,892 7,307 3,970 3,521 4,254 15,233 4 16 15,120 26,077 COSTS AND EXPENSES: Cost of sales - - - - 3,654 13,927 - - 3,654 13,927 General and administrative expenses - - - - 772 2,977 6,825 7,824 7,597 10,801 Franchise expenses 1,298 1,355 1,347 1,381 - - - - 2,645 2,736 Pre-opening expenses - - - - 114 162 - - 114 162 (Gain)/Loss on sale of assets - - - - - - (144) 882 (144) 882 Impairment of long-lived assets and other lease charges - - - - 894 5,877 - - 894 5,877 Bad debt - - - - 124 - 227 342 351 342 Interest expense - - - - - - 183 106 183 106 Amortization and depreciation expense - - - - 459 1,964 415 470 874 2,434 Total costs and expenses 1,298 1,355 1,347 1,381 6,017 24,907 7,506 9,624 16,168 37,267 INCOME (LOSS) FROM CONTINUING OPERATIONSBEFORE TAXES $ 5,594 $ 5,952 $ 2,623 $ 2,140 $ (1,763) $ (9,674) $ (7,502) $ (9,608) $ (1,048) $ (11,190) Revenues:Revenues are derived from (1) franchise royalties, franchise fees and supplier incentives, (2) sales by Company-owned restaurants, and (3) interestincome. The volume of supplier incentive revenues is dependent on the level of chain-wide retail sales, which are impacted by changes in comparable storesales and restaurant count, and the products sold to franchisees through third-party food distributors. Total revenues for fiscal 2018 and for the same period inthe prior fiscal year were $15.1 million and $26.1 million, respectively. Pizza Inn Franchise Revenues Pizza Inn franchise revenues decreased by $0.4 million to $6.9 million for the fiscal year ended June 24, 2018 compared to $7.3 million for fiscal2017. The 5.7% decrease was primarily the result of reduced retail sales, largely attributable to closure of under-performing stores. Franchise fees comprised$0.1 million of Pizza Inn franchise revenues for each of the fiscal years ended June 24, 2018 and June 25, 2017. Pie Five Franchise Revenue Pie Five franchise revenues increased by $0.5 million to $4.0 million for the fiscal year ended June 24, 2018 compared to $3.5 million for fiscal2017. The increase was primarily driven by the recognition of a set up fee for the first international franchisee and recognition of defaulted franchiseefees. The transfer of Company-owned stores to franchisees also contributed to the increased franchise revenues. Franchise fees, area development fees,and set up fees comprised $1.0 million and $0.6 million of Pie Five franchise revenues for the fiscal years ended June 24, 2018 and June 25, 2017respectively. Restaurant Sales Restaurant sales, which consist of revenue generated by Company-owned restaurants, decreased 72.1%, or $10.9 million, to $4.3 million for fiscal2018 compared to $15.2 million for the prior fiscal year. This decrease was primarily due to the transfer to franchisees of 12 Company-owned stores in fiscal2018. Interest Income Interest income is primarily derived from franchisee notes and receivables. Total interest income for fiscal 2018 and for the same period in the priorfiscal year were $4 thousand and $16 thousand, respectively. 19 Costs and Expenses: Cost of Sales Cost of sales primarily includes food and supply costs and labor directly related to restaurant sales. These costs decreased 73.8%, or $10.2 million, to$3.7 million for fiscal 2018 compared to $13.9 million for the prior fiscal year. The decrease in cost of sales was primarily due to the decreased number ofCompany-owned Pie Five restaurants compared to the prior year. General and Administrative Expenses Total general and administrative expenses decreased $3.2 million to $7.6 million for fiscal 2018 compared to $10.8 million for the prior fiscal year.General and administrative expenses for Company-owned restaurants decreased $2.2 million to $0.8 million for fiscal 2018 compared to $3.0 million for theprior fiscal year primarily as a result of lower store count. General and administrative expenses for corporate decreased $1.0 million to $6.8 million for fiscal2018 compared to $7.8 million for the prior year primarily as a result of lower legal and recruiting fees, management fees, and other overhead expenses. Franchise Expenses Franchise expenses include general and administrative expenses directly related to the sale and continuing service of domestic and internationalfranchises. Total franchise expenses decreased $0.1 million to $2.6 million in fiscal 2018 from $2.7 million in the prior fiscal year. Pizza Inn franchiseexpenses decreased $0.1 million to $1.3 million in fiscal 2018 from $1.4 million in the prior fiscal year primarily due to lower professional outside servicesduring fiscal 2018. Pie Five franchise expenses remained roughly flat at $1.3 million in fiscal 2018 as compared to fiscal 2017. Pre-Opening Expense The Company's pre-opening costs are expensed as incurred and generally include payroll and other direct costs associated with training newmanagers and employees prior to opening a new restaurant, rent and other unit operating expenses incurred prior to opening, and promotional costsassociated with the opening of Company-owned restaurants. Pre-opening expenses decreased to $0.1 million in fiscal 2018 from $0.2 million in the prior yearprimarily due to opening fewer Company-owned Pie Five stores. (Gain)/Loss on sale of assets The Company’s (gain) / loss on sale of assets reflects the net difference between the sale price of assets and the net carrying value of the assets at thetime of sale. (Gain) / loss on sale of assets improved $1.0 million to a gain of $0.1 million in fiscal 2018 from a loss of $0.9 million in the prior year due tomore favorable terms on assets sold in fiscal 2018. 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 fullyrecoverable. Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from use of an asset compared to itscarrying value. If impairment is recognized, the carrying value of the impaired asset is reduced to its fair value, based on discounted estimated future cashflows. During fiscal year 2018, the Company tested its long-lived assets for impairment and recognized pre-tax, non-cash impairment charges of $0.9 millioncompared to $5.9 million in the prior year. The fiscal 2018 impairment charges related to $0.9 million in other lease termination expenses for undeveloped,closed and transferred restaurant sites. These impairment charges arose as a result of the decisions over the past two fiscal years to close certainunderperforming Company-owned Pie Five restaurants and to abandon previously executed leases for eight locations no longer deemed desirable for futurerestaurant development. 20 Bad Debt Expense Total provision for bad debt remained relatively stable at $0.3 million in both fiscal 2018 and fiscal 2017. Bad debt provision related to accountsreceivable from franchisees decreased $0.1 million to $0.2 million in fiscal 2018 compared to $0.3 million in the prior year. Bad debt provision forCompany-owned stores of $0.1 million related to the collectability of a promissory note taken in connection with the prior sale of two Company-owned PieFive Units to a franchisee. The Company believes that the provision and related allowance for doubtful accounts adequately reserves for outstandingreceivables due from franchisees whose restaurants closed and for outstanding receivables due from continuing franchisees. For restaurants that areanticipated to close or are exhibiting signs of financial distress, credit terms are typically restricted. Interest Expense Interest expense increased $0.1 million for the fiscal year ended June 24, 2018 to $0.2 million, compared to $0.1 million in the prior year due to thetiming of the issuance of $3.0 million in senior convertible notes in the third quarter of fiscal 2017. 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, reversalof existing taxable temporary differences, and tax planning strategies. During the fourth quarter of fiscal year June 24, 2018, the Company reversed a portionof the prior valuation allowance against its deferred tax assets. The valuation allowance decreased by $6.6 million during fiscal year 2018, from $9.0 millionat June 25, 2017 to $2.4 million at June 24, 2018. This resulted in a tax benefit of $3.4 million due to expected future taxable income. The Company assessed whether the valuation allowance should be maintained against its deferred tax assets based on consideration of all availableevidence, using a “more likely than not” standard. In assessing the need for the valuation allowance, the Company considered both positive and negativeevidence related to the likelihood of realization of deferred tax assets. Future sources of taxable income were also considered in determining the amount ofthe recorded valuation allowance. Based on the Company's review of this evidence, management determined it was appropriate to reverse a portion of thevaluation allowance against the Company's deferred tax assets. Income tax benefit of $3.3 million for fiscal 2018 represents $0.1 million in state and foreign tax expense and a $3.4 million benefit on reversal of aportion of the valuation allowance. At the end of tax year ended June 24, 2018, the Company had net operating loss carryforwards totaling $23.5 million thatare available to reduce future taxable income and will begin to expire in 2032. Discontinued Operations Net losses from the Norco food and supply distribution division are included within discontinued operations. The discontinuation of the Norco foodand supply distribution entity was a strategic shift for the Company during the second quarter of fiscal 2018, releasing the Company from the credit risk,overhead expense, and delivery responsibilities of directly supplying franchised restaurants and PIE kiosks. Discontinued operations also includes lossesfrom leased buildings and operating losses associated with Company-owned restaurants closed in prior years. 21 Liquidity and Capital Resources Sources and Uses of Funds Our primary sources of liquidity are cash flows from operating activities and proceeds from the sale of securities. Cash flows from operating activities generally reflect net income adjusted for certain non-cash items including depreciation and amortization,changes in deferred tax assets, share based compensation, and changes in working capital. Cash used by operations was $3.9 million in fiscal 2018 comparedto cash used of $5.5 million in fiscal year 2017. Cash flows from investing activities reflect net proceeds from sale of assets and capital expenditures for the purchase of Company assets. Cashprovided by investing activities during fiscal 2018 of $0.7 million was primarily attributable to sales of assets of closed Company-owned Pie Five restaurantspartially offset by capital expenditures for a new Pie Five Unit, computers and other miscellaneous assets. This compares to cash provided by investingactivities of $0.4 million during the fiscal year ended June 25, 2017 primarily attributable to sales of assets of closed Company-owned Pie Five restaurantspartially offset by capital expenditures for a new Pie Five Unit, computers and other miscellaneous assets. Cash flows from financing activities generally reflect changes in the Company's borrowings and securities activity during the period. Net cashprovided by financing activities was $4.1 million and $4.7 million for the fiscal years ended June 24, 2018 and June 25, 2017, respectively. Cash flows fromfinancing activities for fiscal 2018 were primarily the result of the sale of stock in connection with a shareholder rights offering that closed in September2017, plus stock sales in an at-the-market offering, partially offset by the repayment of a $1.0 million short-term promissory note. Cash flows from financingactivities for fiscal 2017 were primarily the result of proceeds from the exercise of stock options, the issuance of convertible notes and proceeds from a shortterm note. ATM Offering On December 5, 2017, the Company entered into an At Market Issuance Sales Agreement with B. Riley FBR, Inc. (“B. Riley FBR”) pursuant towhich the Company may offer and sell shares of its common stock having an aggregate offering price of up to $5,000,000 from time to time through B. RileyFBR acting as agent (the “2017 ATM Offering”). The 2017 ATM Offering is being undertaken pursuant to Rule 415 and a shelf Registration Statement onForm S-3 which was declared effective by the SEC on November 6, 2017. Through June 24, 2018, the Company had sold an aggregate of 150,011 shares inthe 2017 ATM Offering, realizing aggregate gross proceeds of $0.2 million. Short Term Loan On December 22, 2016, the Company obtained a $1.0 million loan from its largest shareholder, Newcastle Partners, LP (“Newcastle”), evidenced bya Promissory Note. The loan bore interest at 10% per annum and was originally due and payable on April 30, 2017. On May 8, 2017, the Company executedan Extended and Restated Promissory Note in favor of Newcastle extending the due date of the short term loan until the earlier of September 1, 2017, or theCompany’s receipt of at least $2.0 million in additional debt or equity capital. The short term loan was paid in full during fiscal 2018. Newcastle is anaffiliate of the Company’s Chairman, Mark E. Schwarz. Convertible Notes On March 3, 2017, the Company completed a registered shareholder rights offering of its 4% Convertible Senior Notes due 2022 (“Notes”).Shareholders exercised subscription rights to purchase all 30,000 of the Notes at the par value of $100 per Note, resulting in gross offering proceeds to theCompany of $3.0 million. The Notes bear interest at the rate of 4% per annum on the principal or par value of $100 per note, payable annually in arrears on February 15 of eachyear, commencing February 15, 2018. Interest is payable in cash or, at the Company’s discretion, in shares of Company common stock. The Notes mature onFebruary 15, 2022, at which time all principal and unpaid interest will be payable in cash or, at the Company’s discretion, in shares of Company commonstock. The Notes are secured by a pledge of all outstanding equity securities of our two primary direct operating subsidiaries.22 Noteholders may convert their notes to common stock effective February 15, May 15, August 15 and November 15 of each year, unless theCompany sooner elects to redeem the notes. The conversion price is $2.00 per share of common stock. Accrued interest will be paid through the effective dateof the conversion in cash or, at the Company’s sole discretion, in shares of Company common stock. The Company determined that the Notes contained a beneficial conversion feature of $0.1 million since the market price of the Company’s commonstock was higher than the effective conversion price of the notes when issued. The beneficial conversion feature and the issuance costs of the notesaggregated $0.2 million and were considered a debt discount and accreted into interest expense using the effective interest method over the debt maturityperiod. During fiscal 2018, $1.3 million in par value of the Notes were converted to common shares. At the end of fiscal 2018, $1.7 million in par value ofthe Notes were outstanding, offset by $0.1 million of unamortized debt issue costs and unamortized debt discounts. Equity Rights Offering On September 13, 2017, the Company completed a registered shareholder rights offering of 3,571,429 shares of its common stock at a subscriptionprice of $1.40 per share. The equity shareholder rights offering was fully subscribed resulting in gross offering proceeds to the Company of $5.0 million. Liquidity We expect to fund continuing operations and planned capital expenditures for the next fiscal year primarily from cash on hand, operating cash flowand sales of securities. Based on budgeted and year-to-date cash flow information, we believe that we have sufficient liquidity to satisfy our cashrequirements for the 2019 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 thataffect our reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. The Company bases its estimates onhistorical experience and various other assumptions that it believes are reasonable under the circumstances. Estimates and assumptions are reviewedperiodically. 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, aresusceptible to change, and therefore require subjective judgments. Changes in the estimates and judgments could significantly impact the Company’s resultsof operations and financial condition in future periods. Accounts receivable consist primarily of receivables generated from franchise royalties and food and supply sales to franchisees prior to thediscontinuation of the Norco division. The Company records a provision for doubtful receivables to allow for any amounts which may be unrecoverablebased upon an analysis of the Company’s prior collection experience, customer creditworthiness and current economic trends. Actual realization of accountsreceivable could differ materially from the Company’s estimates. The Company reviews long-lived assets for impairment when events or circumstances indicate that the carrying value of such assets may not be fullyrecoverable. Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from use of an asset compared to itscarrying value. If impairment is recognized, the carrying value of the impaired asset is reduced to its fair value based on discounted estimated future cashflows. During fiscal year 2018, the Company tested its long-lived assets for impairment and recognized pre-tax, non-cash impairment charges of $0.9 millionprimarily related to lease termination expense for closed and non-operating Pie Five Units. During fiscal year 2017, the Company tested its long-lived assetsfor impairment and recognized pre-tax, non-cash impairment charges of $5.9 million primarily related to the carrying value of 20 Pie Five Units and leasetermination expenses for seven undeveloped restaurant sites. 23 Franchise revenue consists of income from license fees, royalties, area development and foreign master license agreements and supplier incentiverevenues. 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. Supplier incentive revenues are recognized as earned,typically as the underlying commodities are shipped. The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversalof existing taxable temporary differences, and tax planning strategies. The Company assesses whether a valuation allowance should be established against itsdeferred 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 considers both positive and negative evidence related to the likelihood of realization of deferred tax assets. In making such assessment, moreweight is given to evidence that can be objectively verified, including recent cumulative losses. Future sources of taxable income are also considered indetermining the amount of the recorded valuation allowance. The Company accounts for uncertain tax positions in accordance with ASC 740-10, which prescribes a comprehensive model for how a companyshould recognize, measure, present, and disclose in its financial statements uncertain tax positions that it has taken or expects to take on a tax return. ASC740-10 requires that a company recognize in its financial statements the impact of tax positions that meet a “more likely than not” threshold, based on thetechnical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefitthat has a greater than fifty percent likelihood of being realized upon ultimate settlement. As of June 24, 2018 and June 25, 2017, the Company had nouncertain tax positions. The Company assesses its exposures to loss contingencies from legal matters based upon factors such as the current status of the cases andconsultations 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 theactual loss from a contingency differs from management’s estimate, operating results could be adversely impacted. In December 2017, President Donald Trump signed the Tax Cuts and Jobs Act. The new law reduces the income tax rate for corporations to 21%effective January 1, 2018. Due to the tax rate change, the deferred tax assets as of December 24, 2017 were adjusted by $3.5 million. There wereapproximately $5.9 million of deferred tax assets less a valuation allowance of $2.4 million at June 24, 2018. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers.” The standardrequires that the transaction price received from customers be allocated to each separate and distinct performance obligation. The transaction priceattributable to each separate and distinct performance obligation is then recognized into revenue as the performance obligations are met. The standard alsorequires any unamortized portion of allocated revenue obligations received prior to adoption be presented in the consolidated balance sheet as a liability.ASU 2014-09 is effective for annual reporting periods (including interim periods therein) beginning after December 15, 2017. The Company will adopt thisnew guidance in the first quarter of fiscal 2019 and expects to use the modified retrospective transition method, which will result in recognizing thecumulative effect of initially applying the revenue standard as an adjustment to the opening balance of retained earnings in the first quarter of fiscal 2019.The Company has not yet estimated the impact of the adoption of ASU 2014-09. Based on a preliminary assessment, the Company believes the recognition of the majority of its revenues, including royalties and supplier anddistributor incentive revenues, which are directly based upon franchise sales, and revenues from Company-owned stores, will not be affected by the newguidance. The Company expects the adoption of the new guidance to change the timing of recognition of license fees and area development and foreignmaster license fees. Currently, these fees are generally recognized into revenue upon either opening of the respective restaurant or when a renewal agreementbecomes effective. The new guidance will generally require these fees to be recognized over the term of the related franchise license for the respectiverestaurant. 24 The Company also expects the adoption of ASU 2014-09 to change the reporting of franchisee advertising fund contributions and the relatedadvertising fund expenditures, which are currently presented as a net expense in the consolidated statements of operations. Under the new guidance, theCompany expects advertising fund contributions and expenditures to be reported on a gross basis in the consolidated statements of operations. Although weexpect this change to have a material impact to our total revenues and expenses, we expect such contributions and expenditures to be largely offsetting andnot to materially impact our reported net income. The Company continues to evaluate the impact the adoption of this new guidance will have on these and other revenue transactions, in addition tothe impact on accounting policies and related disclosures. In February 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 amends the existing accounting standards for lease accounting, includingrequiring lessees to recognize most leases on their balance sheets. The new lease standard is effective for public companies for fiscal years, (including interimperiods therein), beginning after December 15, 2018. Application of ASU 2016-02 will be required beginning in the first quarter of our fiscal 2020. Earlyadoption of ASU 2016-02 as of its issuance is permitted. This new guidance requires a modified retrospective transition approach for all leases existing at, orentered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adoptingthis new guidance on the consolidated financial statements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not required for a smaller reporting company. 25 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. Evaluation of Disclosure Controls and ProceduresThe Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, evaluated theeffectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the principalexecutive officer and principal financial officer concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by thisreport, 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 timelydecisions 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 Rule13a-15(f) under the Securities Exchange Act of 1934). Under the supervision and with the participation of management, including our principal executiveofficer and principal financial officer, the Company has conducted an evaluation of the effectiveness of its internal control over financial reporting. TheCompany’s management based it’s evaluation on criteria set forth in the framework in Internal Control-Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission. Based upon that evaluation, management has concluded that our internal control over financialreporting was effective as of June 24, 2018. During the most recent fiscal quarter, there have been no changes in the Company’s internal controls overfinancial 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. 26 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 pursuantto 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 pursuantto 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 pursuantto 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 pursuantto 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. The information required by this Item is incorporated by reference from the Company’s definitive proxy statement to be filed with the SEC pursuantto Regulation 14A not later than 120 days after the end of the fiscal year covered by this report. 27 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a)1.The financial statements filed as part of this report are listed in the Index to Consolidated Financial Statements and Supplementary Data appearing onpage 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 Dataappearing on page F-1 of this report on Form 10-K. 3.Exhibits: 3.1Amended and Restated Articles of Incorporation of Rave Restaurant Group, Inc. (filed as Exhibit 3.1 to Form 8-K filed January 8, 2015 andincorporated herein by reference). 3.2Amended and Restated Bylaws of Rave Restaurant Group, Inc. (filed as Exhibit 3.2 to Form 8-K filed January 8, 2015 and incorporatedherein by reference). 4.1Indenture for 4% Convertible Senior Notes due 2022 (filed as Exhibit 4.1 to Form S-3/A filed January 6, 2017 and incorporated herein byreference). 4.2Pledge Agreement (filed as Exhibit 4.2 to Form S-3/A filed January 6, 2017 and incorporated herein by reference). 4.3Supplemental Indenture Number 1 dated as of October 31, 2017, between Rave Restaurant Group, Inc. and Securities Transfer Corporation(filed as Exhibit 4.1 to Form 8-K filed November 9, 2017 and incorporated herein by reference). 10.12005 Non-Employee Directors Stock Award Plan of the Company and form of Stock Option Award Agreement (filed as Exhibit 10.25 toForm 10-K for the fiscal year ended June 26, 2005 and incorporated herein by reference).* 10.22005 Employee Incentive Stock Option Award Plan of the Company and form of Stock Option Award Agreement (filed as Exhibit 10.26 toForm 10-K for the fiscal year ended June 26, 2005 and incorporated herein by reference).* 10.32015 Long Term Incentive Plan of the Company (filed as Exhibit 10.1 to Form 8-K filed November 20, 2014 and incorporated herein byreference).* 10.4Form of Stock Option Grant Agreement under the Company’s 2015 Long Term Incentive Plan (filed as Exhibit 10.2 to Form 8-K filedNovember 20, 2014 and incorporated herein by reference).* 10.5Form of Restricted Stock Unit Award Agreement under the Company’s 2015 Long-Term Incentive Plan (filed as Exhibit 10.1 to Form 10-Qfor the fiscal quarter ended December 27, 2015, and incorporated herein by reference).* 10.7Lease agreement with A&H Properties Partnership for corporate headquarter offices located at 3551 Plano Parkway in The Colony, TXcommencing January 2, 2017. 10.8Letter agreement dated January 6, 2017, between Rave Restaurant Group, Inc. and Scott Crane (filed as Exhibit 10.1 to Form 8-K filedJanuary 12, 2017 and incorporated herein by reference).* 10.9 21.1At Market Issuance Sales Agreement between the Company and B. Riley FBR, Inc. dated December 5, 2017 (filed as Exhibit 1.1 to Form8-K filed December 5, 2017 and incorporated herein by reference). List of Subsidiaries. 23.1Consent of Independent Registered Public Accounting Firm. 31.1Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer. 31.2Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer. 32.1Section 1350 Certification of Principal Executive Officer. 32.2Section 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.28SIGNATURESPursuant 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 onits behalf by the undersigned, thereunto duly authorized.Rave Restaurant Group, Inc.Date: September 21, 2018By: /s/ Scott Crane Scott CraneChief Executive OfficerPursuant 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 inthe capacities and on the dates indicated.Name and PositionDate/s/ Scott Crane September 21, 2018Scott CraneChief Executive Officer(Principal Executive Officer)/s/Andrea K. AllenSeptember 21, 2018Andrea K. AllenChief Accounting and Administrative Officer(Principal Financial and Accounting Officer)/s/Mark E. SchwarzSeptember 21, 2018Mark E. SchwarzDirector and Chairman of the Board/s/Ramon D. PhillipsSeptember 21, 2018Ramon D. PhillipsDirector and Vice Chairman of the Board/s/ Brian T. BaresSeptember 21, 2018Brian T. BaresDirector/s/Robert B. PageSeptember 21, 2018Robert B. PageDirector/s/ William C. Hammett, Jr.September 21, 2018William C. Hammett, Jr.Director/s/ Clinton J. ColemanSeptember 21, 2018Clinton J. ColemanDirector29[This page intentionally left blank] RAVE RESTAURANT GROUP, INC.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATADescriptionPage No.Report of Independent Registered Public Accounting FirmF-2Consolidated Statements of Operations for the fiscal years ended June 24, 2018 and June 25, 2017.F-3Consolidated Balance Sheets at June 24, 2018 and June 25, 2017.F-4Consolidated Statements of Shareholders' Equity (Deficit) for the fiscal years ended June 24, 2018 and June 25, 2017.F-5Consolidated Statements of Cash Flows for the fiscal years ended June 24, 2018 and June 25, 2017.F-6Supplemental Disclosures of Cash Flow Information for the fiscal years ended June 24, 2018 and June 25, 2017.F-6Notes to Consolidated Financial Statements.F-7F-1Report of Independent Registered Public Accounting FirmBoard of Directors and ShareholdersRave Restaurant Group, Inc.The Colony, TexasWe have audited the accompanying consolidated balance sheets of Rave Restaurant Group, Inc. as of June 24, 2018 and June 25, 2017 and the relatedconsolidated statements of operations, shareholders’ equity (deficit), and cash flows for the fiscal years then ended. These consolidated financial statementsare the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on ouraudits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. TheCompany is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included considerationof internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An auditalso includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believethat 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 24, 2018 and June 25, 2017, and the results of its operations and cash flows for the fiscal years then ended, in conformity with accountingprinciples generally accepted in the United States of America./s/ Montgomery Coscia Greilich LLPPlano, TexasSeptember 21, 2018F-2CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share amounts) Fiscal Year EndedJune 24,June 25,20182017REVENUES:$15,120 $26,077 COSTS AND EXPENSES:Cost of sales3,654 13,927 General and administrative expenses7,597 10,801 Franchise expenses2,645 2,736 Pre-opening expenses114 162 Loss/(Gain) on sale of assets(144)882 Impairment of long-lived assets and other lease charges894 5,877 Bad debt351 342 Interest expense183 106 Depreciation and amortization expense874 2,434 Total costs and expenses16,168 37,267 LOSS FROM CONTINUING OPERATIONS BEFORE TAXES(1,048)(11,190)Income tax expense / (benefit)(3,322)53 INCOME/(LOSS) FROM CONTINUING OPERATIONS2,274 (11,243)Loss from discontinued operations(362)(1,248)NET INCOME / (LOSS)$1,912 $(12,491)INCOME / (LOSS) PER SHARE OF COMMON STOCK - BASIC:Income / (loss) from continuing operations$0.17 $(1.06)Loss from discontinued operations(0.03)(0.12)Net income / (loss)$0.14 $(1.18)INCOME / (LOSS) PER SHARE OF COMMON STOCK - DILUTED:Income / (loss) from continuing operations$0.16 $(1.06)Loss from discontinued operations(0.03)(0.12)Net income / (loss)$0.13 $(1.18)Weighted average common shares outstanding - basic13,854 10,617 Weighted average common andpotential dilutive common shares outstanding14,983 10,617 See accompanying Notes to Consolidated Financial Statements.F-3RAVE RESTAURANT GROUP, INC.CONSOLIDATED BALANCE SHEETS(In thousands, except share amounts)June 25,June 24,20182017ASSETSCURRENT ASSETS Cash and cash equivalents$1,386 $451 Accounts receivable, less allowance for bad debts of $158 and $249, respectively1,518 2,761 Other receivable300 — Notes receivable712 675 Inventories6 79 Income tax receivable5 194 Property held for sale539 671 Prepaid expenses and other273 295 Total current assets4,739 5,126 LONG-TERM ASSETS Property, plant and equipment, net1,510 3,808 Intangible assets definite-lived, net212 239 Long-term notes receivable803 127 Deferred tax asset, net3,479 — Deposits and other243 246 Total assets$10,986 $9,546 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)CURRENT LIABILITIES Accounts payable - trade$774 $4,165 Short-term debt— 1,000 Accrued expenses1,109 1,265 Deferred rent32 101 Deferred revenues65 212 Total current liabilities1,980 6,743 LONG-TERM LIABILITIES Convertible notes1,562 2,749 Deferred rent, net of current portion433 655 Deferred revenues, net of current portion670 1,425 Other long-term liabilities42 53 Total liabilities4,687 11,625 COMMITMENTS AND CONTINGENCIES (SEE NOTE J)SHAREHOLDERS' EQUITY (DEFICIT) Common stock, $.01 par value; authorized 26,000,000 shares; issued 22,166,674 and 17,786,049 shares, respectively; outstanding 15,047,470 and 10,666,845 shares, respectively222 178 Additional paid-in capital33,206 26,784 Accumulated deficit(2,493)(4,405) Treasury stock at cost Shares in treasury: 7,119,204(24,636)(24,636) Total shareholders' equity (deficit)6,299 (2,079) Total liabilities and shareholders' equity (deficit)$10,986 $9,546 See accompanying Notes to Consolidated Financial Statements.F-4RAVE RESTAURANT GROUP, INC.CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)(In thousands)RetainedAdditional EarningsCommon StockPaid-in(Accumulated Treasury StockSharesAmountCapitalDeficit)SharesAmountTotalBALANCE, JUNE 26, 201610,342 $175 $25,778 $8,086 (7,119)$(24,636)$9,403 Stock compensation expense— — 58 — — — 58 Stock options exercised315 3 803 — — — 806 Conversion of senior notes, net10 — 145 — — — 145 Net loss— — — (12,491)— — (12,491)BALANCE, JUNE 25, 201710,667 $178 $26,784 $(4,405)(7,119)$(24,636)$(2,079)Stock compensation expense— — 115 — — — 115 Conversion of senior notes, net614 6 1,308 — — — 1,314 Sale of shares3,766 38 5,140 — — — 5,178 Equity issue costs - Sr conv notes— — (92)(92)Equity issue costs - ATM offering— — (49)—— — (49)Net income— — — 1,912 — 1,912 BALANCE, JUNE 24, 201815,047 $222 $33,206 $(2,493)(7,119)$(24,636)$6,299 See accompanying Notes to Consolidated Financial Statements.F-5RAVE RESTAURANT GROUP, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)Fiscal Year EndedJune 24,June 25,20182017CASH FLOWS FROM OPERATING ACTIVITIES:Net income/(loss)$1,912 $(12,491)Adjustments to reconcile net inome/(loss) to cash used by operating activities:Impairment of fixed assets and other assets894 4,773 Stock compensation expense115 58 Depreciation and amortization835 2,410 Amortization of intangible assets definite-lived39 46 Amortization of debt issue costs35 — Gain/loss on the sale of assets(144)882 Provision for bad debt351 342 Changes in operating assets and liabilities:Accounts receivable908 (576)Inventories73 118 Prepaid expenses, deposits and other, net25 116 Deferred revenue(767)(107)Accounts payable - trade(4,241)350 Deferred tax assets(3,479)— Accrued expenses, deferred rent and other(458)(1,469) Cash used by operating activities(3,902)(5,548)CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sale of assets1,789 999 Capital expenditures(1,081)(573)Cash provided by investing activities708 426 CASH FLOWS FROM FINANCING ACTIVITIES:Issuance (payments) of short-term debt(1,000)1,000 Proceeds from sale of stock5,129 — Proceeds from issuance of convertible notes— 2,894 Proceeds from exercise of stock options— 806 Cash provided by financing activities4,129 4,700 Net increase/(decrease) in cash and cash equivalents935 (422)Cash and cash equivalents, beginning of year451 873 Cash and cash equivalents, end of year$1,386 $451 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCASH PAID FOR:Interest$187 $25 Income taxes$64 $29 Non-cash activities:Capital expenditures included in accounts payable$49 $— Conversion of notes to equity$1,314 $ — See accompanying Notes to Consolidated Financial Statements.F-6RAVE RESTAURANT GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:Description of Business:Rave Restaurant Group, Inc. and its subsidiaries (collectively referred to as the “Company”, or in the first person notations of “we”, “us” and “our”)franchise pizza buffet, delivery/carry-out and express restaurants domestically and internationally under the trademark “Pizza Inn” and operate and franchisedomestic fast casual restaurants under the trademarks “Pie Five Pizza Company” or “Pie Five”. We facilitate the procurement and distribution of food,equipment and supplies to our domestic and international system of restaurants through agreements with third party distributors.As of June 24, 2018, we owned and operated one Pie Five restaurant (“Pie Five Units”). As of that date, we also had 72 franchised Pie Five Units, 208franchised Pizza Inn restaurants, and three licensed Pizza Inn Express, or PIE, kiosks (“PIE Units”). The 150 domestic franchised Pizza Inn restaurants werecomprised of 90 pizza buffet restaurants (“Buffet Units”), eight delivery/carry-out restaurants (“Delco Units”), and 52 express restaurants (“Express Units”).As of June 24, 2018, there were 58 international franchised Pizza Inn restaurants. Domestic Pizza Inn restaurants and kiosks were located predominantly inthe southern half of the United States, with Texas, Arkansas, North Carolina and Tennessee accounting for approximately 24%, 13%, 13% and 7%,respectively, of the total number of domestic units.Principles of Consolidation:The consolidated financial statements include the accounts of Rave Restaurant Group, Inc. and its subsidiaries, all of which are wholly owned. Allappropriate 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. Restrictedcash of $0.2 million at June 24, 2018 and June 25, 2017 is omitted from cash and cash equivalents and is included in other long term assets. The restrictedcash is held in an interest-bearing money market account and is restricted pursuant to a letter of credit for an insurance claim dating back to the mid-1980’s.F-7Concentration of Credit Risk:Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. AtJune 24, 2018 and June 25, 2017, and at various times during the fiscal years then ended, cash and cash equivalents were in excess of Federal DepositoryInsurance Corporation insured limits. We do not believe we are exposed to any significant credit risk on cash and cash equivalents.Notes receivable, which potentially subject the Company to concentrations of credit risk, consist primarily of structured Company-financed sales ofassets. At June 24, 2018 and June 25, 2017, and at various times during the fiscal years then ended, the Company had concentrations of credit risk with threefranchisees on notes receivables with both short and long term maturities. As of June 24, 2018, the Company had one short term note receivable with onefranchisee with a balloon payment of $0.6 million due during the second quarter of fiscal 2019. At June 24, 2018, the Company had three additional notesreceivable with three franchisees totaling $0.9 million. Each of the financed asset sales was executed with a 5.0% stated interest rate, principal and interestpayments due monthly and a balloon payment due after 24 months.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 offuture retail sales by Company-owned restaurants. Overestimating retail sales by Company-owned restaurants could result in the write-down of inventorywhich would have a negative impact on the gross margin of such Company-owned restaurants.Closed Restaurants and Discontinued Operations:In April, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Presentation ofFinancial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals ofComponents of an Entity, which modifies the definition of discontinued operations to include only disposals of an entity that represent strategic shifts thathave or will have a major effect on an entity’s operation and requires entities to disclose information about disposals of individually significant componentsthat do not meet the definition of discontinued operations. The standard was effective prospectively for annual and interim periods beginning after December15, 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 meetcertain criteria be reflected in the statement of operations after results of continuing operations as a net amount. This guidance also requires that theoperations 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 withan exit or disposal activity be recognized when the liability is incurred. This authoritative guidance also establishes that fair value is the objective for initialmeasurement of the liability.Discontinued operations include losses attributable to the discontinued Norco distribution and supply division, leased buildings associated withCompany-owned restaurants closed in prior years, and Company-owned restaurants closed in the reported period.F-8Property, Plant and Equipment:Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Repairs and maintenance are charged to operationsas incurred while major renewals and betterments are capitalized. Upon the sale or disposition of a fixed asset, the asset and the related accumulateddepreciation or amortization are removed from the accounts and the gain or loss is included in operations. The Company capitalizes interest on borrowingsduring the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying asset and amortized over theestimated 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 leaseholdimprovements, over the term of the lease including any reasonably assured renewal periods, if shorter. The useful lives of the assets range from three to tenyears.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 fullyrecoverable. Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from use of an asset compared to itscarrying value. If impairment is recognized, the carrying value of the impaired asset is reduced to its fair value, based on discounted estimated future cashflows. During fiscal year 2018 and 2017, the Company tested its long-lived assets for impairment and recognized pre-tax, non-cash impairment charges of$0.9 million and $5.9 million, respectively, related to the carrying value of multiple Pie Five and Pizza Inn units.Accounts Receivable:Accounts receivable consist primarily of receivables generated from franchise royalties and food and supply sales to franchisees prior to thediscontinuation of the Norco division. The Company records a provision for doubtful receivables to allow for any amounts that may be unrecoverable basedupon an analysis of the Company's prior collection experience, customer creditworthiness and current economic trends. After all attempts to collect areceivable 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 maximumamount allowed by law, on past due receivables. The interest income recorded from finance charges is immaterial.F-9Notes Receivable:Notes receivable primarily consist of promissory notes arising from franchisee agreements. The majority of amounts and terms are evidenced byformal promissory notes and personal guarantees. All notes allow for early payment without penalty. Fixed principle and interest payments are due monthly.Interest income is recognized monthly. Notes receivable mature at various dates through 2021 and bear interest at a weighted average rate of 5.0% at June 24,2018.Management evaluates the creditworthiness of franchisees by considering credit history and sales to evaluate credit risk. Management determinesinterest rates based on credit risk of the underlining franchisee. The Company monitors payment history to determine whether or not a loan should be placedon a nonaccrual status or impaired. The Company charges off notes receivable based on an account-by-account analysis of the borrower’s current economicconditions, monthly payments history and historical loss experience. The allowance for doubtful notes receivable is netted within notes receivable.The principal balance outstanding on the notes receivable and expected principal collections for the next three years were as follows as of June 24,2018 (in thousands): Notes Receivable 2019 $ 7122020 3172021 486 $ 1,515Income 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 todifferences between the financial statement and carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes for a changein tax rates is recognized in income in the period that includes the enactment date. The Company recognizes future tax benefits to the extent that realizationof 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, reversalof existing taxable temporary differences, and tax planning strategies. During the fourth quarter of fiscal year June 24, 2018, the Company reversed a portionof the prior valuation allowance against its deferred tax asset. The valuation allowance decreased by $6.6 million during fiscal year 2018, from $9.0 millionat June 25, 2017 to $2.4 million at June 24, 2018. This resulted in a tax benefit of $3.4 million due to expected future taxable income.The Company assessed whether the valuation allowance should be maintained against its deferred tax assets based on consideration of all availableevidence, using a “more likely than not” standard. In assessing the need for the valuation allowance, the Company considered both positive and negativeevidence related to the likelihood of realization of deferred tax assets. Future sources of taxable income were also considered in determining the amount ofthe recorded valuation allowance. Based on the Company's review of this evidence, management determined it was appropriate to reverse a portion of thevaluation allowance against the Company's deferred tax assets.Income tax benefit of $3.3 million for fiscal 2018 represents $0.1 million in state and foreign tax expense and a $3.4 million benefit on reversal of aportion of the valuation allowance. At the end of tax year ended June 24, 2018, the Company had net operating loss carryforwards totaling $23.5 million thatare available to reduce future taxable income and will begin to expire in 2032.F-10Pre-Opening Expense:The Company's pre-opening costs are expensed as incurred and generally include payroll and other direct costs associated with training newmanagers and employees prior to opening a new restaurant, rent and other unit operating expenses incurred prior to opening, and promotional costsassociated 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”) pursuantto which NCMS will provide certain advisory and consulting services to the Company. NCMS is indirectly owned and controlled by Mark E. Schwarz, theChairman of the Company. The term of the Agreement commenced December 30, 2013, and continues quarterly thereafter until terminated by eitherparty. 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 perquarter (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 withall financial covenants under its primary credit facility or to the extent that payment of those fees would result in non-compliance with such financialcovenants. The Agreement was terminated at the end of fiscal 2017.On December 22, 2016, the Company obtained a $1.0 million loan from its largest shareholder, Newcastle Partners, LP ("Newcastle"), evidenced by apromissory note. The loan bore interest at 10% per annum and was originally due and payable on April 30, 2017. On May 8, 2017, the Company renewed andextended the promissory note on the same terms until the earlier of September 1, 2017, or the Company’s receipt of at least $2.0 million in additional debt orequity capital. The note was paid in full in fiscal 2018. Newcastle is an affiliate of the Company's Chairman, Mark E. Schwarz.Revenue Recognition:Revenue from restaurant sales is recognized when food and beverage products are sold. The Company reports revenue net of sales taxes collectedfrom customers and remitted to governmental taxing authorities.Franchise revenues consist of income from license fees, royalties, and area development and foreign master license fees and supplier and distributorincentive revenues. License fees are recognized as income when there has been substantial performance under the agreement by the Company. Domesticlicense fees are generally recognized at the time the restaurant is opened. Foreign master license fees are generally recognized upon execution of theagreement as all material services relating to the sale have been substantially performed by the Company and the fee has been collected. Royalties arerecognized as income when earned. Supplier and distributor incentive revenues are recognized when title to the underlying commodities transfer.Stock Options:The Company accounts for stock options using the fair value recognition provisions of the authoritative guidance on share-based payments. TheCompany uses the Black-Scholes formula to estimate the value of stock-based compensation for options granted to employees and directors and expects tocontinue to use this acceptable option valuation model in the future. The authoritative guidance also requires the benefits of tax deductions in excess ofrecognized 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 pricesequal 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: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 vestingperiod if achievement of the performance criteria is deemed probable, with the amount of the expense recognized based on the best estimate of the ultimateachievement level.F-11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.Advertising and Marketing Costs:Advertising and marketing costs are expensed as incurred and totaled $0.7 million for fiscal year ended June 24, 2018 and $0.8 million for fiscalyear ended June 25, 2017. Advertising and marketing costs are included in cost of sales and franchise 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 withthe authoritative guidance on Accounting for Contingencies. If the best estimate of cost can only be identified within a range and no specific amount withinthat 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 theCompany’s management to make estimates and assumptions that affect its reported amounts of assets, liabilities, revenues, expenses and related disclosure ofcontingent liabilities. The Company bases its estimates on historical experience and other various assumptions that it believes are reasonable under thecircumstances. 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 years ended June 24, 2018 and June 25, 2017 both contained 52 weeks.Discontinuation of Norco Distribution Division:During the fiscal quarter ended December 24, 2017, the Company discontinued its Norco distribution division and revised its arrangements withthird party suppliers and distributors of food, equipment and supplies. As a result, sale of food, equipment and supplies is no longer recognized as revenueand the cost of such items is no longer included in cost of sales. The Company now recognizes incentive revenues received from third party suppliers anddistributors as revenue.F-12NOTE B – PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS:Property, and plant and equipment consist of the following (in thousands):Estimated UsefulJune 24,June 25,Lives20182017Equipment, furniture and fixtures3 - 7 yrs$1,090 $4,791 Software5 yrs778 1,143 Leasehold improvements 10 yrs or lease term, if shorter1,033 3,949 2,901 9,883 Less: accumulateddepreciation/amortization(1,391)(6,075)$1,510 $3,808 Depreciation and amortization expense was approximately $0.9 million and $2.4 million for the fiscal years ended June 24, 2018 and June 25, 2017,respectively.Intangible assets consist of the following (in thousands):June 24, 2018June 25, 2017EstimatedUsefulAcquisitionAccumulatedNetAcquisitionAccumulatedNetLivesCostAmortizationValueCostAmortizationValueTrademarks andtradenames10 years$264 $(127)$137 $261 $(101)$160 Name change15 years70 (16)54 70 (11)59 Prototypes5 years218 (197)21 208 (188)20 $552 $(340)$212 $539 $(300)$239 Amortization expense for intangible assets was approximately $39 thousand and $46 thousand for the fiscal years ended June 24, 2018 and June 25,2017, respectively. NOTE C - ACCRUED EXPENSES:Accrued expenses consist of the following (in thousands):June 24,June 25,20182017Compensation $ 654 $ 836Other 404 254Professional fees 43 167Insurance loss reserves 8 8 $ 1,109 $ 1,265NOTE D - CONVERTIBLE NOTES:On March 3, 2017, the Company completed a registered shareholder rights offering of its 4% Convertible Senior Notes due 2022 (“Notes”).Shareholders exercised subscription rights to purchase all 30,000 of the Notes at the par value of $100 per Note, resulting in gross offering proceeds to theCompany of $3.0 million.The Notes bear interest at the rate of 4% per annum on the principal or par value of $100 per note, payable annually in arrears on February 15 of eachyear, commencing February 15, 2018. Interest is payable in cash or, at the Company’s discretion, in shares of Company common stock. The Notes mature onFebruary 15, 2022, at which time all principal and unpaid interest will be payable in cash or, at the Company’s discretion, in shares of Company commonstock. The Notes are secured by a pledge of all outstanding equity securities of our two primary direct operating subsidiaries.F-13Noteholders may convert their notes to common stock effective February 15, May 15, August 15 and November 15 of each year, unless theCompany sooner elects to redeem the notes. The conversion price is $2.00 per share of common stock. Accrued interest will be paid through the effective dateof the conversion in cash or, at the Company’s sole discretion, in shares of Company common stock.The Company determined that the Notes contained a beneficial conversion feature of $0.1 million since the market price of the Company’s commonstock was higher than the effective conversion price of the notes when issued. The beneficial conversion feature and the issuance costs of the notesaggregated $0.2 million and were considered a debt discount and accreted into interest expense using the effective interest method over the debt maturityperiod.During fiscal 2018, $1.3 million in par value of the Notes were converted to common shares. At the end of fiscal 2018, $1.7 million in par value ofthe Notes were outstanding, offset by $0.1 million of unamortized debt issue costs and unamortized debt discounts.NOTE E - INCOME TAXES:Provision for income taxes from continuing operations consists of the following (in thousands):Fiscal Year EndedJune 24,June 25,20182017Current - Federal$(33)$— Current - Foreign51 — Current - State30 53 Deferred - Federal— — Deferred - State— — Provision for income taxes$48 $53 Included in loss from discontinued operations is $60 thousand and $0 of tax benefit for the fiscal years ended June 24, 2018 and June 25, 2017,respectively.The effective income tax rate varied from the statutory rate for the fiscal years ended June 24, 2018 and June 25, 2017 as reflected below (inthousands):June 24,June 25,20182017Federal income taxes blended statutory rate of 27.64% of pre-tax loss$(291)$(4,119)State income tax, net of federal effect51 35Foreign taxes30 -Permanent adjustments35 24Rate change3,416 -Valuation allowance(6,597)4,019Other34 94$(3,322)$53F-14The tax effects of temporary differences that give rise to the net deferred tax assets consisted of the following (in thousands):June 24,June 25,20182017CurrentReserve for bad debt$36 $89 Deferred fees15 27 Other reserves and accruals562 1,323 613 1,439 Non CurrentCredit carryforwards153 199 Net operating loss carryforwards5,122 4,799 Depreciable assets17 2,585 Total gross deferred tax asset5,905 9,022 Valuation allowance(2,426)(9,022)Net deferred tax asset$3,479 $— At the end of tax year ended June 24, 2018, the Company had net operating loss carryforwards totaling $23.5 million that are available to reduce futuretaxable income and will begin to expire in 2032.F-15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 leaseagreements contain either a provision requiring additional rent if sales exceed specified amounts or an escalation clause based upon a predeterminedmultiple.The Company leases its 19,576 square foot corporate office facility with average annual lease payments of approximately $17.50 per square foot. This lease began on January 2, 2017 and has a ten year term.Future minimum rental payments under active non-cancelable leases with initial or remaining terms of one year or more at June 24, 2018 were asfollows (in thousands):OperatingLeases2019$2,00720202,02420212,09120222,03520231,833Thereafter4,264$14,254Future minimum sublease rental income under active non-cancelable leases with initial or remaining terms of one year or more at June 24, 2018 wereas follows (in thousands):Sublease RentalIncome2019$1622020168202117420221752023177Thereafter181$1,037Rental expense consisted of the following (in thousands):Fiscal Year EndedYear Ended Year EndedJune 24,June 25,20182017Minimum rentals$1,114 $1,878 Sublease rentals(161) (129)$953 $1,749 F-16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 sixmonths 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 havebetween 1% and 15% of their compensation deferred and contributed to the plan subject to certain IRS limitations. Effective June 27, 2005, the Company hasa discretionary matching contribution. For calendar years 2016 and 2017, the Company contributed on behalf of each participating employee an amountequal to 50% of the employee’s contributions up to 4% of compensation. Separate accounts are maintained with respect to contributions made on behalf ofeach participating employee. Employer matching contributions and earnings thereon are invested in the same investments as each participant’s employeedeferral. 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 Section401(k) of the Code.For the fiscal years ended June 24, 2018 and June 25, 2017, total matching contributions to the tax advantaged savings plan by the Company onbehalf of participating employees were approximately $44,000 and $40,000, respectively.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 shareholderswith a plan effective date of June 23, 2005. Under the 2005 Employee Plan, officers and employees of the Company were eligible to receive options topurchase 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 andexercise periods as determined by the Compensation Committee of the board of directors, and could be designated as non-qualified or incentive stockoptions. A total of 1,000,000 shares of common stock were authorized for issuance under the 2005 Employee Plan. The 2005 Employee Plan expired by itsterms on June 23, 2015.The shareholders also approved the 2005 Non-Employee Directors Stock Award Plan (the “2005 Directors Plan”) in June 2005, to be effective as ofJune 23, 2005. Directors not employed by the Company were eligible to receive stock options under the 2005 Directors Plan. Options for common stockequal 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 toeach 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, withvesting 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 wereauthorized for issuance pursuant to the 2005 Directors Plan. The 2005 Directors Plan expired by its terms on June 23, 2015.The 2015 Long Term Incentive Plan (the “2015 LTIP”) was approved by the Company’s shareholders on November 18, 2014, and became effectiveJune 1, 2015. Officers, employees and non-employee directors of the Company are eligible to receive awards under the 2015 LTIP. A total of 1,200,000shares 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 optionsto 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 ofdirectors. The Compensation Committee may also determine the vesting periods, performance criteria and other terms and conditions of all awards under the2015 LTIP. The Compensation Committee has adopted resolutions under the 2015 LTIP automatically granting to each non-employee director on the firstday 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 40,000shares. 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 10years from the date of grant.Share based compensation expense is included in general and administrative expense in the statement of operations. F-17 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: Twelve Months Ended June 24, 2018 June 25, 2017 Weighted- Weighted- Average Average Exercise Exercise Shares Price Shares PriceOutstanding at beginning of year 478,056 $4.16 847,556 $3.77 Granted — — 50,000 $3.95 Exercised — — (315,000) $2.56 Forfeited/Canceled/Expired — — (104,500) $5.67 Outstanding at end of period 478,056 $4.16 478,056 $4.16 Exercisable at end of year 478,056 $4.16 388,056 $3.54 Weighted-average fair value of options granted during the year — 1.11 Total intrinsic value of $— $806,400 options exercised At June 24, 2018, there was no intrinsic value of options outstanding. The following table provides information on options outstanding and options exercisable as of June 24, 2018: Options Outstanding Options Exercisable Weighted- Average Options Remaining Weighted- Shares Weighted-Range of Outstanding Contractual Average Exercisable AverageExercise Prices at Jun 24, 2018 Life (Years) Exercise Price at Jun 24, 2018 Exercise Price $1.55 - 1.95 81,306 1.1 $1.90 81,306 $1.90$1.96 - 2.35 90,000 0.0 $2.32 90,000 $2.32$2.36 - 2.75 40,000 3.0 $2.71 40,000 $2.71$2.76 - 3.30 55,000 4.0 $3.11 55,000 $3.11$3.31 - 3.95 50,000 8.0 $3.95 50,000 $3.95$5.51 - 5.74 8,664 5.0 $5.74 8,664 $5.74$5.95 - 6.25 128,800 5.9 $6.07 128,800 $6.07$6.26 - 13.11 24,286 7.0 $13.11 24,286 $13.11 478,056 3.8 $4.16 478,056 $4.16 We determine fair value following the authoritative guidance as follows: Valuation and Amortization Method. We estimate the fair value of share-based awards granted using the Black-Scholes option valuation model. Weamortize the fair value of all awards on a straight-line basis over the requisite service periods, which are generally the vesting periods. F-18 Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. Unless a life is specificallystated, we determine the expected life using the “simplified method” in accordance with Staff Accounting Bulletin No. 110 since we do not have sufficienthistorical 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 onthe 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 availableon 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 cashdividends 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 awardsthat are expected to vest. The following weighted average assumptions were used for options granted in the last two fiscal years: Fiscal Year Ended June 24, June 25, 2018 2017 Expected life (in years) n/a 5.5 Expected volatility n/a 34.6% Risk-free interest rate n/a 1.1% Expected forfeiture rate n/a 61.8% At June 24, 2018, the Company had no unvested options. Stock compensation expense related to stock options of $35 thousand and $58 thousandwas recognized in fiscal years 2018 and 2017, 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 vestingrequirements, performance criteria and other terms and conditions. During fiscal 2018, an aggregate of 488,723 performance-based restricted stock units weregranted to certain employees. During fiscal 2017, an aggregate of 536,310 performance-based 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’sbusiness, as well as its overall operations, measured based on the second fiscal year following the date of grant. Achievement of the various performancecriteria 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 awardfully vests upon satisfaction of the vesting schedule, performance criteria and other conditions set forth in their award agreement. Therefore, unvestedrestricted stock units are not considered participating securities under ASC 260, “Earnings Per Share,” and are not included in the calculation of basic ordiluted 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 vestingperiod if achievement of the performance criteria is deemed probable, with the amount of the expense recognized based on the best estimate of the ultimateachievement level. The grant date fair value of the restricted stock units granted in fiscal 2018 was $1.27 per unit. F-19 A summary of the status of restricted stock units as of June 24, 2018 and June 25, 2017, and changes during the fiscal years then ended is presentedbelow: June 24, June 25, 2018 2017Outstanding at beginning of year 487,950 79,620 Granted during the year 488,723 536,310 Forfeited during the year (68,380) (127,980)Outstanding at end of year 908,293 487,950 Vested at beginning of year — — Vested during the year — — Vested at end of year — — Unvested at end of year 908,293 487,950 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 previouslyamended 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 3,016,000shares. No shares were repurchased during fiscal 2018 and, as of June 24, 2018, there were 848,425 shares available to repurchase under the plan. On December 5, 2017, the Company entered into an At Market Issuance Sales Agreement with B. Riley FBR, Inc. (“B. Riley FBR”) pursuant towhich the Company may offer and sell shares of its common stock having an aggregate offering price of up to $5,000,000 from time to time through B. RileyFBR acting as agent (the “2017 ATM Offering”). The 2017 ATM Offering is being undertaken pursuant to Rule 415 and a shelf Registration Statement onForm S-3 which was declared effective by the SEC on November 6, 2017. The Company pays to B. Riley FBR a fee equal to 3% of the gross sales price in addition to reimbursing certain costs. The Company had $8thousand in expenses associated with the 2017 ATM Offering in fiscal 2018. F-20 NOTE J - COMMITMENTS AND CONTINGENCIES: The Company is subject to various claims and contingencies related to employment agreements, franchise disputes, lawsuits, taxes, food productpurchase contracts and other matters arising out of the normal course of business. Management believes that any such claims and actions currently pendingare 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 ina manner that is unfavorable to us. 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 EPSexcludes the effect of potentially dilutive securities while diluted EPS reflects the potential dilution that would occur if securities or other contracts to issuecommon 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 ofthe diluted EPS calculation (in thousands, except per share amounts). Fiscal Year Ended June 24, June 25, 2018 2017Income/(loss) from continuing operations $2,274 $(11,243)Loss from discontinued operations (362) (1,248)Net income/(loss) available to common stockholders $1,912 $(12,491)Interest saved on Notes of $2,258.4 at 4% $90 $— Adjusted net income/(loss) $2,002 $(12,491) BASIC: Weighted average common shares 13,854 10,617 Income/(loss) from continuing operations per common share $0.17 $(1.06)Loss from discontinued operations per common share (0.03) (0.12)Net income/(loss) per common share $0.14 $(1.18) DILUTED: Weighted average common shares 13,854 10,617 Convertible Notes 1,129 — Dilutive stock options — — Weighted average common shares outstanding 14,983 10,617 Income/(loss) from continuing operations per common share $0.16 $(1.06)Loss from discontinued operations per common share (0.03) (0.12)Net income/(loss) per common share $0.13 $(1.18) We had 478,056 shares and 388,056 shares of common stock potentially issuable upon exercise of employee stock options for years ended June 24, 2018 andJune 25, 2017, respectively, that were excluded from the weighted average number of shares outstanding on a diluted basis because the effect of such optionswould be anti-dilutive. These instruments expire at varying times from fiscal 2019 through fiscal 2026. F-21 NOTE L– SEGMENT REPORTING: The Company has three reportable operating segments as determined by management using the “management approach” as defined by theauthoritative guidance on Disclosures about Segments of an Enterprise and Related Information: (1) Pizza Inn Franchising, (2) Pie Five Franchising and (3)Company-Owned Restaurants. These segments are a result of differences in the nature of the products and services sold. Corporate administration costs, whichinclude, but are not limited to, general accounting, human resources, legal and credit and collections, are partially allocated to the three operating segments.Other revenue consists of nonrecurring items. The Pizza Inn and Pie Five Franchising segments establish franchisees, licensees, and territorial rights. Revenue for this segment is derived fromfranchise royalties, franchise fees, sale of area development and foreign master license rights and incentive payments from third party suppliers anddistributors. 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 includeequipment, 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 corporateoffice and trademarks and other intangible assets. All assets are located within the United States. F-22 Summarized in the following tables are net sales and operating revenues, depreciation and amortization expense, income from continuing operationsbefore taxes, capital expenditures and assets for the Company's reportable segments as of and for the fiscal years ended June 24, 2018 and June 25, 2017 (inthousands): Fiscal Year Ended June 24, June 25, 2018 2017 Net sales and operating revenues: Pizza Inn Franchising $ 6,892 $ 7,307 Pie Five Franchising 3,970 3,521 Company-Owned Restaurants (Note 1) 4,254 15,233 Interest income 4 16 Consolidated revenues $ 15,120 $ 26,077 Depreciation and amortization: Pizza Inn Franchising $ - $ - Pie Five Franchising - - Company-Owned Restaurants (Note 1) 459 1,964 Combined 459 1,964 Corporate administration and other (Note 2) 415 470 Depreciation and amortization $ 874 $ 2,434 Gain/(Loss) from continuing operations before taxes: Pizza Inn Franchising $ 5,594 $ 5,952 Pie Five Franchising 2,623 2,140 Company-Owned Restaurants (Note 1) (1,763) (9,674) Combined 6,454 (1,582) Corporate administration and other (7,502) (9,608) Loss from continuing operations before taxes $ (1,048) $ (11,190) Notes: (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. The following table provides information on our foreign and domestic revenues: Geographic information (revenues): United States $14,566 $25,807 Foreign countries 554 270 Consolidated total $15,120 $26,077 F-23[This page intentionally left blank]  Exhibit 21.1 SUBSIDIARIES OF RAVE RESTAURANT GROUP, INC. Name of SubsidiaryJurisdiction of Organization Pizza Inn, Inc.*Missouri (d/b/a Pizza Inn) Pie Five Pizza Company, Inc.*Texas (d/b/a Pie Five Pizza Company or Pie Five) Pie Five Restaurants, Inc.*Texas PIBC Holding, Inc.*Texas Pizza Inn Beverage Corp.*Texas Pie Five Beverage Corp.*Texas * Does business under its corporate name as well as any referenced assumed name.  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, 333-177436 and333-207428) and Forms S-3 (Nos. 333-219483 and 333-221169) of Rave Restaurant Group, Inc. of our report dated September 19, 2018, relating to theconsolidated financial statements, which appears in this Form 10-K. Montgomery Coscia Greilich LLPPlano, Texas September 21, 2018Exhibit 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERPursuant to section 3.02 of the Sarbanes-Oxley Act of 2002 I, Scott Crane, 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 thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial 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 inExchange 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 withinthose 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal 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 theeffectiveness 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 mostrecent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto 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 theRegistrant’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 arereasonably 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 internalcontrol over financial reporting. Date: September 21, 2018 By:/s/ Scott Crane Scott CraneChief Executive Officer(Principal Executive Officer)Exhibit 31.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICERPursuant to Section 3.02 of the Sarbanes-Oxley Act of 2002 I, Andrea K. Allen, 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 thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial 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 inExchange 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 withinthose 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal 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 theeffectiveness 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 mostrecent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto 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 theRegistrant’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 arereasonably 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 internalcontrol over financial reporting. Date: September 21, 2018 By:/s/ Andrea K. AllenAndrea K. AllenChief Accounting and Administrative Officer(Principal Financial Officer) Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTEDPursuant 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 accompanyingAnnual Report on Form 10-K for the fiscal year ended June 24, 2018, and filed with the Securities and Exchange Commission on the date hereof (the “Form10-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 inthe Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: September 21, 2018 By:/s/ Scott Crane Chief Executive Officer(Principal Executive Officer)  Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTEDPursuant 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 accompanyingAnnual Report on Form 10-K for the fiscal year ended June 24, 2018, and filed with the Securities and Exchange Commission on the date hereof (the “Form10-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 inthe Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: September 21, 2018 By:/s/ Andrea K. AllenAndrea K. AllenChief Accounting and Administrative Officer(Principal Financial Officer) CORPORATE INFORMATION OFFICERS Scott Crane President/Chief Executive Officer Robert W. Bafundo President Andrea K. Allen Chief Accounting and Administrative Officer 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 Chairman and Chief Executive Officer of Novo Labs, Inc. Brian T. Bares Chief Executive and Investment Officer of Bares Capital Management, Inc. CORPORATE OFFICE RAVE Restaurant Group, Inc. 3551 Plano Parkway The Colony, TX 75056 (469) 384-5000 Internet: http://www.raverg.com 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 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Montgomery, Coscia and Greilich, LLP Plano, TX OUTSIDE LEGAL COUNSEL McGuire, Craddock & Strother, P.C. Dallas, TX LOCATIONS Alabama Arkansas California Delaware Florida Georgia Iowa Illinois DOMESTIC Indiana Kansas Kentucky Louisiana Maryland Missouri Mississippi North Carolina New Jersey New Mexico Oklahoma South Carolina Tennessee Texas Virginia Washington DC INTERNATIONAL Bangladesh Honduras Kuwait Oman Saudi Arabia United Arab Emirates INVESTOR INFORMATION For further information about the company’s common stock, please write to the Investor Relations Department at the company’s corporate office. ANNUAL MEETING The Annual Meeting of Shareholders will take place on Tuesday, December 4, 2018 at 3:00 p.m. local time at Hampton Inn – The Colony 3650 Plano Parkway The Colony, TX 75056 BR754198-1018-10K