RAVE Restaurant (RAVE) 10-Q 12 Nov 15 2016 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Sep. 27, 2015	Nov. 12, 2015
Document and Entity Information:
Entity Registrant Name	RAVE RESTAURANT GROUP, INC.
Entity Trading Symbol	rave
Document Type	10-Q
Document Period End Date	Sep. 27, 2015
Amendment Flag	false
Entity Central Index Key	718,332
Current Fiscal Year End Date	--06-26
Entity Common Stock, Shares Outstanding		10,313,635
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q1

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 27, 2015	Jun. 28, 2015
CURRENT ASSETS
Cash and cash equivalents	$ 3,916	$ 5,958
Accounts receivable, less allowance for bad debts accounts of $272 and $193, respectively	3,357	3,437
Notes receivable	21	24
Inventories	213	180
Income tax receivable	212	492
Deferred income tax assets	812	729
Prepaid expenses and other	834	872
Total current assets	9,365	11,692
LONG-TERM ASSETS
Property, plant and equipment, net	13,097	10,020
Long-term notes receivable	121	119
Long-term deferred tax asset	2,062	1,864
Deposits and other	274	276
Total assets	24,919	23,971
CURRENT LIABILITIES
Accounts payable - trade	3,289	2,875
Accrued expenses	1,227	1,267
Deferred rent	250	155
Deferred revenues	247	374
Total current liabilities	5,013	4,671
LONG-TERM LIABILITIES
Deferred rent, net of current portion	985	893
Deferred revenues, net of current portion	1,415	1,166
Deferred gain on sale of property	3	9
Other long-term liabilities	26	22
Total liabilities	$ 7,442	$ 6,761
COMMITMENTS AND CONTINGENCIES (See Note 2)
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; authorized 26,000,000 shares; issued 17,433,035 and 17,374,735 shares, respectively; outstanding 10,313,635 and 10,255,335 shares, respectively	$ 174	$ 174
Additional paid-in capital	25,524	24,700
Retained earnings	16,415	16,972
Treasury stock at cost Shares in treasury: 7,119,400	(24,636)	(24,636)
Total shareholders' equity	17,477	17,210
Total liabilities and shareholders' equity	$ 24,919	$ 23,971

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEETS PARENTHETICALS - USD ($) $ in Thousands	Sep. 27, 2015	Jun. 28, 2015
Parentheticals
Allowance for bad debts accounts	$ 272	$ 193
Common Stock, Par Value	$ 0.01	$ 0.01
Common Stock, Shares Authorized	26,000,000	26,000,000
Common Stock, Shares Issued	17,433,035	17,374,735
Common Stock, Shares Outstanding	10,313,635	10,255,335
Treasury Stock, shares	7,119,400	7,119,400

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Sep. 27, 2015	Sep. 28, 2014
Revenue
REVENUES:	$ 14,536	$ 11,306
COSTS AND EXPENSES:
Cost of sales	12,350	9,614
General and administrative expenses	1,569	1,109
Franchise expenses	859	715
Pre-opening expenses	432	35
Bad debt	103	79
Interest expense	1	107
Total costs and expenses	15,314	11,659
LOSS FROM CONTINUING OPERATIONS BEFORE TAXES	(778)	(353)
Income tax benefit	(258)	(115)
LOSS FROM CONTINUING OPERATIONS	(520)	(238)
Loss from discontinued operations, net of taxes	(37)	(28)
NET LOSS	$ (557)	$ (266)
LOSS PER SHARE OF COMMON STOCK - BASIC:
Loss from continuing operations	$ (0.05)	$ (0.03)
Loss from discontinued operations	0	0
Net loss	(0.05)	(0.03)
LOSS PER SHARE OF COMMON STOCK - DILUTED:
Loss from continuing operations.	(0.05)	(0.03)
Loss from discontinued operations	0	0
Net loss.	$ (0.05)	$ (0.03)
Weighted average common shares outstanding - basic	10,342	9,291
Weighted average common and potential dilutive common shares outstanding	10,954	9,865

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Sep. 27, 2015	Sep. 28, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (557)	$ (266)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Depreciation and amortization	517	376
Stock compensation expense	45	23
Deferred income taxes	(281)	(136)
Provision for bad debt	103	79
Changes in operating assets and liabilities:
Notes and accounts receivable	258	77
Inventories	(33)	(157)
Accounts payable - trade	414	(682)
Accrued expenses	151	(15)
Deferred revenue	116	168
Prepaid expenses and other	10	(209)
Cash provided by (used in) operating activities	743	(742)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(3,564)	(530)
Cash used in investing activities	(3,564)	(530)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock	779	1,196
Repayments of bank debt	0	(767)
Cash provided by financing activities	779	429
Net increase (decrease) in cash and cash equivalents	(2,042)	(843)
Cash and cash equivalents, beginning of period	5,958	2,796
Cash and cash equivalents, end of period	3,916	1,953
CASH PAYMENTS FOR:
Interest	1	15
Income taxes - net	$ 5	$ 0

Summary of Significant Accounti

Summary of Significant Accounting Policies	3 Months Ended
	Sep. 27, 2015
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies	(1) Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All appropriate intercompany balances and transactions have been eliminated. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Fiscal Quarters The three month periods ended September 27, 2015 and September 28, 2014, each contained 13 weeks. Revenue Recognition The Company recognizes revenue when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. The Company's Norco division sells food and supplies to franchisees on trade accounts under terms common in the industry. Food and supply sales revenues, including shipping and handling costs, are recognized upon delivery of the product. Revenue from restaurant sales is recognized when food and beverage products are sold. The Company reports revenue net of sales taxes collected from customers and remitted to governmental taxing authorities. Franchise revenue consists of income from license fees, royalties, and area development and foreign master license fees. License fees are recognized as income when there has been substantial performance under the agreement by the Company. Domestic license fees are generally recognized at the time the restaurant is opened. Foreign master license fees are generally recognized upon execution of the agreement as all material services relating to the sale have been substantially performed by the Company and the fee has been collected. Royalties are recognized as income when earned. Stock-Based Compensation The Company accounts for stock options using the fair value recognition provisions of the authoritative guidance on share-based payments. The Company uses the Black-Scholes formula to estimate the value of stock-based compensation for options granted to employees and directors and expects to continue to use this acceptable option valuation model in the future. The authoritative guidance also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow. Use of Management Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the Company’s management to make estimates and assumptions that affect its reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. The Company bases its estimates on historical experience and other various assumptions that it believes are reasonable under the circumstances. Estimates and assumptions are reviewed periodically and actual results could differ materially from estimates. Reclassification Certain items have been reclassified in the prior year financial statements to conform to current year presentation.

Commitments and Contingencies

Commitments and Contingencies	3 Months Ended
	Sep. 27, 2015
Commitments and Contingencies {1}
Commitments and Contingencies	(2) Commitments and Contingencies On April 22, 2009, the Company’s board of directors amended the stock purchase plan first adopted on May 23, 2007, and previously amended on June 2, 2008, to increase the number of shares of common stock the Company may repurchase to a total of 3,016,000 shares. As of September 27, 2015, up to an additional 848,425 shares could be purchased under the plan. The Company is subject to various claims and legal actions in the ordinary course of its business. The Company believes that all such claims and actions currently pending against it are either adequately covered by insurance or would not have a material adverse effect on the Company’s annual results of operations, cash flows or financial condition if decided in a manner that is unfavorable to the Company.

Stock-Based Compensation

Stock-Based Compensation	3 Months Ended
	Sep. 27, 2015
Stock-Based Compensation
Stock-Based Compensation	(3) Stock-Based Compensation For the three months ended September 27, 2015, and September 28, 2014, the Company recognized stock-based compensation expense of $45,000 and $23,000, respectively. As of September 27, 2015, unamortized stock-based compensation expense was $0.3 million. The following table summarizes the number of shares of the Company’s common stock subject to outstanding stock options: Three Months Ended September 27, 2015 September 28, 2014 Outstanding at beginning of year 871,798 921,198 Granted 42,786 78,800 Exercised - - Forfeited/Canceled/Expired - - Outstanding at end of period 914,584 999,998 Exercisable at end of period 443,028 484,323

Earnings per Share (EPS)

Earnings per Share (EPS)	3 Months Ended
	Sep. 27, 2015
Earnings per Share (EPS)
Earnings per Share (EPS)	(4) Earnings per Share (EPS) The following table shows the reconciliation of the numerator and denominator of the basic EPS calculation to the numerator and denominator of the diluted EPS calculation (in thousands, except per share amounts). Three Months Ended September 27, September 28, 2015 2014 Loss from continuing operations $ (520 ) $ (238 ) Loss from discontinued operations (37 ) (28 ) Net loss available to common stockholders $ (557 ) $ (266 ) BASIC: Weighted average common shares 10,342 9,291 Loss from continuing operations per common share $ (0.05 ) $ (0.03 ) Loss from discontinued operations per common share - - Net loss per common share $ (0.05 ) $ (0.03 ) DILUTED: Weighted average common shares 10,342 9,291 Stock options 612 574 Weighted average common shares outstanding 10,954 9,865 Loss from continuing operations per common share $ (0.05 ) $ (0.03 ) Loss from discontinued operations per common share - - Net loss per common share $ (0.05 ) $ (0.03 ) For the three months ended September 27, 2015, options to purchase 24,286 shares of common stock at an exercise price of $13.11 were excluded from the computation of diluted EPS because the options’ exercise price exceeded the average market price of the common shares for the period.

Closed restaurants and disconti

Closed restaurants and discontinued operations	3 Months Ended
	Sep. 27, 2015
Closed restaurants and discontinued operations:
Closed restaurants and discontinued operations	5) Closed restaurants and discontinued operations In April, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, The authoritative guidance on “ Accounting for Costs Associated with Exit or Disposal Activities,” Discontinued operations reflect losses from two Company-owned Pizza Inn locations in Texas. These losses were attributable to leasehold expense associated with a restaurant closed during fiscal 2008 and operating results for a restaurant closed in the fourth quarter of fiscal 2014.

Income Taxes

Income Taxes	3 Months Ended
	Sep. 27, 2015	Sep. 28, 2014
Income Taxes
Income Taxes	6) Income Taxes For the three month periods ended September 27, 2015 and September 28, 2014 income tax benefit of $0.3 million and $0.1 million, respectively, were calculated on an effective income tax rate that is consistent with the statutory U.S. federal income tax rate of 34% adjusted for state income tax effects and permanent difference items. Management believes that future operations will generate sufficient taxable income, along with the reversal of temporary differences, to fully realize the net deferred tax asset of $2.9 million.
Effective income tax rate that is consistent with the statutory U.S. federal income tax rate	34.00%	34.00%

Related Party Transactions

Related Party Transactions	3 Months Ended
	Sep. 27, 2015
Related Party Transactions:
Related Party Transactions	7) Related Party Transactions On February 20, 2014, the Company entered into an Advisory Services Agreement (the “Agreement”) with NCM Services, Inc. (“NCMS”) pursuant to which NCMS will provide certain advisory and consulting services to the Company. NCMS is indirectly owned and controlled by Mark E. Schwarz, the Chairman of the Company. The term of the Agreement commenced December 30, 2013, and continues quarterly thereafter until terminated by either party. Pursuant to the Agreement, NCMS was paid an initial fee of $150,000 and earns quarterly fees of $50,000 and an additional fee of up to $50,000 per quarter (not to exceed an aggregate of $100,000 in additional fees). The quarterly and additional fees are waived if the Company is not in compliance with all financial covenants under its primary credit facility or to the extent that payment of those fees would result in non-compliance with such financial covenants.

Segment Reporting

Segment Reporting	3 Months Ended
	Sep. 27, 2015
Segment Reporting
Segment Reporting	(8) Segment Reporting Summarized in the following tables are net sales and operating revenues, operating income and geographic information (revenues) for the Company’s reportable segments for the three month periods ended September 27, 2015 and September 28, 2014 (in thousands). Operating income reported below excludes income tax provision and discontinued operations. Three Months Ended September 27, September 28, 2015 2014 Net sales and operating revenues: Franchising and food and supply distribution $ 9,912 $ 8,486 Company-owned restaurants (1) 4,624 2,820 $ 14,536 $ 11,306 Depreciation and amortization: Franchising and food and supply distribution $ 6 $ 5 Company-owned restaurants (1) 443 321 Combined 449 326 Corporate administration and other 68 50 $ 517 $ 376 Income (loss) from continuing operations before taxes: Franchising and food and supply distribution (2) $ 633 $ 421 Company-owned restaurants (1) (2) (663 ) (101 ) Combined (30 ) 320 Corporate administration and other (2) (748 ) (673 ) $ (778 ) $ (353 ) Geographic information (revenues): United States $ 14,335 $ 11,139 Foreign countries 201 167 $ 14,536 $ 11,306 (1) Company stores that were closed are included in discontinued operations in the accompanying Condensed Consolidated Statement of Operations. (2) Portions of corporate administration and other have been allocated to segments.

Accounting Policies (Policies)

Accounting Policies (Policies)	3 Months Ended
	Sep. 27, 2015
Accounting Policies:
Principles of Consolidation	Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All appropriate intercompany balances and transactions have been eliminated.
Cash and Cash Equivalents	Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Fiscal Quarters	Fiscal Quarters The three month periods ended September 27, 2015 and September 28, 2014, each contained 13 weeks.
Revenue Recognition	Revenue Recognition The Company recognizes revenue when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. The Company's Norco division sells food and supplies to franchisees on trade accounts under terms common in the industry. Food and supply sales revenues, including shipping and handling costs, are recognized upon delivery of the product. Revenue from restaurant sales is recognized when food and beverage products are sold. The Company reports revenue net of sales taxes collected from customers and remitted to governmental taxing authorities. Franchise revenue consists of income from license fees, royalties, and area development and foreign master license fees. License fees are recognized as income when there has been substantial performance under the agreement by the Company. Domestic license fees are generally recognized at the time the restaurant is opened. Foreign master license fees are generally recognized upon execution of the agreement as all material services relating to the sale have been substantially performed by the Company and the fee has been collected. Royalties are recognized as income when earned.
Stock-Based Compensation, Policy	Stock-Based Compensation The Company accounts for stock options using the fair value recognition provisions of the authoritative guidance on share-based payments. The Company uses the Black-Scholes formula to estimate the value of stock-based compensation for options granted to employees and directors and expects to continue to use this acceptable option valuation model in the future. The authoritative guidance also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow.
Use of Management Estimates	Use of Management Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the Company’s management to make estimates and assumptions that affect its reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. The Company bases its estimates on historical experience and other various assumptions that it believes are reasonable under the circumstances. Estimates and assumptions are reviewed periodically and actual results could differ materially from estimates.
Reclassification	Reclassification Certain items have been reclassified in the prior year financial statements to conform to current year presentation.

Schedule of Summary of Outstand

Schedule of Summary of Outstanding Stock Options (Tables)	3 Months Ended
	Sep. 27, 2015
Schedule of Summary of Outstanding Stock Options
Schedule of Summary of Outstanding Stock Options	The following table summarizes the number of shares of the Company’s common stock subject to outstanding stock options: Three Months Ended September 27, 2015 September 28, 2014 Outstanding at beginning of year 871,798 921,198 Granted 42,786 78,800 Exercised - - Forfeited/Canceled/Expired - - Outstanding at end of period 914,584 999,998 Exercisable at end of period 443,028 484,323

Schedule of reconciliation of t

Schedule of reconciliation of the numerator and denominator of the basic EPS calculation to the numerator and denominator of the diluted EPS calculation (Tables)	3 Months Ended
	Sep. 27, 2015
Schedule of reconciliation of the numerator and denominator of the basic EPS calculation to the numerator and denominator of the diluted EPS calculation
Schedule of Earnings Per Share, Basic and Diluted	The following table shows the reconciliation of the numerator and denominator of the basic EPS calculation to the numerator and denominator of the diluted EPS calculation (in thousands, except per share amounts). Three Months Ended September 27, September 28, 2015 2014 Loss from continuing operations $ (520 ) $ (238 ) Loss from discontinued operations (37 ) (28 ) Net loss available to common stockholders $ (557 ) $ (266 ) BASIC: Weighted average common shares 10,342 9,291 Loss from continuing operations per common share $ (0.05 ) $ (0.03 ) Loss from discontinued operations per common share - - Net loss per common share $ (0.05 ) $ (0.03 ) DILUTED: Weighted average common shares 10,342 9,291 Stock options 612 574 Weighted average common shares outstanding 10,954 9,865 Loss from continuing operations per common share $ (0.05 ) $ (0.03 ) Loss from discontinued operations per common share - - Net loss per common share $ (0.05 ) $ (0.03 )

Schedule of Summary of Income,

Schedule of Summary of Income, Revenues and Geographic Information for Company's reportable segments (Tables)	3 Months Ended
	Sep. 27, 2015
Schedule of Summary of Income, Revenues and Geographic Information for Company's reprtable segments
Schedule of Segment Reporting Information, by Segment	(8) Segment Reporting Summarized in the following tables are net sales and operating revenues, operating income and geographic information (revenues) for the Company’s reportable segments for the three month periods ended September 27, 2015 and September 28, 2014 (in thousands). Operating income reported below excludes income tax provision and discontinued operations. Three Months Ended September 27, September 28, 2015 2014 Net sales and operating revenues: Franchising and food and supply distribution $ 9,912 $ 8,486 Company-owned restaurants (1) 4,624 2,820 $ 14,536 $ 11,306 Depreciation and amortization: Franchising and food and supply distribution $ 6 $ 5 Company-owned restaurants (1) 443 321 Combined 449 326 Corporate administration and other 68 50 $ 517 $ 376 Income (loss) from continuing operations before taxes: Franchising and food and supply distribution (2) $ 633 $ 421 Company-owned restaurants (1) (2) (663 ) (101 ) Combined (30 ) 320 Corporate administration and other (2) (748 ) (673 ) $ (778 ) $ (353 ) Geographic information (revenues): United States $ 14,335 $ 11,139 Foreign countries 201 167 $ 14,536 $ 11,306 (1) Company stores that were closed are included in discontinued operations in the accompanying Condensed Consolidated Statement of Operations. (2) Portions of corporate administration and other have been allocated to segments.

Commitments and Contingencies (

Commitments and Contingencies (Details) - shares	Sep. 27, 2015	Apr. 22, 2009
Commitments and Contingencies Details
Common stock shares may be repurchased		3,016,000
Additional shares could be purchased the plan	848,425

Stock-Based Compensation (Narra

Stock-Based Compensation (Narrative) (Details) - USD ($)	3 Months Ended
	Sep. 27, 2015	Sep. 28, 2014
Stock-Based Compensation Narrative Details
Stock-based compensation recognized	$ 45,000	$ 23,000
Unamortized stock-based compensation expense	$ 300,000

Stock-Based Compensation (Detai

Stock-Based Compensation (Details) - shares	3 Months Ended
	Sep. 27, 2015	Sep. 28, 2014
Stock-Based Compensation Details
Outstanding at beginning of year	871,798	921,198
Granted	42,786	78,800
Exercised	0	0
Forfeited/Canceled/Expired	0	0
Outstanding at end of period	914,584	999,998
Exercisable at end of period	443,028	484,323

Earnings per Share (EPS) (Detai

Earnings per Share (EPS) (Details) - USD ($) shares in Thousands	3 Months Ended
	Sep. 27, 2015	Sep. 28, 2014
Earnings per Share (EPS) Details
Loss from continuing operations	$ (520)	$ (238)
Loss from discontinued operations	(37)	(28)
Net loss available to common stockholders	$ (557)	$ (266)
BASIC:
Weighted average common shares	10,342	9,291
Loss from continuing operations per common share	$ (0.05)	$ (0.03)
Loss from discontinued operations per common share	0	0
Net loss per common share	$ (0.05)	$ (0.03)
DILUTED:
Weighted average common shares	10,342	9,291
Stock options	612	574
Weighted average common shares outstanding	10,954	9,865
Loss from continuing operations per common share	$ (0.05)	$ (0.03)
Loss from discontinued operations per common share	0	0
Net loss per common share	$ (0.05)	$ (0.03)

Earnings per Share (EPS) (Narra

Earnings per Share (EPS) (Narrative) (Details)	3 Months Ended
	Sep. 27, 2015$ / sharesshares
Earnings per Share (EPS) Narrative Details
Options to purchase shares of common stock excluded from computation of diluted eps	24,286
Exercise price of the options | $ / shares	$ 13.11

Related Party Transactions (Det

Related Party Transactions (Details)	Sep. 27, 2015USD ($)
Related Party Transactions Details
NCMS was paid an initial fee	$ 150,000
Earns quarterly fees	50,000
Additional fee per quarter	50,000
Aggregate amount not to be exceeded in additional fees	$ 100,000

Segment Reporting (Details)

Segment Reporting (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 27, 2015	Sep. 28, 2014
Net sales and operating revenues:
Franchising and food and supply distribution	$ 9,912	$ 8,486
Company-owned restaurants (1)	4,624	2,820
Consolidated revenues	14,536	11,306
Depreciation and amortization:
Franchising and food and supply distribution	6	5
Company-owned restaurants (1)	443	321
Combined	449	326
Corporate administration and other	68	50
Depreciation and amortization	517	376
Income (loss) from continuing operations before taxes:
Franchising and food and supply distribution (2)	633	421
Company-owned restaurants (1) (2)	(663)	(101)
Combined	(30)	320
Corporate administration and other (2)	(748)	(673)
Loss from continuing operations before taxes	(778)	(353)
Geographic information (revenues):
United States	14,335	11,139
Foreign countries	201	167
Consolidated total	$ 14,536	$ 11,306