RAVE · Read the filing

ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes appearing elsewhere in this Annual Report on Form 10-K and may contain certain forward-looking statements. See “Forward-Looking Statements.”

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.

Non-GAAP Financial Measures and Other Terms

The Company’s financial statements are prepared in accordance with United States generally accepted accounting principles (“GAAP”). However, the Company also presents and discusses certain non-GAAP financial measures that it believes are useful to investors as measures of operating performance. Management may also use such non-GAAP financial measures in evaluating the effectiveness of business strategies and for planning and budgeting purposes. However, these non-GAAP financial measures should not be viewed as an alternative or substitute for the results reflected in the Company’s GAAP financial statements.

We consider EBITDA and Adjusted EBITDA to be important supplemental measures of operating performance that are commonly used by securities analysts, investors and other parties interested in our industry. We believe that EBITDA is helpful to investors in evaluating our results of operations without the impact of expenses affected by financing methods, accounting methods and the tax environment. We believe that Adjusted EBITDA provides additional useful information to investors by excluding non-operational or non-recurring expenses to provide a measure of operating performance that is more comparable from period to period. Management also uses these non-GAAP financial measures for evaluating operating performance, assessing the effectiveness of business strategies, projecting future capital needs, budgeting and other planning purposes.

The following key performance indicators presented herein, some of which represent non-GAAP financial measures, have these meanings and are calculated as follows:

•

“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, which may be segmented by brand or domestic/international locations.

•

“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.

•

“Average units open” reflects the number of restaurants open during a reporting period weighted by the percentage of the days in a reporting period that each restaurant was open.

•

“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.

•

“Closed and non-operating store costs” represent gain or loss on asset disposal, store closure expenses, lease termination expenses and expenses related to abandoned store sites.

Overview

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

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Fiscal Year Ended June 29, 2025

(in thousands, except unit data)

Pizza Inn Pie Five All Concepts

Ending Units Retail Sales Ending Units Retail Sales Ending Units Retail Sales

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.

Fiscal years 2025 and 2024 included 52 and 53 weeks, respectively. In order to reflect comparable 53-week periods, week 53 of fiscal 2024 has been included in both periods in the presentation of retail sales, average units open and comparable store retail sales.

The following table summarizes domestic comparable store retail sales for the Company.

53 Weeks Ended

(in thousands)

Pizza Inn Domestic Comparable Store Retail Sales $ 104,717 $ 102,791

Pie Five Domestic Comparable Store Retail Sales 10,992 11,999

Pizza Inn Brand Summary

The following tables summarize certain key indicators for the Pizza Inn franchised and licensed domestic units that management believes are useful in evaluating performance:

53 Weeks Ended

Pizza Inn Retail Sales - Total Domestic Units (in thousands, except unit data)

Delco/Express Units - Franchised 3,209 3,846

PIE Units - Licensed 24 70

Pizza Inn Ghost Kitchen Units - Franchised 7 4

Pizza Inn Comparable Store Retail Sales - Total Domestic $ 104,717 $ 102,791

Pizza Inn Average Units Open in Period

Buffet Units - Franchised 77 76

Delco/Express Units - Franchised 21 29

PIE Units - Licensed 1 4

Pizza Inn Ghost Kitchen Units - Franchised 1 —

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.

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The following chart summarizes Pizza Inn restaurant activity for the fiscal year ended June 29, 2025:

Fiscal Year Ended June 29, 2025

Beginning Units Opened Concept Change Transfer Closed Ending Units

Delco/Express Units - Franchised 23 — — — 8 15

PIE Units - Licensed 3 — — — 2 1

Pizza Inn Ghost Kitchen Units - Franchised 1 — — — — 1

International Units (all types) 24 8 — — 10 22

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.

Pie Five Brand Summary

The following tables summarize certain key indicators for the Pie Five franchised restaurants that management believes are useful in evaluating performance:

53 Weeks Ended

Pie Five Retail Sales - Total Domestic Units (in thousands, except unit data)

Pie Five Ghost Kitchen Units - Franchised 274 11

Pie Five Comparable Store Retail Sales - Total $ 10,992 $ 11,999

Pie Five Average Units Open in Period

Pie Five Units - Franchised 18 24

Pie Five Ghost Kitchen Units - Franchised 2 1

Total Domestic Units 20 25

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.

The following chart summarizes Pie Five restaurant activity for the fiscal year ended June 29, 2025:

Fiscal Year Ended June 29, 2025

Beginning Units Opened Concept Change Transfer Closed Ending Units

Pie Five Units - Franchised 18 — (1 ) — 1 16

Pie Five Ghost Kitchen Units - Franchised 2 — — 1 1 1

Total Domestic Units 20 — (1 ) 1 2 17

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.

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Financial Results

In addition to Corporate overhead support, the Company defines its operating segments as Pizza Inn Franchising and Pie Five Franchising. The following is additional business segment information for the Fiscal Years ended June 29, 2025 and June 30, 2024 (in thousands):

Pizza Inn Franchising Pie Five Franchising Corporate Total

Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended

REVENUES:

COSTS AND EXPENSES:

Provision (recovery) for credit losses — — — — (21 ) 69 (21 ) 69

Depreciation and amortization expense — — — — 182 219 182 219

Revenues:

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.

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

Pizza Inn Franchise and License

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.

Pie Five Franchise and License

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.

Costs and Expenses:

General and Administrative Expenses

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.

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Franchise Expenses

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.

Provision (Recovery) for Credit Losses

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.

Interest Income

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.

Depreciation and Amortization Expense

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.

Provision for Income Taxes

Total income tax expense consists of the following (in thousands):

Fiscal Year Ended

Federal tax expense $ 793 $ 530

Total income tax expense $ 918 $ 619

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.

There are no material uncertain tax positions. Management’s position is that all relevant requirements are met and necessary returns have been filed, and therefore the tax positions taken on the tax returns would be sustained upon examination.

Earnings per Share

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.

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EBITDA and Adjusted EBITDA

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):

Fiscal Year Ended

Depreciation and amortization 182 219

Stock-based compensation expense 136 149

Franchisee default and closed store revenue (13 ) (156 )

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

Liquidity and Capital Resources

Sources and Uses of Funds

During fiscal 2025, the Company's primary source of liquidity was proceeds from operating activities.

Cash flows from operating activities generally reflect net income adjusted for certain non-cash items including depreciation and amortization, changes in deferred taxes, stock-based compensation, 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.

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.

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. Net cash used by financing activities in fiscal 2025 was primarily attributable to repurchases of the Company's stock. On February 24, 2025, the Company repurchased 500,000 shares at $2.40 per share in a negotiated transaction. Net cash used by financing activities in fiscal 2024 was primarily attributable to taxes paid on vested Restricted Stock Units (“RSUs”).

Liquidity

We expect to fund continuing operations and planned capital expenditures for the next fiscal year primarily from cash on hand and operating cash flow. Based on budgeted and year-to-date cash flow information, we believe that we have sufficient liquidity to satisfy our cash requirements for the 2026 fiscal year and beyond.

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.

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.

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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 and eventual disposition of the assets compared to their carrying value. If impairment is indicated, the carrying value of an impaired asset is reduced to its fair value, based on discounted estimated future cash flows.

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.

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. The Company assesses whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, using a “more likely than not” standard. In assessing the need for a valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization of deferred tax assets. In making such assessment, more weight is given to evidence that can be objectively verified, including recent operating performance. Future sources of taxable income are also considered in determining the amount of the recorded valuation allowance.

The Company accounts for uncertain tax positions in accordance with ASC 740-10, which prescribes a comprehensive model for how a 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 June 29, 2025 and June 30, 2024, 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.

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 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.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required for a smaller reporting company.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See information set forth on Index to Consolidated Financial Statements and Supplementary Data appearing on page F-1 of this report on Form 10-K.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

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ITEM 9A.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this report, were effective in assuring that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is (i) accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Management's Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate “internal control over financial reporting” (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, the Company has conducted an evaluation of the effectiveness of its internal control over financial reporting. The Company’s management based its evaluation on criteria set forth in the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon that evaluation, management has concluded that our internal control over financial reporting was effective as of June 29, 2025.

ITEM 9B.

OTHER INFORMATION.

During the quarter ended June 29, 2025, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information required by this Item is incorporated by reference from the Company’s definitive proxy statement to be filed with the SEC pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.

ITEM 11.

EXECUTIVE COMPENSATION.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES.

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PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

The financial statements filed as part of this report are listed in the Index to Consolidated Financial Statements and Supplementary Data appearing on page F-1 of this report on Form 10-K.

Any financial statement schedule filed as part of this report is listed in the Index to Consolidated Financial Statements and Supplementary Data appearing on page F-1 of this report on Form 10-K.

Exhibits:

19.1 Rave Restaurant Group, Inc. Insider Trading Policy

23.1 Consent of Independent Registered Public Accounting Firm.

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.

*Management contract or compensatory plan or agreement.

ITEM 16.

FORM 10-K SUMMARY.

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Rave Restaurant Group, Inc.

Date: September 25, 2025 By: /s/ Brandon L. Solano

Brandon L. Solano

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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Name and Position Date

/s/ Brandon L. Solano

Brandon L. Solano

Chief Executive Officer

(principal executive officer) September 25, 2025

/s/ Mark E. Schwarz

Mark E. Schwarz

Director and Chairman of the Board September 25, 2025

/s/ Robert B. Page

Robert B. Page

/s/ William C. Hammett, Jr.

William C. Hammett, Jr.

/s/ Clinton J. Coleman

Clinton J. Coleman

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RAVE RESTAURANT GROUP, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Description Page No.

Consolidated Balance Sheets at June 29, 2025 and June 30, 2024 F-4

Notes to Consolidated Financial Statements F-7

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors

Rave Restaurant Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Rave Restaurant Group, Inc and subsidiaries (the “Company”) as of June 29, 2025 and June 30, 2024, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended June 29, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 29, 2025 and June 30, 2024, and the results of their operations and their cash flows for each of the three years in the period ended June 29, 2025, in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ Whitley Penn LLP

We have served as the Company’s auditor since 2023.

Plano, Texas

September 25, 2025

F-2

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RAVE RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

Fiscal Year Ended

COSTS AND EXPENSES

Impairment of long-lived assets and other lease charges — — 5

Provision (recovery) for credit losses (21 ) 69 73

Interest (income) expense (354 ) (153 ) 1

Depreciation and amortization expense 182 219 214

INCOME PER SHARE OF COMMON STOCK

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

See accompanying Notes to Consolidated Financial Statements.

F-3

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RAVE RESTAURANT GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

ASSETS

CURRENT ASSETS

Cash and cash equivalents $ 2,859 $ 2,886

Notes receivable, current 45 68

Assets held for sale 38 33

Deferred contract charges, current 21 26

Prepaid expenses and other current assets 335 167

LONG-TERM ASSETS

Property and equipment, net 137 182

Operating lease right-of-use assets, net 489 817

Intangible assets definite-lived, net 182 252

Notes receivable, net of current portion 75 79

Deferred contract charges, net of current portion 186 197

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable - trade $ 207 $ 359

Operating lease liabilities, current 370 402

Deferred revenues, current 308 343

LONG-TERM LIABILITIES

Operating lease liabilities, net of current portion 206 555

Deferred revenues, net of current portion 457 543

COMMITMENTS AND CONTINGENCIES (SEE NOTE I)

SHAREHOLDERS' EQUITY

Treasury stock, at cost

Total liabilities and shareholders' equity $ 16,557 $ 15,819

See accompanying Notes to Consolidated Financial Statements.

F-4

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RAVE RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

Common Stock Additional Paid-in Retained Earnings Treasury Stock Total

Shares Amount Capital Shares Amount

Stock-based compensation expense — — 345 — — — 345

Purchase of treasury stock — — — — (3,357 ) (4,979 ) (4,979 )

Common Stock Additional Paid-in Retained Treasury Stock Total

Shares Amount Capital Earnings Shares Amount

Stock-based compensation expense — — 149 — — — 149

RSU vested and taxes paid on RSUs 432 4 (315 ) — — — (311 )

Common Stock Additional Paid-in Retained Earnings Treasury Stock Total

Shares Amount Capital Shares Amount

Stock-based compensation expense — — 136 — — — 136

RSU vested and taxes paid on RSUs 125 1 (183 ) — — — (182 )

Purchase of treasury stock — — — — (500 ) (1,204 ) (1,204 )

See accompanying Notes to Consolidated Financial Statements.

F-5

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RAVE RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Fiscal Year Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net income to cash provided by operating activities:

Amortization of discount on short-term investment (115 ) (50 ) —

Impairment of long-lived assets and other lease charges — — 5

Amortization of operating lease right-of-use assets 352 410 505

Amortization of definite-lived intangible assets 81 84 73

Non-cash lease expense 24 46 —

Provision (recovery) for credit losses (21 ) 69 73

Changes in operating assets and liabilities:

Deferred contract charges 16 30 7

Prepaid expenses and other current assets (168 ) 37 (58 )

Operating lease liabilities (429 ) (511 ) (558 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of short-term investments (14,117 ) (10,115 ) —

Maturities of short-term investments 12,153 5,220 —

Purchase of assets held for sale (19 ) — —

Proceeds from sale of assets held for sale 14 3 7

Purchase of definite-lived intangible assets (11 ) (8 ) (169 )

Purchase of property and equipment (56 ) (76 ) (65 )

Cash used in investing activities (2,036 ) (4,976 ) (227 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Purchase of treasury stock (1,204 ) — (4,979 )

Taxes paid on issuance of restricted stock units (182 ) (311 ) —

Payments on short-term loan — — (30 )

Cash used in financing activities (1,386 ) (311 ) (5,009 )

Net decrease in cash and cash equivalents (27 ) (2,442 ) (2,395 )

Cash and cash equivalents, beginning of year 2,886 5,328 7,723

Cash and cash equivalents, end of year $ 2,859 $ 2,886 $ 5,328

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

CASH PAID FOR:

Interest $ — $ — $ 1

Income taxes (net of refunds) $ 122 $ 5 $ 87

NON-CASH ACTIVITIES:

See accompanying Notes to Consolidated Financial Statements.

F-6

Index

RAVE RESTAURANT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Description of Business:

Rave Restaurant Group, Inc., and its subsidiaries (collectively referred to as the “Company”, or in the first person notations of “we”, “us” and “our”) franchise pizza buffet, delivery/carry-out, express restaurants and ghost kitchens domestically and internationally under the trademark “Pizza Inn” and franchise domestic fast casual restaurants under the trademarks “Pie Five Pizza Company” or “Pie Five”. The Company also licenses pizza kiosks under the “Pizza Inn” trademark. We facilitate the procurement and distribution of food, equipment and supplies to our domestic and international system of restaurants through agreements with third-party distributors.

As of June 29, 2025, we had 117 franchised Pizza Inn restaurants, 17 franchised Pie Five Units, and one licensed Pizza Inn Express, or PIE, kiosk (“PIE Units”). The 95 domestic franchised Pizza Inn restaurants were comprised of 79 pizza buffet restaurants (“Buffet Units”), five delivery/carry-out restaurants (“Delco Units”), 10 express restaurants (“Express Units”), and one ghost kitchen (“Pizza Inn Ghost Kitchen Units”). As of June 29, 2025, there were 22 international franchised Pizza Inn restaurants. Domestic Pizza Inn restaurants and kiosks were located predominantly in the southern half of the United States, with Texas, North Carolina, Arkansas and Mississippi accounting for approximately 20%, 19%, 10% and 10%, respectively, of the total number of domestic units.

Principles of Consolidation:

The consolidated financial statements include the accounts of Rave Restaurant Group, Inc. and its subsidiaries, all of which are wholly owned. 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.

Short-Term Investments:

The Company holds short-term investments in U.S. Treasury bills, classified as trading securities. Accordingly, interest income is recorded through the Consolidated Statements of Income, when earned. Management has elected to classify all U.S. Treasury bills as short-term, regardless of their maturity dates, as these are readily available to fund current operations and can be liquidated at any time at the discretion of the Company. As of June 29, 2025 and June 30, 2024, the Company held treasury bills valued at approximately $7.0 million and $4.9 million, respectively, which are included within short-term investments on the accompanying Consolidated Balance Sheets. Interest income is reflected in the accompanying Consolidated Statements of Income and Cash Flows. For the years ended June 29, 2025, June 30, 2024, and June 25, 2023, interest income recognized on the treasury bills was $313 thousand, $151 thousand, and zero, respectively.

F-7

Index

Fair Value Measurements:

Assets and liabilities carried at fair value are categorized based on the level of judgment associated with the inputs used to measure their fair value. Authoritative guidance for fair value measurements establishes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into the following three levels:

Level 1:

Inputs are unadjusted quoted market prices in active markets for identical assets or liabilities at the measurement date.

Level 2:

Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date for the duration of the instrument’s anticipated life.

Level 3:

Inputs are unobservable and therefore reflect management’s best estimate of the assumptions that market participants would use in pricing the asset or liability.

The fair value of the Company’s investments in U.S. Treasury bills at June 29, 2025 and June 30, 2024, was determined using level 1 observable inputs.

The following table summarizes the Company’s financial assets and financial liabilities measured at fair value (in thousands):

The Company has no financial assets or liabilities classified within Level 3 of the valuation hierarchy.

These items are classified in their entirety based on the lowest priority level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement of assets and liabilities within the levels of the fair value hierarchy.

Concentration of Credit Risk:

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. Balances in accounts are insured up to Federal Deposit Insurance Corporation (“FDIC”) limits of $250 thousand per institution. At June 29, 2025 and June 30, 2024, the Company had cash and cash equivalent balances in excess of FDIC insurance coverage of approximately $2.3 million and $2.4 million, respectively. We do not believe we are exposed to any significant credit risk on cash and cash equivalents.

The Company invests in U.S. Treasury bills, which are considered short-term investments. While U.S. Treasury bills are not insured by the FDIC, they are backed by the full faith and credit of the United States government. However, following the downgrade of the U.S. sovereign credit rating, the Company recognizes that the long-term fiscal outlook of the United States has weakened. Nevertheless, the Company believes the credit risk associated with these investments is minimal.

Notes receivable, which potentially subject the Company to concentrations of credit risk, consist primarily of promissory notes from franchise agreements and structured Company-financed sales of assets. At June 29, 2025, and at various times during the fiscal year then ended, the Company had concentrations of credit risk with three franchisees on notes receivables with long-term maturities. At June 30, 2024, and at various times during the fiscal year then ended, the Company had concentrations of credit risk with four franchisees on notes receivables with both short and long term maturities. As of June 29, 2025 and June 30, 2024, the financed asset sales were executed with a weighted average interest rate of 5.3% and 4.8%, respectively. Principal payments are due weekly or monthly and mature from January 1, 2027 to July 5, 2028.

F-8

Index

Property and Equipment:

Property and equipment are stated at cost less accumulated depreciation and amortization. Repairs and maintenance are charged to operations as incurred while major renewals and betterments are capitalized. Upon the sale or disposition of any property or equipment, the asset and the related accumulated depreciation or amortization are removed from the accounts and the gain or loss is included in operations. The Company capitalizes interest on borrowings during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying asset and amortized over the estimated useful life of the asset.

Depreciation and amortization are computed on the straight-line method over the estimated useful lives of the assets or, in the case of leasehold improvements, over the term of the lease including any reasonably assured renewal periods, if shorter. The useful lives of the assets range from three to ten years.

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 Space Agreements

The Company rents office space from third parties for its corporate location. Office space agreements are typically structured with non-cancelable terms of one to 10 years. The Company has concluded that its office space 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 subleased one of its restaurant spaces to a third-party through January 2025. The Company has no plans to enter into future sublease arrangements.

Information Technology Equipment Agreements

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 one to five years. The Company has concluded that its information technology equipment agreements 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.

F-9

Index

Future minimum rental payments for guaranteed leases with initial or remaining terms of one year or more at June 29, 2025 were as follows (in thousands):

Guaranteed Leases

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, a lease that, at commencement, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise). Accordingly, we recognize lease payments related to our short-term leases in our income statements on a straight-line basis over the lease term which has not changed from our prior recognition. 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.

Impairment of Long-Lived Asset and Other Lease Charges:

Accounts Receivable and Allowance for Credit Losses:

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 that may be unrecoverable based upon an analysis of the Company's prior collection experience, customer creditworthiness and current economic trends. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Finance charges may be accrued at a rate of 18% per year, or up to the maximum amount allowed by law, on past due receivables. The interest income recorded from finance charges is immaterial.

Changes in the allowance for credit losses consisted of the following (in thousands):

Balance at beginning of year $ 57 $ 58

Provision (recovery) for credit losses (21 ) 69

Amounts written off (5 ) (70 )

Ending balance $ 31 $ 57

Notes Receivable and Allowance for Credit Losses:

Notes receivable primarily consist of promissory notes arising from franchisee agreements and structured Company-financed sales of assets. The majority of amounts and terms are evidenced by formal promissory notes and personal guarantees. All notes allow for early payment without penalty. Fixed principal payments are due monthly. Notes receivable mature at various dates through 2028 and bear interest at a weighted average rate of 5.3% and 4.8% at June 29, 2025 and June 30, 2024, respectively.

F-10

Index

Notes receivable are reported at original issue amount less principal repaid, reduced by an allowance for credit losses. An allowance for expected credit losses is determined based on a specific assessment of all notes that are delinquent or determined to be doubtful to be collected. Notes are considered delinquent if the repayment terms are not met. All amounts deemed to be uncollectible are charged against the allowance for credit losses in the period that determination is made.

The allowance for credit losses for notes receivable incorporates an estimate of lifetime expected credit losses and is recorded on each note upon asset origination. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. As of June 29, 2025 and June 30, 2024, there were no modifications to notes receivable.

In evaluating the notes receivable, the Company determines that the notes are pooled based on historical collections and write-offs for purposes of determining its allowance for credit losses related to notes receivable. These notes have an amortized cost of approximately $120 thousand and $147 thousand at June 29, 2025 and June 30, 2024, respectively. Historical loss information for notes receivable at the Company shows a 0% loss rate over the contractual term.

As of June 29, 2025 and June 30, 2024, the Company has not recorded any allowance for credit losses related to the notes receivable balances. Additionally, as of June 29, 2025 and June 30, 2024, the Company did not have any notes receivable with past due or non-accrual status. The total amount of write-offs and recoveries of notes receivable were zero for the fiscal years ended June 29, 2025 and June 30, 2024.

The expected principal collections on notes receivable for the next three years are as follows as of June 29, 2025 (in thousands):

Notes Receivable

Income Taxes:

Income taxes are accounted for using the asset and liability method pursuant to the authoritative guidance on ASC 740 Accounting for Income Taxes. Deferred taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement and carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes for a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes future tax benefits to the extent that realization of such benefits is more likely than not.

Under ASC 740, we recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. From time to time, the Company may be assessed interest and penalties by taxing authorities. In those cases, the charges are recorded as income tax expense, as incurred, in the Consolidated Statements of Income.

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.

F-11

Index

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 fund contributions, and 6) supplier convention funds.

Franchise royalties, which are based on a percentage of net retail 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 typically range from five to 20 years. Fees received for renewal periods are amortized over the life of the renewal period. In the event of a closed franchise or terminated development agreement, the remaining balance of unamortized license fees will be recognized in entirety as of the date of the closure or termination.

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 Consolidated Balance Sheets and allocated on a pro rata basis to all stores opened under that specific development agreement as the stores are opened. Area development exclusivity fees that include rights to sub-franchise are amortized as revenue over the term of the contract.

Advertising fund contributions for Pizza Inn and Pie Five 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 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. Pizza Inn and Pie Five marketing fund contributions are billed and collected weekly or monthly.

Supplier convention funds are deferred until the obligations of the agreement are met and the event takes place.

The Company had subleased some of its restaurant space to a third-party. The Company's last remaining sublease term ended in January 2025 and the Company has no plans to enter into future sublease arrangements. The sublease agreements were non-cancelable through the end of the term and both parties had 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):

Fiscal Year Ended

Supplier and distributor incentive revenues 4,940 4,833 4,418

Area development exclusivity fees and foreign master license fees 13 15 18

F-12

Index

The following table reflects the changes in deferred franchise and development fees for the fiscal years ended on June 29, 2025 and June 30, 2024 (in thousands):

Amount recognized to franchise revenues (166 ) (296 )

The following table illustrates franchise and development fees expected to be recognized in the future related to performance obligations that were unsatisfied or partially satisfied as of June 29, 2025 (in thousands):

Fiscal Year Franchise and Development Fees Revenue Recognition

Stock-Based Compensation:

The Company accounts for stock options using the fair value recognition provisions of the authoritative guidance on stock-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.

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.

Contingencies:

Provisions for legal settlements are accrued when payment is considered probable and the amount of loss is reasonably estimable in accordance with the authoritative guidance on ASC 450 Accounting for Contingencies. If the best estimate of cost can only be identified within a range and no specific amount within that range can be determined more likely than any other amount within the range, and the loss is considered probable, the minimum of the range is accrued. Legal and related professional services costs to defend litigation are expensed as incurred.

Evaluating contingencies related to litigation is a process involving judgment on the potential outcome of future events, and the ultimate resolution of litigated claims may differ from our current analysis. Accordingly, we review the adequacy of accruals and disclosures pertaining to litigated matters each quarter in consultation with legal counsel and we assess the probability and range of possible losses associated with contingencies for potential accrual in the Consolidated Financial Statements.

We are engaged in various legal proceedings and have certain unresolved claims pending. Liabilities have been established based on our best estimates of our potential liability in certain of these matters. Based upon consultation with legal counsel, management is of the opinion that there are no matters pending or threatened which are expected to have a material adverse effect, individually or in the aggregate, on the consolidated financial condition or results of operations.

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.

Fiscal Year:

The Company's fiscal year ends on the last Sunday in June. The fiscal year ended June 29, 2025 contained 52 weeks, the fiscal year ended June 30, 2024 contained 53 weeks, and the fiscal year June 25, 2023 contained 52 weeks.

F-13

Index

Recently Adopted Accounting Guidance:

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU” or “standard”) 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures (Topic 280). The new guidance is effective for the Company's fiscal year beginning after December 15, 2023 and for interim periods beginning after December 15, 2024. The Company adopted this standard on July 1, 2024, which required companies to enhance disclosure of significant reportable segment expenses.

Recently Issued Accounting Standards:

December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a company’s effective tax rate reconciliation and requires disclosure of income taxes paid by jurisdiction. The amendments are effective for fiscal years beginning after December 15, 2024, which require us to adopt the provisions in our fiscal 2026 Form 10-K. The amendments should be applied prospectively; however, retrospective application is permitted. Management does not expect this ASU to have a material impact on our disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires, for each relevant expense caption on the income statement, detailed disclosure amounts for purchases of inventory, employee compensation, depreciation, and intangible asset amortization. In addition, this ASU requires companies to include amounts already required by GAAP in the same disclosure, provide a qualitative description of remaining amounts not separately disaggregated, and disclose the amount of total selling expenses along with the companies’ definition of selling expenses. The amendment is effective for fiscal years beginning after December 15, 2026, which would require us to adopt the provisions in our fiscal 2028 Form 10-K. Early adoption is permitted. The amendments should be applied prospectively; however, retrospective application is permitted. Management is currently evaluating this ASU to determine its impact on our disclosures.

NOTE B – PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS:

Property and equipment consist of the following (in thousands):

Equipment, furniture and fixtures 3 - 7 yrs $ 1,228 $ 1,173

Leasehold improvements 10 yrs or lease term, if shorter 472 472

Less: accumulated depreciation/amortization (1,563 ) (1,463 )

Depreciation and amortization expense for property and equipment was approximately $101 thousand, $135 thousand, and $141 thousand for the fiscal years ended June 29, 2025, June 30, 2024, and June 25, 2023, respectively.

Intangible assets consist of the following (in thousands):

Amortization expense for intangible assets was approximately $81 thousand, $84 thousand, and $73 thousand for the fiscal years ended June 29, 2025, June 30, 2024, and June 25, 2023, respectively.

F-14

Index

NOTE C - ACCRUED EXPENSES:

Accrued expenses consist of the following (in thousands):

NOTE D - EMPLOYEE RETENTION CREDIT:

On December 27, 2020, the Consolidated Appropriations Act of 2021 (the “CAA”) was signed into law. The CAA expanded eligibility for an employee retention credit for companies impacted by the COVID-19 pandemic with fewer than five hundred employees and at least a twenty percent decline in gross receipts compared to the same quarter in 2019, to encourage retention of employees. This payroll tax credit was a refundable tax credit against certain federal employment taxes. For the fiscal year ended June 26, 2022, the Company recorded $0.7 million of other income for the employee retention credit. The Company had $0.1 million outstanding and included within accounts receivable as of June 30, 2024 for the employee retention credit. The Company received $0.1 million and the full amount of employee retention credit has been received as of June 29, 2025, and no balance remains outstanding.

NOTE E - INCOME TAXES:

Provision for income taxes from continuing operations consists of the following (in thousands):

Fiscal Year Ended

Current - Federal $ — $ — $ —

The effective income tax rate varied from the statutory rate for the fiscal years ended June 29, 2025, June 30, 2024, and June 25, 2023 as reflected below (in thousands):

Fiscal Year Ended

Federal income taxes based on a statutory rate of 21% $ 760 $ 649 $ 452

State income taxes (net of federal benefit) 99 82 119

Permanent Adjustments (31 ) (128 ) 7

Return to Provision — 16 (49 )

The tax effects of temporary differences that give rise to the net deferred tax assets consisted of the following (in thousands):

Allowance for credit losses $ 7 $ 13

Other reserves and accruals 420 475

Operating lease liabilities 135 222

Credit carryforwards 56 156

Net operating loss carryforwards 3,503 4,057

Total deferred tax assets $ 4,176 $ 4,981

Right-of-use assets (115 ) (190 )

Other deferred tax liabilities (66 ) (35 )

Total deferred tax liabilities $ (181 ) $ (225 )

F-15

Index

The Company utilized net operating losses to offset federal taxes. At the end of tax year 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.

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 a valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization of deferred tax assets. Future sources of taxable income are also considered in determining the amount of any required valuation allowance. As of June 29, 2025 and June 30, 2024, the Company determined that no valuation allowance was necessary.

NOTE F - LEASES:

The Company leases its 19,576 square foot corporate office facility with average annual lease payments of approximately $18.00 per square foot. This lease began on January 2, 2017 and has a ten-year term. The Company amended its lease agreement in June 2020 and has elected to defer one-half of the monthly base rent for the period from June 2020 through May 2021. As of June 29, 2025 and June 30, 2024, the unpaid balance of deferred base rent was approximately $24 thousand and $56 thousand, respectively which is included in accounts payable on the accompanying Consolidated Balance Sheets.

The components of total lease expense for the fiscal years ended June 29, 2025, June 30, 2024, and June 25, 2023, where operating lease cost is included in general and administrative expense and sublease income is included in revenues in the accompanying Consolidated Statements of Income, are as follows (in thousands):

Fiscal Year Ended

Total lease expense, net of sublease income $ 324 $ 316 $ 308

Supplemental cash flow information related to operating leases is included in the table below (in thousands):

Fiscal Year Ended

Weighted average remaining lease term and weighted average discount rate for operating leases are as follows:

Fiscal Year Ended

Weighted average remaining lease term 1.6 Years 1.5 Years

Weighted average discount rate 4.2 % 4.0 %

Remaining operating lease liabilities with enforceable contract terms that are greater than one year mature as follows (in thousands):

Operating Leases

Thereafter 1

Total operating lease payments $ 598

Less: imputed interest (22 )

Total operating lease liability $ 576

F-16

Index

NOTE G - EMPLOYEE BENEFITS:

The Company has a tax advantaged savings plan that is designed to meet the requirements of Section 401(k) of the Internal Revenue Code (the “Code”). Employees who have completed three months of service and are at least 21 years of age are eligible to participate in the plan. The plan provides that participating employees may elect to have between 1% and 100% of their compensation deferred and contributed to the plan subject to certain IRS limitations. The Company has a discretionary matching contribution. Separate accounts are maintained with respect to contributions made on behalf of each participating employee. Employer matching contributions and earnings thereon are invested in the same investments as each participant’s employee deferral. The plan is subject to the provisions of the Employee Retirement Income Security Act, as amended, and is a profit-sharing plan as defined in Section 401(k) of the Code.

For the fiscal years ended June 29, 2025, June 30, 2024, and June 25, 2023, total matching contributions to the tax advantaged savings plan by the Company on behalf of participating employees were approximately $27 thousand, $21 thousand, and $24 thousand, respectively.

NOTE H - STOCK-BASED COMPENSATION PLANS:

The 2015 Long Term Incentive Plan (the “2015 LTIP”) was approved by the Company’s shareholders on November 18, 2014 and became effective June 1, 2015. Officers, employees and non-employee directors of the Company were eligible to receive awards under the 2015 LTIP. A total of 3,000,000 shares of common stock were authorized for issuance under the 2015 LTIP. Awards authorized under the 2015 LTIP included incentive stock options, non-qualified stock options, restricted shares, restricted stock units and rights (either with or without accompanying options). The 2015 LTIP provided for options to be granted at market value of the stock on the date of grant and have exercise periods determined by the Compensation Committee of the board of directors. The Compensation Committee also determined the vesting periods, performance criteria and other terms and conditions of all awards under the 2015 LTIP. The Compensation Committee had adopted resolutions under the 2015 LTIP automatically granting to each non-employee director on the first day of each fiscal year options to purchase twice the number of shares of common stock acquired during the previous fiscal year, up to a maximum of 40,000 shares. Such options were exercisable at the market value of the stock on the first day of the fiscal year, vested six months from the date of grant and expired 10 years from the date of grant. The 2015 LTIP expired by its terms on June 1, 2025.

Stock-based compensation expense is included in general and administrative expense in the accompanying Consolidated Statements of Income.

Stock Options:

A summary of stock option transactions under all of the Company’s stock option plans and information about fixed-price stock options is as follows:

Fiscal Year Ended Fiscal Year Ended

Exercised — — — — — —

Forfeited/Canceled/Expired — (37,464 ) — — (6.12 ) —

F-17

Index

The intrinsic value of options outstanding at June 29, 2025 was $63 thousand.

The following table provides information on options outstanding and options exercisable as of June 29, 2025:

Options Outstanding Options Exercisable

The following table provides information on options outstanding and options exercisable as of June 30, 2024:

Options Outstanding Options Exercisable

The following table provides information on options outstanding and options exercisable as of June 25, 2023:

Options Outstanding Options Exercisable

Stock options issued during the years ended June 29, 2025, June 30, 2024, and June 25, 2023 was zero, zero, and 40,000, respectively.

We determine fair value following the authoritative guidance as follows:

Valuation and Amortization Method. We estimate the fair value of share-based awards granted using the Black-Scholes option valuation model. We amortize the fair value of all awards on a straight-line basis over the requisite service periods, which are generally the vesting periods.

Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. Unless a life is specifically stated, we determine the expected life using the “simplified method” in accordance with Staff Accounting Bulletin No. 110 since we do not have sufficient historical share option exercise experience.

Expected Volatility. Using the Black-Scholes option valuation model, we estimate the volatility of our common stock at the date of grant based on the historical volatility of our common stock.

F-18

Index

Risk-Free Interest Rate. We base the risk-free interest rate used in the Black-Scholes option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.

Expected Dividend Yield. We have not historically paid any cash dividends on our common stock and we currently do not anticipate paying any cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero in the Black-Scholes option valuation model.

Expected Forfeitures. We use historical data to estimate pre-vesting option forfeitures. We record stock-based compensation only for those awards that are expected to vest.

Stock compensation expense related to stock options recognized in either fiscal 2025, 2024, or 2023 was zero, zero, and $15 thousand, respectively. There were no stock options that were unvested at June 29, 2025 or June 30, 2024. There was zero unamortized stock compensation expense at June 29, 2025.

Restricted Stock Units:

Restricted stock units awarded under the 2015 LTIP represent the right to receive shares of common stock upon the satisfaction of vesting requirements, performance criteria and other terms and conditions. During fiscal 2025 and 2024, 142,328 and 131,460 performance-based RSUs, respectively, were granted to certain employees. For the years ended June 29, 2025, June 30, 2024, and June 25, 2023, the Company had stock compensation expense of $136 thousand, $149 thousand, and $329 thousand, respectively, related to RSUs. As of June 29, 2025, there was $151 thousand, $128 thousand and $35 thousand unamortized stock compensation expense related to RSUs, which should be recognized during fiscal years 2026, 2027 and 2028, respectively.

The restricted stock units granted to each recipient are allocated among performance criteria pertaining to various aspects of the Company’s business, as well as its overall operations, measured based on the second fiscal year following the date of grant. Achievement of the various performance criteria entitles the recipient to receive shares of common stock in amounts ranging from 50% to 150% of the number of restricted stock units granted. Grantees of restricted stock units do not have any rights of a stockholder, and do not participate in any distributions on our common stock, until the award fully vests upon satisfaction of the vesting schedule, performance criteria and other conditions set forth in their award agreement. Contingent unvested restricted stock units are considered participating securities under ASC 260, “Earnings Per Share,” and are included in the calculation of diluted earnings per share at the beginning of the most recent quarterly period when the performance targets and vesting are probable to be met.

Compensation cost is measured as an amount equal to the fair value of the restricted stock units on the date of grant and is expensed over the 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.

A summary of the status of restricted stock units as of June 29, 2025, June 30, 2024, and June 25, 2023, and changes during the fiscal years then ended is presented below:

NOTE I - 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.

F-19

Index

NOTE J - EARNINGS PER SHARE:

The Company computes and presents earnings per share (“EPS”) in accordance with ASC 260 Earnings Per Share. Basic EPS excludes the effect of potentially dilutive securities while diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised, converted or resulted in the issuance of common stock that then shared in the earnings of the Company.

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

Fiscal Year Ended

Net income available to common shareholders $ 2,702 $ 2,473 $ 1,613

BASIC:

Net income per common share $ 0.19 $ 0.17 $ 0.11

DILUTED:

Dilutive stock options and restricted stock units 62 184 588

Net income per common share $ 0.19 $ 0.17 $ 0.10

We had 91,592, 94,769, and 151,750 shares of common stock potentially issuable upon exercise of employee stock options for years ended June 29, 2025, June 30, 2024, and June 25, 2023, respectively, which were excluded from the weighted average number of shares outstanding on a diluted basis because they had an intrinsic value of zero. These options expire at varying times from fiscal 2025 through fiscal 2032. We had 142,328, 105,000, and 271,825 restricted stock units for years ended June 29, 2025, June 30, 2024, and June 25, 2023, respectively, which were excluded from the weighted average number of shares outstanding on a diluted basis because the performance criteria had not been met and vesting was not probable.

NOTE K - 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) Corporate administration and other. 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. The Company's chief operating decision maker (“CODM”) is the chief executive officer, who assesses segment performance primarily based on operating revenues and income before taxes to inform decisions regarding resource allocation. In addition, the CODM uses segment income to evaluate investment opportunities and strategic priorities across the Company's brands.

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 and incentive payments from third-party suppliers and distributors. Assets for these segments include equipment, furniture and fixtures.

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 operating revenues, depreciation and amortization expense, and income before taxes for the Company's reportable segments as of and for the fiscal years ended June 29, 2025, June 30, 2024, and June 25, 2023 (in thousands):

Rave Restaurant Group, Inc. RAVE US Equity

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Rave Restaurant Group, Inc. RAVE US Equity☆

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Rave Restaurant Group, Inc. RAVE US Equity