Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
|
|
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
|
Smaller reporting company
|
Emerging growth company
|
PART I. FINANCIAL INFORMATION
|
|||
Item 1.
|
Financial Statements
|
Page
|
|
3
|
|||
4
|
|||
5
|
|||
6 | |||
7
|
|||
Item 2.
|
14
|
||
Item 3.
|
21
|
||
Item 4.
|
21
|
||
PART II. OTHER INFORMATION
|
|||
Item 1.
|
22
|
||
Item 1A.
|
22
|
||
Item 2.
|
22
|
||
Item 3.
|
22
|
||
Item 4.
|
22
|
||
Item 5.
|
22
|
||
Item 6.
|
23
|
||
24
|
Three Months Ended
|
||||||||
September 25,
2022
|
September 26,
2021
|
|||||||
REVENUES:
|
$
|
|
$
|
|
||||
COSTS AND EXPENSES:
|
||||||||
General and administrative expenses
|
|
|
||||||
Franchise expenses
|
|
|
||||||
Impairment of long-lived assets and other lease charges
|
|
|
||||||
Bad debt expense
|
|
|
||||||
Interest expense
|
|
|
||||||
Depreciation and amortization expense
|
|
|
||||||
Total costs and expenses
|
|
|
||||||
INCOME BEFORE TAXES
|
|
|
||||||
Income tax expense
|
(
|
)
|
(
|
)
|
||||
NET INCOME
|
|
|
||||||
INCOME PER SHARE OF COMMON STOCK - BASIC:
|
$
|
|
$
|
|
||||
INCOME PER SHARE OF COMMON STOCK - DILUTED:
|
$
|
|
$
|
|
||||
Weighted average common shares outstanding - basic
|
|
|
||||||
Weighted average common and potential dilutive common shares outstanding
|
|
|
September 25,
2022
|
June 26,
2022
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Accounts receivable, less allowance for bad debts of $
|
|
|
||||||
Notes receivable, current
|
|
|
||||||
Deferred contract charges, current
|
|
|
||||||
Prepaid expenses and other
|
|
|
||||||
Total current assets
|
|
|
||||||
LONG-TERM ASSETS
|
||||||||
Property, plant and equipment, net
|
|
|
||||||
Operating lease right of use asset, net
|
|
|
||||||
Intangible assets definite-lived, net
|
|
|
||||||
Notes receivable, net of current portion
|
|
|
||||||
Deferred tax asset, net
|
||||||||
Deferred contract charges, net of current portion
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable - trade
|
$
|
|
$
|
|
||||
Accrued expenses
|
||||||||
Other current liabilities
|
||||||||
Operating lease liability, current
|
|
|
||||||
Short term loan, current
|
|
|
||||||
Deferred revenues, current
|
|
|
||||||
Total current liabilities
|
|
|
||||||
LONG-TERM LIABILITIES
|
||||||||
Operating lease liability, net of current portion
|
|
|
||||||
Deferred revenues, net of current portion
|
|
|
||||||
Total liabilities
|
|
|
||||||
COMMITMENTS AND CONTINGENCIES (SEE NOTE D)
|
|
|
||||||
SHAREHOLDERS’ EQUITY
|
||||||||
Common stock, $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Retained earnings
|
|
|
||||||
Treasury stock at cost
|
||||||||
Shares in treasury:
|
(
|
)
|
(
|
)
|
||||
Total shareholders’ equity
|
|
|
||||||
Total liabilities and shareholders’ equity
|
$
|
|
$
|
|
Common Stock
|
Treasury Stock
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||
Balance, June 27, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||||
Stock-based compensation expense
|
— |
— |
||||||||||||||||||||||||||
Net income
|
—
|
|
|
|
—
|
|
|
|||||||||||||||||||||
Balance, September 26, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Common Stock
|
Treasury Stock
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Retained
Earnings
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||
Balance, June 26, 2022
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||||||||||||
Stock-based compensation expense
|
—
|
|
|
|
—
|
|
|
|||||||||||||||||||||
Purchase of Treasury Stock |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
Net income
|
—
|
|
|
|
—
|
|
|
|||||||||||||||||||||
Balance, September 25, 2022
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Three Months Ended
|
||||||||
September 25,
2022
|
September 26,
2021
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net income
|
$
|
|
$
|
|
||||
Adjustments to reconcile net income to cash provided by/(used in) operating activities:
|
||||||||
Impairment of long-lived assets and other lease charges
|
|
|
||||||
Stock-based compensation expense
|
|
|
||||||
Depreciation and amortization
|
|
|
||||||
Amortization of operating right of use assets
|
|
|
||||||
Amortization of intangible assets definite-lived
|
||||||||
Amortization of debt issue costs
|
|
|
||||||
Allowance for bad debts
|
|
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
|
|
||||||
Notes receivable
|
|
|
||||||
Deferred contract charges
|
|
(
|
)
|
|||||
Prepaid expenses and other
|
|
|
||||||
Accounts payable - trade
|
|
(
|
)
|
|||||
Accrued expenses
|
|
(
|
)
|
|||||
Operating lease liability
|
(
|
)
|
(
|
)
|
||||
Deferred revenues
|
( |
) | ( |
) | ||||
Cash provided by/(used in) operating activities
|
(
|
)
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Payments received on notes receivable
|
|
|
||||||
Purchase of intangible assets definite-lived
|
( |
) | ( |
) | ||||
Purchase of property, plant and equipment
|
(
|
)
|
(
|
)
|
||||
Cash (used in)/provided by investing activities
|
(
|
)
|
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Purchase of stock
|
( |
) | ||||||
Short term loan, current
|
(
|
)
|
(
|
)
|
||||
Cash (used in) financing activities
|
(
|
)
|
(
|
)
|
||||
Net (decrease)/increase in cash and cash equivalents
|
(
|
)
|
(
|
)
|
||||
Cash and cash equivalents, beginning of period
|
|
|
||||||
Cash and cash equivalents, end of period
|
$
|
|
$
|
|
||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
||||||||
CASH PAID FOR:
|
||||||||
Income taxes
|
$
|
|
$
|
|
Three Months Ended
|
||||||||
September 25,
2022
|
September 26,
2021
|
|||||||
Franchise royalties
|
$
|
|
$
|
|
||||
Supplier and distributor incentive revenues
|
|
|
||||||
Franchise license fees
|
|
|
||||||
Area development exclusivity fees and foreign master license fees |
|
|
||||||
Advertising funds contributions | ||||||||
Supplier convention funds |
||||||||
Rental income
|
|
|
||||||
Other |
||||||||
$
|
|
$
|
|
Three Months Ended
|
||||
September 25, 2022
|
||||
Operating lease cost
|
$
|
|
||
Rental income
|
(
|
)
|
||
Total lease expense, net of sublease income
|
$
|
|
Three Months Ended
|
||||
September 25, 2022
|
||||
Cash paid for amounts included in the measurement of lease liabilities
|
$
|
|
September 25, 2022
|
||||
Weighted average remaining lease term | |
|||
Weighted average discount rate
|
|
%
|
Operating Leases
|
||||
2023 | $ | |||
2024
|
||||
2025
|
||||
2026
|
||||
Thereafter
|
||||
Total operating lease payments
|
$ | |||
Less: imputed interest
|
( |
) |
||
Total operating lease liability
|
$ |
Period
|
Total Number
of Shares
Purchased
|
Average Price
Paid Per Share
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plan
|
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plan
|
||||||||||||
July 27, 2022 - July 31, 2022
|
|
$
|
|
|
|
|||||||||||
August 1, 2022 - August 28, 2022
|
|
|
|
|
||||||||||||
August 29, 2022 - September 25, 2022
|
|
|
|
|
||||||||||||
Total
|
|
$
|
|
Three Months Ended
|
||||||||
September 25,
2022
|
September 26,
2021
|
|||||||
Shares
|
Shares
|
|||||||
Outstanding at beginning of year
|
|
|
||||||
Granted
|
|
|
||||||
Exercised
|
|
|
||||||
Forfeited/Canceled/Expired
|
|
|
||||||
Outstanding at end of period
|
|
|
||||||
Exercisable at end of period
|
|
|
Unvested at June 26, 2022
|
|
|||
Granted
|
|
|||
Issued
|
|
|||
Forfeited
|
|
|||
Unvested at September 25,
2022
|
|
Three Months Ended
|
||||||||
September 25,
2022
|
September 26,
2021
|
|||||||
Net income available to common shareholders
|
$
|
|
$
|
|
||||
BASIC:
|
||||||||
Weighted average common shares
|
|
|
||||||
Net income per common share
|
$
|
|
$
|
|
||||
DILUTED:
|
||||||||
Weighted average common shares
|
|
|
||||||
Convertible notes
|
|
|
||||||
Dilutive stock options
|
|
|
||||||
Weighted average common shares outstanding
|
|
|
||||||
Net income per common share
|
$
|
|
$
|
|
Three Months Ended
|
||||||||
September 25,
2022
|
September 26,
2021
|
|||||||
Net sales and operating revenues:
|
||||||||
Pizza Inn Franchising
|
$
|
|
$
|
|
||||
Pie Five Franchising
|
|
|
||||||
Company-Owned Restaurants |
||||||||
Corporate administration and other
|
|
|
||||||
Consolidated revenues
|
$
|
|
$
|
|
||||
Depreciation and amortization:
|
||||||||
Corporate administration and other
|
|
|
||||||
Depreciation and amortization
|
$
|
|
$
|
|
||||
Income/(loss) before taxes: | ||||||||
Pizza Inn Franchising
|
$
|
|
$
|
|
||||
Pie Five Franchising
|
|
|
||||||
Company-Owned Restaurants
|
|
(
|
)
|
|||||
Combined
|
|
|
||||||
Corporate administration and other
|
(
|
)
|
(
|
)
|
||||
Income/(loss) before taxes
|
$
|
|
$
|
|
||||
Geographic information (revenues): | ||||||||
United States
|
$
|
|
$
|
|
||||
Foreign countries
|
|
|
||||||
Consolidated revenues
|
$
|
|
$
|
|
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
Pizza Inn
|
Pie Five
|
All Concepts
|
||||||||||||||||||||||
Ending
Units
|
Retail
Sales
|
Ending
Units
|
Retail
Sales
|
Ending
Units
|
Retail
Sales
|
|||||||||||||||||||
Domestic Franchised/Licensed
|
128
|
$
|
23,979
|
31
|
$
|
5,243
|
159
|
$
|
29,222
|
|||||||||||||||
International Franchised
|
33
|
—
|
33
|
● |
“EBITDA” represents earnings before interest, taxes, depreciation and amortization.
|
● |
“Adjusted EBITDA” represents earnings before interest, taxes, depreciation and amortization, stock-based compensation expense, severance, gain/loss on sale of assets, costs related to impairment and other
lease charges, franchisee default and closed store revenue/expense, and closed and non-operating store costs.
|
● |
“Retail sales” represents the restaurant sales reported by our franchisees and Company-owned restaurants, which may be segmented by brand or domestic/international locations.
|
● |
“System-wide retail sales” represents combined retail sales for franchisee and Company-owned restaurants for a specified brand.
|
● |
“Comparable store retail sales” includes the retail sales for restaurants that have been open for at least 18 months as of the end of the reporting period. The sales results for a restaurant that was closed
temporarily for remodeling or relocation within the same trade area are included in the calculation only for the days that the restaurant was open in both periods being compared.
|
● |
“Store weeks” represent the total number of full weeks that specified restaurants were open during the period.
|
● |
“Average units open” reflects the number of restaurants open during a reporting period weighted by the percentage of the weeks in a reporting period that each restaurant was open.
|
● |
“Average weekly sales” for a specified period is calculated as total retail sales (excluding partial weeks) divided by store weeks in the period.
|
● |
“Non-operating store costs” represent gain or loss on asset disposal, store closure expenses, lease termination expenses and expenses related to abandoned store sites.
|
● |
“Franchisee default and closed store revenue/expense” represents the net of accelerated revenues and costs attributable to defaulted area development agreements and closed franchised stores.
|
Three Months Ended
|
||||||||
September 25,
2022
|
September 26,
2021
|
|||||||
Net income
|
$
|
307
|
$
|
285
|
||||
Interest expense
|
1
|
24
|
||||||
Income taxes
|
92
|
3
|
||||||
Depreciation and amortization
|
51
|
44
|
||||||
EBITDA
|
$
|
451
|
$
|
356
|
||||
Stock-based compensation expense
|
86
|
42
|
||||||
Severance
|
—
|
33
|
||||||
Impairment of long-lived assets and other lease charges
|
5
|
—
|
||||||
Franchisee default and closed store revenue
|
—
|
(1
|
)
|
|||||
Closed and non-operating store costs
|
—
|
1
|
||||||
Adjusted EBITDA
|
$
|
542
|
$
|
431
|
Three Months Ended
|
||||||||
September 25,
2022
|
September 26,
2021
|
|||||||
Pizza Inn Retail Sales - Total Domestic Units
|
(in thousands, except unit data)
|
|||||||
Domestic Units
|
||||||||
Buffet Units - Franchised
|
$
|
22,441
|
$
|
18,645
|
||||
Delco/Express Units - Franchised
|
1,482
|
1,642
|
||||||
PIE Units - Licensed
|
56
|
60
|
||||||
Total Domestic Retail Sales
|
$
|
23,979
|
$
|
20,347
|
||||
Pizza Inn Comparable Store Retail Sales - Total Domestic
|
22,512
|
20,017
|
||||||
Pizza Inn Average Units Open in Period
|
||||||||
Domestic Units
|
||||||||
Buffet Units - Franchised
|
72
|
71
|
||||||
Delco/Express Units - Franchised
|
47
|
52
|
||||||
PIE Units - Licensed
|
9
|
10
|
||||||
Total Domestic Units
|
128
|
133
|
Three Months Ended September 25, 2022
|
||||||||||||||||||||
Beginning
Units
|
Opened
|
Concept
Change
|
Closed
|
Ending
Units
|
||||||||||||||||
Domestic Units:
|
||||||||||||||||||||
Buffet Units - Franchised
|
72
|
—
|
—
|
—
|
72
|
|||||||||||||||
Delco/Express Units - Franchised
|
47
|
—
|
—
|
—
|
47
|
|||||||||||||||
PIE Units - Licensed
|
9
|
—
|
—
|
—
|
9
|
|||||||||||||||
Total Domestic Units
|
128
|
—
|
—
|
—
|
128
|
|||||||||||||||
International Units (all types)
|
31
|
2
|
—
|
—
|
33
|
|||||||||||||||
Total Units
|
159
|
2
|
—
|
—
|
161
|
Three Months Ended
|
||||||||
September 25,
2022
|
September 26,
2021
|
|||||||
(in thousands, except unit data)
|
||||||||
Pie Five Retail Sales - Total Units
|
||||||||
Domestic Units - Franchised
|
$
|
5,243
|
$
|
5,060
|
||||
Domestic Units - Company-owned
|
—
|
—
|
||||||
Total Domestic Retail Sales
|
$
|
5,243
|
$
|
5,060
|
||||
Pie Five Comparable Store Retail Sales - Total
|
$
|
4,989
|
$
|
4,635
|
||||
Pie Five Average Units Open in Period
|
||||||||
Domestic Units - Franchised
|
31
|
33
|
||||||
Domestic Units - Company-owned
|
—
|
—
|
||||||
Total Domestic Units
|
31
|
33
|
Three Months Ended September 25, 2022
|
||||||||||||||||||||
Beginning
Units
|
Opened
|
Transfer
|
Closed
|
Ending
Units
|
||||||||||||||||
Domestic - Franchised
|
31
|
—
|
—
|
—
|
31
|
|||||||||||||||
Domestic - Company-owned
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Total Domestic Units
|
31
|
—
|
—
|
—
|
31
|
Pizza Inn
Franchising
|
Pie Five
Franchising
|
Company-Owned
Restaurants
|
Corporate
|
Total
|
||||||||||||||||||||||||||||||||||||
Fiscal Quarter Ended
|
Fiscal Quarter Ended
|
Fiscal Quarter Ended
|
Fiscal Quarter Ended
|
Fiscal Quarter Ended
|
||||||||||||||||||||||||||||||||||||
September
25,
2022
|
September
26,
2021
|
September
25,
2022
|
September
26,
2021
|
September
25,
2022
|
September
26,
2021
|
September
25,
2022
|
September
26,
2021
|
September
25,
2022
|
September
26,
2021
|
|||||||||||||||||||||||||||||||
REVENUES:
|
||||||||||||||||||||||||||||||||||||||||
Franchise and license revenues
|
$
|
2,469
|
$
|
2,034
|
$
|
488
|
$
|
468
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
2,957
|
$
|
2,502
|
||||||||||||||||||||
Rental income
|
—
|
—
|
—
|
—
|
—
|
—
|
47
|
47
|
47
|
47
|
||||||||||||||||||||||||||||||
Interest income and other
|
—
|
—
|
—
|
4
|
—
|
—
|
1
|
—
|
1
|
4
|
||||||||||||||||||||||||||||||
Total revenues
|
2,469
|
2,034
|
488
|
472
|
—
|
—
|
48
|
47
|
3,005
|
2,553
|
||||||||||||||||||||||||||||||
COSTS AND EXPENSES:
|
||||||||||||||||||||||||||||||||||||||||
General and administrative expenses
|
—
|
—
|
—
|
—
|
—
|
1
|
1,343
|
1,205
|
1,343
|
1,206
|
||||||||||||||||||||||||||||||
Franchise expenses
|
958
|
759
|
244
|
227
|
—
|
—
|
—
|
—
|
1,202
|
986
|
||||||||||||||||||||||||||||||
Impairment of long-lived assets and other lease charges
|
—
|
—
|
—
|
—
|
—
|
—
|
5
|
—
|
5
|
—
|
||||||||||||||||||||||||||||||
Bad debt expense
|
—
|
—
|
—
|
—
|
—
|
—
|
4
|
5
|
4
|
5
|
||||||||||||||||||||||||||||||
Interest expense
|
—
|
—
|
—
|
—
|
—
|
—
|
1
|
24
|
1
|
24
|
||||||||||||||||||||||||||||||
Depreciation and amortization expense
|
—
|
—
|
—
|
—
|
—
|
—
|
51
|
44
|
51
|
44
|
||||||||||||||||||||||||||||||
Total costs and expenses
|
958
|
759
|
244
|
227
|
—
|
1
|
1,404
|
1,278
|
2,606
|
2,265
|
||||||||||||||||||||||||||||||
INCOME/(LOSS) BEFORE TAXES
|
$
|
1,511
|
$
|
1,275
|
$
|
244
|
$
|
245
|
$
|
—
|
$
|
(1
|
)
|
$
|
(1,356
|
)
|
$
|
(1,231
|
)
|
$
|
399
|
$
|
288
|
Amended and Restated Articles of Incorporation of Rave Restaurant Group, Inc. (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed January 8,
2015).
|
|
Amended and Restated Bylaws of Rave Restaurant Group, Inc. (incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed January 8, 2015).
|
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.
|
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.
|
|
Section 1350 Certification of Principal Executive Officer.
|
|
Section 1350 Certification of Principal Financial Officer.
|
|
101
|
Interactive data files pursuant to Rule 405 of Regulation S-T.
|
RAVE RESTAURANT GROUP, INC.
|
|||
(Registrant)
|
|||
By:
|
/s/ Brandon L. Solano
|
||
Brandon L. Solano
|
|||
Chief Executive Officer
|
|||
(principal executive officer)
|
|||
By:
|
/s/ Clinton D. Fendley
|
||
Clinton D. Fendley
|
|||
Chief Financial Officer
|
|||
(principal financial officer)
|
|||
Dated: November 3, 2022
|
1. |
I have reviewed this quarterly report on Form 10-Q of Rave Restaurant Group, Inc. (“the Registrant”);
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4. |
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c. |
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d. |
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the
Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5. |
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s
auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the Registrant’s ability to record, process, summarize and report financial information; and
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial
reporting.
|
Date: November 3, 2022
|
By:
|
/s/ Brandon L. Solano
|
Brandon L. Solano
|
||
Chief Executive Officer
|
||
(principal executive officer)
|
1. |
I have reviewed this quarterly report on Form 10-Q of Rave Restaurant Group, Inc. (“the Registrant”);
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of
the Registrant as of, and for, the periods presented in this report;
|
4. |
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c. |
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
|
d. |
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5. |
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the
Registrant’s board of directors (or persons performing the equivalent functions):
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record,
process, summarize and report financial information; and
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
Date: November 3, 2022
|
By:
|
/s/ Clinton D. Fendley
|
Clinton D. Fendley
|
||
Chief Financial Officer
|
||
(principal financial officer)
|
Date: November 3, 2022
|
By:
|
/s/ Brandon L. Solano
|
Brandon L. Solano
|
||
Chief Executive Officer
|
||
(principal executive officer)
|
Date: November 3, 2022
|
By:
|
/s/ Clinton D. Fendley
|
Clinton D. Fendley
|
||
Chief Financial Officer
|
||
(principal financial officer)
|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 25, 2022 |
Sep. 26, 2021 |
|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME [Abstract] | ||
REVENUES: | $ 3,005 | $ 2,553 |
COSTS AND EXPENSES: | ||
General and administrative expenses | 1,343 | 1,206 |
Franchise expenses | 1,202 | 986 |
Impairment of long-lived assets and other lease charges | 5 | 0 |
Bad debt expense | 4 | 5 |
Interest expense | 1 | 24 |
Depreciation and amortization expense | 51 | 44 |
Total costs and expenses | 2,606 | 2,265 |
INCOME BEFORE TAXES | 399 | 288 |
Income tax expense | (92) | (3) |
NET INCOME | $ 307 | $ 285 |
INCOME PER SHARE OF COMMON STOCK - BASIC: (in dollars per share) | $ 0.02 | $ 0.02 |
INCOME PER SHARE OF COMMON STOCK - DILUTED: (in dollars per share) | $ 0.02 | $ 0.02 |
Weighted average common shares outstanding - basic (in shares) | 16,632 | 18,005 |
Weighted average common and potential dilutive common shares outstanding (in shares) | 16,632 | 18,803 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Sep. 25, 2022 |
Jun. 26, 2022 |
---|---|---|
CURRENT ASSETS | ||
Accounts receivable, allowance for bad debts | $ 25 | $ 27 |
SHAREHOLDERS' EQUITY | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 26,000,000 | 26,000,000 |
Common stock, shares issued (in shares) | 25,090,058 | 25,090,058 |
Common stock, shares outstanding (in shares) | 16,400,539 | 17,511,430 |
Treasury stock at cost (in shares) | 8,689,519 | 7,578,628 |
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings [Member] |
Treasury Stock [Member] |
Total |
---|---|---|---|---|---|
Beginning balance at Jun. 27, 2021 | $ 251 | $ 37,215 | $ (7,196) | $ (24,537) | $ 5,733 |
Beginning balance (in shares) at Jun. 27, 2021 | 25,090,000 | (7,085,000) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock-based compensation expense | $ 0 | 42 | 0 | $ 0 | 42 |
Net income | 0 | 0 | 285 | 0 | 285 |
Ending balance at Sep. 26, 2021 | $ 251 | 37,257 | (6,911) | $ (24,537) | 6,060 |
Ending balance (in shares) at Sep. 26, 2021 | 25,090,000 | (7,085,000) | |||
Beginning balance at Jun. 26, 2022 | $ 251 | 37,384 | 826 | $ (25,049) | $ 13,412 |
Beginning balance (in shares) at Jun. 26, 2022 | 25,090,000 | (7,579,000) | 17,511,430 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock-based compensation expense | $ 0 | 86 | 0 | $ 0 | $ 86 |
Purchase of treasury stock | $ 0 | 0 | 0 | $ (1,384) | (1,384) |
Purchase of treasury stock (in shares) | 0 | (1,111,000) | |||
Net income | $ 0 | 0 | 307 | $ 0 | 307 |
Ending balance at Sep. 25, 2022 | $ 251 | $ 37,470 | $ 1,133 | $ (26,433) | $ 12,421 |
Ending balance (in shares) at Sep. 25, 2022 | 25,090,000 | (8,690,000) | 16,400,539 |
Summary of Significant Accounting Policies |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 25, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies |
Note A - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Rave Restaurant Group, Inc. and its subsidiaries, all of which are wholly owned. All appropriate
inter-company balances and transactions have been eliminated.
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 September 25, 2022 and September 26, 2021 each contained 13 weeks.
Use of Management Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company’s
management to make estimates and assumptions that affect its reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. The Company bases its estimates on historical experience and other
various assumptions that it believes are reasonable under the circumstances. Estimates and assumptions are reviewed periodically. Actual results could differ materially from estimates.
Revenue Recognition
Revenue is measured based on consideration specified in contracts with customers and excludes incentives and amounts collected on behalf of third parties,
primarily sales tax. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Taxes assessed by a governmental authority that are both imposed on and concurrent
with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
The following describes principal activities, separated by major product or service, from which the Company generates its revenues:
Franchise Revenues
Franchise revenues consist of 1) franchise royalties, 2) supplier and distributor incentive revenues, 3) franchise license fees, 4) area
development exclusivity fees and foreign master license fees, 5) advertising funds, and 6) supplier convention funds.
Franchise royalties, which are based on a percentage of franchise restaurant sales, are recognized as sales occur.
Supplier and distributor incentive revenues are recognized when title to the underlying commodities transfer.
Franchise license fees are typically billed upon execution of the franchise agreement and amortized over the term of the franchise agreement
which can range from
to 20 years. Fees received for renewal periods are amortized over the life of the renewal period.Area development exclusivity fees and foreign master license fees are typically billed upon execution of the area development and foreign
master license agreements. Area development exclusivity fees are included in deferred revenue in the accompanying Condensed Consolidated Balance Sheets and allocated on a pro rata basis to all stores opened under that specific development
agreement. Area development exclusivity fees that include rights to sub-franchise are amortized as revenue over the term of the contract.
Advertising fund contributions for Pie Five and Pizza Inn units represent contributions collected where we have control over the activities
of the fund. Contributions are based on a percentage of net retail sales. We have determined that we are the principal in these arrangements, and advertising fund contributions and expenditures are, therefore, reported on a gross basis in the
Condensed Consolidated Statements of Income. In general, we expect such advertising fund contributions and expenditures to be largely offsetting and, therefore, do not expect a significant impact on our reported income before income taxes.
Our obligation related to these funds is to develop and conduct advertising activities.
Supplier convention funds are deferred until the obligations of the agreement are met and the event takes place.
Rental Income
The Company subleases some of its restaurant space to third parties. The Company’s two subleases have terms that end in 2023 and 2025. The sublease agreements are noncancelable through the end of the term and both parties have substantive rights to
terminate the lease when the term is complete. Sublease agreements are not capitalized and are recorded as rental income in the period that rent is received.
Total revenues consist of the following (in thousands):
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.
Restricted
stock units (“RSUs”) represent the right to receive shares of common stock upon the satisfaction of vesting requirements, performance criteria and other terms and conditions. Compensation cost for RSUs is measured as an amount equal to the
fair value of the RSUs on the date of grant and is expensed over the vesting period if achievement of the performance criteria is deemed probable, with the amount of the expense recognized based on the best estimate of the ultimate
achievement level.
|
Leases |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 25, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases |
Note B - Leases
The Company determines if an
arrangement is a lease at inception of the arrangement. To the extent that it can be determined that an arrangement represents a lease, it is classified as either an operating lease or a finance lease. The Company does not currently have
any finance leases. The Company capitalizes operating leases on the Condensed Consolidated Balance Sheets through a right of use asset and a corresponding lease liability. Right of use assets represent the Company’s right to use an
underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Short-term leases that have an initial term of one year or less are not capitalized. The Company
does not presently have any short-term leases.
Operating lease right of use assets
and liabilities are recognized at the commencement date of an arrangement based on the present value of lease payments over the lease term. In addition to the present value of lease payments, the operating lease right of use asset also
includes any lease payments made to the lessor prior to lease commencement less any lease incentives and initial direct costs incurred. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.
Nature of Leases
The Company leases certain office space, restaurant space, and information technology equipment under non-cancelable leases to support its
operations. A more detailed description of significant lease types is included below.
Office Agreements
The Company rents office space from third parties for its corporate location. Office agreements are typically structured with non-cancelable
terms of
to ten years.
The Company has concluded that its office agreements represent operating leases with a lease term that equals the primary non-cancelable contract term. Upon completion of the primary term, both parties have substantive rights to terminate the
lease. As a result, enforceable rights and obligations do not exist under the rental agreement subsequent to the primary term.Restaurant Space Agreements
The Company rents restaurant space from third parties for its Company-owned restaurants. Restaurant space agreements are typically
structured with non-cancelable terms of
to 10 years. The Company has concluded that its restaurant agreements represent operating leases with a lease term that equals the primary non-cancelable contract term. Upon completion of the primary term, both
parties have substantive rights to terminate the lease. As a result, enforceable rights and obligations do not exist under the rental agreements subsequent to the primary term.The Company subleases some of its restaurant space to third parties. The Company’s two subleases have terms that end in 2023 and 2025. The sublease agreements are noncancelable through the end of the term and both parties have substantive rights to
terminate the lease when the term is complete. Sublease agreements are not capitalized and are recorded as rental income in the period that rent is received.
As of September 25,
2022, the Company had no Company-owned
restaurants.
Information Technology Equipment
The Company rents information technology equipment, primarily printers and copiers, from a third party for its corporate office location.
Information technology equipment agreements are typically structured with non-cancelable terms of
to five years. The Company has concluded that its information technology equipment commitments are operating leases.Discount Rate
Leases typically do not provide an implicit interest rate. Accordingly, the Company is required to use its incremental borrowing rate in
determining the present value of lease payments based on the information available at the lease commencement date. The Company’s incremental borrowing rate reflects the estimated rate of interest that it would pay to borrow on a
collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. The Company uses the implicit rate in the limited circumstances in which that rate is readily determinable.
Lease Guarantees
The Company has guaranteed the financial responsibilities of certain franchised store leases. These guaranteed leases are not considered
operating leases because the Company does not have the right to control the underlying asset. If the franchisee abandons the lease and fails to meet the lease’s financial obligations, the lessor may assign the lease to the Company for the
remainder of the term. If the Company does not expect to assign the abandoned lease to a new franchisee within 12 months, the lease will be considered an operating lease and a right of use asset and lease liability will be recognized.
Practical Expedients and Accounting Policy Elections
Certain lease agreements include lease and non-lease components. For all existing asset classes with multiple component types, the Company
has utilized the practical expedient that exempts it from separating lease components from non-lease components. Accordingly, the Company accounts for the lease and non-lease components in an arrangement as a single lease component.
In addition, for all existing asset classes, the Company
has made an accounting policy election not to apply the lease recognition requirements to short-term leases (that is, leases that, at commencement, have a lease term of 12 months or less and do not include an option to purchase the
underlying asset that the Company is reasonably certain to exercise). Accordingly, we recognize lease payments related to short-term leases in our income statements on a straight-line basis over the lease term. To the extent that there
are variable lease payments, we recognize those payments in our income statements in the period in which the obligation for those payments is incurred.
The components of total lease expense for the three months ended September 25, 2022, the majority of which is included in general and administrative expense in the accompanying Condensed Consolidated Statements of
Income, are as follows (in thousands):
Supplemental cash flow information related to operating leases is included in the table below (in thousands):
Weighted average remaining lease term and weighted average discount rate for operating leases are as follows:
Operating lease liabilities with enforceable contract terms that are greater than one year mature as follows (in thousands):
|
Stock Purchase Plan |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 25, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Purchase Plan [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Purchase Plan |
Note C - Stock Purchase Plan
On May 23, 2007, the Company’s board of directors approved a stock purchase plan (the “2007 Stock Purchase Plan”) authorizing the purchase
on our behalf of up to 1,016,000 shares of our common stock in the open market or in privately negotiated transactions. On June
2, 2008, the Company’s board of directors amended the 2007 Stock Purchase Plan to increase the number of shares of common stock the Company may repurchase by 1,000,000 shares to a total of 2,016,000 shares. On April 22, 2009, the Company’s board of
directors amended the 2007 Stock Purchase Plan again to increase the number of shares of common stock the Company may repurchase by 1,000,000
shares to a total of 3,016,000 shares. On June 28, 2022, the Company’s board of directors amended the 2007 Stock Purchase Plan
again to increase the number of shares of common stock the Company may repurchase by 5,000,000 shares to a total of 8,016,000 shares. The 2007 Stock Purchase Plan does not have an expiration date.
The following table furnishes
information for purchases made pursuant to the 2007 Stock Purchase Plan during the first quarter of fiscal 2023:
The Company’s
ability to purchase shares of our common stock is subject to various laws, regulations and policies as well as the rules and regulations of the Securities and Exchange Commission (the “SEC”). The Company may also purchase shares of our
common stock other than pursuant to the 2007 Stock Purchase Plan or other publicly announced plans or programs.
|
Commitments and Contingencies |
3 Months Ended |
---|---|
Sep. 25, 2022 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies |
Note D - Commitments and Contingencies
The Company is subject to various claims and contingencies related to employment agreements, franchise disputes, lawsuits, taxes, food
product purchase contracts and other matters arising out of the normal course of business. Management believes that any such claims and actions currently pending are either covered by insurance or would not have a material adverse effect on
the Company’s annual results of operations or financial condition if decided in a manner that is unfavorable to the Company.
|
Stock-Based Compensation |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 25, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation |
Note E - Stock-Based Compensation
Stock Options:
For the fiscal quarters ended September 25, 2022 and September 26, 2021, the Company recognized stock-based compensation expense related to stock options of $4 thousand and zero, respectively. As of September 25, 2022, there was $11 thousand unamortized stock-based compensation expense related to stock options.
The following table summarizes the number of shares of the Company’s common stock subject to outstanding stock options:
Restricted Stock Units:
For the three months ended September 25, 2022 and September 26, 2021, the Company had stock-based compensation expense of $82 thousand and $42 thousand,
respectively, related to RSUs. As of September 25, 2022, there was no unamortized stock-based compensation expense related to
RSUs.
A summary of the status of restricted stock units as of September 25, 2022, and changes during the three months then ended is presented
below:
|
Earnings per Share (EPS) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 25, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share (EPS) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share (EPS) |
Note F - 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):
For the three months ended September 25, 2022, exercisable options to purchase
111,750 shares of common stock at exercise prices from $3.95 to $13.11 were excluded from the computation of
diluted EPS because they had an intrinsic value of zero.
For the three months ended September 26, 2021, exercisable options to purchase 166,750 shares of common stock at exercise prices
ranging from $3.11 to $13.11
were excluded from the computation of diluted EPS because they had an intrinsic value of zero.
|
Income Taxes |
3 Months Ended |
---|---|
Sep. 25, 2022 | |
Income Taxes [Abstract] | |
Income Taxes |
Note G - Income Taxes
For the three months ended September 25, 2022, the Company recorded an income tax expense of $92 thousand, most of which is attributable to current state taxes.
The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable
income, reversal of existing taxable temporary differences, and tax planning strategies. In assessing the need for the valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization
of deferred tax assets.
|
Segment Reporting |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 25, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting |
Note H - Segment Reporting
The Company has three
reportable operating segments as determined by management using the “management approach” as defined by ASC 280 Disclosures about Segments of an Enterprise and Related Information: (1) Pizza Inn
Franchising, (2) Pie Five Franchising and (3) Company-Owned Restaurants. These segments are a result of differences in the nature of the products and services sold. Corporate administration costs, which include, but are not limited to,
general accounting, human resources, legal, and credit and collections, are partially allocated to the three operating segments.
Other revenue consists of nonrecurring items.
The Pizza Inn and Pie Five Franchising segments establish franchisees, licensees and territorial rights. Revenue for these segments are derived from franchise royalties, franchise fees,
sale of area development and foreign master license rights, incentive payments from third party suppliers and distributors, advertising funds, and supplier convention funds. Assets for these segments include equipment, furniture and
fixtures.
The Company-Owned Restaurants segment includes sales and operating results for all Company-owned restaurants. Assets for this segment include equipment, furniture and fixtures for the
Company-owned restaurants. As of September 25, 2022, the Company did not operate any Company-owned restaurants.
Corporate administration and other assets primarily include cash and short-term investments, as well as furniture and fixtures located at the corporate office and trademarks and other
intangible assets. All assets are located within the United States.
Summarized in the
following tables are net sales and operating revenues, depreciation and amortization expense, income from continuing operations before taxes, capital expenditures and assets for the Company’s reportable segments as of the three months
ended September 25, 2022 and September 26, 2021 (in thousands):
|
Summary of Significant Accounting Policies (Policies) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 25, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation |
Principles of Consolidation
The consolidated financial statements include the accounts of Rave Restaurant Group, Inc. and its subsidiaries, all of which are wholly owned. All appropriate
inter-company balances and transactions have been eliminated.
|
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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.
|
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Fiscal Quarters |
Fiscal Quarters
The three month periods ended September 25, 2022 and September 26, 2021 each contained 13 weeks.
|
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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 requires the Company’s
management to make estimates and assumptions that affect its reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. The Company bases its estimates on historical experience and other
various assumptions that it believes are reasonable under the circumstances. Estimates and assumptions are reviewed periodically. Actual results could differ materially from estimates.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition |
Revenue Recognition
Revenue is measured based on consideration specified in contracts with customers and excludes incentives and amounts collected on behalf of third parties,
primarily sales tax. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Taxes assessed by a governmental authority that are both imposed on and concurrent
with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
The following describes principal activities, separated by major product or service, from which the Company generates its revenues:
Franchise Revenues
Franchise revenues consist of 1) franchise royalties, 2) supplier and distributor incentive revenues, 3) franchise license fees, 4) area
development exclusivity fees and foreign master license fees, 5) advertising funds, and 6) supplier convention funds.
Franchise royalties, which are based on a percentage of franchise restaurant sales, are recognized as sales occur.
Supplier and distributor incentive revenues are recognized when title to the underlying commodities transfer.
Franchise license fees are typically billed upon execution of the franchise agreement and amortized over the term of the franchise agreement
which can range from
to 20 years. Fees received for renewal periods are amortized over the life of the renewal period.Area development exclusivity fees and foreign master license fees are typically billed upon execution of the area development and foreign
master license agreements. Area development exclusivity fees are included in deferred revenue in the accompanying Condensed Consolidated Balance Sheets and allocated on a pro rata basis to all stores opened under that specific development
agreement. Area development exclusivity fees that include rights to sub-franchise are amortized as revenue over the term of the contract.
Advertising fund contributions for Pie Five and Pizza Inn units represent contributions collected where we have control over the activities
of the fund. Contributions are based on a percentage of net retail sales. We have determined that we are the principal in these arrangements, and advertising fund contributions and expenditures are, therefore, reported on a gross basis in the
Condensed Consolidated Statements of Income. In general, we expect such advertising fund contributions and expenditures to be largely offsetting and, therefore, do not expect a significant impact on our reported income before income taxes.
Our obligation related to these funds is to develop and conduct advertising activities.
Supplier convention funds are deferred until the obligations of the agreement are met and the event takes place.
Rental Income
The Company subleases some of its restaurant space to third parties. The Company’s two subleases have terms that end in 2023 and 2025. The sublease agreements are noncancelable through the end of the term and both parties have substantive rights to
terminate the lease when the term is complete. Sublease agreements are not capitalized and are recorded as rental income in the period that rent is received.
Total revenues consist of the following (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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.
Restricted
stock units (“RSUs”) represent the right to receive shares of common stock upon the satisfaction of vesting requirements, performance criteria and other terms and conditions. Compensation cost for RSUs is measured as an amount equal to the
fair value of the RSUs on the date of grant and is expensed over the vesting period if achievement of the performance criteria is deemed probable, with the amount of the expense recognized based on the best estimate of the ultimate
achievement level.
|
Summary of Significant Accounting Policies (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 25, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Revenues |
Total revenues consist of the following (in thousands):
|
Leases (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 25, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Components of Total Lease Expense |
The components of total lease expense for the three months ended September 25, 2022, the majority of which is included in general and administrative expense in the accompanying Condensed Consolidated Statements of
Income, are as follows (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information Related to Operating Leases |
Supplemental cash flow information related to operating leases is included in the table below (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||
Weighted Average Remaining Lease Term and Weighted Average Discount Rate |
Weighted average remaining lease term and weighted average discount rate for operating leases are as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||
Maturities of Operating Lease Liabilities |
Operating lease liabilities with enforceable contract terms that are greater than one year mature as follows (in thousands):
|
Stock Purchase Plan (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 25, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Purchase Plan [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchases Pursuant to 2007 Stock Purchase Plan |
The following table furnishes
information for purchases made pursuant to the 2007 Stock Purchase Plan during the first quarter of fiscal 2023:
|
Stock-Based Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 25, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Stock Options |
The following table summarizes the number of shares of the Company’s common stock subject to outstanding stock options:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Restricted Stock Units |
A summary of the status of restricted stock units as of September 25, 2022, and changes during the three months then ended is presented
below:
|
Earnings per Share (EPS) (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 25, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share (EPS) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share Basic and Diluted |
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):
|
Segment Reporting (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 25, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Information |
Summarized in the
following tables are net sales and operating revenues, depreciation and amortization expense, income from continuing operations before taxes, capital expenditures and assets for the Company’s reportable segments as of the three months
ended September 25, 2022 and September 26, 2021 (in thousands):
|
Stock Purchase Plan (Details) - shares |
Jun. 28, 2022 |
Apr. 22, 2009 |
Jun. 02, 2008 |
Sep. 25, 2022 |
Aug. 28, 2022 |
Jul. 31, 2022 |
May 23, 2007 |
---|---|---|---|---|---|---|---|
2007 Stock Purchase Plan [Member] | |||||||
Treasury Stock, Shares [Abstract] | |||||||
Number of common stock shares authorized to purchase (in shares) | 4,244,060 | 4,244,060 | 4,463,601 | 1,016,000 | |||
Amended 2007 Stock Purchase Plan [Member] | |||||||
Treasury Stock, Shares [Abstract] | |||||||
Number of common stock shares authorized to purchase (in shares) | 8,016,000 | 3,016,000 | 2,016,000 | ||||
Repurchase of shares common stock (in shares) | 5,000,000 | 1,000,000 | 1,000,000 |
Stock Purchase Plan, Purchases Pursuant to 2007 Stock Purchase Plan (Details) - 2007 Stock Purchase Plan [Member] - $ / shares |
1 Months Ended | 3 Months Ended | |||
---|---|---|---|---|---|
Jul. 31, 2022 |
Sep. 25, 2022 |
Aug. 28, 2022 |
Sep. 25, 2022 |
May 23, 2007 |
|
Stock Purchase Plan [Abstract] | |||||
Total number of shares purchased (in shares) | 891,350 | 0 | 219,541 | 1,110,891 | |
Average price paid per share (in dollars per share) | $ 1.2 | $ 0 | $ 1.35 | $ 1.23 | |
Total number of shares purchased as part of publicly announced plan (in shares) | 3,552,399 | 3,771,940 | 3,771,940 | ||
Maximum number of shares that may yet be purchased under the plan (in shares) | 4,463,601 | 4,244,060 | 4,244,060 | 4,244,060 | 1,016,000 |
Stock-Based Compensation (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 25, 2022 |
Sep. 26, 2021 |
|
Stock Options [Member] | ||
Share-based Arrangement [Abstract] | ||
Stock-based compensation expense recognized | $ 4 | $ 0 |
Unamortized stock-based compensation expense | $ 11 | |
Summary of Shares of Common Stock Subject to Outstanding Stock Options [Roll Forward] | ||
Outstanding at beginning of year (in shares) | 111,750 | 166,750 |
Granted (in shares) | 40,000 | 0 |
Exercised (in shares) | 0 | 0 |
Forfeited/Canceled/Expired (in shares) | 0 | 0 |
Outstanding at end of period (in shares) | 151,750 | 166,750 |
Exercisable at end of Period (in shares) | 111,750 | 166,750 |
Restricted Stock Units [Member] | ||
Share-based Arrangement [Abstract] | ||
Stock-based compensation expense recognized | $ 82 | $ 42 |
Unamortized stock-based compensation expense | $ 0 | |
Summary of Restricted Stock Units [Roll forward] | ||
Unvested Beginning Balance (in shares) | 885,687 | |
Granted (in shares) | 0 | |
Issued (in shares) | 0 | |
Forfeited (in shares) | 0 | |
Unvested Ending Balance (in shares) | 885,687 |
Income Taxes (Details) $ in Thousands |
3 Months Ended |
---|---|
Sep. 25, 2022
USD ($)
| |
Income Taxes [Abstract] | |
Current state tax expense | $ 92 |
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