RAVE RESTAURANT GROUP, INC.

Previous wording

A comparison of our results of operations and cash flows for fiscal year 2024 compared to fiscal year 2023 can be found under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, filed with the SEC on September 26, 2024.

Current wording

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

Previous wording

The domestic units were located in 15 states predominately situated in the southern half of the United States. The international restaurants were located in eight foreign countries predominantly in the Middle East.

Current wording

The domestic units were located in 16 states predominantly situated in the southern half of the United States. The international restaurants were located in six foreign countries predominantly in the Middle East.

Previous wording

Results of operations for the fiscal years 2025 and 2024 included 52 and 53 weeks, respectively.

Current wording

Results of operations for the fiscal years 2026 and 2025 both included 52 weeks.

Previous wording

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

Current wording

“Comparable store retail sales” includes the retail sales for restaurants that have been open for at least 18 months as of the end of the reporting period. The sales results for a restaurant that was closed for seven consecutive days or longer are not included in the calculation.

Previous wording

Adjusted EBITDA for the fiscal year ended June 29, 2025, increased to $3.6 million compared to $3.2 million for the prior fiscal year. The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown (in thousands):

Current wording

Adjusted EBITDA for the fiscal year ended June 28, 2026, increased to $3.9 million compared to $3.6 million for the prior fiscal year. The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown (in thousands):

Previous wording

Pizza Inn total domestic retail sales increased by $2.0 million, or 1.9%, for fiscal 2025 when compared to the prior 53 weeks. Compared to the prior year, average Buffet Units open in the period increased from 76 to 77. Comparable store retail sales increased by $1.9 million to $104.7 million for fiscal 2025 as compared to the prior 53 weeks. For fiscal 2025, the increase in domestic retail sales were primarily the result of the increase in Buffet Units, supplemented by an increase in comparable domestic store retail sales.

Current wording

Pizza Inn total domestic retail sales increased by $3.7 million, or 3.4%, for fiscal 2026 when compared to the prior year. Compared to the prior year, average Buffet Units open in the period increased from 77 to 80. Comparable store retail sales increased by $2.5 million to $107.1 million for fiscal 2026 as compared to the prior year. For fiscal 2026, the increase in domestic retail sales was primarily the result of the increase in Buffet Units, supplemented by an increase in comparable store retail sales.

Previous wording

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

Current wording

There was a net decrease of five units in the total domestic Pizza Inn unit count during fiscal 2026. There were four transfers in the total domestic Pizza Inn unit count during fiscal 2026. For fiscal 2026, the number of international Pizza Inn units decreased by four units. There were zero transfers in the total international Pizza Inn unit count during fiscal 2026. The Company believes the number of both domestic and international Pizza Inn units will increase modestly in future periods.

Previous wording

Pie Five total domestic retail sales decreased by $5.6 million, or 33.2%, for fiscal 2025 when compared to the prior year. Compared to the prior year, average units open in the period decreased from 25 to 20. Comparable store retail sales decreased by $1.0 million to $11.0 million for fiscal 2025 as compared to the prior year. For fiscal 2025, the decrease in domestic retail sales were primarily the result of the decrease in store count, supplemented by a decrease in comparable store retail sales. The highest-volume Pie Five unit closed during the last week of fiscal 2024. This location accounted for approximately 13.6% of Pie Five's total domestic retail sales for fiscal 2024.

Current wording

Pie Five total domestic retail sales decreased by $2.7 million, or 23.8%, for fiscal 2026 when compared to the prior year. Compared to the prior year, average units open in the period decreased from 20 to 15. Comparable store retail sales decreased by $0.9 million to $8.5 million for fiscal 2026 as compared to the prior year. For fiscal 2026, the decrease in domestic retail sales was primarily the result of the decrease in store count, supplemented by a decrease in comparable store retail sales.

Previous wording

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

Current wording

There was a net decrease of four units in the total domestic Pie Five unit count during fiscal 2026. There was a net decrease of one Pie Five Ghost Kitchen Unit during fiscal 2026. We believe that Pie Five units will decrease in future periods.

Previous wording

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

Current wording

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

Previous wording

Total revenues for fiscal 2025 and fiscal 2024 were $12.0 million and $12.2 million, respectively.

Current wording

Total revenues for fiscal 2026 and fiscal 2025 were $12.9 million and $12.0 million, respectively.

Previous wording

Pizza Inn franchise revenues increased by $0.5 million to $10.8 million for fiscal 2025 as compared to $10.3 million for fiscal 2024. The 4.8% increase was driven by increased advertising fund revenues due to an increase in the average contribution rate from new stores and expiring rate abatements from existing stores and increased supplier and distributor incentives under the terms of new contracted pricing.

Current wording

Pizza Inn franchise revenues increased by $1.2 million to $12.0 million for fiscal 2026 as compared to $10.8 million for fiscal 2025. The 11.2% increase was driven by increases in supplier and distributor incentives and domestic royalties mainly due to an increase in system-wide retail sales.

Previous wording

Pie Five franchise revenues decreased by $0.5 million to $1.2 million for fiscal 2025 as compared to $1.7 million for fiscal 2024. The 30.7% decrease was driven by decreases in domestic royalties related to a decrease in system-wide sales.

Current wording

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

Previous wording

Total general and administrative expenses decreased by $0.1 million to $5.2 million for fiscal 2025 as compared to $5.3 million for fiscal 2024. The 1.0% decrease was driven by decreases in recruiting fees, offset by increases in salaries.

Current wording

Total general and administrative expenses increased by $0.7 million to $5.9 million for fiscal 2026 as compared to $5.2 million for fiscal 2025. The 12.7% increase was driven by increases in salaries, offset by decreases in legal fees.

Previous wording

Franchise expenses include general and administrative expenses directly related to the sale and continuing service of domestic and international franchises. Total franchise expenses decreased by $0.3 million to $3.4 million in fiscal 2025 as compared to $3.7 million for fiscal 2024. Pizza Inn franchise expenses remained relatively stable at $3.0 million for fiscal 2025 as compared to fiscal 2024. The 0.4% increase was driven by increases in advertising fees, offset by decreases in salaries directly related to franchise operations. Pie Five franchise expenses decreased $0.3 million to $0.4 million for fiscal 2025 compared to $0.7 million for fiscal 2024. The 40.4% decrease was driven by decreases in salaries directly related to franchise operations and advertising fees.

Current wording

Franchise expenses include general and administrative expenses directly related to the sale and continuing service of domestic and international franchises. Total franchise expenses remained relatively stable at $3.4 million for fiscal 2026 as compared to fiscal 2025. Pizza Inn franchise expenses increased by $0.1 million to $3.1 million for fiscal 2026 as compared to $3.0 million for fiscal 2025. The 3.1% increase was driven by increases in advertising fees, offset by decreases in salaries directly related to franchise operations. Pie Five franchise expenses decreased by $0.1 million to $0.3 million for fiscal 2026 as compared to $0.4 million for fiscal 2025. The 31.8% decrease was driven by decreases in salaries directly related to franchise operations and advertising fees.

Previous wording

The Company monitors franchisee receivable balances and adjusts credit terms when necessary to minimize the Company’s exposure to high-risk accounts receivable. For fiscal 2025, recoveries for credit losses were $21 thousand compared to provision for credit losses of $69 thousand for fiscal 2024. During fiscal 2025, the Company recorded a gain in provision for credit losses due to the recoveries of receivables that had been previously reserved, partially offset by losses due to write offs of receivables.

Current wording

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

Previous wording

Depreciation and amortization expense decreased by $37 thousand for fiscal 2025 to $182 thousand compared to $219 thousand in the prior year. The decrease was primarily the result of lower depreciation of equipment due to an overall decrease in capital expenditures.

Current wording

Depreciation and amortization expense decreased by $15 thousand for fiscal 2026 to $167 thousand compared to $182 thousand in the prior year. The decrease was primarily the result of lower depreciation of equipment due to less capital expenditure spend.

Previous wording

Interest income increased by $201 thousand for fiscal 2025 to $354 thousand compared to $153 thousand in the prior year. The increase was primarily driven by interest received on short-term investments, all of which were U.S. Treasury bills.

Current wording

Interest income increased by $37 thousand for fiscal 2026 to $391 thousand compared to $354 thousand in the prior year. The increase was primarily driven by interest received on U.S. Treasury bills.

Previous wording

For the year ended June 29, 2025, the Company recorded an income tax expense of $918 thousand. The federal and state tax expense was $793 thousand and $125 thousand, respectively. The increase was primarily driven by increases in federal taxes, primarily due to higher taxable income and fewer discrete tax items related to restricted stock units vesting in the prior year. The Company utilized net operating losses to offset federal taxes payable. At the end of tax year ended June 29, 2025, the Company had federal net operating loss carryforwards totaling $16 million that are available to reduce future taxable income and will begin to expire in 2035. Under the Tax Cuts and Jobs Act, approximately $1.3 million of the loss carryforwards are limited to 80% and do not expire. Tax years that remain subject to examination by the IRS are the years ended June 28, 2022 through June 30, 2024. Tax years that remain subject to examination by state authorities are the years ended June 30, 2021 through June 30, 2024.

Current wording

For the year ended June 28, 2026, the Company recorded an income tax expense of $1,006 thousand. The federal and state tax expense was $880 thousand and $126 thousand, respectively. The increase was primarily driven by increases in federal taxes, primarily due to higher taxable income and fewer discrete tax items related to restricted stock units vesting than in the prior year. The Company utilized net operating losses to offset federal taxes payable. At the end of tax year ended June 28, 2026, the Company had federal net operating loss carryforwards totaling $12 million that are available to reduce future taxable income and will begin to expire in 2035. Under the Tax Cuts and Jobs Act, approximately $1.3 million of the loss carryforwards are limited to 80% and do not expire. Tax years that remain subject to examination by the IRS are the years ended June 25, 2023 through June 29, 2025. Tax years that remain subject to examination by state authorities are the years ended June 26, 2022 through June 29, 2025.

Previous wording

Basic net income per common share increased $0.02 per share to $0.19 per share for fiscal 2025 compared to $0.17 per share in the prior fiscal year. Diluted net income per common share increased $0.02 per share to $0.19 per share for fiscal 2025 compared to $0.17 per share in the prior fiscal year. Net income increased $0.2 million to net income of $2.7 million for fiscal 2025 compared to a net income of $2.5 million for the prior fiscal year on revenues of $12.0 million for fiscal 2025 as compared to $12.2 million in fiscal 2024.

Current wording

Basic net income per common share increased $0.01 per share to $0.20 per share for fiscal 2026 compared to $0.19 per share in the prior fiscal year. Diluted net income per common share increased $0.01 per share to $0.20 per share for fiscal 2026 compared to $0.19 per share in the prior fiscal year. Net income increased $0.2 million to net income of $2.9 million for fiscal 2026 compared to a net income of $2.7 million for the prior fiscal year on revenues of $12.9 million for fiscal 2026 as compared to $12.0 million in fiscal 2025.

Previous wording

Cash flows from operating activities generally reflect net income adjusted for certain non-cash items including depreciation and amortization, changes in deferred taxes, stock-based compensation, short-term investment discount amortization, and changes in working capital. Cash provided by operating activities was $3.4 million in fiscal 2025 compared to cash provided by operating activities of $2.8 million in fiscal 2024. The primary driver of increased operating cash flow during fiscal 2025 was increased collections of accounts receivable related to the payment of franchise receivables.

Current wording

Cash flows from operating activities generally reflect net income adjusted for certain non-cash items including depreciation and amortization, changes in deferred taxes, stock-based compensation, and changes in working capital. Cash provided by operating activities was $3.6 million in fiscal 2026 compared to cash provided by operating activities of $3.4 million in fiscal 2025. The primary driver of increased operating cash flow during fiscal 2026 was increased revenues related to supplier and distributor incentives.

Previous wording

Cash flows from investing activities reflect purchases and maturities of short-term investments as well as net proceeds from the sale of assets and capital expenditures for the purchase of Company assets. Cash used in investing activities during fiscal 2025 was $2.0 million compared to cash used in investing activities of $4.9 million in fiscal 2024. Net cash used in investing activities in fiscal 2025 was primarily attributable to increased activity related to the purchase and redemption of short-term investments.

Current wording

Cash flows from investing activities reflect purchases and maturities of short-term investments as well as net proceeds from the sale of assets and capital expenditures for the purchase of Company assets. Cash used in investing activities during fiscal 2026 was $5.3 million compared to cash used in investing activities of $2.0 million in fiscal 2025. Net cash used in investing activities in fiscal 2026 was primarily attributable to increased activity related to the purchase of short-term investments. The decrease in proceeds from maturities of short-term investments was primarily attributable to the timing of investment maturity, with fewer investments reaching maturity during fiscal 2026.

Previous wording

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

Current wording

Cash flows used in financing activities generally reflect changes in the Company's stock and debt activity during the period. Net cash used in financing activities was zero for fiscal 2026 compared to net cash used in financing activities of $1.4 million for fiscal 2025. Net cash used by financing activities in fiscal 2025 was primarily attributable to repurchases of the Company's stock.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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