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Pizza Inn Reports Results for First Quarter Fiscal Year 2008

Company Posts Positive Same Store Sales Growth and Earnings in Q1

Pizza Inn, Inc. today reported net income of $0.03 per share in its first fiscal quarter ended September 23, 2007 versus a net loss of ($0.10) per share in the same quarter in the prior fiscal year. The quarter resulted in net income of $345,000 versus a net loss of ($1,061,000) for the same quarter in the prior fiscal year on revenues of $12.1 million and $11.8 million respectively. Operating performance for the first quarter of fiscal year 2008 included the following:

  -- Comparable buffet restaurant sales increased 3.4% for the first
     quarter.
  -- Total domestic chain-wide comparable restaurant sales increased 1.4%
     for the first quarter.
  -- The Company recorded a charge of $300,000 or ($0.03) per share, in the
     quarter related to the departure of the company's previous CEO. After
     adjusting for this expense, the Company would have posted diluted
     earnings per share of $0.06.
  -- General and administrative expenses for the first quarter were lower by
     approximately 59%, or $914,000, due primarily to lower legal fees
     related to various litigation issues settled during fiscal 2007.
  -- Interest expense decreased 100%, or $200,000, compared to the same
     quarter in the prior fiscal year due to the Company eliminating all
     outstanding debt in December 2006.


Operating results for the first quarter mark the fourth consecutive profitable quarter for Pizza Inn, further strengthening the Company's financial and cash positions. It also marks seven consecutive months of comparable buffet sales growth.

Charlie Morrison, Interim CEO and Chief Financial Officer, commented, "Our momentum in same store sales through remodeling and operational execution demonstrates our progress in revitalizing the Pizza Inn brand. Working with our franchisee leadership, we are closing in on modifications to our buffet restaurant, taking the best elements of our existing prototype and combining these with a service and hospitality platform that deliver an exceptional customer experience in a more efficient restaurant. This new prototype will be introduced in 2008 as a company-owned restaurant and will be offered through our domestic and international franchise sales channels."

Further details of the new prototype will be released in the near future.

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 materially 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; success of its franchise operations; national, regional and local economic conditions affecting the restaurant industry; competition within the restaurant industry; restaurant sales cannibalization; negative publicity; fluctuations in quarterly results of operations, including seasonality; government regulations; weather; and commodity, insurance and labor costs.

Pizza Inn, Inc. (https://www.pizzainn.com/) is headquartered in The Colony, Texas, along with its distribution division, Norco Restaurant Services Company. Pizza Inn franchises approximately 346 restaurants and owns one restaurant with annual domestic and international chain-wide sales of approximately $145 million.

  Contact:
  Danny Meisenheimer
  VP of Brand Management
  Pizza Inn, Inc.
  469-384-5000
  [email protected]



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

                                                     Three Months Ended
                                             September 23,     September 24,
  REVENUES:                                      2007              2006

    Food and supply sales                         $10,779           $10,388
    Franchise revenue                               1,116             1,189
    Restaurant sales                                  183               190

                                                   12,078            11,767

  COSTS AND EXPENSES:
    Cost of sales                                  10,072             9,929
    Franchise expenses                                620               672
    General and administrative expenses               635             1,549
    Severance                                         300                 -
    Bad debt                                           23                 -
    Gain on sale of assets                              -               (10)
    Other income                                        -               (33)
    Provision for litigation costs                      -               410
    Interest expense                                    -               200
                                                   11,650            12,717

  INCOME (LOSS) FROM CONTINUING
   OPERATIONS BEFORE TAXES                            428              (950)
    Income taxes                                      -                 -
  INCOME (LOSS) FROM CONTINUING
   OPERATIONS                                         428              (950)

    Income (loss) from discontinued
     operations, net of taxes                         (83)             (111)
  NET INCOME (LOSS)                                   345            (1,061)

  EARNINGS PER SHARE OF COMMON STOCK -
   BASIC:
    Income (loss) from continuing
     operations                                     $0.04            $(0.09)
    Income (loss) from discontinued
     operations                                     (0.01)           $(0.01)
    Net income (loss)                               $0.03            $(0.10)

  EARNINGS PER SHARE OF COMMON STOCK -
   DILUTED:
  Diluted income (loss) per common share
    Income (loss) from continuing
     operations                                     $0.04            $(0.09)
    Income (loss) from discontinued
     operations                                     (0.01)            (0.01)
    Net income (loss)                               $0.03            $(0.10)

  Weighted average common shares
   outstanding - basic                             10,166            10,138

  Weighted average common and
   potential dilutive common shares
   outstanding                                     10,167            10,138

          CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                (In thousands)

                                                    Three Months Ended
                                            September 23,      September 24,
                                                2007               2006

    Net income (loss)                              $345             $(1,061)
    Interest rate swap (loss) gain -
     (net of tax expense
     of $0 and $29, respectively)                     -                 (34)
    Comprehensive income (loss)                    $345             $(1,095)



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

                                             September 23,       June 24,
  ASSETS                                         2007             2007

  CURRENT ASSETS
    Cash and cash equivalents                      $1,320           $1,879
    Accounts receivable, less allowance
     for bad debts of $472 and $451,
     respectively                                   3,074            2,716
    Notes receivable, current portion                   7                8
    Inventories                                     1,334            1,518
    Property held for sale                            336              336
    Deferred income tax assets                        458              458
    Prepaid expenses and other                        251              165
        Total current assets                        6,780            7,080

  LONG-TERM ASSETS
    Property, plant and equipment, net                752              778
    Notes receivable                                   12               12
    Re-acquired development territory, net            190              239
    Deposits and other                                115               85
                                                   $7,849           $8,194
  LIABILITIES AND SHAREHOLDERS' EQUITY
  CURRENT LIABILITIES
    Accounts payable - trade                       $1,780           $2,082
    Accrued expenses                                1,458            1,805
        Total current liabilities                   3,238            3,887

  LONG-TERM LIABILITIES
    Deferred gain on sale of property                 203              209
    Deferred revenues                                 301              314
    Other long-term liabilities                        20                7
        Total liabilities                           3,762            4,417

  COMMITMENTS AND CONTINGENCIES

  SHAREHOLDERS' EQUITY
    Common stock, $.01 par value;
     authorized 26,000,000
     shares; issued 15,121,518 and
     15,120,319 shares, respectively;
     outstanding 10,153,689 and
     10,168,494 shares, respectively                  151              151
    Additional paid-in capital                      8,471            8,471
    Retained earnings                              15,144           14,799
    Treasury stock at cost
      Shares in treasury: 4,967,829 and
      4,951,825, respectively                     (19,679)         (19,644)
        Total shareholders' equity                  4,087            3,777
                                                   $7,849           $8,194



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

                                                   Three Months Ended
                                             September 23,    September 24,
                                                 2007             2006

  CASH FLOWS FROM OPERATING ACTIVITIES:

    Net income (loss)                               $345           $(1,061)
    Adjustments to reconcile net income
     (loss) to cash (used) provided by
     operating activities:
      Depreciation and amortization                   84               311
      Severance accrual expense                      300                 -
      Deferred rent expense                            -                 2
      Stock compensation expense                       -                42
      Litigation expense accrual                       -               410
      Gain on sale of assets                           -               (10)
      Provision for bad debts                         23                 -
      Deferred revenue                                 -               112
    Changes in operating assets and
     liabilities:
      Notes and accounts receivable                 (380)              406
      Inventories                                    184                62
      Accounts payable - trade                      (302)             (138)
      Accrued expenses                              (646)               30
      Prepaid expenses and other                     (92)               51
      Cash (used) provided by operating
       activities                                   (484)              217

  CASH FLOWS FROM INVESTING ACTIVITIES:

    Proceeds from sale of assets                       -                10
    Capital expenditures                             (40)              (94)
      Cash used for investing activities             (40)              (84)

  CASH FLOWS FROM FINANCING ACTIVITIES:
    Deferred financing costs                           -               (25)
    Change in line of credit, net                      -                (6)
    Repayments of long-term bank debt                  -              (102)
    Repurchase of common stock                       (35)                -
      Cash used for financing activities             (35)             (133)

  Net decrease in cash and cash
   equivalents                                      (559)                -
  Cash and cash equivalents, beginning
   of period                                       1,879               184
  Cash and cash equivalents, end of
   period                                         $1,320              $184

            SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

                                                     Three Months Ended
                                              September 23,    September 24,
                                                  2007               2006

  CASH PAYMENTS FOR:

    Interest                                          $-               $200
    Income taxes                                       -                  -

  NON CASH FINANCING AND INVESTING
  ACTIVITIES:
    Capital lease obligations incurred
    Loss on interest rate swap                        $-               $(27)

First Call Analyst:
FCMN Contact:

SOURCE: Pizza Inn, Inc.

CONTACT: Danny Meisenheimer, VP of Brand Management of Pizza Inn, Inc.,
+1-469-384-5000, [email protected]