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Pizza Inn Reports Results for Fourth Quarter and Fiscal Year 2007

Operating Performance Strengthens as Company Posts Positive Same Store Sales Growth in Q4

PIZZA INN, INC. today reported net income of $658,000, or $0.06 per share for the fourth quarter of the fiscal year ended June 24, 2007 versus ($4,421,000), or ($0.43) per share for the fourth quarter of fiscal 2006. The Company also reported net income of $206,000, or $0.02 per share for fiscal 2007 versus a net loss of ($5,989,000), or ($0.59) per share for fiscal 2006. Operating performance for the fourth quarter and fiscal 2007 reflected the following:

  -- Comparable buffet restaurant sales increased 3.1% for the fourth
     quarter from the fourth quarter of fiscal 2006.  For fiscal 2007,
     comparable buffet restaurant sales increased 0.8% from fiscal 2006, the
     first such annual increase in five years.
  -- Domestic chain-wide comparable restaurant sales increased 1.1% for the
     fourth quarter from the fourth quarter of fiscal 2006.  For fiscal
     2007, domestic chain-wide comparable restaurant sales decreased 0.7%
     from fiscal 2006.
  -- Overall domestic chain-wide restaurant sales decreased 3.2% for the
     fourth quarter from the fourth quarter of fiscal 2006 due to a net
     reduction in franchise openings driven by additional closures of
     underperforming restaurants.
  -- General and administrative expenses for fiscal 2007 were lower by
     $1.5 million compared to fiscal 2006.  The reduction was due primarily
     to a reduction in payroll expenses of $416,000, driven primarily by the
     outsourcing of our warehousing and distribution activities, and a
     reduction in stock compensation expense of $355,000, due primarily to
     the reversal of prior expenses for unvested options that terminated.
     Occupancy costs for fiscal 2007 were lower by $211,000 compared to
     fiscal 2006, also due primarily to the outsourcing initiative.
  -- Net income for the fourth quarter improved $5,079,000 compared to the
     fourth quarter of fiscal 2006, due primarily to accrued expenses in the
     fourth quarter of fiscal 2006 of $2,800,000 related to the litigation
     settlement between the Company and its former CEO as well as an
     impairment expense in the fourth quarter of fiscal 2006 of $1,166,000
     related to two Company-owned restaurants.


Operating results for the fourth quarter mark the third consecutive profitable quarter for Pizza Inn, further strengthening the Company's financial and cash positions.

Charlie Morrison, Interim CEO and Chief Financial Officer, commented, "We are encouraged by our continued progress. We believe that our foundation is much stronger as evidenced by our increases in cash and the elimination of our debt. The fiscal year end marks the fourth consecutive month of comparable buffet sales gains and reflects the momentum we have achieved in part due to the increasing number of franchisees remodeling their restaurants. We continue to strive to identify ways to reduce costs and improve the profitability of our franchisees to assist in the reinvestment in their businesses. While executing these initiatives, we are working on the long-term development of this chain, specifically in the areas of domestic and international restaurant growth."

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 350 restaurants and owns one restaurant with annual domestic and international chain-wide sales of approximately $145 million.

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


                                                      Year Ended
                                           June 24,    June 25,    June 26,
                                             2007        2006        2005
  REVENUES:
    Food and supply sales                  $41,029     $44,202     $49,161
    Franchise revenue                        4,622       4,799       5,162
    Restaurant sales                         1,485       1,458         946
                                            47,136      50,459      55,269

  COSTS AND EXPENSES:
    Cost of sales                           40,101      43,762      46,617
    Franchise expenses                       2,633       3,126       2,791
    General and administrative expenses      4,002       5,531       4,882
    Gain on sale of assets                    (570)       (149)         --
    Impairment of long-lived assets and
     goodwill                                   48       1,319          --
    Litigation settlement accrual              302       2,800          --
    Other (income) expense                    (159)         --          --
    Provision for bad debt                      96         301          30
    Total costs and expenses, net           46,453      56,690      54,320

  OPERATING INCOME (LOSS)                      683      (6,231)        949

    Interest expense                           477         787         590

  INCOME (LOSS) BEFORE INCOME TAXES            206      (7,018)        359

    Provision (benefit) for income taxes        --      (1,029)        155

  NET INCOME (LOSS)                           $206     $(5,989)       $204

  Basic earnings (loss) per common share     $0.02      $(0.59)      $0.02

  Diluted earnings (loss) per common share   $0.02      $(0.59)      $0.02

  Weighted average common shares
   outstanding                              10,145      10,123      10,105

  Weighted average common and
   potentially dilutive common shares
   outstanding                              10,146      10,123      10,142



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

                                                   June 24,         June 25,
  ASSETS                                             2007             2006

  CURRENT ASSETS
    Cash and cash equivalents                      $1,879             $184
    Accounts receivable, less allowance for
     doubtful accounts of $451 and $324,
     respectively                                   2,716            2,627
    Accounts receivable - related parties              --              452
    Notes receivable, current portion                   8               52
    Inventories                                     1,518            1,772
    Property held for sale                            336               --
    Deferred income tax assets                        458            1,145
    Prepaid expenses and other                        165              299
        Total current assets                        7,080            6,531

  LONG-TERM ASSETS
    Property, plant and equipment, net                778           11,921
    Notes receivable                                   12               20
    Re-acquired development territory, net            239              431
    Deposits and other                                 85               98
                                                   $8,194          $19,001
  LIABILITIES AND SHAREHOLDERS' EQUITY
  CURRENT LIABILITIES
    Accounts payable - trade                       $2,082           $2,217
    Accrued expenses                                1,805            4,791
    Current portion of long-term debt                  --            8,044
        Total current liabilities                   3,887           15,052

  LONG-TERM LIABILITIES
    Deferred gain on sale of property                 209               --
    Deferred revenues                                 314              379
    Other long-term liabilities                         7               58
        Total liabilities                           4,417           15,489

  COMMITMENTS AND CONTINGENCIES

  SHAREHOLDERS' EQUITY
    Common stock, $.01 par value; authorized
     26,000,000 shares; issued 15,120,319 and
     15,090,319 shares, respectively;
     outstanding 10,168,494 and 10,138,494
     shares, respectively                             151              151
    Additional paid-in capital                      8,471            8,426
    Retained earnings                              14,799           14,593
    Accumulated other comprehensive loss               --              (14)
    Treasury stock at cost
      Shares in treasury: 4,951,825 for both
       years                                      (19,644)         (19,644)
        Total shareholders' equity                  3,777            3,512
                                                   $8,194          $19,001



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

                                                        Year Ended
                                             June 24,    June 25,   June 26,
                                               2007        2006       2005

  CASH FLOWS FROM OPERATING ACTIVITIES:

   Net income (loss)                           $206      $(5,989)      $204
   Adjustments to reconcile net income
    (loss) to cash provided by (used for)
    operating activities:
     Depreciation and amortization              692        1,214      1,143
     Impairment of long-lived assets &
      goodwill                                   48        1,443         --
     Deferred rent expense                       (9)          56         --
     Provision for bad debt                      96          301         30
     Stock compensation expense                 (14)         341         --
     Litigation expense accrual                 302        2,800         --
     Gain on sale of assets                    (570)        (149)        --
     Deferred income taxes                      687       (1,029)        39
     Deferred revenue                           196          542         --
   Changes in operating assets and liabilities:
     Notes and accounts receivable              320          884       (256)
     Inventories                                254          145       (205)
     Accounts payable - trade                  (135)         255        716
     Accrued expenses                        (3,520)           7       (735)
     Prepaid expenses and other                  76          414        152
     Cash (used for) provided by
      operating activities                   (1,371)       1,235      1,088

  CASH FLOWS FROM INVESTING ACTIVITIES:

    Proceeds from sale of assets             11,325          589         --
    Capital expenditures                       (249)      (2,227)      (753)
      Cash provided by (used for)
       investing activities                  11,076       (1,638)      (753)

  CASH FLOWS FROM FINANCING ACTIVITIES:
    Deferred financing costs                    (25)          --         --
    Change in line of credit, net                --          747       (234)
    Repayments of long-term bank debt        (8,044)        (414)      (415)
    Purchases of treasury stock                  --           --       (160)
    Proceeds from exercise of stock options      59           81         30
      Cash (used for) provided by
       financing activities                  (8,010)         414       (779)

  Net increase in cash and cash equivalents   1,695           11       (444)
  Cash and cash equivalents, beginning of
   year                                         184          173        617
  Cash and cash equivalents, end of year     $1,879         $184       $173


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

First Call Analyst:
FCMN Contact: [email protected]

SOURCE: Pizza Inn, Inc.

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