RESTAURANT RAVE: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS. (form 10-K)

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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."

Overview

The Company franchises pizza buffet ("Buffet Units"), delivery/carry-out ("Delco
Units") and express ("Express Units") restaurants under the trademark "Pizza
Inn" and franchises fast casual pizza restaurants ("Pie Five Units") under the
trademarks "Pie Five Pizza Company" or "Pie Five". The Company also licenses
Pizza Inn Express 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 27, 2021, Company-owned and franchised restaurants
consisted of the following (in thousands, except unit data):

Fiscal Year Ended June 27, 2021
(in thousands, except unit data)

                               Pizza Inn                     Pie Five                   All Concepts
                          Ending        Retail         Ending        Retail         Ending        Retail
                          Units          Sales         Units          Sales         Units          Sales
Domestic
Franchised/Licensed            135     $  70,073             33     $  17,734            168     $  87,807
Company-Owned                    -             -              -             -              -             -
Total Domestic Units           135     $  70,073             33     $  17,734            168     $  87,807

International
Franchised                      32                            -                           32


Domestic units were located in 19 states, mostly located in the southern half of United States. The international restaurants were located in six foreign countries.

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

                                                       52 Weeks Ended
                                                   June 27,      June 28,
                                                     2021          2020
                                                       (in thousands)

Pizza Inn National comparable store retail sales $ 68,107 $ 68,812
Pie Five National retail sales of comparable stores 15,612 16,640 Total retail sales of comparable stores Rave

           $  83,719     $  85,452



Basic net income per common share increased $0.37 to net income of $0.09 per
share for fiscal 2021 compared to a net loss of $(0.28) per share in the prior
fiscal year.  Diluted net income per common share increased $0.37 to net income
of $0.09 per share for fiscal 2021 compared to a net loss of $(0.28) per share
in the prior fiscal year. Net income increased $5.7 million to net income of
$1.5 million for fiscal 2021 compared to a net loss of $4.2 million for the
prior fiscal year on revenues of $8.6 million for fiscal 2021 as compared to
$10.0 million in fiscal 2020.

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Adjusted EBITDA for the fiscal year ended June 27, 2021, improved to $2.0
million compared to $0.6 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):

                                                             Fiscal Year Ended
                                                          June 27,      June 28,
                                                            2021          2020
Net income (loss)                                         $   1,520     $  (4,233 )
Interest expense                                                 92            95
Income taxes                                                    (29 )       4,078
Depreciation and amortization                                   167         

186

EBITDA                                                    $   1,750     $   

126

Stock compensation expense (income)                              80          (104 )
Severance                                                        23           157
Gain on sale of assets                                          (10 )         (24 )
Impairment of long-lived assets and other lease charges          21         

880

Franchisee default and closed store revenue                    (170 )        (606 )
Closed and non-operating store costs                            271           137
Adjusted EBITDA                                           $   1,965     $     566


The operating results for fiscal 2021 and 2020 both included 52 weeks.

Covid-19 pandemic

On March 11, 2020, the World Health Organization declared the outbreak of novel
coronavirus (COVID-19) as a pandemic, and the disease has spread rapidly
throughout the United States and the world.  Federal, state and local responses
to the COVID-19 pandemic, as well as our internal efforts to protect customers,
franchisees and employees, have severely disrupted our business operations.
Most of the domestic Pizza Inn buffet restaurants and Pie Five restaurants are
in areas that were for varying periods subject to "shelter-in-place" and social
distancing restrictions prohibiting in-store sales and, therefore, were limited
to carry-out and/or delivery orders.  In some areas, these restrictions limited
non-essential movement outside the home, which discouraged or even precluded
carry-out orders.  In most cases, in-store dining has now resumed subject to
seating capacity limitations, social distancing protocols, and enhanced cleaning
and disinfecting practices. Further, the COVID-19 pandemic has precipitated
significant job losses and a national economic downturn that typically impacts
the demand for restaurant food service.  Although most of our domestic
restaurants have continued to operate under these conditions, we have
experienced temporary closures from time to time during the pandemic.

The COVID-19 pandemic has resulted in dramatically reduced aggregate in-store
retail sales at Buffet Units and Pie Five Units, modestly offset by increased
aggregate carry-out and delivery sales.  The decreased aggregate retail sales
have correspondingly decreased supplier rebates and franchise royalties payable
to the Company.  During the fourth quarter of fiscal 2020, we participated in a
government-sponsored loan program. (See, "Liquidity and Capital Resources--PPP
Loan," below.) We also temporarily furloughed certain employees and reduced base
salary by 20% for all remaining employees for the fourth quarter of fiscal 2020,
as well as reducing other expenses. While the Company will remain focused on
controlling expenses, future results of operations are likely to be materially
adversely impacted by the pandemic and its aftermath.

We expect that Buffet Units and Pie Five Units will continue to be subject to
capacity restrictions for some time as social distancing protocols remain in
place. Additionally, an outbreak or perceived outbreak of COVID-19 connected to
restaurant dining could cause negative publicity directed at any of our brands
and cause customers to avoid our restaurants. We cannot predict how long the
pandemic will last or whether it will reoccur, what additional restrictions may
be enacted, to what extent off-premises dining will continue, or if individuals
will be comfortable returning to our Buffet Units and Pie Five Units following
social distancing protocols. Any of these changes could materially adversely
affect the Company's future financial performance.  However, the ultimate impact
of COVID-19 on our future results of operations and liquidity cannot presently
be predicted.

Pizza Inn Brand Summary

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

                                                                           52 Weeks Ended
                                                                   June 27,               June 28,
                                                                     2021                   2020
Pizza Inn Retail Sales - Total Domestic Units                     (in thousands, except unit data)
Domestic Units
Buffet Units - Franchised                                      $         63,776       $         71,267
Delco/Express Units - Franchised                                          6,053                  6,200
PIE Units - Licensed                                                        244                    289
Total Domestic Retail Sales                                    $         70,073       $         77,756

Pizza Inn comparable store retail sales – Domestic total $ 68,107 $ 68,812

Pizza Inn Average Units Open in Period
Domestic Units
Buffet Units - Franchised                                                    77                     85
Delco/Express Units - Franchised                                             55                     57
PIE Units - Licensed                                                         12                     10
Total Domestic Units                                                        144                    152



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Pizza Inn’s total domestic retail sales decreased by $ 7.7 million, or 9.9% compared to the previous year. The decline in domestic retail sales is mainly due to the effects of COVID-19. Pizza Inn’s national comparable store retail sales declined by $ 0.7 million, or 1.0%.

The following chart summarizes Pizza Inn restaurant activity for the fiscal year
ended June 27, 2021:

                                                         Fiscal Year Ended June 27, 2021
                                    Beginning                           Concept                        Ending
                                      Units            Opened           Change          Closed         Units
Domestic Units:
Buffet Units - Franchised                   83                 1               (1 )           13             70
Delco/Express Units - Franchised            55                 2                1              4             54
PIE Units - Licensed                        13                 -                -              2             11
Total Domestic Units                       151                 3                -             19            135

International Units (all types)             38                 3                -              9             32

Total Units                                189                 6                -             28            167



The net decrease of 16 domestic units was primarily due to declines in Buffet,
Delco, and PIE units. The net decrease of six international Pizza Inn units was
primarily due to closure of underperforming units in Bangladesh partially offset
by new units in the Middle East. We believe that this represents a stabilizing
of international unit count.

Pie Five Brand Summary

The following tables summarize certain key indicators for the Pie Five
franchised and Company-owned restaurants that management believes are useful in
evaluating performance.

                                                                           52 Weeks Ended
                                                                   June 27,               June 28,
                                                                     2021                   2020
                                                                  (in thousands, except unit data)
Pie Five Retail Sales - Total Units
Domestic Units - Franchised                                    $         17,734       $         25,771
Domestic Units - Company-owned                                                -                    240
Total Domestic Retail Sales                                    $         

$ 17,734 26,011

Pie Five Comparable Store Retail Sales - Total                 $         

$ 15,612 $ 16,640

Pie Five Average Units Open in Period
Domestic Units - Franchised                                                  37                     53
Domestic Units - Company-owned                                                -                      1
Total Domestic Units                                                         37                     54



Pie Five domestic total retail sales decreased $8.3 million, or 31.8%, compared
to the prior year.  Average units open in the period decreased to 37 from 54 the
prior year.  Comparable store retail sales decreased by $1.0 million, or 6.2%
during fiscal 2021 compared to the prior year.

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The following chart summarizes Pie Five restaurant activity for the fiscal year
ended June 27, 2021:

                                     Fiscal Year Ended June 27, 2021
                           Beginning                                    Ending
                             Units          Opened        Closed         Units

Domestic - Franchised              42             1            10            33
Domestic - Company-owned            -             -             -             -
Total Domestic Units               42             1            10            33



The net decrease of 9 Pie Five units during fiscal 2021 was primarily the result
of the closure of poor-performing units, which we believe provides us a stronger
foundation for future brand growth.  We believe that this trend of net store
closures will moderate and then reverse in future periods.

Pie Five - Company-Owned Restaurants                                 Fiscal Year Ended
(in thousands, except store weeks and average data)              June 27,   

June 28,

                                                                   2021     

2020

Store weeks (excluding partial weeks)                                     -              30
Average weekly sales                                                      -           8,108
Average number of units                                                   -               1

Restaurant sales (excluding partial weeks)                                -             240
Restaurant sales                                                          -             240

Loss from continuing operations before taxes                           (292 )        (1,006 )
Allocated marketing and advertising expenses                              -              12
Depreciation/amortization expense                                         -               -
Impairment, other lease charges and non-operating store costs           291             810
Restaurant operating cash flow                                           (1 

) (184)



We closed our single remaining Company-owned Pie Five restaurant during the
third quarter of fiscal 2020.  Average weekly sales for Company-owned Pie Five
restaurants also decreased $8.1 thousand, or 100.0%, to zero for the fiscal year
ended June 27, 2021.

Loss from continuing operations before taxes for Company-owned Pie Five stores
decreased $0.7 million for the fiscal year ended June 27, 2021 compared to the
same period of the prior year primarily due to the closure of all remaining
Company-owned restaurants.  Similarly, operating cash flow from Company-owned
Pie Five restaurants improved by $183 thousand to $1 thousand cash used in
fiscal 2021 compared to $184 thousand cash used in fiscal 2020.

Non-GAAP financial measures and other conditions

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. We believe that restaurant operating cash flow is a useful
metric to investors in evaluating the ongoing operating performance of
Company-owned restaurants and comparing such store operating performance 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 here, some of which represent non-GAAP financial measures, have the meaning and are calculated as follows:

• “EBITDA” represents earnings before interest, taxes, depreciation and amortization.

amortization.

• “Adjusted EBITDA” represents earnings before interest, taxes, depreciation and amortization.

amortization, stock-based compensation expense, severance pay, gain / loss on the sale of

assets, costs related to depreciation and other rental charges, franchisee default

and income / expenses of closed stores, and costs of closed and non-operating stores.



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• “Retail sales” represents restaurant sales reported by our franchisees and

Company-owned restaurants, which can be segmented by brand or

national / international sites.

• “Comparable store retail sales” includes retail sales of restaurants that

have been open for at least 18 months at the end of the reference period.

The sales results of a restaurant temporarily closed for renovation

or relocation in the same commercial area are included in the calculation only

for the days when the restaurant was open in the two periods compared.

• “Store weeks” represent the total number of complete weeks specified

restaurants were open during the period.

• “Average open units” reflects the number of restaurants open during a report.

period weighted by the percentage of weeks in a reporting period during which each

the restaurant was open.

• “Average weekly sales” for a specified period are calculated as total retail sales.

sales (excluding partial weeks) divided by the period’s store weeks.

• “Restaurant operating cash flow” represents the pre-tax profit realized by

Restaurants owned by the company before (1) allocated marketing and advertising

charges, (2) depreciation and amortization, (3) depreciation and other leases

fees and (4) costs unrelated to the operation of the store.

• “Non-operating store costs” represent the gain or loss on the disposal of assets, the store

closing costs, lease termination costs and abandonment costs

store locations.

• “Default Franchisee and Closed Store Revenues / Expenses” represents the net amount of

accelerated revenues and costs attributable to the development of the failing area

agreements and closures of franchised stores.

Financial results

The Company defines its operating segments as Pizza Inn Franchising, Pie Five
Franchising and Company-Owned Restaurants. The following is additional business
segment information for the Fiscal Years ended June 27, 2021 and June 28, 2020
(in thousands):

                              Pizza Inn                     Pie Five                   Company-Owned
                             Franchising                   Franchising                     Stores                     Corporate                     Total
                          Fiscal Year Ended             Fiscal Year Ended            Fiscal Year Ended            Fiscal Year Ended           Fiscal

Year ended

                       June 27,       June 28,       June 27,       June 

28, June 27, June 28, June 27, June 28, June 27,

     June 28,
                         2021           2020           2021           2020          2021           2020          2021          2020          2021          2020
REVENUES:
Franchise and
license revenues      $    6,582     $    6,662     $    1,800     $    2,891     $       -      $       -     $       -     $       -     $   8,382     $   9,553
Restaurant sales               -              -              -              -             -            240             -             -             -           240
Rental income                  -              -              -              -             -              -           200           195           200           195
Interest income and
other                          -              -             16              3             -              -            (5 )          37            11            40
Total revenues             6,582          6,662          1,816          2,894             -            240           195           232         8,593        10,028

COSTS AND EXPENSES:
Cost of sales                  -              -              -              -           264            439             -             -           264           439
General and
administrative
expenses                       -              -              -              -             7             90         4,703         5,413         4,710         5,503
Franchise expenses         1,377          1,297          1,017          1,754             -              -             -             -         2,394         3,051
Gain on sale of
assets                         -              -              -              -             -              -           (10 )         (24 )         (10 )         (24 )
Impairment of
long-lived assets
and other lease
charges                        -              -              -              -            21            717             -           163            21           880
Bad debt                       -              -              -              -             -              -           121            53           121            53
Interest expense               -              -              -              -             -              -            92            95            92            95
Amortization and
depreciation
expense                        -              -              -              -             -              -           167           186           167           186
Total costs and
expenses                   1,377          1,297          1,017          1,754           292          1,246         5,073         5,886         7,759        10,183

OTHER INCOME:
Gain on forgiveness
of PPP loan                    -              -              -              -             -              -          (657 )           -          (657 )           -
Total other income             -              -              -              -             -              -          (657 )           -          (657 )           -

INCOME/(LOSS)
BEFORE TAXES          $    5,205     $    5,365     $      799     $    1,140     $    (292 )    $  (1,006 )   $  (4,221 )   $  (5,654 )   $   1,491     $    (155 )



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Revenues:

Revenues are derived from franchise royalties, franchise fees and supplier and
distributer incentives, advertising funds, area development exclusivity fees and
foreign master license fees, supplier convention funds, sublease rental income,
interest and other income, and sales by Company-owned restaurants. The volume of
supplier incentive revenues is dependent on the level of chain-wide retail
sales, which are impacted by changes in comparable store sales and restaurant
count, and the products sold to franchisees through third-party food
distributors. Total revenues for fiscal 2021 and fiscal 2020 were $8.6 million
and $10.0 million, respectively.

Pizza Inn Franchise and license revenues

Pizza Inn franchise revenues decreased by $0.1 million to $6.6 million in fiscal
2021 compared to $6.7 million in fiscal 2020. The 1.2% decrease was primarily
due to the effects of COVID-19.

Pie Five Franchise and License Revenues

Pie Five franchise revenues decreased by $1.1 million to $1.8 million for fiscal
2021 compared to $2.9 million for fiscal 2020. The 37.7% decrease was primarily
due to reduced restaurant count and the effects of COVID-19.

Restaurant sales

We had no restaurant sales, which consist of revenue generated by Company-owned
restaurants, in fiscal 2021 because we closed our single remaining Company-owned
restaurant during the third quarter of fiscal 2020.

Costs and expenses:

Cost of sales

Cost of sales primarily includes food and supply costs, labor costs, and lease
costs directly related to Company-owned restaurant sales. These costs decreased
39.9%, or $175 thousand, to $264 thousand for fiscal 2021 compared to $439
thousand in fiscal 2020.  The decrease was primarily the result of the closure
of all remaining Company-owned stores during the third quarter of fiscal 2020
offset by ongoing lease costs directly related to the closed Company-owned
stores.

General and administrative expenses

Total general and administrative expenses decreased $0.8 million to $4.7 million
for fiscal 2021 compared to $5.5 million for the prior fiscal year. General and
administrative expenses for Company-owned restaurants decreased $83 thousand to
$7 thousand for fiscal 2021 compared to $90 thousand for the prior fiscal year
primarily as a result of the closure of all remaining Company-owned stores
during the third quarter of fiscal 2020. General and administrative expenses for
corporate decreased $0.7 million to $4.7 million for fiscal 2021 compared to
$5.4 million for the prior year primarily as a result of a decrease in Pie Five
advertising costs and payroll and related partially offset by an increase in
Pizza Inn advertising costs.

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 $0.7 million to $2.4 million in fiscal 2021
from $3.1 million in the prior fiscal year. Pizza Inn franchise expenses
increased $0.1 million to $1.4 million in fiscal 2021 compared to $1.3 million
in the prior fiscal year primarily as a result of an increase in payroll and
related, advertising, and travel costs partially offset by a decrease in
convention costs.  Pie Five franchise expenses decreased by $0.8 million to $1.0
million in fiscal 2021 compared to $1.8 million in the prior fiscal year
primarily as a result of a reduction in advertising costs.

Gain on sale of assets

The Company's gain on sale of assets reflects the net difference between the
sale price of assets and the net carrying value of the assets at the time of
sale.  Gain on sale of assets decreased to $10 thousand in fiscal 2021 compared
to $24 thousand in the prior year.

Depreciation charges

Impairment of long-lived assets and other lease charges were $21 thousand for
fiscal 2021 compared to $880 thousand for fiscal 2020. Impairment of long-lived
assets and other lease charges for Company-owned restaurants decreased to $21
thousand in fiscal 2021 compared to $717 thousand in fiscal 2020 primarily due
to a reduction in lease charges for closed stores.

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Bad Debt Expense

The Company monitors franchisee debit balances and adjusts credit terms as necessary to minimize the Company’s exposure to high risk accounts receivable. Bad debts increased by $ 68,000 To $ 121,000 during fiscal year 2021 compared to $ 53,000 in fiscal year 2020 mainly related to national accounts receivable.

Interest charges

Interest expense has decreased $ 3,000 for fiscal year 2021 to $ 92,000 compared to $ 95,000 in the previous year.

Amortization and depreciation expense

Amortization and depreciation expense decreased $19 thousand to $167 thousand in
fiscal 2021 compared to $186 thousand in fiscal 2020 primarily as a result of
lower amortization of software.

Provision for income tax

The Company continually reviews the realizability of its deferred tax assets,
including an analysis of factors such as future taxable income, reversal of
existing taxable temporary differences, and tax planning strategies. In
assessing the need for the valuation allowance, the Company considers both
positive and negative evidence related to the likelihood of realization of
deferred tax assets. Future sources of taxable income are also considered in
determining the amount of the recorded valuation allowance. The Company has
continued to maintain a full valuation allowance for the year ended June 27,
2021.

At the end of tax year ended June 27, 2021, the Company had net operating loss
carryforwards totaling $23.6 million that are available to reduce future taxable
income and will begin to expire in 2032. Under the Tax Cuts and Jobs Act,
approximately $1.78 million of the loss carryforwards are limited to 80% and do
not expire.

As of June 27, 2021, tax years remained open to examination from June 24, 2012,
by the federal and state tax authorities, for three or four years from the tax
year in which net operating losses or tax credits are utilized. The Company was
not subject to any open income tax examinations by any tax authority as of June
27, 2021.

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.

On March 27, 2020, President Trump signed into law the CARES Act. The
legislation enacts various measures to assist companies affected by the COVID-19
pandemic. Key income tax-related provisions of the bill include temporary
modifications to net operating loss utilization and carryback limitations,
allowance of refundable alternative minimum tax credits, reduced limitation of
charitable contributions, reduced limitations of business interest expense, and
technical corrections to depreciation of qualified improvement property.

On December 27, 2020, President Trump signed into law the Consolidated
Appropriations Act, an omnibus spending bill that includes an array of
COVID-related tax relief for individuals and businesses.  The tax-related
measures contained in the Act revise and expand provisions enacted earlier in
the year by the Families First Coronavirus Response Act and the CARES Act.  The
Act also extends a number of expiring tax provisions. Additionally, the Act
provides for a 100% deduction for certain business meals incurred in calendar
years 2021 and 2022, which are currently deductible at 50% for years ending
December 31, 2020. The Company determined that income tax effects related to the
passage of the Consolidated Appropriations Act were not material to the
financial statements for the year ended June 27, 2021.

                        Liquidity and Capital Resources

Sources and uses of funds

Our primary sources of liquidity are cash flow from operating activities, loan proceeds and sale of securities.

Cash flows from operating activities generally reflect net income adjusted for
certain non-cash items including depreciation and amortization, changes in
deferred taxes, share based compensation, and changes in working capital.  Cash
provided by operations was $1.5 million in fiscal 2021 compared to cash used in
operations of $0.4 million in fiscal year 2020. The increase in operating cash
flow was primarily attributable to an increase in net income and the decrease in
deferred income tax.

Cash flows from investing activities reflect net proceeds from sale of assets
and capital expenditures for the purchase of Company assets. Cash used by
investing activities was $0.2 million in fiscal 2021 compared to cash provided
by investing activities of $0.1 million in fiscal 2020.

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Cash flows from financing activities generally reflect changes in the Company's
borrowings and securities activity during the period.  Net cash provided by
financing activities was $3.9 million and $1.0 million for the fiscal years
ended June 27, 2021 and  June 28, 2020, respectively.  Cash flows from financing
activities for fiscal 2021 were primarily the result of proceeds sales of stock
in an at-the-market offering. Cash flows from financing activities for fiscal
2020 were primarily the result of proceeds from a government-sponsored loan
program and sales of stock in the at-the-market offering.

We expect that operating cash flow in fiscal 2022 will continue to be negatively affected by the COVID-19 pandemic. However, management believes that cash on hand combined with operating cash will be sufficient to fund operations over the next 12 months.

PPP loan

On April 13, 2020, the Company received the proceeds from a loan in the amount
of $0.7 million (the "PPP Loan") from JPMorgan Chase Bank, N.A. (the "Lender")
pursuant to the Paycheck Protection Program (the "PPP") of the Coronavirus Aid,
Relief, and Economic Security Act (the "CARES Act") administered by the U.S.
Small Business Administration ("SBA"). The PPP Loan was unsecured by the Company
and was guaranteed by the SBA. We applied for and received a forgiveness
decision in the fourth quarter of fiscal 2021, such that all of the PPP Loan was
forgiven at that time.

ATM Offering

On December 5, 2017, the Company entered into an At Market Issuance Sales
Agreement with B. Riley FBR, Inc. ("B. Riley FBR") pursuant to which the Company
may offer and sell shares of its common stock having an aggregate offering price
of up to $5.0 million from time to time through B. Riley FBR acting as agent
(the "2017 ATM Offering").  The 2017 ATM Offering is being undertaken pursuant
to Rule 415 and a shelf Registration Statement on Form S-3 which was declared
effective by the SEC on November 6, 2017. Through June 27, 2021, the Company had
sold an aggregate of 3,064,342 shares in the 2017 ATM Offering, realizing
aggregate gross proceeds of $4.4 million. The 2017 ATM Offering expired on
November 6, 2020.

Convertible Notes

On March 3, 2017, the Company completed a registered shareholder rights offering
of its 4% Convertible Senior Notes due 2022 ("Notes").  Shareholders exercised
subscription rights to purchase all 30,000 of the Notes at the par value of $100
per Note, resulting in gross offering proceeds to the Company of $3.0 million.

The Notes bear interest at the rate of 4% per annum on the principal or par
value of $100 per note, payable annually in arrears on February 15 of each year,
commencing February 15, 2018.  Interest is payable in cash or, at the Company's
discretion, in shares of Company common stock.  The Notes mature on February 15,
2022, at which time all principal and unpaid interest will be payable in cash
or, at the Company's discretion, in shares of Company common stock.  The Notes
are secured by a pledge of all outstanding equity securities of our two primary
direct operating subsidiaries.

Noteholders may convert their Notes to common stock as of the 15th day of any
calendar month, unless the Company sooner elects to redeem the Notes.  The
conversion price is $2.00 per share of common stock.  Accrued interest will be
paid through the effective date of the conversion in cash or, at the Company's
sole discretion, in shares of Company common stock.

During fiscal 2021, none of the Notes were converted to common shares.  As of
June 27, 2021, $1.6 million in par value of the Notes was outstanding, offset by
$28 thousand of unamortized debt issue costs and unamortized debt discounts.

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 2022 fiscal year.

Critical accounting conventions 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.

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

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

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. During fiscal year 2021, the Company
tested its long-lived assets for impairment and recognized $21 thousand in
pre-tax, non-cash impairment charges. The Company had lease charges related to
closed units of $0.7 million partially offset by $0.2 million in sublease
income.

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.
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 losses. Future sources of taxable income are also considered in
determining the amount of the recorded valuation allowance. The Company has
continued to maintain a full valuation allowance for the year ended June 27,
2021.

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 27, 2021 and June 28, 2020, 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.

Leases

The Company determines if an arrangement is a lease at inception of the
arrangement. To the extent that it can be determined that an arrangement
represents a lease, it is classified as either an operating lease or a finance
lease. The Company does not currently have any finance leases. The Company
capitalizes operating leases on the Condensed Consolidated Balance Sheets
through a right of use asset and a corresponding lease liability. Right of use
assets represent the Company's right to use an underlying asset for the lease
term and lease liabilities represent the Company's obligation to make lease
payments arising from the lease. Short-term leases that have an initial term of
one year or less are not capitalized but are disclosed below. Short-term lease
costs exclude expenses related to leases with a lease term of one month or less.

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.

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Nature of Leases

The Company rents certain office space, catering facilities and information technology equipment under non-cancellable leases to support its operations. A more detailed description of the main types of leases is included below.

Office agreements

The Company rents office space from third parties for its corporate location.
Office agreements are typically structured with non-cancelable terms of one to
10 years. The Company has concluded that its office agreements represent
operating leases with a lease term that equals the primary non-cancelable
contract term. Upon completion of the primary term, both parties have
substantive rights to terminate the lease. As a result, enforceable rights and
obligations do not exist under the rental agreements subsequent to the primary
term.

Catering space agreements

The Company rents restaurant space from third parties for its Company-owned
restaurants. Restaurant space agreements are typically structured with
non-cancelable terms of one to 10 years. The Company has concluded that its
restaurant agreements represent operating leases with a lease term that equals
the primary non-cancelable contract term. Upon completion of the primary term,
both parties have substantive rights to terminate the lease. As a result,
enforceable rights and obligations do not exist under the rental agreements
subsequent to the primary term.

The Company also subleases some of its restaurant space to third parties. The
Company's two subleases have terms that end in 2023 and 2025. The sublease
agreements are noncancelable through the end of the term and both parties have
substantive rights to terminate the lease when the term is complete. Sublease
agreements are not capitalized and are recorded as rental income in the period
that rent is received.

From June 27, 2021, the Company had no restaurants owned by the Company.

Information technology equipment

The Company rents information technology equipment, primarily printers and copiers, to a third party for its head office. Information technology equipment contracts are generally structured with non-cancellable terms of one to five years. The Company has concluded that its information technology equipment commitments are operating leases.

Discount rate

Leases typically do not provide an implicit rate. Accordingly, the Company is
required to use incremental borrowing rate in determining the present value of
lease payments based on the information available at 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 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 liability will be recognized.

Practical expedients and accounting policy choices

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 statement of operations 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 statement of operations in the period in which the
obligation for those payments is incurred.

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The components of total lease expense for the fiscal year ended June 27, 2021,
the majority of which is included in general and administrative expense, are as
follows (in thousands):

                                               Fiscal Year Ended
                                                 June 27, 2021
Operating lease cost                          $               705
Sublease income                                              (200 )
Total lease expense, net of sublease income   $               505



Additional information on cash flows related to operating leases is included in the table below (in thousands):

Year ended

                                                                            June 27, 2021
Cash paid for amounts included in the measurement of lease liabilities   $               755



Additional information on the balance sheet relating to operating leases is included in the table below (in thousands):

                                                       Fiscal Year Ended
                                                         June 27, 2021
Operating lease right of use assets, net              $             2,085
Operating lease liabilities, current                                  465
Operating lease liabilities, net of current portion                 1,911



The weighted average residual term of the leases and the weighted average discount rate of the operating leases are as follows:

                                         Fiscal Year Ended
                                           June 27, 2021
Weighted average remaining lease term             4.0 Years
Weighted average discount rate                          4.0 %



Operating lease commitments with enforceable contractual terms exceeding one year expire as follows (in thousands):

                                   Operating Leases
2022                              $              551
2023                                             558
2024                                             511
2025                                             433
2026                                             382
Thereafter                                       191
Total operating lease payments    $            2,626
Less: imputed interest                          (250 )
Total operating lease liability   $            2,376

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