10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C.  20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 30, 2014

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

Commission File Number:   0-12919

PIZZA INN HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Missouri	45-3189287
(State or other jurisdiction of	(I.R.S. Employer
Incorporation or organization)	Identification No.)

3551 Plano Parkway

The Colony, Texas 75056

(Address of principal executive offices)

(469) 384-5000

(Registrant's telephone number,

including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check One)

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

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

As of May 13, 2014 8,767,944 shares of the issuer’s common stock were outstanding.

2

PIZZA INN HOLDINGS, INC.

Index

PART I.    FINANCIAL INFORMATION

Item 1.	Financial Statements	Page
	Condensed Consolidated Statements of Operations for the three months and nine months ended March 30, 2014 and March 24, 2013 (unaudited)	4
	Condensed Consolidated Balance Sheets at March 30, 2014 (unaudited) and June 30, 2013	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended March 30, 2014 and March 24, 2013 (unaudited)	6
	Supplemental Disclosure of Cash Flow Information for the nine months ended March 30, 2014 and March 24, 2013 (unaudited)	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20

PART II.   OTHER INFORMATION

Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	22
	Signatures	23

3

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

PIZZA INN HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
	Three Months Ended						Nine Months Ended
	March 30,			March 24,			March 30,			March 24,
	2014			2013			2014			2013
REVENUES:	$	10,912		$	9,781		$	31,281		$	30,767
COSTS AND EXPENSES:
Cost of sales		9,570			8,460			27,028			26,127
General and administrative expenses		1,130			840			3,314			2,995
Franchise expenses		677			608			2,150			1,675
Pre-opening expenses		4			82			160			249
Bad debt		93			45			203			135
Interest expense		34			58			113			197
		11,508			10,093			32,968			31,378
LOSS FROM CONTINUING OPERATIONS BEFORE TAXES		(596	)		(312	)		(1,687	)		(611	)
Income tax benefit		(159	)		(22	)		(527	)		(170	)
LOSS FROM CONTINUING OPERATIONS		(437	)		(290	)		(1,160	)		(441	)
Loss from discontinued operations, net of taxes		(14	)		(100	)		(39	)		(127	)
NET LOSS	$	(451	)	$	(390	)	$	(1,199	)	$	(568	)
EARNINGS PER SHARE OF COMMON STOCK - BASIC:
Loss from continuing operations	$	(0.05	)	$	(0.04	)	$	(0.14	)	$	(0.05	)
Loss from discontinued operations		-			(0.01	)		-			(0.02	)
Net loss	$	(0.05	)	$	(0.05	)	$	(0.14	)	$	(0.07	)
EARNINGS PER SHARE OF COMMON STOCK - DILUTED:
Loss from continuing operations	$	(0.05	)	$	(0.04	)	$	(0.13	)	$	(0.05	)
Loss from discontinued operations		-			(0.01	)		-			(0.02	)
Net loss	$	(0.05	)	$	(0.05	)	$	(0.13	)	$	(0.07	)
Weighted average common shares outstanding - basic		8,771			8,021			8,566			8,021
Weighted average common and
potential dilutive common shares outstanding		9,290			8,267			9,109			8,198

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

4

PIZZA INN HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
	March 30,			June 30,
ASSETS	2014 (unaudited)			2013
CURRENT ASSETS
Cash and cash equivalents	$	365		$	919
Accounts receivable, less allowance for bad debts
of $417 and $228, respectively		3,679			3,139
Notes receivable		123			292
Inventories		1,601			1,615
Income tax receivable		343			343
Deferred income tax assets		943			882
Prepaid expenses and other		336			307
Total current assets		7,390			7,497
LONG-TERM ASSETS
Property, plant and equipment, net		5,652			4,711
Long-term notes receivable		14			40
Long-term deferred tax asset		657			168
Deposits and other		430			119
Total assets	$	14,143		$	12,535
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade	$	2,178		$	1,572
Accrued expenses		1,611			1,749
Deferred revenues		154			169
Bank debt		375			669
Total current liabilities		4,318			4,159
LONG-TERM LIABILITIES
Bank debt, net of current portion		750			1,856
Deferred revenues, net of current portion		680			370
Deferred gain on sale of property		40			59
Other long-term liabilities		70			22
Total liabilities		5,858			6,466
COMMITMENTS AND CONTINGENCIES  (See Note 3)
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; authorized 26,000,000
shares; issued 15,849,615 and 15,312,680 shares, respectively;
outstanding 8,730,215 and 8,193,280 shares, respectively		158			153
Additional paid-in capital		13,584			10,174
Retained earnings		19,179			20,378
Treasury stock at cost
Shares in treasury: 7,119,400		(24,636	)		(24,636	)
Total shareholders' equity		8,285			6,069
	$	14,143		$	12,535

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

5

PIZZA INN HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
	Nine Months Ended
	March 30,			March 24
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,199	)	$	(568	)
Adjustments to reconcile net loss to
cash (used) provided by operating activities:
Depreciation and amortization		1,056			958
(Gain) loss on sale of assets		(40	)		129
Stock compensation expense		45			135
Deferred taxes		(551	)		(243	)
Provision for bad debts		203			44
Changes in operating assets and liabilities:
Notes and accounts receivable		(548	)		(172	)
Inventories		14			330
Accounts payable - trade		606			(21	)
Accrued expenses		(90	)		129
Deferred revenue		276			61
Prepaid expenses and other		(367	)		(102	)
Cash (used) provided by operating activities		(595	)		680
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets		58			184
Capital expenditures		(1,987	)		(1,547	)
Cash used for investing activities		(1,929	)		(1,363	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock		3,288			-
Proceeds from stock options		82			-
Borrowings of bank debt		-			3,160
Repayments of bank debt		(1,400	)		(2,252	)
Cash provided by financing activities		1,970			908
Net increase (decrease) in cash and cash equivalents		(554	)		225
Cash and cash equivalents, beginning of period		919			590
Cash and cash equivalents, end of period	$	365		$	815
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAYMENTS FOR:
Interest	$	113		$	248
Income taxes - net	$	1		$	(84	)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

6

PIZZA INN HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying condensed consolidated financial statements of Pizza Inn Holdings, Inc. (the "Company") have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  Certain information and footnote disclosures normally included in the financial statements have been omitted pursuant to such rules and regulations.  The unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company's financial position and results of operations for the interim periods reflected.  Except as noted, all adjustments are of a normal recurring nature.  Results of operations for the fiscal periods presented are not necessarily indicative of fiscal year-end results.

(1) Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned.  All appropriate intercompany balances and transactions have been eliminated.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Fiscal Quarters

The three month periods ended March 30, 2014 and March 24, 2013, each contained 13 weeks.  The nine month periods ended March 30, 2014 and March 24, 2013, each contained 39 weeks.

Revenue Recognition

The Company recognizes revenue when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable.  The Company's Norco division sells food and supplies to franchisees on trade accounts under terms common in the industry.  Food and supply sales revenues, including shipping and handling costs, are recognized upon delivery of the product. Revenue from restaurant sales is recognized when food and beverage products are sold. The Company reports revenue net of sales taxes collected from customers and remitted to governmental taxing authorities.

Franchise revenue consists of income from license fees, royalties, and area development and foreign master license fees. License fees are recognized as income when there has been substantial performance under the agreement by the Company.  Domestic license fees are generally recognized at the time the restaurant is opened.  Foreign master license fees are generally recognized upon execution of the agreement as all material services relating to the sale have been substantially performed by the Company and the fee has been collected.  Royalties are recognized as income when earned.

Stock-Based Compensation

The Company accounts for stock options using the fair value recognition provisions of the authoritative guidance on share-based payments. The Company uses the Black-Scholes formula to estimate the value of stock-based compensation for options granted to employees and directors and expects to continue to use this acceptable option valuation model in the future.  The authoritative guidance also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow.

Use of Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the Company’s management to make estimates and assumptions that affect its reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities.  The Company bases its estimates on historical experience and other various assumptions that it believes are reasonable under the circumstances.  Estimates and assumptions are reviewed periodically and actual results could differ materially from estimates.

7

Reclassification

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

(2) Long-Term Debt

On August 28, 2012, the Company entered into a Loan and Security Agreement (the “F&M Loan Agreement”) with The F&M Bank & Trust Company (“F&M”) providing for a $2.0 million revolving credit facility (with a $500 thousand letter of credit subfacility), a $2.0 million fully funded term loan facility and a $6.0 million advancing term loan facility.  An origination fee of 0.5% of the total credit facilities was paid at closing.  At closing, F&M funded a $2.0 million term loan payable in 48 equal monthly installments of principal plus accrued interest at a fixed rate of 4.574% per annum.  Amounts repaid under this fully funded term loan may not be reborrowed.  Initial proceeds from the F&M Loan Agreement were used to repay amounts borrowed under a previous credit facility that subsequently was canceled.

On June 13, 2013 the Company entered into a First Amendment to the F&M Loan Agreement that revised certain financial covenants to address proceeds from the Company’s at-the-market offering of common stock.  On September 10, 2013 the Company entered into a Second Amendment to the F&M Loan Agreement that specified the application of prepayments to the loan amortization schedule and revised certain definitions.

The Company may borrow, repay and reborrow under the revolving credit facility through August 28, 2014, at which time all amounts outstanding under the revolving credit facility mature. The Company has not drawn borrowings on the revolving credit facility during fiscal year 2014.  Availability under the revolving credit facility is limited by advance rates on eligible inventory and accounts receivable.  Per annum interest on indebtedness from time to time outstanding under the revolving credit facility is computed at the Wall Street Journal prime rate plus 1.00% and is payable monthly.  An unused commitment fee of 0.50% per annum is payable quarterly on the average unused portion of the revolving credit facility.

Through August 28, 2014, F&M has agreed to make up to $6.0 million in additional term loans to the Company.  After such date any outstanding term loans continue to amortize according to each loan’s specified payment schedule.  Advances for such additional term loans are limited by a percentage of the costs of equipment, leasehold improvements and other opening costs for new Company-owned Pie Five Units and may not be reborrowed after repayment.  Interest only is payable monthly on all additional term loan advances during an annual borrowing period.  At the end of each annual borrowing period, all additional term loan advances during such borrowing period become payable in 48 equal monthly installments of principal plus accrued interest. Interest on each term loan accrues at the Wall Street Journal prime rate plus 1.00% or, at the Company’s option, a fixed rate equal to the Bloomberg 4-year LIBOR swap rate plus 3.90%.

As security for the credit facilities, the Company has pledged substantially all of its assets including, but not limited to, accounts receivable, inventory and equipment.  The F&M Loan Agreement contains various affirmative covenants which, among other things, require the Company to provide F&M with certain financial statements, compliance statements, reports and other information. The F&M Loan Agreement also contains various negative covenants which, among other things, require the Company to maintain certain financial ratios and restrict the ability of the Company to engage in certain activities.  If an event of default occurs under the F&M Loan Agreement and any cure periods have expired, F&M may terminate all commitments under the credit facilities and declare all unpaid principal, interest and other amounts owing under the credit facilities to be immediately due and payable.

The Company was in compliance with all covenants under the F&M Loan Agreement as of March 30, 2014. As of March 30, 2014, the balance on the initial term loan facility was $1.1 million with an interest rate of 4.574% and scheduled monthly principle payments through September 1 2016.  The balance on the advancing term loan facility was zero with an interest rate of 4.25%, the balance on the revolving credit facility was zero with an interest rate of 4.25% and the Company had an outstanding letter of credit of $0.2 million.

8

(3) Commitments and Contingencies

On April 22, 2009, the Company’s board of directors amended the stock purchase plan first adopted on May 23, 2007, and previously amended on June 2, 2008, to increase the number of shares of common stock the Company may repurchase to a total of 3,016,000 shares.  As of March 30, 2014, up to an additional 848,425 shares could be purchased under the plan.

The Company is subject to various claims and legal actions in the ordinary course of its business.  The Company believes that all such claims and actions currently pending against it are either adequately covered by insurance or would not have a material adverse effect on the Company’s annual results of operations, cash flows or financial condition if decided in a manner that is unfavorable to the Company.

(4)           Stock-Based Compensation

For the three months and nine months ended March 30, 2014, the Company recognized stock-based compensation expense of $15,000 and $45,000, respectively.  As of March 30, 2014, unamortized stock-based compensation expense was $0.2 million.

The following table summarizes the number of shares of the Company’s common stock subject to outstanding stock options:

	Nine Months Ended
	March 30, 2014			March 24, 2013
Outstanding at beginning of year		851,306			486,506
Granted		85,392			464,800
Exercised		(39,144	)		-
Forfeited/Canceled/Expired		(38,856	)		-
Outstanding at end of period		858,698			951,306
Exercisable at end of period		473,659			391,939

9

(5) Earnings per Share (EPS)

The following table shows the reconciliation of the numerator and denominator of the basic EPS calculation to the numerator and denominator of the diluted EPS calculation (in thousands, except per share amounts).

	Three Months Ended						Nine Months Ended
	March 30,			March 24,			March 30,			March 24,
	2014			2013			2014			2013
Loss from continuing operations	$	(437	)	$	(290	)	$	(1,160	)	$	(441	)
Discontinued operations		(14	)		(100	)		(39	)		(127	)
Net loss available to common stockholders	$	(451	)	$	(390	)	$	(1,199	)	$	(568	)
BASIC:
Weighted average common shares		8,771			8,021			8,566			8,021
Loss from continuing operations per share	$	(0.05	)	$	(0.04	)	$	(0.14	)	$	(0.05	)
Discontinued operations per common share		-			(0.01	)		-			(0.02	)
Net loss per common share	$	(0.05	)	$	(0.05	)	$	(0.14	)	$	(0.07	)
DILUTED:
Weighted average common shares		8,771			8,021			8,566			8,021
Dilutive stock options		519			246			543			177
Weighted average common shares outstanding		9,290			8,267			9,109			8,198
Loss from continuing operations per share	$	(0.05	)	$	(0.04	)	$	(0.13	)	$	(0.05	)
Discontinued operations per common share		-			(0.01	)		-			(0.02	)
Loss per common share	$	(0.05	)	$	(0.05	)	$	(0.13	)	$	(0.07	)

For the three months and nine months ended March 30, 2014, options to purchase 15,000 shares of common stock were excluded from the computation of diluted EPS because the options’ exercise prices exceeded the average market price of the common shares for the period.

(6)           Closed restaurants and discontinued operations

The authoritative guidance on “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires that discontinued operations that meet certain criteria be reflected in the statement of operations after results of continuing operations as a net amount.  This guidance also requires that the operations of the closed restaurants, including any impairment charges, be reclassified to discontinued operations for all periods presented.

The authoritative guidance on “Accounting for Costs Associated with Exit or Disposal Activities,” requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred.  This authoritative guidance also establishes that fair value is the objective for initial measurement of the liability.

Loss from discontinued operations reflects costs associated with a former Company-owned restaurant in Texas that was closed during the quarter ended September 23, 2007. This property is on the market for sub-lease. Because we believe that the property will sub-lease at or above the contracted lease rates, we have not reserved any additional costs related to our obligations under this non-cancelable lease.

(7)           Income Taxes

For the three and nine month period ended March 30, 2014, income tax benefit of  $0.2 million and $0.5 million, respectively, was calculated on an effective income tax rate that is consistent with the statutory U.S. federal income tax rate of 34% adjusted for state income tax effects and permanent difference items. Management believes that future operations will generate sufficient taxable income, along with the reversal of temporary differences, to fully realize the net deferred tax asset of $1.6 million.

10

(8) Segment Reporting

Summarized in the following tables are net sales and operating revenues, operating income and geographic information (revenues) for the Company’s reportable segments for the three month and nine month periods ended March 30, 2014 and March 24, 2013 (in thousands).  Operating income reported below excludes income tax provision and discontinued operations.

		Three Months Ended						Nine Months Ended
		March 30,			March 24,			March 30,			March 24,
		2014			2013			2014			2013
Net sales and operating revenues:
Franchising and food and supply distribution		$	8,104		$	7,719		$	23,667		$	24,922
Company-owned restaurants (1)			2,808			2,062			7,614			5,845
	Consolidated revenues	$	10,912		$	9,781		$	31,281		$	30,767
Depreciation and amortization:
Franchising and food and supply distribution		$	-		$	-		$	7		$	-
Company-owned restaurants (1)			329			279			921			762
	Combined		329			279			928			762
Corporate administration and other			41			61			128			205
	Depreciation and amortization	$	370		$	340		$	1,056		$	967
Income (loss) from continuing operations before taxes:
Franchising and food and supply distribution (2)		$	(74	)	$	245		$	546		$	1,526
Company-owned restaurants (1) (2)			(259	)		(357	)		(1,062	)		(956	)
	Combined		(333	)		(112	)		(516	)		570
Corporate administration and other (2)			(263	)		(200	)		(1,171	)		(1,181	)
	Operating loss	$	(596	)	$	(312	)	$	(1,687	)	$	(611	)
Geographic information (revenues):
United States		$	10,666		$	9,509		$	30,561		$	29,939
Foreign countries			246			272			720			828
	Consolidated total	$	10,912		$	9,781		$	31,281		$	30,767
(1)	Company stores that were closed are included in discontinued
	operations in the accompanying Condensed Consolidated Statement
	of Operations.
(2)	Portions of corporate administration and other have been allocated to segments.

11

Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes appearing elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended June 30, 2013, and may contain certain forward-looking statements that are based on current management expectations.  Generally, verbs in the future tense and the words “believe,” “expect,” “anticipate,” “estimate,” “intend,” “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 30, 2013.  These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  The forward-looking statements contained herein speak only as of the date of this Quarterly Report on Form 10-Q and, except as may be required by applicable law, we do not undertake, and specifically disclaim any obligation to, publicly update or revise such statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Results of Operations

Overview

The Company operates and franchises pizza buffet (“Buffet Units”), delivery/carry-out (“Delco Units”) and express (“Express Units”) restaurants domestically and internationally under the trademark “Pizza Inn” and operates and franchises domestic fast casual pizza restaurants (“Pie Five Units”) under the trademarks “Pie Five Pizza Company” or “Pie Five”. We provide or facilitate food, equipment and supply distribution to our domestic and international system of restaurants through our Norco Restaurant Services Company (“Norco”) division and through agreements with third party distributors. At March 30, 2014, Company and franchised restaurants consisted of the following:

	Buffet Units		Delco Units		Express Units		Pie Five Units		Total Units
Company Owned		3		-		-		13		16
Domestic Franchise		104		25		52		6		187
International Franchise		19		44		8		-		71
Total Franchise		123		69		60		6		258
Total Units		126		69		60		19		274

Domestic restaurants are located predominantly in the southern half of the United States, with Texas, North Carolina, Arkansas and Mississippi accounting for approximately 34%, 15%, 11% and 6%, respectively, of the total number of domestic restaurants.  International restaurants are located in seven foreign countries.

           Basic and diluted loss per common share remained consistent at $0.05 for the three month periods ended March 30, 2014 and March 24, 2013.  The Company had a net loss for the three month period ended March 30, 2014 of $0.5 million compared to a net loss of $0.4 million for the comparable period in the prior fiscal year, on revenues of $10.9 million for the three month period ended March 30, 2014 compared to $9.8 million in the comparable period in the prior fiscal year.  Earnings before interest, taxes, depreciation, amortization, and stock compensation expense (“Adjusted EBITDA”) for the three month period ended March 30, 2014 decreased $0.2 million to a loss of $0.2 million compared to breakeven for the comparable period in the prior fiscal year.

The increase in net loss from prior year was primarily due to higher general and administrative expenses, franchise costs and bad debt.  Recruiting fees, increased marketing expenses and a legal settlement related to patent litigation contributed to the increased costs.

Management believes that key performance indicators in evaluating financial results include domestic and international franchisee retail sales and the number and type of operating restaurants. The following tables summarize these key performance indicators for all franchise locations. All amounts are in thousands except the average number of units.

12

Franchise Stores - Total Stores	Three Months Ended				Nine Months Ended
(in thousands, except average data)	March 30,		March 24,		March 30,		March 24,
	2014		2013		2014		2013
Domestic retail sales of Buffet Units	$	20,249	$	20,809	$	60,631	$	65,087
Domestic retail sales of Delco Units		1,292		1,573		3,971		4,830
Domestic retail sales of Express Units		811		675		2,130		2,428
Domestic retail sales of Pie Five Units		899		-		1,688		-
Total domestic retail sales	$	23,251	$	23,057	$	68,420	$	72,345
Average number of domestic Buffet Units		104		114		106		121
Average number of domestic Delco Units		25		31		26		29
Average number of domestic Express Units		51		42		46		45
Average number of domestic Pie Five Units		6		-		4		-
		186		187		182		195
	Three Months Ended				Nine Months Ended
	March 30,		March 24,		March 30,		March 24,
		2014		2013		2014		2013
International retail sales of Buffet Units	$	1,663	$	2,154	$	5,167	$	4,653
International retail sales of Delco Units		2,269		2,992		7,066		10,545
International retail sales of Express Units		489		261		1,510		818
Total International retail sales	$	4,421	$	5,407	$	13,743	$	16,016
Average number of International Buffet Units		21		20		22		20
Average number of International Delco Units		44		48		47		49
Average number of International Express Units		7		8		7		8
		72		76		76		77

Total domestic chain-wide franchisee retail sales increased $0.2 million, or 0.8%, and international chain-wide retail sales decreased $1.0 million, or 18.2%, for the three months ended March 30, 2014 when compared to the same period of the prior year.  Total domestic chain-wide franchisee retail sales decreased $3.9 million, or 5.4%, and international chain-wide retail sales decreased $2.3 million, or 14.2%, for the nine months ended March 30, 2014 when compared to the same period of the prior year.

Management also believes that a comparison of period-to-period retail sales by restaurants open throughout both periods is an important performance measure in evaluating financial results. The calculation of “comparable store sales” includes the sales results for restaurants which have been open for at least 18 months as of the end of the reporting period.  The sales results for a restaurant that was closed temporarily for remodeling or relocation within the same trade area are included in the calculation only for the days that the restaurant was open in both periods being compared.  The following tables summarize franchisee comparable store retail sales for the periods presented:

Franchise Stores - Comparable Stores	Three Months Ended				Nine Months Ended
(in thousands)	March 30,		March 24,		March 30,		March 24,
	2014		2013		2014		2013
Domestic retail sales of same store Buffet Units	$	19,053	$	18,771	$	56,003	$	56,750
Domestic retail sales of same store Delco Units		986		1,069		3,029		3,364
Domestic retail sales of same store Express Units		531		569		1,617		1,753
Total domestic same store retail sales	$	20,570	$	20,409	$	60,649	$	61,867
International retail sales of same store Buffet Units	$	1,395	$	1,711	$	3,536	$	4,381
International retail sales of same store Delco Units		2,237		2,571		6,587		7,590
International retail sales of same store Express Units		336		346		1,195		860
Total International same store retail sales	$	3,968	$	4,628	$	11,318	$	12,831

Domestic comparable store franchisee retail sales increased $0.2 million, or 0.8%, for the three months ended March 30, 2014 when compared to the same period of the prior year.  International same store franchisee retail sales decreased $0.7 million, or 14.3%, for the three months ended March 30, 2014 when compared to the same period of the prior year.  Domestic comparable store franchisee retail sales decreased $1.2 million, or 2.0%, for the nine months ended March 30, 2014 when compared to the same period of the prior year.  International same store franchisee retail sales decreased $1.5 million, or 11.8%, for the nine months ended March 30, 2014 when compared to the same period of the prior year.

13

The following table summarizes the results and key performance indicators for the Pie Five and Pizza Inn Company-owned restaurants. We believe this information is useful to management and investors to measure the performance of the Company-owned restaurants. These indicators provide performance trend information as well as the cash flow of the restaurants before pre-opening costs and allocated corporate administration and other expenses. This information is important in evaluating the effectiveness of our business strategies and for planning and budgeting purposes. These non-GAAP financial measures should not be viewed as an alternative or substitute for our reported GAAP results. All amounts are in thousands except the store weeks, average weekly sales and the average number of units.

Pie Five - Company-Owned Restaurants	Three Months Ended						Nine Months Ended
(in thousands, except store weeks and average data)	March 30,			March 24,			March 30,			March 24,
	2014			2013			2014			2013
Store weeks		169			113			465			296
Average weekly per store sales		13,189			11,283			12,327			11,449
Average number of units		13			9			12			8
Restaurant sales		2,229			1,275			5,732			3,389
Restaurant operating cash flow		205			121			355			278
Depreciation/amortization expense		(280	)		(176	)		(773	)		(455	)
Pre-opening expenses		(4	)		(82	)		(160	)		(246	)
Allocated corporate administration and other expenses		(59	)		(47	)		(159	)		(124	)
Deferred rent adjustment net of store closure/relocation costs		-			-			3			-
Loss from continuing operations before taxes		(138	)		(184	)		(734	)		(547	)
Pizza Inn - Company-Owned Restaurants	Three Months Ended						Nine Months Ended
(in thousands, except store weeks and average data)	March 30,			March 24,			March 30,			March 24,
		2014			2013			2014			2013
Store weeks		39			52			133			156
Average weekly per store sales		14,846			15,145			14,150			15,746
Average number of units		3			4			3			4
Restaurant sales		579			787			1,882			2,456
Restaurant operating cash flow		(36	)		(29	)		(174	)		8
Depreciation/amortization expense		(49	)		(103	)		(148	)		(307	)
Pre-opening expenses		-			-			-			-
Allocated corporate administration and other expenses		(36	)		(41	)		(95	)		(110	)
Deferred rent adjustment net of store closure/relocation costs		-			-			89			-
Loss from continuing operations before taxes		(121	)		(173	)		(328	)		(409	)

Store weeks represent the total number of weeks Company-owned restaurants were open during the period. Average weekly per store sales represents the average weekly revenues earned by the Company-owned restaurants that were open during the period. Restaurant operating cash flow represents the income earned by Company-owned restaurants adjusted for (1) depreciation and amortization, (2) pre-opening expenses, (3) allocated corporate administration and other expenses and (4) deferred rent adjustment net of other costs related to store closures and relocations. Pre-opening expenses consist primarily of certain costs incurred prior to the opening of a restaurant, including: (a) marketing and promotional expenses, (b) accrued rent, and (c) manager salaries, employee payroll and related training costs.

For Pie Five Company-owned restaurants, the year over year increase in average weekly per store sales in the quarter ended March 30, 2014 was primarily a result of the opening of five new restaurants in the prior twelve months that collectively generated higher average weekly per store sales than the existing restaurants.  In addition, a 4.4% increase in Pie Five Company-owned comparable store sales as compared to the same quarter in the prior fiscal year also contributed to the increase in average weekly per store sales.

Revenues

Revenues are derived from (1) sales of food, paper products and supplies from Norco to franchisees, (2) franchise royalties and franchise fees, and (3) Company-owned restaurant operations. Financial results are dependent in large part upon the volume, pricing and cost of the products and supplies sold to franchisees. The volume of products sold by Norco to franchisees is dependent on the level of franchisee chain-wide retail sales, which are impacted by changes in comparable store sales and restaurant count, and the products sold to franchisees through Norco rather than through third-party food distributors.

14

Total revenues for the three month period ended March 30, 2014 and for the same period in the prior fiscal year were $10.9 million and $9.8 million, respectively.  Total revenues for the nine month period ended March 30, 2014 and for the same period in the prior fiscal year were $31.3 million and $30.8 million, respectively.  Revenue consisted of the following:

	Three Months Ended				Nine Months Ended
	March 30,		March 24,		March 30,		March 24,
	2014		2013		2014		2013
Food and supply sales	$	7,274	$	6,893	$	21,138	$	22,304
Franchise revenue		830		826		2,529		2,618
Restaurant sales		2,808		2,062		7,614		5,845
Total revenue	$	10,912	$	9,781	$	31,281	$	30,767

Food and Supply Sales

Food and supply sales by Norco include food and paper products and other distribution revenues. For the three month period ended March 30, 2014, food and supply sales increased to $7.3 million compared to $6.9 million the same period in the prior fiscal year due primarily to an increase in sales to franchisees as a result of increased domestic franchisee retail sales and higher food commodity costs passed through in price.  For the nine month period ended March 30, 2014, food and supply sales decreased to $21.1 million compared to $22.3 million due primarily to a decline in domestic franchisee retail sales in the first half of fiscal 2014.

Franchise Revenue

Franchise revenue, which includes income from domestic and international royalties and license fees, had a slight increase for the three month period ended March 30, 2014 compared to the same period in the prior fiscal year.  Decreased international royalties resulting from lower Pizza Inn franchisee retail sales were offset primarily by increased franchise fees from new Pie Five franchisees.  Franchise revenue decreased by $0.1 million for the nine month period ended March 30, 2014 compared to the same period in the prior fiscal year for primarily the same reasons.

Restaurant Sales

Restaurant sales, which consist of revenue generated by Company-owned restaurants, increased 36.2%, or $0.7 million, to $2.8 million for the three month period ended March 30, 2014, compared to $2.1 million for the comparable period in the prior year.  This increase was primarily due to the opening of two new Company-owned restaurants in the second half of fiscal 2013 and four new Company-owned restaurants in fiscal 2014 (one of which was a relocation of an existing restaurant), partially offset by the closing of one Company-owned restaurant in fiscal 2014.  Similarly, restaurant sales increased 30.3%, or $1.8 million, to $7.6 million for the nine month period ended March 30, 2014, compared to $5.8 million for the comparable period in the prior year.

Costs and Expenses

Cost of Sales

Cost of sales, which primarily includes food and supply costs, distribution fees, and labor, occupancy and general and administrative expenses directly related to restaurant sales, increased $1.1 million, or 13.1%, for the three month period ended March 30, 2014 compared to the comparable period in the prior fiscal year.  The increase in costs was primarily the result of higher food and supply sales.  Cost of sales increased 3.4%, or $0.9 million, for the nine month period ended March 30, 2014 compared to the comparable period in the prior year.  The nine month period ended March 30, 2014 included a net reduction to cost of sales of $0.1 million related to the net impact of adjustments to deferred rent net of costs related to the closure of one Company-owned Pizza Inn restaurant and the relocation of one Company-owned Pie Five restaurant.

General and Administrative Expenses

General and administrative expenses increased $0.3 million for the three month period ended March 30, 2014.  Additional operating expenses associated with new Company-owned Pie Five Units and a legal settlement related to patent litigation was partially offset by reduced stock compensation expense.  General and administrative expenses increased $0.3 million for the nine month period ended March 30, 2014 for substantially the same reasons.

15

Franchise Expenses

Franchise expenses include selling, general and administrative expenses directly related to the sale and continuing service of domestic and international franchises. These expenses increased $0.1 million for the three month period ended March 30, 2014 compared to the comparable period in the prior fiscal year primarily due to higher employee costs and franchise marketing expenses associated with the Company’s Pie Five franchising efforts.  Franchise expenses increased $0.5 million for the nine month period ended March 30, 2014 compared to the comparable period in the prior year for substantially the same reasons.

Pre-Opening Expenses

Pre-opening expenses consist primarily of certain costs incurred prior to the opening of a restaurant, including: (1) marketing and promotional expenses, (2) accrued rent, and (3) manager salaries, employee payroll and related training costs. Pre-opening expenses for the three and nine month periods ended March 30, 2014 decreased $0.1 million compared to the similar periods of the prior year due to the timing of store openings.

Bad Debt Expense

The Company monitors franchisee retail sales and receivable balances and adjusts credit terms when necessary to minimize the Company’s exposure to high risk accounts receivable.  Bad debt expense increased marginally for the three month period ended March 30, 2014 as compared to the comparable period in the prior fiscal year.  Bad debt expense increased $0.1 million for the nine month period ended March 30, 2014 as compared to the comparable period in the prior fiscal year.

Interest Expense

Interest expense remained relatively flat for the three month period ended March 30, 2014 as compared to the comparable period in the prior fiscal year.  Interest expense decreased slightly for the nine month period ended March 30, 2013 as compared to the comparable period in the prior fiscal year due to a lower average debt balance.

Provision for Income Tax

For the three month period ended March 30, 2014, an income tax benefit of $0.2 million was calculated on an effective income tax rate that is consistent with the statutory U.S. federal income tax rate of 34% adjusted for state income tax effects and permanent difference items.  Management believes that future operations will generate sufficient taxable income, along with the reversal of temporary differences, to fully realize the net deferred tax asset of $1.6 million.

Discontinued Operations

Discontinued operations include losses from a leased building associated with a Company-owned restaurant in Texas that was closed during fiscal 2008.

Restaurant Openings and Closings

The following charts summarize restaurant activity for the three month and nine month periods ended March 30, 2014 and March 24, 2013:

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Three months ended March 30, 2014
	Beginning						End of
	of Period		Opened		Closed		Period
Pizza Inn Domestic:
Buffet Units		109		-		2		107
Delco Units		27		-		2		25
Express Units		46		7		1		52
Pizza International Units		71		-		-		71
Pie Five Units		18		1		-		19
Total		271		8		5		274
Three months ended March 24, 2013
	Beginning						End of
	of Period		Opened		Closed		Period
Domestic:
Buffet Units		126		-		6		120
Delco Units		31		2		1		32
Express Units		45		-		4		41
International Units		65		-		-		65
Pie Five Units		8		1		-		9
Total		275		3		11		267
Nine months ended March 30, 2014
	Beginning						End of
	of Period		Opened		Closed		Period
Domestic:
Buffet Units		114		1		8		107
Delco Units		27		1		3		25
Express Units		43		13		4		52
International Units		66		5		-		71
Pie Five Units		11		8		-		19
Total		261		28		15		274
Nine months ended March 24, 2013
	Beginning						End of
	of Period		Opened		Closed		Period
Domestic:
Buffet Units		135		-		15		120
Delco Units		29		4		1		32
Express Units		47		-		6		41
International Units		81		5		21		65
Pie Five Units		6		3		-		9
Total		298		12		43		267

17

We believe that the net increase of two domestic Pizza Inn units during the third quarter of fiscal 2014 reflects a return to an improving trend in net domestic store closures that was interrupted by the expiration of an abnormally high number of domestic franchise agreements in fiscal 2013.  We believe that the opening of 28 new domestic stores during the last nine months of fiscal 2014 reflects the beginning of an accelerated pace of growth in store openings, particularly for the Pie Five concept and Pizza Inn Express concept.

Non-GAAP Financial Measures

We report and discuss our operating results using financial measures consistent with GAAP. From time to time we disclose certain non-GAAP financial measures such as Adjusted EBITDA. We believe Adjusted EBITDA is useful to investors as a measure of operating performance without regard to items that can vary substantially depending upon financing and accounting methods, book value of assets, capital structures and methods by which assets have been acquired. In addition, our management uses Adjusted EBITDA in evaluating the effectiveness of our business strategies and for planning and budgeting purposes. However, this non-GAAP financial measure should not be viewed as an alternative or substitute for our reported GAAP results.

The following table sets forth a reconciliation of net income to Adjusted EBITDA for the periods shown (in thousands):

	Three Months Ended						Nine Months Ended
	March 30,			March 24,			March 30,			March 24,
	2014			2013			2014			2013
Net loss	$	(451	)	$	(390	)	$	(1,199	)	$	(568	)
Interest expense		34			58			113			197
Income Taxes - Continuing Operations		(159	)		(22	)		(527	)		(170	)
Income Taxes - Discontinued Operations		(7	)		(8	)		(20	)		(66	)
Stock compensation expense		15			45			45			135
Depreciation and amortization		370			340			1,056			958
Adjusted EBITDA	$	(198	)	$	23		$	(532	)	$	486

Liquidity and Capital Resources

Our primary sources of liquidity are cash flow from operating activities, borrowings under our credit facilities and, beginning in the fourth quarter of fiscal 2013, proceeds from the sale of common stock.

Cash flows from operating activities generally reflect net income adjusted for certain non-cash items including depreciation and amortization, changes in deferred tax assets, share based compensation, and changes in working capital.  Cash used by operating activities increased $1.3 million for the nine months ended March 30, 2014 compared to the nine months ended March 24, 2013 largely due to the decrease in net income net of deferred taxes.

Cash flows from investing activities generally reflect capital expenditures for the purchase of Company assets.  The Company used cash of $1.9 million for the nine month period ended March 30, 2014, primarily for new Company-owned restaurants that opened or will open in the Dallas/Fort Worth, Texas area.  This compares to cash used by investing activities of $1.4 million during the same period in the prior fiscal year attributable to Company-owned restaurants that opened in the Dallas/Fort Worth, Texas area.

Cash flows from financing activities generally reflect changes in the Company's borrowings and stock activity during the period.  Net cash provided by financing activities was $2.0 million for the nine month period ended March 30, 2014, which reflected proceeds from the sale of stock partially offset by the repayment of bank debt. Net cash provided of $0.9 million for the comparable periodin the prior fiscal year reflected a net increase in borrowing.

On May 20, 2013, the Company entered into an At-the-Market Issuance Sales Agreement with MLV & Co. LLC (“MLV”) pursuant to which the Company could offer and sell shares of its common stock having an aggregate offering price of up to $3,000,000 from time to time through MLV, acting as agent (the “ATM Offering”). The ATM Offering was undertaken pursuant to Rule 415 and a shelf Registration Statement on Form S-3 which was declared effective by the SEC on May 13, 2013.  On November 20, 2013, the Company and MLV amended the At-the-Market Issuance Sales Agreement and the SEC declared effective a new shelf registration statement on Form S-3 to increase the ATM Offering by $5,000,000.  Through March 30, 2014, the Company had sold an aggregate of 670,152 shares in the ATM Offering, realizing aggregate net proceeds of $4.2 million.

18

On August 28, 2012, the Company entered into a Loan and Security Agreement (the “F&M Loan Agreement”) with The F&M Bank & Trust Company (“F&M”) providing for a $2.0 million revolving credit facility (with a $500 thousand letter of credit subfacility), a $2.0 million fully funded term loan facility and a $6.0 million advancing term loan facility.  An origination fee of 0.5% of the total credit facilities was paid at closing.  At closing, F&M funded a $2.0 million term loan payable in 48 equal monthly installments of principal plus accrued interest at a fixed rate of 4.574% per annum.  Amounts repaid under this fully funded term loan may not be reborrowed.  Initial proceeds from the F&M Loan Agreement were used to repay amounts borrowed under a previous credit facility that subsequently was canceled.

On June 13, 2013 the Company entered into a First Amendment to the F&M Loan Agreement that revised certain financial covenants to address proceeds from the Company’s at-the-market offering of common stock.  On September 10, 2013 the Company entered into a Second Amendment to the F&M Loan Agreement that specified the application of prepayments to the loan amortization schedule and revised certain definitions.

The Company may borrow, repay and reborrow under the revolving credit facility through August 28, 2014, at which time all amounts outstanding under the revolving credit facility mature. The Company has not drawn borrowings on the revolving credit facility during fiscal 2014.  Availability under the revolving credit facility is limited by advance rates on eligible inventory and accounts receivable.  Per annum interest on indebtedness from time to time outstanding under the revolving credit facility is computed at the Wall Street Journal prime rate plus 1.00% and is payable monthly.  An unused commitment fee of 0.50% per annum is payable quarterly on the average unused portion of the revolving credit facility.

Through August 28, 2014, F&M has agreed to make up to $6.0 million in additional term loans to the Company.  After such date any outstanding term loans continue to amortize according to each loan’s specified payment schedule.  Advances for such additional term loans are limited by a percentage of the costs of equipment, leasehold improvements and other opening costs for new Company-owned Pie Five Units and may not be reborrowed after repayment.  Interest only is payable monthly on all additional term loan advances during an annual borrowing period.  At the end of each annual borrowing period, all additional term loan advances during such borrowing period become payable in 48 equal monthly installments of principal plus accrued interest. Interest on each term loan accrues at the Wall Street Journal prime rate plus 1.00% or, at the Company’s option, a fixed rate equal to the Bloomberg 4-year LIBOR swap rate plus 3.90%.

As security for the credit facilities, the Company has pledged substantially all of its assets including, but not limited to, accounts receivable, inventory and equipment.  The F&M Loan Agreement contains various affirmative covenants which, among other things, require the Company to provide F&M with certain financial statements, compliance statements, reports and other information. The F&M Loan Agreement also contains various negative covenants which, among other things, require the Company to maintain certain financial ratios and restrict the ability of the Company to engage in certain activities.  If an event of default occurs under the F&M Loan Agreement and any cure periods have expired, F&M may terminate all commitments under the credit facilities and declare all unpaid principal, interest and other amounts owing under the credit facilities to be immediately due and payable.

The Company was in compliance with all covenants under the F&M Loan Agreement as of March 30, 2014. As of March 30, 2014, the balance on the initial term loan facility was $1.1 million with an interest rate of 4.574% and scheduled monthly principle payments through September 1, 2016.  The balance on the advancing term loan facility was zero with an interest rate of 4.25%, the balance on the revolving credit facility was zero with an interest rate of 4.25% and the Company had an outstanding letter of credit of $0.2 million.

Management believes the cash on hand combined with cash from operations and available credit facilities is sufficient to fund operations for the next 12 months.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities.  The Company bases its estimates on historical experience and various other assumptions that it believes are reasonable under the circumstances.  Estimates and assumptions are reviewed periodically.  Actual results could differ materially from estimates.

19

The Company believes the following critical accounting policies require estimates about the effect of matters that are inherently uncertain, are susceptible to change, and therefore require subjective judgments.  Changes in the estimates and judgments could significantly impact the Company’s results of operations and financial condition in future periods.

Accounts receivable consist primarily of receivables generated from food and supply sales to franchisees and franchise royalties.  The Company records a provision for doubtful receivables to allow for any amounts which may be unrecoverable based upon an analysis of the Company’s prior collection experience, customer creditworthiness and current economic trends.  Actual realization of accounts receivable could differ materially from the Company’s estimates.

Inventory, which consists primarily of food, paper products and supplies primarily warehoused by the Company’s third-party distributors, is stated at lower of cost or market, with cost determined according to the weighted average cost method.  The valuation of inventory requires us to estimate the amount of obsolete and excess inventory.  The determination of obsolete and excess inventory requires us to estimate the future demand for the Company’s products within specific time horizons, generally six months or less.  If the Company’s demand forecast for specific products is greater than actual demand and the Company fails to reduce purchasing accordingly, the Company could be required to write down inventory, which would have a negative impact on the Company’s gross margin.

The Company reviews long-lived assets for impairment when events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from use of the assets compared to its carrying value. If impairment is recognized, the carrying value of the impaired asset is reduced to its fair value, based on discounted estimated future cash flows. During fiscal year 2013, the Company tested its long-lived assets for impairment and recognized pre-tax, non-cash impairment charges of $0.8 million related to the carrying value of two Company-owned Buffet Units in Texas and one Company-owned Pie Five Unit in Texas that has been relocated in fiscal 2014.

The Company periodically evaluates the realizability of its deferred tax assets based upon the Company’s analysis of existing tax credits by jurisdiction and expectations of the Company’s ability to utilize these tax assets through a review of estimated future taxable income and establishment of tax strategies.  These estimates could be materially impacted by changes in future taxable income, the results of tax strategies or changes in tax law.

The Company recognizes food and supply revenue when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable.  Franchise revenue consists of income from license fees, royalties, and area development and foreign master license sales.  License fees are recognized as income when there has been substantial performance of the agreement by both the franchisee and the Company, generally at the time the restaurant is opened.  Royalties are recognized as income when earned.

The Company 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 March 30, 2014 and March 24, 2013, the Company had no uncertain tax positions.

The Company assesses its exposures to loss contingencies from legal matters based upon factors such as the current status of the cases and consultations with external counsel and provides for the exposure by accruing an amount if it is judged to be probable and can be reasonably estimated. If the actual loss from a contingency differs from management’s estimate, operating results could be adversely impacted.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Not required for a smaller reporting company.

Item 4.  Controls and Procedures

The Company maintains disclosure controls and procedures designed to ensure that information it is required to disclose in the reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. The Company’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

20

The Company’s management, including the Company’s principal executive officer and principal financial officer, or persons performing similar functions, have evaluated the Company’s disclosure controls and procedures as of the end of the period covered by this report.  Based on such evaluation, the Company’s principal executive officer and principal financial officer, or persons performing similar functions, have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report. During the most recent fiscal quarter, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is subject to claims and legal actions in the ordinary course of its business.  The Company believes that all such claims and actions currently pending against it are either adequately covered by insurance or would not have a material adverse effect on the Company’s annual results of operations, cash flows or financial condition if decided in a manner that is unfavorable to the Company.

Item 1A.  Risk Factors

Not required for a smaller reporting company.

Item 2.  Unregistered Sales of Equity Securities and the Use of Proceeds

On May 23, 2007, the board of directors of the Company approved a stock purchase plan (the “2007 Stock Purchase Plan”) authorizing the purchase of up to 1,016,000 shares of the Company’s common stock in the open market or in privately negotiated transactions.  On June 2, 2008, the Company’s board of directors amended the 2007 Stock Purchase Plan to increase the number of shares the Company may repurchase by 1,000,000 shares to a total of 2,016,000 shares.  On April 22, 2009, the board of directors further amended the 2007 Stock Purchase Plan by increasing the aggregate number of shares the Company may repurchase by 1,000,000 shares to a total of 3,016,000 shares.  The 2007 Stock Purchase Plan does not have an expiration date.  There were no stock purchases in the three or nine month periods ending March 30, 2014.  As of March 30, 2014, up to an additional 848,425 shares could be purchased under the 2007 Stock Purchase Plan.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

Not applicable.

21

Item 6.  Exhibits

3.1 Articles of Incorporation (filed as Exhibit 3.1 to Form 8-K filed on September 23, 2011 and incorporated herein by reference).

3.2 By-laws (filed as Exhibit 3.1 to Form 8-K filed on September 23, 2011 and incorporated herein by reference).

10.1 Amendment No. 1 to At-the-Market Issuance Sales Agreement between Pizza Inn Holdings, Inc. and MLV & Co. LLC dated November 20, 2013 (filed as Exhibit 1.1 to Form 8-K filed on November 20, 2013 and incorporated herein by reference).

31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.

31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.

32.1 Section 1350 Certification of Principal Executive Officer.

32.2 Section 1350 Certification of Principal Financial Officer.

101 Interactive data files pursuant to Rule 405 of Regulation S-T

22

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PIZZA INN HOLDINGS, INC.

(Registrant)

By: /s/ Randall E. Gier

Randall E. Gier

President and Chief Executive Officer

By: /s/ Donna Lee

Donna Lee

Controller

Dated:  May 14, 2014

23

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Randall E. Gier, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Pizza Inn Holdings, Inc. (“the Registrant”);

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.   The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.   Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.   Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.   The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: May 14, 2014 By: /s/ Randall E. Gier Randall E. Gier President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Donna Lee, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Pizza Inn Holdings, Inc. (“the Registrant”);

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.   The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.   Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.   Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.   The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: May 14, 2014 By: /s/ Donna Lee Donna Lee Controller (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of Pizza Inn Holdings, Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:

The accompanying Quarterly Report on Form 10-Q for the quarter ended March 30, 2014 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-Q.

Date: May 14, 2014 By: /s/ Randall E. Gier Randall E. Gier President and Chief Executive Officer (Principal Executive Officer)

The foregoing certification is being furnished as an exhibit to the Form 10-Q pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of Pizza Inn Holdings, Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:

The accompanying Quarterly Report on Form 10-Q for the quarter ended March 30, 2014 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-Q.

Date: May 14, 2014 By: /s/ Donna Lee Donna Lee Controller (Principal Financial Officer)

The foregoing certification is being furnished as an exhibit to the Form 10-Q pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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Stock Based Compensation

9 Months Ended

Mar. 30, 2014

Stock-Based Compensation

Stock-Based Compensation

Stock-Based Compensation

For the three months and nine months ended March 30, 2014, the Company recognized stock-based compensation expense of $15,000 and $45,000, respectively.  As of March 30, 2014, unamortized stock-based compensation expense was $0.2 million.

The following table summarizes the number of shares of the Company’s common stock subject to outstanding stock options:

	Nine Months Ended
	March 30, 2014			March 24, 2013
Outstanding at beginning of year		851,306			486,506
Granted		85,392			464,800
Exercised		(39,144	)		-
Forfeited/Canceled/Expired		(38,856	)		-
Outstanding at end of period		858,698			951,306
Exercisable at end of period		473,659			391,939

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Commitment and Contingencies

9 Months Ended

Mar. 30, 2014

Commitment and Contingencies:

Commitments and Contingencies Disclosure

(3) Commitments and Contingencies

On April 22, 2009, the Company’s board of directors amended the stock purchase plan first adopted on May 23, 2007, and previously amended on June 2, 2008, to increase the number of shares of common stock the Company may repurchase to a total of 3,016,000 shares.  As of March 30, 2014, up to an additional 848,425 shares could be purchased under the plan.

The Company is subject to various claims and legal actions in the ordinary course of its business.  The Company believes that all such claims and actions currently pending against it are either adequately covered by insurance or would not have a material adverse effect on the Company’s annual results of operations, cash flows or financial condition if decided in a manner that is unfavorable to the Company.

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CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) (Unaudited) (USD $)	Mar. 30, 2014	Jun. 30, 2013
CURRENT ASSETS
Cash and cash equivalents	$ 365	$ 919
Accounts receivable, less allowance for bad debts of $417 and $228, respectively	3,679	3,139
Notes receivable	123	292
Inventories	1,601	1,615
Income tax receivable	343	343
Deferred income tax assets	943	882
Prepaid expenses and other	336	307
Total current assets	7,390	7,497
LONG-TERM ASSETS
Property, plant and equipment, net	5,652	4,711
Long-term notes receivable	14	40
Long-term deferred tax asset	657	168
Deposits and other	430	119
Total assets	14,143	12,535
CURRENT LIABILITIES
Accounts payable - trade	2,178	1,572
Accrued expenses	1,611	1,749
Deferred revenues	154	169
Bank debt	375	669
Total current liabilities	4,318	4,159
LONG-TERM LIABILITIES
Bank debt, net of current portion	750	1,856
Deferred revenues, net of current portion	680	370
Deferred gain on sale of property	40	59
Other long-term liabilities	70	22
Total liabilities	5,858	6,466
COMMITMENTS AND CONTINGENCIES (See Note 3)
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; authorized 26,000,000 shares; issued 15,849,615 and 15,312,680 shares, respectively; outstanding 8,730,215 and 8,193,280 shares, respectively	158	153
Additional paid-in capital	13,584	10,174
Retained earnings	19,179	20,378
Treasury stock at cost Shares in treasury: 7,119,400	(24,636)	(24,636)
Total shareholders' equity	8,285	6,069
Total Liabilities and Stockholders equity	$ 14,143	$ 12,535

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Summary of Significant Accounting Policies

9 Months Ended

Mar. 30, 2014

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

(1) Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned.  All appropriate intercompany balances and transactions have been eliminated.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Fiscal Quarters

The three month periods ended March 30, 2014 and March 24, 2013, each contained 13 weeks.  The nine month periods ended March 30, 2014 and March 24, 2013, each contained 39 weeks.

Revenue Recognition

The Company recognizes revenue when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable.  The Company's Norco division sells food and supplies to franchisees on trade accounts under terms common in the industry.  Food and supply sales revenues, including shipping and handling costs, are recognized upon delivery of the product. Revenue from restaurant sales is recognized when food and beverage products are sold. The Company reports revenue net of sales taxes collected from customers and remitted to governmental taxing authorities.

Franchise revenue consists of income from license fees, royalties, and area development and foreign master license fees. License fees are recognized as income when there has been substantial performance under the agreement by the Company.  Domestic license fees are generally recognized at the time the restaurant is opened.  Foreign master license fees are generally recognized upon execution of the agreement as all material services relating to the sale have been substantially performed by the Company and the fee has been collected.  Royalties are recognized as income when earned.

Stock-Based Compensation

The Company accounts for stock options using the fair value recognition provisions of the authoritative guidance on share-based payments. The Company uses the Black-Scholes formula to estimate the value of stock-based compensation for options granted to employees and directors and expects to continue to use this acceptable option valuation model in the future.  The authoritative guidance also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow.

Use of Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the Company’s management to make estimates and assumptions that affect its reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities.  The Company bases its estimates on historical experience and other various assumptions that it believes are reasonable under the circumstances.  Estimates and assumptions are reviewed periodically and actual results could differ materially from estimates.

 Reclassification

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

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Earnings per Share (EPS) Consists of the Following (Details) (USD $)	3 Months Ended		9 Months Ended
	Mar. 30, 2014	Mar. 24, 2013	Mar. 30, 2014	Mar. 24, 2013
Earnings per Share (EPS) Consists of the Following
Loss from continuing operations	$ (437)	$ (290)	$ (1,160)	$ (441)
Discontinued operations	$ (14)	$ (100)	$ (39)	$ (127)
Net loss available to common stockholders	$ (451)	$ (390)	$ (1,199)	$ (568)
BASIC:
BASIC-Weighted average common shares	8,771	8,021	8,566	8,021
Loss from continuing operations per share	$ (0.05)	$ (0.04)	$ (0.14)	$ (0.05)
Discontinued operations per common share	$ 0.00	$ (0.01)	$ 0.00	$ (0.02)
Net loss per common share	$ (0.05)	$ (0.05)	$ (0.14)	$ (0.07)
DILUTED:
Weighted average common shares	8,771	8,021	8,566	8,021
Dilutive stock options	519	246	543	177
Weighted average common shares outstanding	9,290	8,267	9,109	8,198
Loss from continuing operations per share	$ (0.05)	$ (0.04)	$ (0.13)	$ (0.05)
Discontinued operations per common share	$ 0.00	$ (0.01)	$ 0.00	$ (0.02)
Loss per common share	$ (0.05)	$ (0.05)	$ (0.13)	$ (0.07)

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Segment Reporting Operating Income and Geographic Information (Details) (USD $)	3 Months Ended		9 Months Ended
	Mar. 30, 2014	Mar. 24, 2013	Mar. 30, 2014	Mar. 24, 2013
Net sales and operating revenues:
Franchising and food and supply distribution	$ 8,104	$ 7,719	$ 23,667	$ 24,922
Company-owned restaurants (1)	2,808	2,062	7,614	5,845
Consolidated revenues	10,912	9,781	31,281	30,767
Depreciation and amortization:
Franchising and food and supply distribution	0	0	7	0
Company-owned restaurants (1)	329	279	921	762
Combined	329	279	928	762
Corporate administration and other	41	61	128	205
Depreciation and amortization	370	340	1,056	967
Income (loss) from continuing operations before taxes:
Franchising and food and supply distribution (2)	(74)	245	546	1,526
Company-owned restaurants (1) (2)	(259)	(357)	(1,062)	(956)
Combined	(333)	(112)	(516)	570
Corporate administration and other (2)	(263)	(200)	(1,171)	(1,181)
Operating loss	(596)	(312)	(1,687)	(611)
Geographic information (revenues):
United States	10,666	9,509	30,561	29,939
Foreign countries	246	272	720	828
Consolidated total	$ 10,912	$ 9,781	$ 31,281	$ 30,767

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Long Term Debt

9 Months Ended

Mar. 30, 2014

Long-Term Debt

Long-term Debt

(2) Long-Term Debt

On August 28, 2012, the Company entered into a Loan and Security Agreement (the “F&M Loan Agreement”) with The F&M Bank & Trust Company (“F&M”) providing for a $2.0 million revolving credit facility (with a $500 thousand letter of credit subfacility), a $2.0 million fully funded term loan facility and a $6.0 million advancing term loan facility.  An origination fee of 0.5% of the total credit facilities was paid at closing.  At closing, F&M funded a $2.0 million term loan payable in 48 equal monthly installments of principal plus accrued interest at a fixed rate of 4.574% per annum.  Amounts repaid under this fully funded term loan may not be reborrowed.  Initial proceeds from the F&M Loan Agreement were used to repay amounts borrowed under a previous credit facility that subsequently was canceled.

On June 13, 2013 the Company entered into a First Amendment to the F&M Loan Agreement that revised certain financial covenants to address proceeds from the Company’s at-the-market offering of common stock.  On September 10, 2013 the Company entered into a Second Amendment to the F&M Loan Agreement that specified the application of prepayments to the loan amortization schedule and revised certain definitions.

The Company may borrow, repay and reborrow under the revolving credit facility through August 28, 2014, at which time all amounts outstanding under the revolving credit facility mature. The Company has not drawn borrowings on the revolving credit facility during fiscal year 2014.  Availability under the revolving credit facility is limited by advance rates on eligible inventory and accounts receivable.  Per annum interest on indebtedness from time to time outstanding under the revolving credit facility is computed at the Wall Street Journal prime rate plus 1.00% and is payable monthly.  An unused commitment fee of 0.50% per annum is payable quarterly on the average unused portion of the revolving credit facility.

Through August 28, 2014, F&M has agreed to make up to $6.0 million in additional term loans to the Company.  After such date any outstanding term loans continue to amortize according to each loan’s specified payment schedule.  Advances for such additional term loans are limited by a percentage of the costs of equipment, leasehold improvements and other opening costs for new Company-owned Pie Five Units and may not be reborrowed after repayment.  Interest only is payable monthly on all additional term loan advances during an annual borrowing period.  At the end of each annual borrowing period, all additional term loan advances during such borrowing period become payable in 48 equal monthly installments of principal plus accrued interest. Interest on each term loan accrues at the Wall Street Journal prime rate plus 1.00% or, at the Company’s option, a fixed rate equal to the Bloomberg 4-year LIBOR swap rate plus 3.90%.

As security for the credit facilities, the Company has pledged substantially all of its assets including, but not limited to, accounts receivable, inventory and equipment.  The F&M Loan Agreement contains various affirmative covenants which, among other things, require the Company to provide F&M with certain financial statements, compliance statements, reports and other information. The F&M Loan Agreement also contains various negative covenants which, among other things, require the Company to maintain certain financial ratios and restrict the ability of the Company to engage in certain activities.  If an event of default occurs under the F&M Loan Agreement and any cure periods have expired, F&M may terminate all commitments under the credit facilities and declare all unpaid principal, interest and other amounts owing under the credit facilities to be immediately due and payable.

The Company was in compliance with all covenants under the F&M Loan Agreement as of March 30, 2014. As of March 30, 2014, the balance on the initial term loan facility was $1.1 million with an interest rate of 4.574% and scheduled monthly principle payments through September 1 2016.  The balance on the advancing term loan facility was zero with an interest rate of 4.25%, the balance on the revolving credit facility was zero with an interest rate of 4.25% and the Company had an outstanding letter of credit of $0.2 million.

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CONDENSED CONSOLIDATED BALANCE SHEETS PARENTHETICALS (USD $)	Mar. 30, 2014	Jun. 30, 2013
Parentheticals
Accounts receivable, less allowance for bad debts	$ 417	$ 228
Common Stock, Par Value	$ 0.01	$ 0.01
Common Stock, shares authorized	26,000,000	26,000,000
Common Stock, shares issued	15,849,615	15,312,680
Common Stock, shares Outstanding	8,730,215	8,193,280
Treasury stock, Shares	7,119,400	7,119,400

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Schedule of Segment Reporting (Tables)

9 Months Ended

Mar. 30, 2014

Schedule of Segment Reporting (Tables):

Schedule of Segment Reporting Information, by Segment

		Three Months Ended						Nine Months Ended
		March 30,			March 24,			March 30,			March 24,
		2014			2013			2014			2013
Net sales and operating revenues:
Franchising and food and supply distribution		$	8,104		$	7,719		$	23,667		$	24,922
Company-owned restaurants (1)			2,808			2,062			7,614			5,845
	Consolidated revenues	$	10,912		$	9,781		$	31,281		$	30,767
Depreciation and amortization:
Franchising and food and supply distribution		$	-		$	-		$	7		$	-
Company-owned restaurants (1)			329			279			921			762
	Combined		329			279			928			762
Corporate administration and other			41			61			128			205
	Depreciation and amortization	$	370		$	340		$	1,056		$	967
Income (loss) from continuing operations before taxes:
Franchising and food and supply distribution (2)		$	(74	)	$	245		$	546		$	1,526
Company-owned restaurants (1) (2)			(259	)		(357	)		(1,062	)		(956	)
	Combined		(333	)		(112	)		(516	)		570
Corporate administration and other (2)			(263	)		(200	)		(1,171	)		(1,181	)
	Operating loss	$	(596	)	$	(312	)	$	(1,687	)	$	(611	)
Geographic information (revenues):
United States		$	10,666		$	9,509		$	30,561		$	29,939
Foreign countries			246			272			720			828
	Consolidated total	$	10,912		$	9,781		$	31,281		$	30,767
(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.

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Document and Entity Information	9 Months Ended
	Mar. 30, 2014	May 13, 2014
Document and Entity Information:
Entity Registrant Name	PIZZA INN HOLDINGS, INC /MO/
Document Type	10-Q
Document Period End Date	Mar. 30, 2014
Amendment Flag	false
Entity Central Index Key	0000718332
Current Fiscal Year End Date	--06-29
Entity Common Stock, Shares Outstanding		8,767,944
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3

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Loan and Security Agreement with F & M Bank & Trust Company (Details) (USD $)	Mar. 30, 2014	Aug. 28, 2012
Loan and Security Agreement with F & M Bank & Trust Company:
Revolving credit facility provided	$ 1.1	$ 2.0
Revolving credit facility with letter of credit subfacility	0.2	0.5
Fully Funded Term loan facility		2.0
Advancing term loan facility	0.7	6.0
Origination fee of the total credit		0.50%
Unused commitment fee per annum is payable quarterly		0.50%
F & M funded term loan payable	1.1	2.0
Term loan payable in equal monthly installments		48
Accrued interest at a fixed rate	4.57%	4.57%
Advancing term loan facility subject to the terms and conditions of the F & M loan agreement	$ 0
Interest on each term Prime plus	4.25%
Bloomberg 4-year LIBOR swap rate plus	3.90%

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share amounts) (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Mar. 30, 2014	Mar. 24, 2013	Mar. 30, 2014	Mar. 24, 2013
Revenues:
REVENUES:	$ 10,912	$ 9,781	$ 31,281	$ 30,767
COSTS AND EXPENSES:
Cost of sales	9,570	8,460	27,028	26,127
General and administrative expenses	1,130	840	3,314	2,995
Franchise expenses	677	608	2,150	1,675
Pre-opening expenses	4	82	160	249
Bad debt	93	45	203	135
Interest expense	34	58	113	197
Total Expenses	11,508	10,093	32,968	31,378
LOSS FROM CONTINUING OPERATIONS BEFORE TAXES	(596)	(312)	(1,687)	(611)
Income tax benefit	(159)	(22)	(527)	(170)
LOSS FROM CONTINUING OPERATIONS	(437)	(290)	(1,160)	(441)
Loss from discontinued operations, net of taxes	(14)	(100)	(39)	(127)
NET LOSS	$ (451)	$ (390)	$ (1,199)	$ (568)
EARNINGS PER SHARE OF COMMON STOCK - BASIC:
Loss from continuing operations	$ (0.05)	$ (0.04)	$ (0.14)	$ (0.05)
Loss from discontinued operations	$ 0	$ (0.01)	$ 0	$ (0.02)
Net loss	$ (0.05)	$ (0.05)	$ (0.14)	$ (0.07)
EARNINGS PER SHARE OF COMMON STOCK - DILUTED:
Loss from continuing operations	$ (0.05)	$ (0.04)	$ (0.13)	$ (0.05)
Loss from discontinued operations	$ 0	$ (0.01)	$ 0	$ (0.02)
Net loss	$ (0.05)	$ (0.05)	$ (0.13)	$ (0.07)
Weighted average common shares outstanding - basic	8,771	8,021	8,566	8,021
Weighted average common and potential dilutive common shares outstanding	9,290	8,267	9,109	8,198

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Income Taxes

9 Months Ended

Mar. 30, 2014

Income Taxes:

Income Taxes

Income Taxes

For the three and nine month period ended March 30, 2014, income tax benefit of  $0.2 million and $0.5 million, respectively, was calculated on an effective income tax rate that is consistent with the statutory U.S. federal income tax rate of 34% adjusted for state income tax effects and permanent difference items. Management believes that future operations will generate sufficient taxable income, along with the reversal of temporary differences, to fully realize the net deferred tax asset of $1.6 million.

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Closed Restaurants and Discontinued Operations

9 Months Ended

Mar. 30, 2014

Closed restaurants and discontinued operations

Closed restaurants and discontinued operations

Closed restaurants and discontinued operations

The authoritative guidance on “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires that discontinued operations that meet certain criteria be reflected in the statement of operations after results of continuing operations as a net amount.  This guidance also requires that the operations of the closed restaurants, including any impairment charges, be reclassified to discontinued operations for all periods presented.

The authoritative guidance on “Accounting for Costs Associated with Exit or Disposal Activities,” requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred.  This authoritative guidance also establishes that fair value is the objective for initial measurement of the liability.

Loss from discontinued operations reflects costs associated with a former Company-owned restaurant in Texas that was closed during the quarter ended September 23, 2007. This property is on the market for sub-lease. Because we believe that the property will sub-lease at or above the contracted lease rates, we have not reserved any additional costs related to our obligations under this non-cancelable lease.

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Income Taxes (Details) (USD $)	3 Months Ended	9 Months Ended
	Mar. 30, 2014	Mar. 30, 2014
Income Taxes Consist of the Following:
Income tax benefit	$ 0.2	$ 0.5
Effective income tax rate that is consistent with the statutory U.S. federal income tax rate	34.00%
Net deferred tax asset	$ 1.6

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Commitments and Contingencies (Details)	Mar. 30, 2014	Jun. 02, 2008
Commitments and Contingencies As Of:
Approved total number of shares that may be repurchased		3,016,000
Additional shares that may be purchased under the plan	848,425

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Schedule of Stock Based Compensation (Tables)

9 Months Ended

Mar. 30, 2014

Schedule of Stock Based Compensation (Tables):

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

	Nine Months Ended
	March 30, 2014			March 24, 2013
Outstanding at beginning of year		851,306			486,506
Granted		85,392			464,800
Exercised		(39,144	)		-
Forfeited/Canceled/Expired		(38,856	)		-
Outstanding at end of period		858,698			951,306
Exercisable at end of period		473,659			391,939

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Segment Reporting

9 Months Ended

Mar. 30, 2014

Segment Reporting:

Segment Reporting Disclosure

(8) Segment Reporting

Summarized in the following tables are net sales and operating revenues, operating income and geographic information (revenues) for the Company’s reportable segments for the three month and nine month periods ended March 30, 2014 and March 24, 2013 (in thousands).  Operating income reported below excludes income tax provision and discontinued operations.

		Three Months Ended						Nine Months Ended
		March 30,			March 24,			March 30,			March 24,
		2014			2013			2014			2013
Net sales and operating revenues:
Franchising and food and supply distribution		$	8,104		$	7,719		$	23,667		$	24,922
Company-owned restaurants (1)			2,808			2,062			7,614			5,845
	Consolidated revenues	$	10,912		$	9,781		$	31,281		$	30,767
Depreciation and amortization:
Franchising and food and supply distribution		$	-		$	-		$	7		$	-
Company-owned restaurants (1)			329			279			921			762
	Combined		329			279			928			762
Corporate administration and other			41			61			128			205
	Depreciation and amortization	$	370		$	340		$	1,056		$	967
Income (loss) from continuing operations before taxes:
Franchising and food and supply distribution (2)		$	(74	)	$	245		$	546		$	1,526
Company-owned restaurants (1) (2)			(259	)		(357	)		(1,062	)		(956	)
	Combined		(333	)		(112	)		(516	)		570
Corporate administration and other (2)			(263	)		(200	)		(1,171	)		(1,181	)
	Operating loss	$	(596	)	$	(312	)	$	(1,687	)	$	(611	)
Geographic information (revenues):
United States		$	10,666		$	9,509		$	30,561		$	29,939
Foreign countries			246			272			720			828
	Consolidated total	$	10,912		$	9,781		$	31,281		$	30,767
(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.

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Accounting Policies

9 Months Ended

Mar. 30, 2014

Accounting Policies:

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned.  All appropriate intercompany balances and transactions have been eliminated.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Fiscal Quarters

Fiscal Quarters

The three month periods ended March 30, 2014 and March 24, 2013, each contained 13 weeks.  The nine month periods ended March 30, 2014 and March 24, 2013, each contained 39 weeks.

Revenue Recognition,

Revenue Recognition

The Company recognizes revenue when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable.  The Company's Norco division sells food and supplies to franchisees on trade accounts under terms common in the industry.  Food and supply sales revenues, including shipping and handling costs, are recognized upon delivery of the product. Revenue from restaurant sales is recognized when food and beverage products are sold. The Company reports revenue net of sales taxes collected from customers and remitted to governmental taxing authorities.

Franchise revenue consists of income from license fees, royalties, and area development and foreign master license fees. License fees are recognized as income when there has been substantial performance under the agreement by the Company.  Domestic license fees are generally recognized at the time the restaurant is opened.  Foreign master license fees are generally recognized upon execution of the agreement as all material services relating to the sale have been substantially performed by the Company and the fee has been collected.  Royalties are recognized as income when earned.

Stock Based Compensation

Stock-Based Compensation

The Company accounts for stock options using the fair value recognition provisions of the authoritative guidance on share-based payments. The Company uses the Black-Scholes formula to estimate the value of stock-based compensation for options granted to employees and directors and expects to continue to use this acceptable option valuation model in the future.  The authoritative guidance also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow.

Use of Management Estimates

Use of Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the Company’s management to make estimates and assumptions that affect its reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities.  The Company bases its estimates on historical experience and other various assumptions that it believes are reasonable under the circumstances.  Estimates and assumptions are reviewed periodically and actual results could differ materially from estimates.

Reclassification,

Reclassification

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

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Earnings Per Share (Tables)

9 Months Ended

Mar. 30, 2014

Earnings Per Share As Follows

Schedule of Earnings Per Share, Basic and Diluted

	Three Months Ended						Nine Months Ended
	March 30,			March 24,			March 30,			March 24,
	2014			2013			2014			2013
Loss from continuing operations	$	(437	)	$	(290	)	$	(1,160	)	$	(441	)
Discontinued operations		(14	)		(100	)		(39	)		(127	)
Net loss available to common stockholders	$	(451	)	$	(390	)	$	(1,199	)	$	(568	)
BASIC:
Weighted average common shares		8,771			8,021			8,566			8,021
Loss from continuing operations per share	$	(0.05	)	$	(0.04	)	$	(0.14	)	$	(0.05	)
Discontinued operations per common share		-			(0.01	)		-			(0.02	)
Net loss per common share	$	(0.05	)	$	(0.05	)	$	(0.14	)	$	(0.07	)
DILUTED:
Weighted average common shares		8,771			8,021			8,566			8,021
Dilutive stock options		519			246			543			177
Weighted average common shares outstanding		9,290			8,267			9,109			8,198
Loss from continuing operations per share	$	(0.05	)	$	(0.04	)	$	(0.13	)	$	(0.05	)
Discontinued operations per common share		-			(0.01	)		-			(0.02	)
Loss per common share	$	(0.05	)	$	(0.05	)	$	(0.13	)	$	(0.07	)

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Outstanding Stock Options (Details)	9 Months Ended
	Mar. 30, 2014	Mar. 24, 2013
Outstanding Stock Options During The Period:
Outstanding at beginning of year	851,306	486,506
Granted	85,392	464,800
Exercised	(39,144)	0
Forfeited/Canceled/Expired	(38,856)	0
Outstanding at end of period	858,698	951,306
Exercisable at end of period	473,659	391,939

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) (USD $)	9 Months Ended
	Mar. 30, 2014	Mar. 24, 2013
Cash flows operating activities:
Net loss	$ (1,199)	$ (568)
Adjustments to reconcile net loss to cash (used) provided by operating activities:
Depreciation and amortization	1,056	958
(Gain) loss on sale of assets	(40)	129
Stock compensation expense	45	135
Deferred taxes	(551)	(243)
Provision for bad debts	203	44
Changes in operating assets and liabilities:
Notes and accounts receivable	(548)	(172)
Inventories	14	330
Accounts payable - trade	606	(21)
Accrued expenses	(90)	129
Deferred revenue	276	61
Prepaid expenses and other	(367)	(102)
Cash (used) provided by operating activities	(595)	680
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets	58	184
Capital expenditures	(1,987)	(1,547)
Cash used for investing activities	(1,929)	(1,363)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock	3,288	0
Proceeds from stock options	82	0
Borrowings of bank debt	0	3,160
Repayments of bank debt	(1,400)	(2,252)
Cash provided by financing activities	1,970	908
Net increase (decrease) in cash and cash equivalents	(554)	225
Cash and cash equivalents, beginning of period	919	590
Cash and cash equivalents, end of period	365	815
CASH PAYMENTS FOR:
Interest	113	248
Income taxes - net	$ 1	$ (84)

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Earnings Per Share (EPS)

9 Months Ended

Mar. 30, 2014

Earnings Per Share:

Earnings Per Share

(5) Earnings per Share (EPS)

The following table shows the reconciliation of the numerator and denominator of the basic EPS calculation to the numerator and denominator of the diluted EPS calculation (in thousands, except per share amounts).

	Three Months Ended						Nine Months Ended
	March 30,			March 24,			March 30,			March 24,
	2014			2013			2014			2013
Loss from continuing operations	$	(437	)	$	(290	)	$	(1,160	)	$	(441	)
Discontinued operations		(14	)		(100	)		(39	)		(127	)
Net loss available to common stockholders	$	(451	)	$	(390	)	$	(1,199	)	$	(568	)
BASIC:
Weighted average common shares		8,771			8,021			8,566			8,021
Loss from continuing operations per share	$	(0.05	)	$	(0.04	)	$	(0.14	)	$	(0.05	)
Discontinued operations per common share		-			(0.01	)		-			(0.02	)
Net loss per common share	$	(0.05	)	$	(0.05	)	$	(0.14	)	$	(0.07	)
DILUTED:
Weighted average common shares		8,771			8,021			8,566			8,021
Dilutive stock options		519			246			543			177
Weighted average common shares outstanding		9,290			8,267			9,109			8,198
Loss from continuing operations per share	$	(0.05	)	$	(0.04	)	$	(0.13	)	$	(0.05	)
Discontinued operations per common share		-			(0.01	)		-			(0.02	)
Loss per common share	$	(0.05	)	$	(0.05	)	$	(0.13	)	$	(0.07	)

For the three months and nine months ended March 30, 2014, options to purchase 15,000 shares of common stock were excluded from the computation of diluted EPS because the options’ exercise prices exceeded the average market price of the common shares for the period.

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Stock-Based Compensation (Details) (USD $)	3 Months Ended
	Mar. 30, 2014
Stock-Based Compensation During The Period:
Recognized stock-based compensation expense	$ 15,000
Unamortized stock-based compensation expense	$ 0.2