RAVE 10-K & 10-Q changes, risk factors and insider trading

A comparison of our results of operations and cash flows for fiscal year 20242025 compared to fiscal year 20232024 can be found under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended June 30,29, 2024,2025, filed with the SEC on September 26,25, 2024.2025, as amended on November 6, 2025.

“Comparable store retail sales” includes the retail sales for restaurants that have been open for at least 18 months as of the end of the reporting period. The sales results for a restaurant that was closed for moreseven than sevenconsecutive days for remodeling or relocation within the same trade arealonger are not included in the calculation.

Pizza Inn total domestic retail sales increased by $2.0$3.7 million, or 1.9%,3.4%, for fiscal 20252026 when compared to the prior 53 weeks.year. Compared to the prior year, average Buffet Units open in the period increased from 7677 to 77.80. Comparable store retail sales increased by $1.9$2.5 million to $104.7$107.1 million for fiscal 20252026 as compared to the prior 53 weeks.year. For fiscal 2025,2026, the increase in domestic retail sales werewas primarily the result of the increase in Buffet Units, supplemented by an increase in comparable domestic store retail sales.

There was a net decrease of ninefive units in the total domestic Pizza Inn unit count during fiscal 2025.2026. There were fivefour transfers in the total domestic Pizza Inn unit count during fiscal 2025.2026. For fiscal 2025,2026, the number of international Pizza Inn units decreased by twofour units. Eight units in Oman were closed following the non-renewal of their franchise agreement. There were zero transfers in the total international Pizza Inn unit count during fiscal 2025.2026. The Company believes the number of both domestic and international Pizza Inn units will increase modestly in future periods.

Pie Five total domestic retail sales decreased by $5.6$2.7 million, or 33.2%,23.8%, for fiscal 20252026 when compared to the prior year. Compared to the prior year, average units open in the period decreased from 2520 to 20.15. Comparable store retail sales decreased by $1.0$0.9 million to $11.0$8.5 million for fiscal 20252026 as compared to the prior year. For fiscal 2025,2026, the decrease in domestic retail sales werewas primarily the result of the decrease in store count, supplemented by a decrease in comparable store retail sales. The highest-volume Pie Five unit closed during the last week of fiscal 2024. This location accounted for approximately 13.6% of Pie Five's total domestic retail sales for fiscal 2024.

TheThere was a net decrease of threefour units in the total domestic Pie Five unit count during fiscal 2025.2026. There was a net decrease of one Pie Five Ghost Kitchen Unit during fiscal 2025. One Pie Five unit converted to become a Pizza Inn Buffet unit.2026. We believe that Pie Five units will decrease modestly in future periods.

Revenues are derived from franchise royalties, supplier and distributor incentives,incentive revenues, franchise license fees, area development exclusivity fees and foreign master license fees, advertising fund contributions, supplier convention funds, rental income, and other income. The volume of supplier and distributor incentive revenues is dependent on the level of total retail sales, which are impacted by changes in comparable store sales and restaurant count, as well as the products sold to franchisees through third-party food distributors.

Pizza Inn franchise revenues increased by $0.5$1.2 million to $12.0 million for fiscal 2026 as compared to $10.8 million for fiscal 2025 as compared to $10.3 million for fiscal 2024.2025. The 4.8%11.2% increase was driven by increasedincreases advertisingin fundsupplier revenuesand distributor incentives and domestic royalties mainly due to an increase in thesystem-wide averageretail contribution rate from new stores and expiring rate abatements from existing stores and increased supplier and distributor incentives under the terms of new contracted pricing.sales.

Pie Five franchise revenues decreased by $0.5$0.3 million to $0.9 million for fiscal 2026 as compared to $1.2 million for fiscal 2025 as compared to $1.7 million for fiscal 2024.2025. The 30.7%23.6% decrease was driven by decreases in domestic royalties relatedfrom lower system-wide retail sales mainly due to aunit decrease in system-wide sales.closures.

Total general and administrative expenses decreasedincreased by $0.1$0.7 million to $5.9 million for fiscal 2026 as compared to $5.2 million for fiscal 2025 as compared to $5.3 million for fiscal 2024.2025. The 1.0%12.7% decreaseincrease was driven by decreasesincreases in recruiting fees,salaries, offset by increasesdecreases in salaries.legal fees.

Franchise expenses include general and administrative expenses directly related to the sale and continuing service of domestic and international franchises. Total franchise expenses decreasedremained byrelatively $0.3stable million toat $3.4 million infor fiscal 20252026 as compared to $3.7 million for fiscal 2024.2025. Pizza Inn franchise expenses remainedincreased relativelyby stable$0.1 atmillion to $3.1 million for fiscal 2026 as compared to $3.0 million for fiscal 2025 as compared to fiscal 2024.2025. The 0.4%3.1% increase was driven by increases in advertising fees, offset by decreases in salaries directly related to franchise operations. Pie Five franchise expenses decreased by $0.1 million to $0.3 million for fiscal 2026 as compared to $0.4 million for fiscal 2025 compared to $0.7 million for fiscal 2024.2025. The 40.4%31.8% decrease was driven by decreases in salaries directly related to franchise operations and advertising fees.

The Company monitors franchisee receivable balances and adjusts credit terms when necessary to minimize the Company’s exposure to high-risk accounts receivable. For fiscal 2025,2026, provision for credit losses was $7 thousand compared to recoveries for credit losses wereof $21 thousand compared to provision for credit losses of $69 thousand for fiscal 2024.2025. During fiscal 2025, the Company recorded a gain in provision for credit losses due to the recoveries of receivables that had been previously reserved, partially offset by losses due to write offs of receivables.

Interest income increased by $201$37 thousand for fiscal 20252026 to $354$391 thousand compared to $153$354 thousand in the prior year. The increase was primarily driven by interest received on short-term investments, all of which were U.S. Treasury bills.

For the year ended June 29,28, 2025,2026, the Company recorded an income tax expense of $918$1,006 thousand. The federal and state tax expense was $793$880 thousand and $125$126 thousand, respectively. The increase was primarily driven by increases in federal taxes, primarily due to higher taxable income and fewer discrete tax items related to restricted stock units vesting than in the prior year. The Company utilized net operating losses to offset federal taxes payable. At the end of tax year ended June 29,28, 2025,2026, the Company had federal net operating loss carryforwards totaling $16$12 million that are available to reduce future taxable income and will begin to expire in 2035. Under the Tax Cuts and Jobs Act, approximately $1.3 million of the loss carryforwards are limited to 80% and do not expire. Tax years that remain subject to examination by the IRS are the years ended June 28,25, 20222023 through June 30,29, 2024.2025. Tax years that remain subject to examination by state authorities are the years ended June 30,26, 20212022 through June 30,29, 2024.2025.

Cash flows from operating activities generally reflect net income adjusted for certain non-cash items including depreciation and amortization, changes in deferred taxes, stock-based compensation, short-term investment discount amortization, and changes in working capital. Cash provided by operating activities was $3.4$3.6 million in fiscal 20252026 compared to cash provided by operating activities of $2.8$3.4 million in fiscal 2024.2025. The primary driver of increased operating cash flow during fiscal 20252026 was increased collections of accounts receivablerevenues related to thesupplier paymentand ofdistributor franchise receivables.incentives.

Cash flows from investing activities reflect purchases and maturities of short-term investments as well as net proceeds from the sale of assets and capital expenditures for the purchase of Company assets. Cash used in investing activities during fiscal 20252026 was $2.0$5.3 million compared to cash used in investing activities of $4.9$2.0 million in fiscal 2024.2025. Net cash used in investing activities in fiscal 20252026 was primarily attributable to increased activity related to the purchase andof redemptionshort-term investments. The decrease in proceeds from maturities of short-term investments.investments was primarily attributable to the timing of investment maturity, with fewer investments reaching maturity during fiscal 2026.

Cash flows used in financing activities generally reflect changes in the Company's stock and debt activity during the period. Net cash used in financing activities was $1.4 millionzero for fiscal 20252026 compared to net cash used in financing activities of $0.3$1.4 million for fiscal 2024.2025. Net cash used by financing activities in fiscal 2025 was primarily attributable to repurchases of the Company's stock. On February 24, 2025, the Company repurchased 500,000 shares at $2.40 per share in a negotiated transaction. Net cash used by financing activities in fiscal 2024 was primarily attributable to taxes paid on vested Restricted Stock Units (“RSUs”).

Accounts receivable consist primarily of receivables generated from franchise royalties and supplier concessions.incentives. The Company records an allowance for credit losses to allow for any amounts which may be unrecoverable based upon an analysis of the Company’s prior collection experience, customer creditworthiness and current economic trends. Actual realization of accounts receivable could differ materially from the Company’s estimates.

Franchise revenue consists of income from license fees, royalties, area development and foreign master license agreements, advertising fund revenues, supplier incentive and convention contribution revenues. Franchise fees, area development and foreign master license agreement fees are amortized into revenue on a straight-line basis over the term of the related contract agreement. In event of a closed franchise or defaulted development agreement, the remaining balance of unamortized license fees will be recognized in entirety as of the date of the closure or default. Royalties and advertising fund revenues, which are based on a percentage of franchise retail sales, are recognized as income as retail sales occur. Supplier incentive revenues are recognized as earned, typically as the underlying commodities are shipped. During fiscal 2026, the Company had a concentration of revenue with a supplier, which accounted for approximately 14.0% of total revenues.

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes appearing elsewhere in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended June 29, 2025, together with our Quarterly ReportReports on Form 10-Q for the periodperiods ended September 28, and December 28, 2025, may contain certain forward-looking statements that are based on current management expectations. Generally, verbs in the future tense and the words “believe,” “expect,” “anticipate,” “estimate,” “intends,” “opinion,” “potential” and similar expressions identify forward-looking statements. Forward-looking statements in this report include, without limitation, statements relating to our business objectives, our customers and franchisees, our liquidity and capital resources, and the impact of our historical and potential business strategies on our business, financial condition, and operating results. Our actual results could differ materially from our expectations. Further information concerning our business, including additional factors that could cause actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q, are set forth in our Annual Report on Form 10-K for the year ended June 29, 2025, as well as our Quarterly Report on Form 10-Q for the periodperiods ended September 28, and December 28, 2025. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The forward-looking statements contained herein speak only as of the date of this Quarterly Report on Form 10-Q and, except as may be required by applicable law, we do not undertake, and specifically disclaim any obligation to, publicly update or revise such statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Rave Restaurant Group, Inc., through its subsidiaries (collectively, the “Company” or “we,” “us” or “our”), franchises pizza buffet (“Buffet Units”), delivery/carry-out (“Delco Units”), express restaurants (“Express Units”) and ghost kitchens (“Pizza Inn Ghost Kitchen Units”) under the trademark “Pizza Inn” and franchises fast casual pizza restaurants (“Pie Five Units”) and ghost kitchens (“Pie Five Ghost Kitchen Units”) under the trademarks “Pie Five Pizza Company” or “Pie Five”. The Company also licenses Pizza Inn Express, or PIE, kiosks (“PIE Units”). We facilitate food, equipment and supply distribution to our domestic and international system of restaurants through agreements with third-party distributors. At DecemberMarch 28,29, 2025,2026, franchised and licensed units consisted of the following:

Three Months Ended DecemberMarch 28,29, 2025 (in thousands, except unit data)2026

Adjusted EBITDA for the fiscal quarter ended DecemberMarch 28,29, 20252026 increased $0.1$0.2 million compared to the same period of the prior fiscal year. Year-to-date Adjusted EBITDA increased $0.2$0.3 million compared to the same period of the prior fiscal year. The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown (in thousands):

Pizza Inn total domestic retail sales increased by $1.1$1.9 million, or 4.1%,7.2%, for the three months ended DecemberMarch 28,29, 20252026 when compared to the same period of the prior year. Compared to the same fiscal quarter of the prior year, average Buffet Units open in the period increased from 7877 to 80.82. Comparable store retail sales increased by $0.6 million, or 2.5%,2.3%, for the three month period ended DecemberMarch 28,29, 20252026 as compared to the same period of the prior fiscal year. For the three months ended DecemberMarch 28,29, 2025,2026, the increase in domestic retail sales were primarily the result of the increase in the average number of Buffet units, supplemented by an increase in comparable domestic store retail sales.

Pizza Inn total domestic retail sales increased by $3.6$5.5 million, or 7.1%, for the sixnine months ended DecemberMarch 28,29, 20252026 when compared to the same period of the prior year. Compared to the same fiscal period of the prior year, average Buffet Units open in the period increased from 78 to 79.80. Comparable store retail sales increased by $2.7$3.3 million, or 5.3%,4.3%, for the sixnine month period ended DecemberMarch 28,29, 20252026 as compared to the same period of the prior fiscal year. For the sixnine months ended DecemberMarch 28,29, 2025,2026, the increase in domestic retail sales were primarily the result of the increase in the average number of Buffet Units, supplemented by an increase in comparable domestic store retail sales.

The following chart summarizes Pizza Inn restaurant activity for the three and sixnine months ended DecemberMarch 28,29, 20252026:

There was a net increase of zero and one unit in the total domestic Pizza Inn unit count during the three and sixnine months ended DecemberMarch 28,29, 2025,2026, respectively. There were zeroone and twofour units transferred between franchisees in the total domestic Pizza Inn unit count during the three and sixnine months ended DecemberMarch 28,29, 2025,2026, respectively. For the three and sixnine months ended DecemberMarch 28,29, 2025,2026, the number of international Pizza Inn units decreased by one and threefour net units, respectively. There were zero transfers in the total international Pizza Inn unit count during the three and sixnine months ended DecemberMarch 28,29, 2025.2026. The Company believes the number of both domestic and international Pizza Inn units will increase modestly in future periods.

Pie Five total domestic retail sales decreased by $0.4$0.7 million, or 16.3%,24.1%, for the three months ended DecemberMarch 28,29, 20252026 when compared to the same period of the prior year. Compared to the same fiscal quarter of the prior year, average units open in the period decreased from 18 to 16.15. Comparable store retail sales decreased by $34$0.3 thousand,million, or 1.5%,11.6%, for the three month period ended DecemberMarch 28,29, 20252026 as compared to the same period of the prior fiscal year. For the three months ended DecemberMarch 28,29, 2025,2026, the decrease in domestic retail sales were primarily the result of the decrease in average store count, supplemented by a decrease in comparable store retail sales.

Pie Five total domestic retail sales decreased by $1.0$1.7 million, or 17.6%,19.7%, for the sixnine months ended DecemberMarch 28,29, 20252026 when compared to the same period of the prior year. Compared to the same fiscal period of the prior year, average units open in the period decreased from 18 to 16. Comparable store retail sales decreased by $0.3$0.6 million, or 5.7%,7.6%, for the sixnine month period ended DecemberMarch 28,29, 20252026 as compared to the same period of the prior fiscal year. For the sixnine months ended DecemberMarch 28,29, 2025,2026, the decrease in domestic retail sales were primarily the result of the decrease in average store count, supplemented by a decrease in comparable store retail sales.

The following chart summarizes Pie Five restaurant activity for the three and sixnine months ended DecemberMarch 28,29, 20252026:

There was a net decrease of onetwo unitand three units in the total domestic Pie Five unit count during the three and sixnine months ended DecemberMarch 28,29, 2025.2026. There were zero transfers in the total domestic Pie Five unit count during the three and sixnine months ended DecemberMarch 28,29, 2025.2026. We believe that Pie Five units will decrease modestly in future periods.

In addition to Corporate overhead support, the Company defines its operating segments as Pizza Inn Franchising and Pie Five Franchising. The following is additional business segment information for the three and sixnine months ended DecemberMarch 28,29, 20252026 and DecemberMarch 29,30, 20242025 (in thousands):

Three Months Ended DecemberMarch 28,29, 20252026 and DecemberMarch 29,30, 20242025

Total revenues for the three month period ended DecemberMarch 28,29, 20252026 and for the same period in the prior fiscal year were $3.0$3.2 million and $2.9$3.0 million, respectively.

Total revenues for the sixnine month period ended DecemberMarch 28,29, 20252026 and for the same period in the prior fiscal year were $6.3$9.5 million and $5.9$8.9 million, respectively.

Pizza Inn franchise revenues increased by $0.3 million to $2.8$3.0 million for the three month period ended DecemberMarch 28,29, 20252026 as compared to the same period in the prior fiscal year. The 10.5%12.2% increase was driven by increases in supplier and distributor incentives and domestic royalties mainly due to an increase in system-wide retail sales. Pizza Inn franchise revenues increased by $0.5$0.8 million to $5.8$8.8 million for the sixnine month period ended DecemberMarch 28,29, 20252026 as compared to the same period in the prior fiscal year. The 9.9%10.7% increase was driven by increases in supplier and distributor incentives and domestic royalties mainly due to an increase in system-wide retail sales.

Pie Five franchise revenues decreased by $0.1 million to $0.2 million for the three month period ended DecemberMarch 28,29, 20252026 as compared to the same period in the prior fiscal year. The 21.7%20.1% decrease was driven by decreases in domestic royalties and supplier and distributor incentives from lower system-wide retail sales mainly due to unit closures. Pie Five franchise revenues decreased by $0.1$0.2 million to $0.5$0.7 million for the sixnine month period ended DecemberMarch 28,29, 20252026 as compared to the same period in the prior fiscal year. The 21.9% decrease was driven by decreases in domestic royalties and supplier and distributor incentives from lower system-wide retail sales mainly due to unit closures.

Total general and administrative expenses increased by $0.2 million to $1.5 million for the three month period ended DecemberMarch 28,29, 20252026 as compared to the same period of the prior fiscal year. The 15.6%11.8% increase was driven by increases in salaries, supplementedoffset by increasesdecreases in legal fees, which reflect fewer legal settlements recognized in the current year compared to the prior year.fees. Total general and administrative expenses increased by $0.1$0.3 million to $2.9$4.4 million for the sixnine month period ended DecemberMarch 28,29, 20252026 as compared to the same period of the prior fiscal year. The 2.3%7.9% increase was driven by increases in salaries.salaries, offset by decreases in legal fees.

Franchise expenses include general and administrative expenses directly related to the sale and continuing service of domestic and international franchises. Total franchise expenses decreasedremained byrelatively $0.1stable million toat $0.7 million for the three month period ended DecemberMarch 28,29, 20252026 as compared to the same period of the prior fiscal year. The 11.7% decrease was driven by decreases in salaries directly related to franchise operations. Total franchise expenses decreased by $0.1 million to $1.8 million for the six month period ended December 28, 2025 as compared to the same period of the prior fiscal year. The 3.0%2.7% decrease was driven by decreases in salaries directly related to franchise operations, offset by increases in advertising fees. Total franchise expenses decreased by $0.1 million to $2.5 million for the nine month period ended March 29, 2026 as compared to the same period of the prior fiscal year. The 2.9% decrease was driven by decreases in salaries directly related to franchise operations, offset by increases in advertising fees.

The Company monitors franchisee receivable balances and adjusts credit terms when necessary to minimize the Company’s exposure to high-risk accounts receivable. For the three month period ended DecemberMarch 28,29, 2025,2026, provision for credit losses were $7$9 thousand compared to $9recoveries for credit losses of $14 thousand for the same period in the prior fiscal year. For the sixnine month period ended DecemberMarch 28,29, 2025,2026, provision for credit losses were $11$20 thousand compared to recoveries for credit losses of $8$22 thousand for the same period in the prior fiscal year.

Depreciation and amortization expense decreased by $11$2 thousand to $42 thousand for the three month period ended DecemberMarch 28,29, 20252026 as compared to the same period in the prior fiscal year. The decrease was primarily the result of lower depreciation of equipment. Depreciation and amortization expense decreased by $12$14 thousand to $84$126 thousand for the sixnine month period ended DecemberMarch 28,29, 20252026 as compared to the same period in the prior fiscal year. The decrease was primarily the result of lower depreciation of equipment due to less capital expenditure spend.

Interest income increased by $4$14 thousand to $91$98 thousand for the three month period ended DecemberMarch 28,29, 20252026 as compared to the same period in the prior fiscal year and increased by $13$27 thousand to $182$280 thousand for the sixnine month period ended DecemberMarch 28,29, 20252026 as compared to the same period in the prior fiscal year. The increase was primarily driven by interest received on U.S. Treasury bills.

For the three and sixnine months ended DecemberMarch 28,29, 2026, the Company recorded an income tax expense of $255 thousand and $666 thousand, respectively. For the three and nine months ended March 30, 2025, the Company recorded an income tax expense of $205$228 thousand and $411 thousand, respectively. For the three and six months ended December 29, 2024, the Company recorded an income tax expense of $144 thousand and $313$541 thousand, respectively. The increase for the three months ended as of DecemberMarch 28,29, 20252026 was driven by increases in federal taxes, primarily due to higher taxable income and fewer discrete tax items related to restricted stock units vesting than in the prior year. The increase for the sixnine months ended as of DecemberMarch 28,29, 20252026 was primarily driven by increases in federal taxes, primarily due to higher taxable income and fewer discrete tax items related to restricted stock units vesting than in the prior year.

Basic net income per share increased $0.01 per share to $0.09$0.06 per share for the sixthree months ended DecemberMarch 28,29, 2025,2026, compared to the comparable period in the prior fiscal year. The Company had net income of $1.3$0.8 million for the sixthree months ended DecemberMarch 28,29, 20252026 compared to net income of $1.1$0.7 million in the comparable period in the prior fiscal year, on revenues of $6.3$3.2 million for the sixthree months ended DecemberMarch 28,29, 20252026 compared to $5.9$3.0 million in the comparable period in the prior fiscal year.

During the sixnine month period ended DecemberMarch 28,29, 2025,2026, the Company's primary source of liquidity was proceeds from operating activities.

Cash flows from operating activities generally reflect net income adjusted for certain non-cash items including depreciation and amortization, changes in deferred taxes, stock-based compensation, and changes in working capital. Cash provided by operating activities was $0.9$2.1 million for the sixnine month period ended DecemberMarch 28,29, 20252026 compared to cash provided by operating activities of $1.2$2.2 million for the sixnine month period ended DecemberMarch 29,30, 2024.2025. The primary driver of decreased operating cash flow during the sixnine month period ended DecemberMarch 28,29, 20252026 was increased prepaidaccounts expensesreceivable relateddue to marketingthe andtiming insurance.of payments.

Cash flows from investing activities reflect purchases and maturities of short-term investments as well as net proceeds from the sale of assets and capital expenditures for the purchase of Company assets. Cash used in investing activities during the sixnine month period ended DecemberMarch 28,29, 20252026 was $3.1$3.8 million compared to cash used in investing activities of $1.1$3.0 million for the sixnine month period ended DecemberMarch 29,30, 2024.2025. Net cash used in investing activities during the sixnine month period ended DecemberMarch 28,29, 20252026 was primarily attributable to decreasedincreased maturitiespurchases of U.S. Treasury bills.

Cash flows used in financing activities generally reflect changes in the Company's stock and debt activity during the period. Net cash used in financing activities was zero for the sixnine month period ended DecemberMarch 28,29, 20252026 compared to net cash used in financing activities of $0.2$1.4 million for the sixnine month period ended DecemberMarch 29,30, 2024.2025. Net cash used by financing activities for the sixnine month period ended DecemberMarch 29,30, 20242025 was primarily attributable to taxesrepurchases paidof onthe vestedCompany's RSUs.stock.

The Company accounts for uncertain tax positions in accordance with ASC 740-10, which prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that it has taken or expects to take on a tax return. ASC 740-10 requires that a company recognize in its financial statements the impact of tax positions that meet a “more likely than not” threshold, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. As of DecemberMarch 28,29, 20252026 and June 29, 2025, the Company had no uncertain tax positions.