UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

☑

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 28, 2025 or

☐

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________ to ________.

Commission File Number: 0-12919

RAVE RESTAURANT GROUP, INC.

(Exact name of registrant as specified in its charter)


Missouri		45-3189287
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3551 Plano Parkway

The Colony, Texas 75056

(Address of principal executive offices)

(Zip Code)

(469) 384-5000

(Registrant’s telephone number,

including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	RAVE	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☑	Smaller reporting company ☑
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of January 29, 2026, 14,211,566 shares of the issuer’s common stock were outstanding.

RAVE RESTAURANT GROUP, INC.

Index


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	Page

	Condensed Consolidated Statements of Income (unaudited) for the three and six months ended December 28, 2025 and December 29, 2024	3

	Condensed Consolidated Balance Sheets at December 28, 2025 (unaudited) and June 29, 2025	4

	Condensed Consolidated Statements of Shareholders’ Equity (unaudited) for the three and six months ended December 28, 2025 and December 29, 2024	5

	Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended December 28, 2025 and December 29, 2024	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4.	Controls and Procedures	24

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3.	Defaults Upon Senior Securities	25

Item 4.	Mine Safety Disclosures	25

Item 5.	Other Information	25

Item 6.	Exhibits	26

Signatures		27

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RAVE RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended				Six Months Ended
		December 28,		December 29,		December 28,		December 29,
		2025		2024		2025		2024
REVENUES	$	3,042	$	2,869	$	6,255	$	5,919

COSTS AND EXPENSES
General and administrative expenses		1,519		1,314		2,897		2,734
Franchise expenses		732		829		1,769		1,824
Provision (recovery) for credit losses		7		9		11		(8	)
Depreciation and amortization expense		42		53		84		96
Total costs and expenses		2,300		2,205		4,761		4,646
OPERATING INCOME		742		664		1,494		1,273
Interest income		91		87		182		169
Other income		9		0		17		4
INCOME BEFORE TAXES		842		751		1,693		1,446
Income tax expense		205		144		411		313
NET INCOME	$	637	$	607	$	1,282	$	1,133

INCOME PER SHARE OF COMMON STOCK
Basic	$	0.04	$	0.04	$	0.09	$	0.08
Diluted	$	0.04	$	0.04	$	0.09	$	0.08

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		14,212		14,690		14,212		14,638
Diluted		14,276		14,716		14,277		14,660

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

RAVE RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)


		December 28,			June 29,
		2025			2025
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	624		$	2,859
Short-term investments		10,279			7,024
Accounts receivable, less allowance for credit losses of $41 and $31, respectively		1,326			1,171
Notes receivable, current		28			45
Assets held for sale		37			38
Deferred contract charges, current		24			21
Prepaid expenses and other current assets		689			335
Total current assets		13,007			11,493

LONG-TERM ASSETS
Property and equipment, net		111			137
Operating lease right-of-use assets, net		335			489
Intangible assets definite-lived, net		141			182
Notes receivable, net of current portion		74			75
Deferred tax asset, net		3,647			3,995
Deferred contract charges, net of current portion		232			186
Total assets	$	17,547		$	16,557

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade	$	479		$	207
Accrued expenses		576			855
Operating lease liabilities, current		378			370
Deferred revenues, current		97			308
Total current liabilities		1,530			1,740

LONG-TERM LIABILITIES
Operating lease liabilities, net of current portion		15			206
Deferred revenues, net of current portion		466			457
Total liabilities		2,011			2,403

COMMITMENTS AND CONTINGENCIES (SEE NOTE C)

SHAREHOLDERS' EQUITY
Common stock, $0.01 par value; authorized 26,000,000 shares; issued 25,647,171 and 25,647,171 shares, respectively; outstanding 14,211,566 and 14,211,566 shares, respectively		256			256
Additional paid-in capital		37,616			37,516
Retained earnings		8,896			7,614
Treasury stock, at cost
Shares in treasury: 11,435,605 and 11,435,605 respectively		(31,232	)		(31,232	)
Total shareholders' equity		15,536			14,154

Total liabilities and shareholders' equity	$	17,547		$	16,557

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

RAVE RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)


					Additional
	Common Stock				Paid-in			Retained		Treasury Stock
	Shares		Amount		Capital			Earnings		Shares			Amount			Total
Balance, June 30, 2024		25,522	$	255	$	37,563		$	4,912		(10,936	)	$	(30,028	)	$	12,702
Stock-based compensation expense		-		-		73			-		-			-			73
Net income		-		-		-			526		-			-			526
Balance, September 29, 2024		25,522	$	255	$	37,636		$	5,438		(10,936	)	$	(30,028	)	$	13,301
Stock-based compensation expense		-		-		53			-		-			-			53
RSU vested and taxes paid on RSUs		125		1		(183	)		-		-			-			(182	)
Net income		-		-		-			607		-			-			607
Balance, December 29, 2024		25,647	$	256	$	37,506		$	6,045		(10,936	)	$	(30,028	)	$	13,779


						Additional
	Common Stock					Paid-in		Retained	Treasury Stock
		Shares		Amount		Capital		Earnings		Shares			Amount			Total
Balance, June 29, 2025		25,647	$	256	$	37,516	$	7,614		(11,436	)	$	(31,232	)	$	14,154
Stock-based compensation expense		-		-		38		-		-			-			38
Net income		-		-		-		645		-			-			645
Balance, September 28, 2025		25,647	$	256	$	37,554	$	8,259		(11,436	)	$	(31,232	)	$	14,837
Stock-based compensation expense		-		-		62		-		-			-			62
Net income		-		-		-		637		-			-			637
Balance, December 28, 2025		25,647	$	256	$	37,616	$	8,896		(11,436	)	$	(31,232	)	$	15,536

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

RAVE RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended
		December 28,			December 29,
		2025			2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,282		$	1,133
Adjustments to reconcile net income to cash provided by operating activities:
Amortization of discount on short-term investment		(122	)		(63	)
Impairment of long-lived assets and other lease charges		-			9
Stock-based compensation expense		100			126
Depreciation and amortization		43			46
Amortization of operating lease right-of-use assets		154			169
Amortization of definite-lived intangible assets		41			41
Non-cash lease expense		8			43
Provision (recovery) for credit losses		11			(8	)
Deferred income tax		348			264
Changes in operating assets and liabilities:
Accounts receivable		(166	)		304
Notes receivable		18			26
Deferred contract charges		(49	)		15
Prepaid expenses and other current assets		(354	)		(40	)
Accounts payable - trade		272			96
Accrued expenses		(279	)		(417	)
Operating lease liabilities		(191	)		(236	)
Deferred revenues		(202	)		(267	)
Cash provided by operating activities		914			1,241

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments		(8,423	)		(8,102	)
Maturities of short-term investments		5,290			7,065
Purchase of assets held for sale		(4	)		-
Proceeds from sale of assets held for sale		5			7
Purchase of property and equipment		(17	)		(44	)
Cash used in investing activities		(3,149	)		(1,074	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Taxes paid on issuance of restricted stock units		-			(182	)
Cash used in financing activities		-			(182	)

Net decrease in cash and cash equivalents		(2,235	)		(15	)
Cash and cash equivalents, beginning of period		2,859			2,886
Cash and cash equivalents, end of period	$	624		$	2,871

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

CASH PAID FOR:
Income taxes	$	97		$	50

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

RAVE RESTAURANT GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Rave Restaurant Group, Inc., through its subsidiaries (collectively, the “Company” or “we,” “us” or “our”), franchises pizza buffet (“Buffet Units”), delivery/carry-out (“Delco Units”) and express restaurants (“Express Units”) 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 previously franchised ghost kitchens under the trademarks “Pizza Inn” and “Pie Five” (“Pizza Inn Ghost Kitchen Units” and “Pie Five Ghost Kitchen Units”) but the remaining two ghost kitchen locations were closed in agreements made with the franchisees during the three month period ended December 28, 2025. The Company may franchise ghost kitchens in the future. 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. The accompanying condensed consolidated financial statements of Rave Restaurant Group, Inc. have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the financial statements have been omitted pursuant to such rules and regulations. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 29, 2025.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments are of a normal recurring nature. Results of operations for the fiscal periods presented are not necessarily indicative of fiscal year-end results.

Note A - Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Rave Restaurant Group, Inc. and its subsidiaries, all of which are wholly owned. All appropriate inter-company balances and transactions have been eliminated.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

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 Condensed 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 December 28, 2025 and June 29, 2025, the Company held U.S. Treasury bills valued at approximately $10.3 million and $7.0 million, respectively, which are included within short-term investments on the accompanying Condensed Consolidated Balance Sheets. For the three months ended December 28, 2025 and December 29, 2024, interest income recognized on U.S. Treasury bills was $86 thousand and $87 thousand, respectively. For the six months ended December 28, 2025 and December 29, 2024, interest income recognized on the U.S. Treasury bills was $171 thousand and $169 thousand, respectively.

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 December 28, 2025 and June 29, 2025, 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):




	December 28,					June 29,
	2025						2025
Fair Value Measurements		Level 1	Level 2	Level 3	Total		Level 1	Level 2	Level 3	Total
U.S. Treasury bills		10,279	-	-	10,279		7,024	-	-	7,024
		10,279	-	-	10,279		7,024	-	-	7,024

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.

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.

The Company monitors franchisee receivable balances and adjusts credit terms when necessary to minimize the Company’s exposure to high-risk accounts receivable. For the three month period ended December 28, 2025, provision for credit losses were $7 thousand compared to $9 thousand for the same period in the prior fiscal year. For the six month period ended December 28, 2025, provision for credit losses were $11 thousand compared to recoveries for credit losses of $8 thousand for the same period in the prior fiscal year.

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



		Three Months Ended						Six Months Ended
		December 28,			December 29,			December 28,			December 29,
		2025			2024			2025			2024
Balance at beginning of year	$	35		$	40		$	31		$	57
Provision (recovery) for credit losses		7			9			11			(8	)
Amounts written off		(1	)		(7	)		(1	)		(7	)
Ending balance	$	41		$	42		$	41		$	42

Fiscal Quarters

The three and six month periods ended December 28, 2025 and December 29, 2024 each contained 13 weeks and 26 weeks, respectively.

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.

Recently Adopted Accounting Guidance

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU” or “standard”) 2023-09, Income Taxes: Improvements to Income Tax Disclosures (Topic 740), which requires companies to provide a more granular breakdown of the components that make up their effective tax rate and additional disclosures about the nature and effect of significant reconciling items. The new guidance is effective for the Company's fiscal year beginning after December 15, 2024. The Company adopted this standard on June 30, 2025, and the adoption of this standard did not have a material impact on the Company's consolidated financial statements and related disclosures.

Recent Accounting Pronouncements

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.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow- Scope Improvements, which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-11.

In December 2025, the FASB issued its final ASU which makes improvements to the Accounting Standards Codification (“ASC”) in response to feedback from stakeholders. This standard, issued as ASU 2025-12, specifically updates the Codification for a broad range of Topics arising from technical corrections, unintended application of the Codification, clarifications, and other minor improvements. This update is effective for annual reporting periods beginning after December 15, 2026, including interim reporting periods within those annual reporting periods. The Company is currently evaluating the impact of adopting ASU 2025-12.

Revenue Recognition

Revenue is measured based on consideration specified in contracts with customers and excludes incentives and amounts collected on behalf of third parties, primarily sales tax. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction that are collected by the Company from a customer are excluded from revenue.

The following describes principal activities, separated by major product or service, from which the Company generates its revenues:

Franchise Revenues

Franchise revenues consist of 1) franchise royalties, 2) supplier and distributor incentive revenues, 3) franchise license fees, 4) area development exclusivity fees and foreign master license fees, 5) advertising 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 Condensed 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 Condensed Consolidated Statements of Income. In general, we expect such advertising fund contributions and expenditures to be largely offsetting and, therefore, do not expect a significant impact on our reported income before income taxes. Our obligation related to these funds is to develop and conduct advertising activities. 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.

Rental Income

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.

Total revenues consist of the following (in thousands):


	Three Months Ended				Six Months Ended
		December 28,		December 29,		December 28,		December 29,
		2025		2024		2025		2024
Franchise royalties	$	1,141	$	1,144	$	2,311	$	2,265
Supplier and distributor incentive revenues		1,361		1,156		2,636		2,348
Franchise license fees		20		36		43		64
Area development exclusivity fees and foreign master license fees		3		3		6		6
Advertising fund contributions		517		502		1,050		966
Supplier convention funds		-		-		209		217
Rental income		-		23		-		46
Other franchise revenue		-		5		-		7
	$	3,042	$	2,869	$	6,255	$	5,919

The following table reflects the changes in deferred franchise and development fees for the six months ended on December 28, 2025 and December 29, 2024 (in thousands):


	December 28,			December 29,
		2025			2024
Beginning balance	$	460		$	549
Additions		60			33
Amount recognized to franchise revenues		(49	)		(70	)
Ending balance	$	471		$	512

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 December 28, 2025 (in thousands):


	Franchise and
	Development Fees
Fiscal Year		Revenue Recognition
2026	$	30
2027		62
2028		55
2029		53
2030		42
Thereafter		229
	$	471

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.

Restricted stock units (“RSUs”) represent the right to receive shares of common stock upon the satisfaction of vesting requirements, performance criteria and other terms and conditions. Compensation cost for RSUs is measured as an amount equal to the fair value of the RSUs on the date of grant and is expensed over the vesting period if achievement of the performance criteria is deemed probable, with the amount of the expense recognized based on the best estimate of the ultimate achievement level.

Note B - Leases

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

Operating lease right-of-use assets and liabilities are recognized at the commencement date of an arrangement based on the present value of lease payments over the lease term. In addition to the present value of lease payments, the operating lease right-of-use asset also includes any lease payments made to the lessor prior to lease commencement less any lease incentives and initial direct costs incurred. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

Nature of Leases

The Company leases certain office space, restaurant space, and information technology equipment under non-cancelable leases to support its operations. A more detailed description of significant lease types is included below.

Office 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 one franchised store lease. The guaranteed lease is not considered an operating lease because the Company does not have the right to control the underlying asset. If the franchisee abandons the lease and fails to meet the lease’s financial obligations, the lessor may assign the lease to the Company for the remainder of the term. If the Company does not expect to assign the abandoned lease to a new franchisee within 12 months, the lease will be considered an operating lease and a right-of-use asset, and lease liability will be recognized.

Practical Expedients and Accounting Policy Elections

Certain lease agreements include lease and non-lease components. For all existing asset classes with multiple component types, the Company has utilized the practical expedient that exempts it from separating lease components from non-lease components. Accordingly, the Company accounts for the lease and non-lease components in an arrangement as a single lease component.

In addition, for all existing asset classes, the Company has made an accounting policy election not to apply the lease recognition requirements to short-term leases (that is, 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.

The components of total lease expense for the three and six months ended December 28, 2025 and December 29, 2024, where operating lease cost is included in general and administrative expense and sublease income is included in revenues in the accompanying Condensed Consolidated Statements of Income, are as follows (in thousands):


	Three Months Ended					Six Months Ended
		December 28, 2025		December 29, 2024			December 28, 2025		December 29, 2024

Operating lease cost	$	81	$	103		$	162	$	207
Sublease income		-		(23	)		-		(46	)
Total lease expense, net of sublease income	$	81	$	80		$	162	$	161

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


	December 28, 2025		December 29, 2024
Weighted average remaining lease term	1.2 Years		2.1 Years
Weighted average discount rate	4.2	%	4.1	%

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


		Operating Leases
Fiscal Year 2026		194
Fiscal Year 2027		197
Fiscal Year 2028		6
Fiscal Year 2029		6
Thereafter		1
Total operating lease payments	$	404
Less: imputed interest		(11	)
Total operating lease liability	$	393

Note C - 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 results of operations or financial condition if decided in a manner that is unfavorable to the Company. No accrual has been recorded for any claims or actions at December 28, 2025 or June 29, 2025.

Note D - Stock-Based Compensation

Stock Options:

For the three and six months ended December 28, 2025 and December 29, 2024, the Company recognized stock-based compensation expense related to stock options of zero. As of December 28, 2025, there was no unamortized stock-based compensation expense related to stock options.

The following table summarizes the number of shares of the Company’s common stock subject to outstanding stock options:


	Six Months Ended
		December 28, 2025		December 29, 2024
		Shares		Shares
Outstanding at beginning of year		114,286		114,286

Granted		-		-
Exercised		-		-
Forfeited/Canceled/Expired		(24,286	)	-

Outstanding at end of period		90,000		114,286

Exercisable at end of period		90,000		114,286

Restricted Stock Units:

For the three and six months ended December 28, 2025, the Company had stock-based compensation expense related to RSUs of $62 thousand and $100 thousand, respectively. For the three and six months ended December 29, 2024, the Company had stock-based compensation expense related to RSUs of $53 thousand and $126 thousand, respectively. As of December 28, 2025, there was $591 thousand unamortized stock-based compensation expense related to RSUs.

As of December 28, 2025 the RSUs will be amortized during the next 34 months. A summary of the status of restricted stock units as of December 28, 2025 and December 29, 2024, and changes during the six months then ended is presented below:

Six Months Ended

December 28, 2025

December 29, 2024

Unvested at beginning of year

Performance adjustment

SEC Form 10-Q filed by Rave Restaurant Group Inc.