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Pizza Inn, Inc. Reports Results for the Second Quarter Fiscal Year 2006

PIZZA INN, INC. today reported a net loss per share for its second quarter ended December 25, 2005 of ($0.06) versus earnings of $0.01 per share for the same quarter last year. The quarter resulted in a net loss of ($601,000) versus net income of $51,000 for the same quarter last year on revenues of $12.8 million and $13.8 million, respectively.

  Second Quarter FY 2006 versus Second Quarter FY 2005 Results

   *  Diluted EPS was ($0.06) versus $0.01 on a net loss of ($601,000)
      versus net income of $51,000.

   *  Revenues decreased approximately 7%, or $1,016,000, primarily due to
      lower comparable chainwide retail sales and fewer net stores.  The
      resulting reduction in food and supply sales and royalties were offset
      partially by equipment sales, which were higher by $248,000 and
      company-owned restaurant sales, which were higher by $96,000.

   *  Comparable chainwide retail sales were down 1.8%.

   *  Legal fees increased approximately $208,000 as the result of ongoing
      litigation and related matters.

   *  Energy costs increased approximately $168,000.

   *  General and administrative expenses included non-cash executive stock
      compensation expense of $94,000 for approximately 560,000 stock option
      rights granted previously.  The prior year did not include any non-
      cash compensation expense.

   *  Preopening expenses for three new company-owned stores were $124,000.

The Company's President and CEO, Tim Taft, commented, "To successfully accomplish the Pizza Inn turnaround, our focus remains on the fundamentals of the business. We continue to make significant progress in the areas of new franchisee selection, existing franchisee evaluation, new store development and improved unit-level profitability. Additionally, our 2006 marketing plan is taking an entirely new approach to improving comparable store sales by focusing on the brand's competitive strengths. Much is being accomplished at Pizza Inn; however, much work remains."

Certain statements in this press release, other than historical information, may be considered forward-looking statements, within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, and are subject to various risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ from those anticipated, estimated or expected. Among the key factors that may have a direct bearing on Pizza Inn's operating results, performance or financial condition are its ability to implement its growth strategies, national, regional and local economic conditions affecting the restaurant/entertainment industry, competition within each of the restaurant and entertainment industries, store sales cannibalization, success of its franchise operations, negative publicity, fluctuations in quarterly results of operations, including seasonality, government regulations, weather, commodity, insurance and labor costs.

Pizza Inn, Inc. is headquartered in The Colony, Texas, along with its distribution division, Norco Restaurant Services Company. Pizza Inn franchises approximately 378 restaurants and owns five restaurants with annual chainwide sales of approximately $155 million.

  Pizza Inn, Inc.                            For more information contact:
  3551 Plano Parkway                         Kevin Kleiner
  The Colony, TX  75056                      Controller
                                            (469) 384-5203

        For more information about the company, visit Pizza Inn at
                         https://www.pizzainn.com/



                             PIZZA INN, INC.
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except per share amounts)
                               (Unaudited)

                          Three Months Ended           Six Months Ended
                      December 25,  December 26,  December 25,  December 26,
  REVENUES:               2005          2004          2005          2004

     Food and supply
      sales             $11,215       $12,301       $22,523       $25,123
     Franchise revenue    1,199         1,225         2,379         2,565
     Restaurant sales       339           243           557           498
                         12,753        13,769        25,459        28,186

  COSTS AND EXPENSES:
     Cost of sales       11,094        11,690        22,226        23,883
     Franchise expenses     793           697         1,601         1,322
     General and
      administrative
      expenses            1,547         1,165         3,098         2,187
                         13,434        13,552        26,925        27,392

  OPERATING (LOSS) INCOME  (681)          217        (1,466)          794

     Gain on sale
      of asset              ---           ---           147           ---
     Interest expense      (199)         (138)         (368)         (274)

  (LOSS) INCOME BEFORE
   INCOME TAXES            (880)           79        (1,687)          520

     Provision for
      income taxes         (279)           28          (596)          184

  NET (LOSS) INCOME       $(601)          $51       $(1,091)         $336

  Basic (loss) earnings
   per common share      $(0.06)        $0.01        $(0.11)        $0.03

  Diluted (loss) earnings
   per common share      $(0.06)        $0.01        $(0.11)        $0.03

  Weighted average
   common shares         10,108        10,104        10,108        10,119

  Weighted average
   common and
   potential dilutive
   common shares         10,153        10,141        10,151        10,155



                             PIZZA INN, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                   (In thousands, except share amounts)

                                                  December 25,      June 26,
  ASSETS                                             2005             2005
                                                  (unaudited)
  CURRENT ASSETS
    Cash and cash equivalents                        $184             $173
    Accounts receivable, less allowance
     for doubtful accounts of $232 and $360,
     respectively                                   3,265            3,419
    Accounts receivable - related parties             559              622
    Notes receivable, current portion,
     less allowance for doubtful accounts
     of $0 and $11, respectively                        3              ---
    Inventories                                     2,342            1,918
    Property held for sale                            ---              301
    Deferred tax assets, net                          759              193
    Prepaid expenses and other                        299              355
        Total current assets                        7,411            6,981

  LONG-TERM ASSETS
    Property, plant and equipment, net             12,878           12,148
    Property under capital leases, net                  9               12
    Long-term receivable                               10              ---
    Long-term receivable - related party              304              314
    Goodwill                                          157              ---
    Reacquired development territory                  527              623
    Deposits and other                                201              177
                                                  $21,497          $20,255
  LIABILITIES AND SHAREHOLDERS' EQUITY
  CURRENT LIABILITIES
    Accounts payable - trade                       $2,607           $1,962
    Accrued expenses                                1,676            1,374
    Current portion of long-term debt               8,881              406
    Current portion of capital lease
     obligations                                       11               11
        Total current liabilities                  13,175            3,753

  LONG-TERM LIABILITIES
    Long-term debt                                    ---            7,297
    Long-term capital lease obligations                 7               13
    Deferred tax liability, net                        26                3
    Other long-term liabilities                       153              283
                                                   13,361           11,349

  COMMITMENTS AND CONTINGENCIES

  SHAREHOLDERS' EQUITY
    Common Stock, $.01 par value;
     authorized 26,000,000 shares;
     issued 15,060,319 and 15,046,319 shares,
     respectively; outstanding 10,108,494 and
     10,094,494 shares, respectively                  151              150
    Additional paid-in capital                      8,223            8,005
    Retained earnings                              19,491           20,582
    Accumulated other comprehensive loss              (85)            (187)
    Treasury stock at cost
      Shares in treasury: 4,951,825 and
       4,951,825, respectively                    (19,644)         (19,644)
        Total shareholders' equity                  8,136            8,906
                                                  $21,497          $20,255



                             PIZZA INN, INC.
             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)
                               (Unaudited)

                                                      Six Months Ended
                                                 December 25,   December 26,
                                                     2005           2004

  CASH FLOWS FROM OPERATING ACTIVITIES:

     Net (loss) income                             $(1,091)         $336
     Adjustments to reconcile net (loss)
      income to cash (used for) provided by
      operating activities:
        Depreciation and amortization                  568           579
        Gain on property held for sale                (157)          ---
        Recovery of bad debt, net                      ---            30
        Utilization of deferred taxes                  ---           (52)
        Stock compensation expense                     197           ---
        Deferred rent                                   31           ---
     Changes in assets and liabilities:
        Notes and accounts receivable                  195          (134)
        Inventories                                   (425)         (202)
        Accounts payable - trade                       645           156
        Accrued expenses                              (385)         (342)
        Prepaid expenses and other                      80           101
        Cash (used for) provided by
         operating activities                         (342)          472

  CASH FLOWS FROM INVESTING ACTIVITIES:

     Proceeds from sale of assets                      474           ---
     Capital expenditures                           (1,315)         (354)
        Cash used for investing
         activities                                   (841)         (354)

  CASH FLOWS FROM FINANCING ACTIVITIES:

     Repayments of long-term bank debt
      and capital lease obligations                   (209)         (438)
     Borrowings of bank debt                         1,381           ---
     Stock buy back                                    ---          (117)
     Proceeds from exercise of stock options            22            10
        Cash provided by (used for)
         financing activities                        1,194          (545)

  Net increase (decrease) in cash and
   cash equivalents                                     11          (427)
  Cash and cash equivalents, beginning
   of period                                           173           617
  Cash and cash equivalents, end of
   period                                             $184          $190

SOURCE: Pizza Inn, Inc.

CONTACT: Kevin Kleiner, Controller of Pizza Inn, Inc., +1-469-384-5203