UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

o QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15( d ) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~February~~May 2831, 2015

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 000-54536

PREFERRED RESTAURANT BRANDS, INC.

(Exact name of registrant as specified in its charter)

Florida	80-0608195
State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification No.)

c/o KCI Investments, LLC 4033 South Dean Martin Drive; Las Vegas, NV	89103
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (702) 834-7101

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 ~~durin`g~~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. x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). x Yes o No

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

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

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

As of ~~July~~ 21August 20, 2015 issuer had 46,~~493~~739,~~262~~366 shares of common stock issued and outstanding.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	4
Item 1: Financial Statements	4
NOTE 1—ORGANIZATION AND NATURE OF BUSINESS	87
NOTE 2—GOING CONCERN	87
NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	118
NOTE 4—PROPERTY AND EQUIPMENT	129
NOTE 5—RESTAURANT PURCHASES AND SALES	13
NOTE 5—ASSET SALES AND PURCHASES	10
NOTE 6—INTANGIBLE ASSETS	1310
NOTE 7—RELATED PARTY TRANSACTIONS	1411
NOTE 8—NOTES PAYABLE	15
NOTE 8—DEBT	12
NOTE 9—CONVERTIBLE NOTES PAYABLE	1613
NOTE 10—DERIVATIVE LIABILITY	1713
NOTE 11—CLASS B MEMBERSHIP UNITS	1814
NOTE 12—STOCKHOLDERS’ DEFICIT	1915
NOTE 13—STOCK OPTIONS AND WARRANTS	2016
NOTE 14—FAIR VALUE MEASUREMENTS	22
NOTE 14—SUBSEQUENT EVENTS	17
NOTE 15—SUBSEQUENT EVENTS	22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
FORWARD LOOKING INFORMATION	18
FORWARD LOOKING INFORMATION	24
OVERVIEW	19
OVERVIEW	24
Item 3. Quantitative and Qualitative Disclosures about Market Risk	23
Results of Operations	24
Item 4. Controls and Procedures.	23
Item 3. Quantitative and Qualitative Disclosures about Market Risk	29
PART II - OTHER INFORMATION	24
Item 4. Controls and Procedures.	29
Item 1. Legal Proceedings	24
PART II - OTHER INFORMATION	30
Item 1A. Risk Factors	24
Item 1. Legal Proceedings	30
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds	24
Item 1A. Risk Factors	30
Item 3. Defaults upon Senior Securities	24
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds	30
Item 4. Mine Safety Disclosures	24
Item 3. Defaults upon Senior Securities	30
Item 5. Other Information	24
Item 4. Mine Safety Disclosures	30
Item 6. Exhibits	24
Item 5. Other Information	30
Item 6. Exhibits	31

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this report contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to implement our business plan and generate revenues, economic, political and market conditions and fluctuations, government and industry regulation, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this in its entirety, including but not limited to our financial statements and the notes thereto. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

PART I - FINANCIAL INFORMATION

Item 1: Financial Statements

PREFERRED RESTAURANT BRANDS, INC
PREFERRED RESTAURANT BRANDS, INC. AND SUBSIDIARIES
(formerly Dixie Foods International, Inc.)
(FORMERLY DIXIE FOODS INTERNATIONAL, INC.)
Consolidated Balance Sheets
CONDENSED CONSOLIDATED BALANCE SHEETS
	February 28,			August 31,
	May 31,			August 31,
	2015			2014
	(Unaudited)
ASSETS
CURRENT ASSETS
CURRENT ASSETS:
Cash	$	1834,~~428~~241		$	24,033
Accounts receivable		~~123~~146,~~905~~751			75,216
Other receivables		-			4,632
Food inventory		~~102~~99,~~793~~679			103,367
Prepaid expenses		~~272~~305,~~741~~951			111,678
Debt issuance costs, net of amortization of $4,916 and $-0-, respectively		157,754			-
Debt issuance costs, net		116,640			-
Total Current Assets		~~675~~703,~~621~~262			318,926
OTHER ASSETS
Prepaid franchise and territory rights fees, net		681,986			897,846
Prepaid franchise and territory rights fees, net		832,708			897,846
Property and equipment, net		4,029,839			3,418,743
Property and equipment, net		4,224,184			3,418,743
TOTAL ASSETS	$	5,415,087		$	4,635,515
TOTAL ASSETS		5,732,513			4,635,515
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	34,~~704~~525,~~351~~024		$	933,507
Deferred revenue		6639,~~392~~835			95,186
Related party notes payable		1,205,072			-
Loans payable		-			-
Short-term notes payable, net of debt discounts of $64,079 and $161,899, respectively		7,389,150			7,366,299
Related party notes payable		1,365,287			-
Short-term convertible notes payable, net of debt discounts of $106,300 and $-0-, respectively		1,193,700			300,000
Short-term notes payable, net of discounts		7,428,027			7,366,299
Derivative liability		1,562,718			-
Short-term convertible notes payable		1,172,484			300,000
Total Current Liabilities		15,121,383			8,694,992
Derivative liability		1,067,472			-
LONG-TERM LIABILITIES
Total Current Liabilities		15,598,129			8,694,992
Long-term notes payable		~~500~~567,~~000~~211			500,000
Long-term convertible notes payable		550,000			550,000
Total Liabilities		16,171,383			9,744,992
TOTAL LIABILITIES		16,715,340			9,744,992
Class B membership units, no par value, 8 units authorized, 7 and 2 units issued and outstanding, respectively, net of subscriptions receivable of $600,000 and $-0-, respectively		2,900,000			1,000,000
Class B membership units, no par value, 8 units authorized, 7 and 2 units issued and outstanding, respectively		3,500,000			1,000,000
STOCKHOLDERS' DEFICIT
STOCKHOLDERS' DEFICIT:
Preferred stock, $0.001 par value, 14,999,999 shares authorized, no shares issued and outstanding		-			-
Series Class B preferred stock, $0.001 par value, 1 share authorized, 1 and -0- shares issued and outstanding, respectively		118,092			-
Common stock, $0.001 par value, 150,000,000 shares authorized, 45,633,262 and 42,570,975 shares issued and outstanding		45,636			42,572
Common stock, $0.001 par value, 150,000,000 shares authorized, 46,339,366 and 42,570,975 shares issued and outstanding		46,340			42,572
Additional paid-in capital		1718,~~384~~412,~~961~~719			14,311,918
Accumulated deficit		(3033,~~887~~377,~~559~~404	)		(20,463,967	)
Total Stockholders' Deficit		(13,338,870	)		(6,109,477	)
TOTAL STOCKHOLDERS' DEFICIT		(14,800,253	)		(6,109,477	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	5,~~732~~415,~~513~~087		$	4,635,515

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

PREFERRED RESTAURANT BRANDS, INC
PREFERRED RESTAURANT BRANDS, INC. AND SUBSIDIARIES
(formerly Dixie Foods International, Inc.)
(FORMERLY DIXIE FOODS INTERNATIONAL, INC.)
Consolidated Statements of Operations
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	Three Months Ended May 31,						Nine Months Ended May 31,
	For the Three Months Ended						For the Six Months Ended
	February 28,						February 28,
	2015			2014			2015			2014
REVENUE	$	12,~~939~~185,~~412~~433		$	1,~~336~~851,~~391~~020		$	36,~~924~~110,~~646~~079		$	24,~~617~~468,~~819~~839
OPERATING EXPENSES
OPERATING EXPENSES:
Restaurant operating costs:
Food, beverage and packaging		~~834~~689,~~470~~944			~~503~~960,~~770~~394			12,~~548~~238,~~784~~728			~~954~~1,~~707~~915,101
Labor and related		~~751~~829,~~865~~004			~~340~~514,~~998~~259			12,~~398~~227,~~817~~821			~~689~~1,~~900~~204,159
Occupancy		~~516~~169,~~781~~607			~~111~~164,~~357~~579			~~795~~964,~~314~~921			~~296~~461,~~474~~053
Other restaurant operating		~~541~~271,~~939~~098			~~304~~179,~~118~~132			1,~~164~~435,~~835~~933			~~531~~710,~~469~~601
Total Restaurant Operating Expenses		21,~~645~~959,~~055~~653			1,~~260~~818,~~243~~364			46,~~907~~867,~~750~~403			24,~~472~~290,~~550~~914
Loss from Restaurant Operations		(705,643	)		76,148			(983,104	)		145,269
Income (Loss) from Restaurant Operations		225,780			32,656			(757,324	)		177,925
General and administrative		2,~~312~~401,~~551~~136			~~484~~131,~~909~~088			47,~~621~~022,~~334~~470			1,~~062~~193,~~848~~936
Depreciation and amortization		~~100~~135,~~804~~416			72239,~~306~~112			~~206~~341,~~019~~435			~~119~~359,~~967~~079
Pre-opening expenses		266,957			211,660			473,404			309,560
Pre-opening costs		35,573			8,512			508,977			318,072
Total		2,~~680~~572,~~312~~125			~~768~~378,~~875~~712			57,~~300~~872,~~757~~882			1,~~492~~871,~~375~~087
LOSS FROM OPERATIONS		(32,~~385~~346,~~955~~345	)		(~~692~~346,~~727~~056	)		(68,~~283~~630,~~861~~206	)		(1,~~347~~693,~~106~~162	)
OTHER INCOME (EXPENSES)
OTHER INCOME (EXPENSES):
Loss on sale of assets		~~(63,280~~-	)		-			(63,280	)		-
Interest expense		(3874,~~512,371~~664	)		(3077,~~011~~691	)		(45,~~846~~721,~~741~~405	)		(~~305~~383,~~442~~133	)
Derivative gain (expense)		~~808~~688,~~240~~197			~~301,140~~-			~~808~~1,~~240~~496,437			301,140
Other income (expense)		~~(37~~42,~~950~~867	)		9(2,~~558~~988	)		~~(37~~5,~~950~~017	)		-(2,988	)
Total Other Income (Expenses)		(2,805,361	)		280,687			(4,139,731	)		(4,302	)
TOTAL OTHER INCOME (EXPENSE)		(143,600	)		(80,679	)		(4,283,231	)		(84,981	)
LOSS BEFORE INCOME TAXES		(6,191,316	)		(412,040	)		(10,423,592	)		(1,351,408	)
LOSS BEFORE PROVISION FOR INCOME TAXES		(2,489,945	)		(426,735	)		(12,913,437	)		(1,778,143	)
PROVISION FOR INCOME TAXES		-			-			-			-
NET LOSS	$	(62,~~191~~489,~~316~~945	)	$	(~~412~~426,~~040~~735	)	$	(1012,~~423~~913,~~592~~437	)	$	(1,~~351~~778,~~408~~143	)
BASIC AND DILUTED LOSS PER COMMON SHARE	$	(0.14	)	$	(0.01	)	$	(0.24	)	$	(0.03	)
NET LOSS PER SHARE - BASIC AND DILUTED	$	(0.05	)	$	(0.01	)	$	(0.29	)	$	(0.04	)
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING		44,288,625			42,570,975			43,667,211			42,570,975
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic and diluted		45,775,720			42,570,975			44,377,770			42,570,975

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

PREFERRED RESTAURANT BRANDS, INC
PREFERRED RESTAURANT BRANDS, INC. AND SUBSIDIARIES
(formerly Dixie Foods International, Inc.)
(FORMERLY DIXIE FOODS INTERNATIONAL, INC.)
Consolidated Statements of Cash Flows
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Nine Months Ended May 31,
	For the Six Months Ended
	February 28,
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1012,~~423~~913,~~592~~437	)	$	(1,~~351~~878,~~408~~143	)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile change in net loss to net cash used in operating activities:
Depreciation and amortization		~~617~~983,~~106~~071			~~410~~726,~~182~~726
Loss on sale of assets		63,280			-
Expenses paid on behalf of the Company by related parties		89,~~408~~760			-
Amortization of debt discounts and debt issuance costs		254,942			519,718
Fair value of warrants issued for interest expense on debt		-			717,207
Change in derivative liability		1,500,838			298,861
Amortization of debt discounts and debt issuance costs		337,830			519,718
Common stock issued in connection with execution of notes payable		475,275			-
Change in derivative liability		1,005,240			(301,140	)
Common stock issued for services		965,017			-
Services credited for exercise of warrants and stock options		-			(75,000	)
Common stock and warrants granted for loan modifications		8,800			-
Stock issued in connection with execution of notes payable		621,597			-
Fair value of stock options vested		1,627,015			23,826
Stock and warrants granted for loan modifications		8,800			-
Vesting of stock options granted		2,491,149			47,652
Common stock issued for services		983,022			-
Changes in operating assets and liabilities:
Accounts receivable		(48,689	)		(48,054	)
Accounts and other receivables, net		(71,535	)		(40,764	)
Food inventory		811,~~606~~720			7(5,~~850~~992	)
Prepaid expenses and other current assets		(151,647	)		8,406
Deposits and prepaid expenses		(184,857	)		(39,554	)
Debt issuance costs		(~~157~~116,~~754~~640	)		-
Accounts payable and accrued expenses		2,796,004			(172,091	)
Accounts payable and accrued liabilities		3,616,678			38,740
Deferred revenue		(2855,~~794~~351	)		35(14,~~425~~177	)
Net Cash Used in Operating Activities		(2,404,185	)		(267,285	)
NET CASH USED IN OPERATING ACTIVITIES		(3,129,673	)		(304,727	)
CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for purchases of property and equipment		(1,118,133	)		(503,808	)
Purchase of property and equipment		(1,139,031	)		(636,796	)
Cash paid for territory and franchise rights		(37,500	)		(~~164~~224,000	)
Cash paid for asset acquisitions		(328,032	)		-
Cash paid for asset acquisition		(328,032	)		(107,187	)
Cash received in asset sales		25,000			-
Net Cash Used in Investing Activities		(1,458,665	)		(667,808	)
NET CASH USED IN INVESTING ACTIVITIES		(1,479,563	)		(967,983	)
CASH FLOWS FROM FINANCING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds on related party debt		1,115,664			421,321
Net proceeds from related party notes payable		1,275,880			530,367
Proceeds from notes payable		~~700~~1,~~000~~023,500			660,000
Repayments on notes payable		(~~858~~1,~~419~~131,016	)		(~~807~~700,~~187~~000	)
Proceeds from convertible notes payable		1,~~000~~190,000			-
Proceeds from Class B membership units issued for cash		1,900,000			500,000
Repayments on convertible notes payable		(238,920	)		-
Net Cash Provided by Financing Activities		3,857,245			774,134
Proceeds from Class B membership units issued for cash		2,500,000			1,000,000
NET CHANGE IN CASH		(5,605	)		(160,959	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		4,619,444			1,490,367
CASH AT BEGINNING OF PERIOD		24,033			255,293
NET CHANGE IN CASH		10,208			217,657
CASH AT END OF PERIOD	$	18,428		$	94,334
CASH, BEGINNING OF PERIOD		24,033			255,293
CASH, END OF PERIOD	$	34,241		$	472,950
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	-		$	-
Cash paid for income taxes	$	-		$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Debt discounts on notes payable	$	83,450		$	-
Origination of derivative liabilities and issuance of preferred stock	$	182,190		$	-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

PREFERRED RESTAURANT BRANDS, INC
(formerly Dixie Foods International, Inc.)
Consolidated Statements of Cash Flows
(Unaudited)
	For the Six Months Ended
	February 28,
	2015		2014
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest paid	$	-	$	-
Income taxes paid	$	-	$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Discounts on notes payable	$	83,450	$	-
Class B membership units issued for subscriptions receivable	$	600,000	$	-
Origination of derivative liabilities and issuance of preferred stock	$	182,190	$	-

The accompanying notes are an integral part of these consolidated financial statements.

PREFERRED RESTAURANT BRANDS, INC. AND SUBSIDIARIES

(FORMERLY DIXIE FOODS INTERNATIONAL, INC.)

Notes to Consolidated Financial Statements

NOTE 1—ORGANIZATION AND NATURE OF BUSINESS

Preferred Restaurant Brands, Inc. (the “Company”; OTCQB:”PRBI”) was formed in May 2010 as Dixie Foods, International, Inc. to operate a specialty food business for salad dressing, sauces and condiments. The Company was organized and still operates under the laws of the State of Florida. In November, 2014, the Company changed its name to “Preferred Restaurant Brands” and recently effected that change with FINRA, the SEC and other regulatory authorities. The fiscal year end for the Company and all of its subsidiaries is August 31. The Company has aggregated its operations into one reportable segment.

On June 4, 2014, the Company completed the purchase (the “Reverse Acquisition”) of KCI Investments, LLC (“KCI”), a Nevada limited liability company headquartered in Las Vegas, Nevada. In connection with the Reverse Acquisition, the Company acquired 100% of the issued and outstanding membership interests of KCI from KCI Holding I, LLC ("KCI Holding"), and an entity that, until the consummation of the Reverse Acquisition, held 100% of the membership interests in KCI. Currently, all of the operations of the Company are conducted under KCI or one of KCI's subsidiaries.

KCI was formed on November 8, 2004, but did not engage in any business operations until November 2010. Currently, KCI is engaged in developing, owning and operating a multi-brand chain of restaurants, currently under two franchise brands: Capriotti’s Sandwich Shops and Papa John’s. KCI also operates and is developing various other restaurant concepts. KCI and its various subsidiaries, currently operate 17 restaurants:

· 9 franchised Capriotti's Sandwich Shops: · ~~Six~~six franchised Papa John’s pizza restaurants (four of which it opened in late calendar 2014 and two of which it acquired in February 2014, and · ~~Two~~two proprietary, fine casual restaurants: Elements Kitchen & Martini Bar and Social Bistro & Wine Bar.

Additionally, the Company has in various stages of development and construction eight Papa John’s all of which it anticipates opening over the next 12 months subject to access to additional capital.

NOTE 2—GOING CONCERN

These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As of ~~February~~May 2831, 2015, the Company has a working capital deficit of $14,~~445~~894,~~762~~867 and an accumulated deficit of $3033,~~887~~377,~~559~~404. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to: identify future investment opportunities and obtain the necessary debt or equity financing and generate profitable operations from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining debt and/or equity capital from existing and/or new investors and/or creditors sufficient to meet its ongoing operating expenses, pending transactions and growth plans. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Condensed Financial Statements

The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at ~~February~~November 2830, ~~2015~~2014 and for all periods presented have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's August 31, 2014 audited financial statements. The results of operations for the periods ended ~~February~~May 2831, 2015 and 2014 are not necessarily indicative of the operating results for the full years.

Use of Estimates

The preparation of financial statements, in conformity with U.S. generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates under different assumptions or conditions.

Cash and Cash Equivalents

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

Accounts Receivable

Accounts receivable primarily consists of receivables from undeposited funds from the Company’s credit card processor, third party gift card distributors, payroll-related tax receivables, vendor rebates and receivables arising from the normal course of business from catering sales. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable based on a specific review of account balances. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recoverability is considered remote.

Inventory

Inventory (consisting principally of food, beverages and supplies), is valued at the lower of first-in, first-out cost or market. Certain key ingredients bread, meats, vegetables, cheeses and beverages are purchased from a small number of suppliers.

Revenue Recognition

Revenue from restaurant sales is recognized when food and beverage products are sold. The Company reports revenue net of sales and use taxes collected from customers and remitted to governmental taxing authorities.

Income Taxes

The Company accounts for income taxes in accordance with Accounting Standards Codification Topic 740, Income Taxes ("Topic 740"), which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns. A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized.

Topic 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company's financial statements. Topic 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.

At the adoption date of November 1, 2007, the Company had no unrecognized tax benefit which would affect the effective tax rate if recognized. The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operations in the provision for income taxes. As of ~~February~~May 2831, 2015 and August 31, 2014, the Company had no accrued interest or penalties related to uncertain tax positions. The Company files an income tax return in the U.S. federal jurisdiction and the state of California. With few exceptions, the Company is no longer subject to U.S. federal, state, and local, or non-U.S. income tax examinations by tax authorities for years before 2008.

Basic and Diluted Loss per Common Share

Basic loss per common share is calculated by dividing the Company’s net loss applicable to shareholders by the weighted average number of shares during the period. Diluted loss per share is calculated by dividing the Company’s net loss available to shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is adjusted for any potentially dilutive debt or equity. There were 5,~~349~~448,~~676~~276 such shares outstanding as of ~~February~~May 2831, 2015, which were excluded from the calculation of diluted loss per share as their effect would have been anti-dilutive.

New Accounting Pronouncements

The Company’s management has considered all recent accounting pronouncements. Management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

NOTE 4—PROPERTY AND EQUIPMENT

As of ~~February~~May 2831, 2015 and August 31, 2014 the Company’s property and equipment consisted of the following:

	February 28, 2015			August 31, 2014
	May 31, 2015			August 31, 2014
Building and leasehold improvements	$	3,~~825~~428,~~917~~387		$	3,161,646
Machinery and equipment		1,~~050~~057,~~275~~787			1,022,299
Furniture and fixtures		~~830~~1,~~044~~253,461			358,390
Less: Accumulated depreciation		(1,~~482~~709,~~052~~796	)		(1,123,~~592~~52	)
Property and equipment, net	$	4,~~224~~029,~~184~~839		$	3,418,743

Depreciation expense included as a charge to income (including restaurant-related depreciation) recorded in “Other operating costs ~~(including Restaurant-Related Depreciation)~~” was $~~358~~620,~~460~~449 and $~~295~~440,~~547~~139 for the ~~six-~~nine months ended ~~February~~May 2831, 2015 and 2014, respectively.

109

NOTE 5—~~RESTAURANT~~ASSET ~~PURCHASES~~SALES AND ~~SALES~~PURCHASES

~~Fresno and Clovis, California~~Purchases

On February 18, 2015, the Company consummated the acquisition of two, franchised Papa John's locations in the Company's existing trade area in Northern California: one in Fresno, CA and the other in Clovis~~, CA~~. In total the Company paid the seller $~~329~~320,~~032~~000 in cash.

The total purchase price was allocated as follows:

Consideration paid:
Cash paid	$	~~329~~320,~~032~~000
Total purchase price	$	~~329~~320,~~032~~000
Consideration received:
Cash	$	1,000
Property and equipment - Fresno	$	35,000
Inventory		8,032
Property and equipment - Clovis		35,000
Other current assets		8,784
Territory and franchise rights – Fresno		75,000
Property and equipment, leasehold improvements		120,000
Territory and franchise rights – Clovis		75,000
Intangible assets – franchise rights		191,216
Leasehold Improvements - Fresno		25,000
Total Assets Acquired	$	329,032
Leasehold Improvements - Clovis		25,000
Covenant not to compete - Fresno		25,000
Covenant not to compete - Clovis		25,000
Total assets acquired	$	320,000

~~Green Valley Ranch, Las Vegas~~Sale

On February 19, 2015, the Company consummated the sale of its Green Valley Ranch Capriotti’s Sandwich Shop (“GVR”) to aanother franchisee of Capriotti’s Sandwich Shops. Pursuant to the asset purchase agreement, the ~~sale~~purchase price of the assets consisted of a one-time payment of $25,000 in cash.

The total ~~purchase~~sale price was allocated as follows:

Consideration paid:
Sale Consideration	$	25,000
Cash paid	$	25,000
Allocation Of Sale Consideration
Forgiveness of rent payable		25,160
Transaction-Related Expenses	$	691
Total purchase price	$	50,160
GVR-Related Payables		21,081
Consideration received:
Receivable For Net Cash Proceeds to Company		3,228
Other current assets	$	4,000
Total	$	25,000
Property and equipment, leasehold improvements, net		27,487
Intangible assets, franchise rights, net		81,954
Loss on sale of assets		(63,281	)
Total assets acquired	$	50,160

NOTE 6—INTANGIBLE ASSETS

Intangible assets ~~represents~~represent capitalized prepaid territory rights and franchise fees paid. The costs are amortized over the remaining life of the contract executed with the franchisor.

~~As of February 28, 2015 and August 31, 2014 the Company’s territory and franchise rights consisted of the following:~~10

11As of May 31, 2015 and August 31, 2014 the Company’s territory and franchise rights consisted of the following:

	February 28, 2015			August 31, 2014
	May 31, 2015			August 31, 2014
Territory and franchise rights	$	21,~~058~~965,~~595~~297		$	1,926,194
Less: Accumulated amortization		(1,~~225~~283,~~887~~311	)		(1,028,348	)
Territory and franchise rights, net	$	~~832~~681,~~708~~986		$	897,846

Amortization expense on intangible assets included as a charge to income was $~~197~~254,~~539~~963 and $~~114~~286,~~635~~588 for the ~~six-month~~nine ~~periods~~months ended ~~February~~May 2831, 2015 and 2014, respectively.

Estimated amortization expense to be recorded for the next five years is as follows:

2015	$	210,358
2015 (remaining)	$	214,937
2016		~~137~~112,~~015~~929
2017		~~137~~110,~~015~~108
2018		~~137~~110,~~015~~108
2019		~~137~~110,~~015~~108
Thereafter		7423,~~289~~796
Total future amortization	$	~~832~~681,~~708~~986

NOTE 7—RELATED PARTY TRANSACTIONS

As of August 31, 2014, the Company owed $-0- to related parties. During the ~~six~~nine month period ended ~~February~~May 2831, 2015, related parties made cash loans of $12,~~573~~382,~~591~~906 and paid for Company expenses of $89,~~408~~407. The Company made cash repayments of $~~457~~1,~~927~~107,027, leaving an ending balance due of $1,~~205~~365,~~072~~287 due to related parties at ~~February~~May 2831, 2015. All related party loans bear no interest, are unsecured and are due on demand.

The Company’s CEO, Kenneth Antos, has personally guaranteed virtually all the outstanding obligations due by the Company. This includes: virtually all of the outstanding notes payables on all loans; leases with the various landlords, and all of the Company's obligations to franchisors.

NOTE 8—DEBT

As of May 31, 2015 and August 31, 2014 the Company’s notes payable consisted of the following:

	May 31,		August 31,
	2015		2014
Note payable bearing interest at 13.5% per annum, originated June 22, 2012, original maturity date of June 22, 2013. This note bears a default interest rate of 18.5%*.	$	2,950,000	$	2,700,000

Note payable bearing interest at 12.0% per annum, originated December 27, 2012, original maturity date of December 27, 2013. This note is in default and currently bears a default interest rate of 17.0% plus late fees1.		1,000,000		1,000,000

Note payable bearing interest at 12.0% per annum, originated February 1, 2013, original maturity date of August 1, 2014. This note is in default and currently bears a default interest rate of 17.0% plus late fees¹.		550,000		550,000

Note payable bearing interest at 12.0% per annum, originated February 1, 2013, original maturity date of August 1, 2014. This note is in default and currently bears a default interest rate of 17.0% plus late fees¹.		650,000		650,000

Note payable bearing interest at 12.0% per annum, originated February 1, 2013, original maturity date of August 1, 2014. This note is in default and currently bears a default interest rate of 17.0% plus late fees¹.		800,000		800,000

Note payable bearing interest at 12.0% per annum, originated October 30, 2013, original maturity date of November 30, 2013. This note is in default and currently bears a default interest rate of 17.0% plus late fees¹.		99,166		99,166

Note payable bearing interest at 13.3% per annum, originated August 13, 2013, original maturity date of August 1, 2014. This note is in default and currently bears a default interest rate of 18.3% plus late fees¹.		90,000		90,000

Note payable bearing interest at 12.0% per annum, originated June 7, 2013, original maturity date of June 7, 2016. This note is in default and currently bears a default interest rate of 17.0% plus late fees ¹.		500,000		500,000

Note payable bearing interest at 12% per annum, originated August 24, 2013, original maturity date of October 24, 2014. This note is in default and currently bears a default interest rate of 18.3% plus late fees¹.		8,858		8,656

Note payable originated October 2, 2014, original maturity date of October 16, 2014.		100,000		-

Note payable bearing interest at 10.0% per annum, originated December 4, 2013, due on October 15, 2014. This note is currently in default and bears a default interest rate of 15.0%.		560,000		560,000

Notes payable bearing interest at 5.0% per annum, originated August 31, 2014, payable upon demand.		80,000		80,000

Notes payable bearing interest at 18.0% per annum originated May 8, 2014, payable upon demand.		225,000		250,000

Notes payable bearing interest at 7.4% per annum, originated July 11, 2014 maturity date of April 13, 2015.		25,860		126,577

Notes payable bearing interest at 6.3% per annum, originated January 26, 2015, maturity date of February 2, 2019.		67,211		-

Notes payable bearing interest at 8.0% per annum, originated April 22, 2015 maturity date of June 30, 2015		250,000		-

Secured borrowings		39,143		449,722

Total notes payable	$	7,995,237	$	7,866,299
Less: current-term portion of notes payable		(7,428,027)		(7,366,299)
Long-term notes payable	$	567,211	$	500,000

~~NOTE~~In ~~8—NOTES~~addition ~~PAYABLE~~to the notes payable noted in the table above, on September 25, 2014, the Company entered into a note payable with a principal balance of $100,000, bearing an interest obligation of $5,000 per annum and due on October 9, 2014. The note was repaid in full during the period ended May 31, 2015 through the payment of $100,000 in cash.

As of February 28, 2015 and August, 2014 the Company’s notes payable consisted of the following:

	February 28,		August 31,
	2015		2014
Note payable bearing interest at 13.5% per annum, originated June 22, 2012, original maturity date of June 22, 2013. This note bears a default interest rate of 18.5%*.	$	2,950,000	$	2,700,000
Note payable bearing interest at 12.0% per annum, originated December 27, 2012, original maturity date of December 27, 2013. This note is in default and currently bears a default interest rate of 17.0% plus late fees1.		1,000,000		1,000,000
Note payable bearing interest at 12.0% per annum, originated February 1, 2013, original maturity date of August 1, 2014. This note is in default and currently bears a default interest rate of 17.0% plus late fees¹.		550,000		550,000
Note payable bearing interest at 12.0% per annum, originated February 1, 2013, original maturity date of August 1, 2014. This note is in default and currently bears a default interest rate of 17.0% plus late fees¹.		650,000		650,000
Note payable bearing interest at 12.0% per annum, originated February 1, 2013, original maturity date of August 1, 2014. This note is in default and currently bears a default interest rate of 17.0% plus late fees¹.		800,000		800,000
Note payable bearing interest at 12.0% per annum, originated October 30, 2013, original maturity date of November 30, 2013. This note is in default and currently bears a default interest rate of 17.0% plus late fees¹.		99,166		99,166
Note payable bearing interest at 13.3% per annum, originated August 13, 2013, original maturity date of August 1, 2014. This note is in default and currently bears a default interest rate of 18.3% plus late fees¹.		90,000		90,000
Note payable bearing interest at 12.0% per annum, originated June 7, 2013, original maturity date of June 7, 2016. This note is in default and currently bears a default interest rate of 17.0% plus late fees ¹.		500,000		500,000
Note payable bearing interest at 12% per annum, originated August 24, 2013, original maturity date of October 24, 2014. This note is in default and currently bears a default interest rate of 18.3% plus late fees¹.		8, 656		8,656
Note payable originated October 2, 2014, original maturity date of October 16, 2014, interest obligation of $5,000.		100,000		-
Note payable bearing interest at 10.0% per annum, originated December 4, 2013, due on October 15, 2014. This note is currently in default and bears a default interest rate of 15.0%.		560,000		560,000
Notes payable bearing interest at 5.0% per annum, originated August 31, 2014, payable upon demand.		80,000		80,000
Notes Payable bearing interest at 18.0% per annum originated May 8, 2014, payable upon demand.		225,000		250,000
Notes Payable bearing interest at 7.4% per annum, originated July 11, 2014 maturity date of April 13, 2015.		53,662		126,577
Secured borrowings		222,666		449,722
Total notes payable	$	7,889,150	$	7,866,299
Less: current-term portion of notes payable		(7,839,150)		(7,366,299)
Long-term notes payable	$	500,000	$	500,000

1Each of these notes is to either: a former director or to various trusts related to but not controlled by that party. Those parties collectively own more than 21% of the Company's common stock.

In addition to the notes payable noted in the table above, on September 25, 2014, the Company entered into a note payable with a principal balance of $100,000, bearing an interest obligation of $5,000 per annum and due on October 9, 2014. The note was repaid in full during the period ended February 28, 2015 through the payment of $100,000 in cash.

Secured Borrowings

As of ~~February~~May 2831, 2015, the Company has entered into various accounts receivable financing arrangements with third parties for a combined principal amount received in cash of $670,000. The terms of the arrangements require the Company to repay the principal balance plus an additional $252,650 for total remittance of $922,650. The terms of repayment require the Company to remit to the lender between 15 and 24 percent of all future receivables arising from credit card, debit card and prepaid transactions until such time as the total remittance is paid in full. These borrowing is secured by the assets of the Company.

The additional $252,650 will be recognized as interest expense over the estimated terms of the agreements. The terms are not fixed due to the variable repayment terms; however, management currently estimates such terms to be between approximately two (2) and eight (8) months. The ending principal balance of these borrowings at ~~February~~May 2831, 2015 and August 31, 2014 was $~~222~~39,~~666~~142and ~~and~~ $449,722, respectively (~~debt~~net of debt discounts of $648,~~079~~895 and $161,899, respectively).

NOTE 9—CONVERTIBLE NOTES PAYABLE

As of ~~February~~May 2831, 2015 and August 31, 2014 the Company’s convertible notes payable consisted of the following:

	February 28,		August 31,
	May 31,		August 31,
	2015		2014
Convertible note payable bearing interest at 10.0% per annum, originated April 23, 2012, original maturity date of April 23, 2017. The note is convertible into common shares of the Company at $1.00 per share.	$	550,000	$	550,000
Convertible note payable bearing interest at 10.0% per annum, originated April 23, 2012, original maturity date of April 23, 2017. The note is convertible into common shares of KCI at $1.00 per share.	$	550,000	$	550,000
Convertible note payable bearing interest at 9.0% per annum, originated July 25, 2013, original maturity date of July 25, 2018. The note is convertible into common shares of the Company at $1.50 per share.		50,000		50,000
Convertible note payable bearing interest at the market interest rate plus 6.4% per annum, originated May 1, 2012, original maturity date of May 1, 2015. The note is convertible into common shares of the Company at $0.30 per share.		300,000		300,000
Convertible note payable bearing interest at the market interest rate plus 6.4% per annum, originated May 1, 2012, original maturity date of May 1, 2015. The note is convertible into common shares of KCI at $0.30 per share.		300,000		300,000
Convertible note payable bearing interest at 12.0% per annum, originated February 17, 2015, maturity date of February 16, 2016. The note is convertible upon the occurrence and continuance of an event of default for a 15 day period at 85 percent of the lowest average daily volume weighted average price of the Company’s common shares during the five trading days immediately prior to the date of conversion.		1,000,000		1,000,000
Convertible note payable bearing interest at 12.0% per annum, originated February 17, 2015, maturity date of February 16, 2016. The note is convertible upon the occurrence and continuance of an event of default for a 15 day period at 85 percent of the lowest average daily volume weighted average price of the Company's common shares during the five trading days immediately prior to the date of conversion.		682,484		-
Total convertible notes payable	$	1,850,000	$	850,000
Convertible note payable bearing interest at 0.0% per annum, originated April 21, 2013, original maturity date of May 29, 2015. The note is convertible into common shares of the Company at the lower of $0.0001 or 50% of the lowest market price for the 10 days prior to conversion date.		190,000		-
Less: current portion		(1,300,000)		(300,000)
Total notes payable	$	1,722,484	$	850,000
Less: current portion		(1,172,484)		300,000
Long-term convertible notes payable	$	550,000	$	550,000

14In addition to the notes payable noted in the table above, on December 31, 2014, the Company entered into a convertible note payable with a principal balance of $100,000, bearing interest at 18.0% per annum and due on demand. The note was convertible into common shares of the Company at the 65% of the lowest average daily volume weighted average price of the Company's common shares during the fifteen trading days immediately prior to the date of conversion. The note was repaid in full during the period ended May 31, 2015 through the payment of $110,000 in cash, inclusive of $10,000 of interest.

InThe ~~addition~~intrinsic tovalue ~~the~~of ~~notes payable noted in~~ the ~~table~~beneficial ~~above,~~conversion onfeature ~~December~~and ~~31, 2014,~~ the ~~Company~~debt ~~entered~~discount ~~into~~associated ~~a convertible note payable~~ with aall ~~principal~~convertible ~~balance~~debts ofwere ~~$100,000,~~recorded ~~bearing~~based ~~interest at 18.0% per annum and due~~ on ~~demand.~~the ~~The~~relative ~~note~~fair ~~was~~value ~~convertible into common shares~~ of the ~~Company~~equity atin ~~the~~relation ~~65%~~to of the ~~lowest~~debt ~~average~~in ~~daily~~accordance ~~volume~~with ~~weighted~~ASC ~~average~~470. ~~price~~The oftotal ~~the~~initial ~~Company’s~~beneficial ~~common~~conversion ~~shares~~feature ~~during~~recorded for the ~~fifteen~~convertible ~~trading~~notes ~~days~~equaled ~~immediately~~$182,190 ~~prior to the date~~ of ~~conversion.~~which ~~The~~$103,594 ~~note~~ was ~~repaid~~amortized ~~in full~~ during the period, ~~ended~~leaving ~~February~~an ~~28,~~ending ~~2015~~balance ~~through~~of ~~the~~debt ~~payment~~discount of $~~110~~78,~~000~~596 inas ~~cash, inclusive~~ of ~~$10~~June 30,~~000~~ ~~of interest~~2015.

The intrinsic value of the beneficial conversion feature and the debt discount associated with the convertible debts were recorded based on the relative fair value of the equity in relation to the debt in accordance with ASC 470. The total initial beneficial conversion feature recorded for the convertible notes equaled $182,190, of which $75,890 was amortized or recorded to interest expense in connection with convertible note retirements, leaving an ending balance of $106,300 in discounts on convertible notes payable.

NOTE 10—DERIVATIVE LIABILITY

~~The~~ Effective ~~Company~~July ~~has~~31, 2009, the Company adopted ASC 815, which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s own stock. The exercise price of certain warrants granted ~~and embedded conversion options on convertible debt issued~~ during the period ended February 2815, 2015 are variable and subject to the fair value of the Company’s common stock on the date of ~~conversion or~~ exercise. As a result, the Company has determined that the exercise ~~and~~feature ~~conversion~~is ~~features do~~ not ~~contain~~considered anto ~~explicit~~be ~~limit~~solely onindexed to the ~~number~~Company’s ofown ~~shares~~stock ~~required to be~~ and ~~are~~is therefore not afforded equity treatment. In accordance with ASC 815, the Company has ~~classified the freestanding warrants and~~ bifurcated the ~~conversion~~exercise ~~features~~feature of the instruments to be recorded as a derivative ~~liabilities~~liability.

ASC 815 requires Company management to assess the fair market value of derivatives at each reporting period and recognize any change in the fair market value as items of other income or expense. The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with these warrants.

At origination and subsequent revaluations, the Company valued the derivative liability using the Black-Scholes options pricing model under the following assumptions:

		February 28, 2015
	February 28 2015
Risk-free interest rate		0.2225% – 1.~~61%~~52	%
Expected options life		000.321 – 54.0065
Expected dividend yield		-
Expected price volatility		74185% – ~~241%~~407	%

During the ~~six-month~~ period ended ~~February~~May 2831, 2015, the Company’s derivative liability increased from $-0- to $1,~~562~~067,~~718,~~472 ~~recognized a gain on derivative liability of $808,240~~ in conjunction with settlement of convertible notes payable, additions of new derivative liabilities and subsequent revaluations of existing derivative liabilities.

During the year ended August 31, 2014, the Company’'s derivative liability decreased from $604,553 to $-0- and recognized a gain on derivative liability of $604,553 in conjunction with settlement of convertible notes payable, additions of new derivative ~~liabilities~~liabilitites and subsequent revaluations of existing derivative liabilities.

NOTE 11—CLASS B MEMBERSHIP UNITS

The Company is authorized to issue up to eight (8) Class B membership units with no par value. As of ~~February~~May 2831, 2015 and August 31, 2014, there were seven (7) and two (2) shares of Class B membership units issued and outstanding, respectively.

In all cases noted above, each Class B membership unit was sold for $500,000, plus for administrative costs payable to third parties. Each unit carries equal voting rights to the Class A membership units of each subsidiary. Each Class B unit is entitled to receive distributions equal to 0.5 percent to 3.0% ~~percent~~ of the value of the units held each year.

Adjudication and Redemption of Class B Membership Units

The Class B membership units are linked to approval of an EB-5 Visa, which requires a foreign investor to invest $1,000,000 (or at least $500,000 in a "Targeted Employment Area" - high unemployment or rural area), in projects that create at least 10 jobs for U.S. workers. The terms of the instrument state that the Class B membership units have an indefinite life; however, once adjudication is reached in the EB-5 Visa approval process, the managing member of the LLC may, in its sole discretion, elect to have the Company purchase, for fair market value, the unit holders Class B Units at any time following an offer by such member to sell his or her Class B Units. This election is optional on the part of the managing member and member has no rights to cause the managing member or the Company to repurchase or redeem such member’s Class B unit. As such, the units (1) are not mandatorily redeemable, (2) are redeemable at the sole discretion of the Company and (3) not redeemable at the sole option of the unit holder and the redemption must be agreed to by Company.

Denial of I-526 Petition

If the member’s I-526 Petition is denied with respect to that member’s investment in the company, and the member has not been previously expelled from the company, the member has the right, within fifteen days following the date of the I-526 Denial, to request that the company cancel that member’s entire interest in the Company and which time the Company will return the member’s capital contribution and administrative fee, without interest. As such and as the Class B units are not entitled to the distribution of profits and losses, the redeemable value of the membership interest are presented in the mezzanine section of the balance until such time as the I-526 petition is successfully approved after they value of the shares will be moved into permanent equity. No adjustments for ~~non-controlling~~noncontrolling interests have been made.

During the ~~six~~nine months ended ~~February~~May 2831, 2015, Company subsidiaries issued ~~five (~~ 5) Class B membership units in exchange for total cash proceeds of $12,~~900~~500,000 ~~and subscriptions receivable of $600,000~~ (not inclusive of $300,000 received for administrative fees due and payable to third parties). ~~Subsequent to the period end the subscriptions receivable had been fully satisfied through the receipt of $600,000 in cash.~~

During the year ended August 31, 2014, Company subsidiaries issued two (2) Class B membership units in exchange for total cash proceeds of $1,120,000 (inclusive of $~~120~~60,000 received for administrative fees due and payable to third parties).

NOTE 12—STOCKHOLDERS’ DEFICIT

The Company’s authorized capital stock consists of 150,000,000 shares of common stock, $0.001 par value per share, and 15,000,000 shares of preferred stock, par value $0.001 per share. As of ~~February~~May 2831, 2015 and August 31, ~~2013~~2014, there were 4546,~~633~~339,~~262~~366 and 42,570,975 shares of common stock issued and outstanding, respectively, and one ~~(1)~~share ~~and zero shares~~ of ~~Series B~~ preferred stock issued and outstanding, respectively.

Preferred Stock

Our board of directors has the authority, without stockholder approval, to issue up to 14,999,999 shares of preferred stock, $0.001 par value, of which 1 share is designated as Series B Convertible Preferred Stock. The authorized preferred stock may be issued by the Board of Directors in one or more series and with the rights, privileges and limitations of the preferred stock determined by the Board of Directors. The rights, preferences, powers and limitations on different series of preferred stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions, and other matters.

Series B Convertible Preferred Stock

The Company is authorized to issue one (1) share of Series B Convertible Preferred Stock with a stated value of $1.00 and a par value of $0.001. The terms of the Series B Preferred Stock are as follows:

(i) Dividends – At issuance, there are no dividends due or payable on the Series B Preferred Stock. Any future terms with respect to dividends shall be determined by Board, consistent with the Company’s certificate of incorporation. (ii) Liquidation and Redemption Rights - In the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, the holder of Series B Preferred Stock is be entitled to receive assets of the Company, on parity with the holders Common Stock. The Series B Preferred shall not have any priority or preference with respect to any distribution of any Company assets. (iii) Rank – All shares of the Series B Preferred Stock rank: a. Senior to the Company’s common stock and any other class or series of capital stock of the Company subsequently created, b. Equal with any class or series of capital stock of the Company subsequently created, c. Junior to any class or series of capital stock of the Company subsequently created which are specifically designated to be ranked senior to the Series B Preferred Stock (iv) Upon an event of default in the convertible note payable executed in connection with the issuance of the share of Series B Preferred Stock, the share of Series B Preferred Stock has voting rights equal to the total issued and outstanding common stock eligible to vote at the time of the respective vote divided by forty nine one-hundredths (0.49) minus the total issued and outstanding shares of common stock eligible to vote at the time of the respective vote.

~~There were no shares of Series B Preferred Shares outstanding at any time during the year ended February 28, 2015. During the six-month period February 28, 2015, the Company issued one~~ (1ii) ~~share~~Liquidation ~~of Series~~and BRedemption ~~preferred~~Rights ~~stock~~- toIn ~~a creditor in connection with~~ the ~~execution~~event of aany ~~convertible note payable. In accordance with ASC 815 and ASC 470~~liquidation, ~~the~~dissolution ~~proceeds~~or ~~from~~winding ~~the~~up ~~issuance~~ of the ~~convertible~~affairs ~~note payable were allocated between the embedded conversion option~~ of the ~~convertible~~Company, ~~note~~whether ~~payable~~voluntary ~~deemed~~or ~~to require derivative accounting due to its variable nature (as discussed in Note 9)~~involuntary, ~~and~~ the ~~host~~holder ~~debt~~of ~~instrument~~Series ~~and~~B ~~the~~Preferred ~~preferred~~Stock ~~stock.~~is ~~The~~be ~~derivative~~entitled ~~was~~to ~~recorded~~receive atassets ~~its fair value~~ of ~~$5,975 with~~ the ~~remaining proceeds of $1~~Company,~~000,000~~ ~~being~~on ~~allocated~~parity ~~between~~with the ~~preferred~~holders ~~stock~~Common ~~and host debt instrument based upon their relative fair values~~Stock. The ~~fair~~Series ~~value~~B ofPreferred ~~the~~shall ~~preferred~~not ~~stock~~have ~~was~~any ~~determined~~priority byor ~~valuing~~preference ~~the~~with ~~voting~~respect ~~interest~~ to ~~which~~any itdistribution ~~would control upon default and then probability adjusting such valuation for the risk~~ of ~~default.~~any ~~The~~Company ~~resulting allocation of proceeds attributed $118,024 to this preferred stock issuance~~assets.

17(iii) Rank – All shares of the Series B Preferred Stock rank:

a.	Senior to the Company’s common stock and any other class or series of capital stock of the Company subsequently created,

b.	Equal with any class or series of capital stock of the Company subsequently created,

c.	Junior to any class or series of capital stock of the Company subsequently created which are specifically designated to be ranked senior to the Series B Preferred Stock

(iv)

Upon an event of default in the convertible note payable executed in connection with the issuance of the share of Series B Preferred Stock, the share of Series B Preferred Stock has voting rights equal to the total issued and outstanding common stock eligible to vote at the time of the respective vote divided by forty nine one-hundredths (0.49) minus the total issued and outstanding shares of common stock eligible to vote at the time of the respective vote.

There were no shares of Series B Convertible Preferred Shares outstanding at any time during the year ended August 31, 2014. During the nine month period ended May 31, 2015, the Company issued one (1) share of Series B convertible preferred stock to a creditor in connection with the execution of a convertible note payable. In accordance with ASC 815 and ASC 470, the proceeds from the issuance of the convertible note payable were allocated between the embedded conversion option of the convertible note payable deemed to require derivative accounting due to its variable nature (as discussed in Note 9), and the host debt instrument and the preferred stock. The derivative was recorded at its fair value of $5,975 with the remaining proceeds of $1,000,000 being allocated between the preferred stock and host debt instrument based upon their relative fair values. The fair value of the preferred stock was determined by valuing the voting interest to which it would control upon default and then probability adjusting such valuation for the risk of default. The resulting allocation of proceeds attributed $118,024 to this preferred stock issuance.

Common Stock

During the ~~six-months~~nine month period ended ~~February~~May 2831, 2015,; the Company issued the following shares of its ~~common~~Common ~~stock~~Stock:

§· In connection with the extension of certain agreements related to the reverse acquisition, the Company issued to certain shareholders of the Company, all of whom were shareholders prior to the reverse acquisition, 10,000 shares of common stock of the Company valued at $8,800. The value of the common stock was based on the market price of the stock on the date of issuance. §· In connection with short-term loans made to the Company by two separate entities (one of which was repaid in full during the period ended ~~February~~May 2831, 2015), the Company agreed that, for each two weeks that each such loan remains outstanding, the Company is required to issue 37,500 shares of its common stock - in addition to an initial grant of 37,500 shares to each lender. During the ~~six~~nine-month period ended ~~February~~May 2831, 2015, the Company issued ~~828~~1,~~750~~074,844 shares valued at $~~475~~965,~~275~~017 in connection with these two loans. The value of the common stock was based on the market price of the stock on the date of issuance and has been recorded as interest expense in the Company’s statement of operations. §· In connection with a short-term convertible loan made to the Company, the Company issued to the lenders 250,000 shares of the Company's common stock. On May 31, 2015, this note went into default due to non-payment and the Company issued an additional 150,000 shares of common stock to the lender to extend the maturity date. · The Company issued 2,~~223~~283,~~537~~547 shares of common stock to various entities and individuals for services valued at $~~965~~983,~~017~~023. The value of the common stock was based on the market price of the stock on the date of issuance.

During the year ended August 31, 2014, the Company issued 26,959,829 shares of common stock as follows:

Description	Shares Issued
Common stock issued for cash proceeds of $3,378,000		7,193,654
Common stock issued for services of $911,569		2,045,163
Cash received for exercise of options and warrants at $0.03 per share		3,909,226
Common stock issued for debt issuance costs		1,587,738
Common stock issued for debt modifications		1,373,914
Cash received and services credited for exercise of options and warrants at $0.03 per share		2,884,134
Common stock issued in reverse recapitalization		8,006,000
Total		26,959,829

NOTE 13—STOCK OPTIONS AND WARRANTS

Stock Options

During the nine ~~six-~~month period ~~February~~May 2831, 2015, the Company ~~granted~~issued no new options to acquire its common stock.

During the year ended August 31, 2014, the Company granted 9,573,604 options to purchase common stock at $0.50 per share to the Company employees and consultants. 1,477,687 options vested immediately and 8,095,917 options vested 1/3 on each grant anniversary date for the subsequent three years. All options ~~granted~~issued in 2014 expire on August 30, ~~2024~~2019. Subsequent to August 31, 2014, 100,000 of the ~~non-vested~~nonvested options granted have been rescinded, thus, leaving 9,473,604 stock options outstanding and 1,477,686 stock options exercisable.

Stock compensation expense is recognized on a pro-rata basis over the vesting period of the options. During the nine ~~three~~ month period ended ~~February~~May 2831, 2015 the Company recognized $12,~~627~~491,~~015~~149 in compensation expense arising from options issued, leaving $87,~~255~~428,~~959~~969 of compensation expense on stock options to be recognized subsequent to ~~February~~May 2831, 2015.

Warrants

During the nine ~~six-month~~months ~~period~~ ended ~~February~~May 2831, 2015, the Company ~~granted~~issued 2,~~892~~200,~~521~~000 warrants to creditors ~~and service providers~~ to acquire its common stock.:

~~During~~· 1,950,000 to the ~~year~~Company's ~~ended~~lender ~~August~~that ~~31,~~has ~~2014,~~a first lien on all of the Company's ~~granted~~assets ~~25,358,996~~- ~~warrants~~in toconnection ~~acquire~~with: (i) its ~~common~~December ~~stock~~2014 additional advance (1,450,000 Warrants exercisable at $0.84 ~~The~~per ~~warrants~~share) ~~were~~and ~~granted~~(ii) its January 2015 loan modification in connection with ~~existing~~the ~~debt~~TCA ~~arrangements~~loan ~~and~~(500,000 ~~the~~Warrants ~~fair~~exercisable ~~value~~at of$0.50 ~~the~~per ~~warrants~~share), ~~were~~· ~~recorded~~250,000 asexercisable ~~interest~~at ~~expense~~$0.50 ~~during~~per ~~the~~share ~~period.~~to Ina Director in connection with advances he made to the ~~reverse~~Company, ~~recapitalization~~· ~~which~~250,000 ~~took~~exercisable ~~effect~~at on$0.50 ~~June~~per 4,share ~~2014~~to an employee in connection with services rendered, 28and · 692,~~824,069~~521 ~~options~~exercisable toat ~~purchase~~$0.72 ~~membership~~per ~~units~~share into ~~KCI~~a ~~Investments,~~debt ~~LLC~~holder ~~were~~for ~~cancelled~~maturity date extensions.

In applying the Black-Scholes options pricing model to the options and warrant grants, the fair value of our share-based awards granted were estimated using the following assumptions for the periods indicated below:

	November 30, 2014
	May 31, 2015
Risk-free interest rate		1.~~45% – 1.49~~39	%
Expected options life		42.~~87 – 5.00~~50
Expected dividend yield		-
Expected price volatility		~~523% – 538~~173	%

~~A summary of the status of the Company’s stock options as of February 28, 2015 and changes during the periods ended February 28, 2015 and August 31, 2014 is presented below:~~16

	Number of Options and Warrants
Outstanding at August 31, 2013		14,648,407
Options and warrants granted		41,245,400
Options and warrants exercised		(947,825	)
Options and warrants forfeited, cancelled or expired		(47,339,044	)
Outstanding at August 31, 2014		9,573,604
Options and warrants granted		2,892,521
Options and warrants exercised		-
Options and warrants forfeited or expired		(100,000	)
Outstanding at February 28, 2015		12,366,125
Exercisable at November 30, 2014		4,370,207

A summary of the status of the Company’s stock options as of May 31, 2015 and changes during the period ended May 31, 2015 is presented below:

The following table summarizes information about options and warrants as of February 28, 2015:

	Number of Options and Warrants

Outstanding at August 31, 2014		9,573,604

Options and warrants granted		3,142,512
Options and warrants exercised		-
Options and warrants forfeited or expired		(100,000	)
Outstanding at May 31, 2015		12,616,125
Exercisable at May 31, 2015		4,620,207

19The following table summarizes information about options and warrants as of May 31, 2015:

		Options and Warrants Outstanding					Options and Warrants Exercisable
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Number Exercisable	Weighted Average Exercise Price
Range of Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life (in years)		Weighted Average Exercise Price	Number Exercisable	Weighted Average Exercise Price
$0.00 - $0.40	500,000	4.65	$0.40	500,000	$0.40
$0.01 to $0.40		500,000		4.90		$0.40	500,000	$0.40
$0.41 - $0.60	9,723,604	4.23	$0.50	1,727,686	$0.50
$0.41 to $0.60		9,723,604		4.46		$0.50	1,727,686	$0.50
$0.61 and up	2,142,521	4.49	$0.80	2,142,521	$0.80
$0.61 and up		2,142,521		4.75		$0.80	2,142,521	$0.80
	12,616,125	4.29	$0.55	4,620,207	$0.63
		12,366,125		4.53		$0.55	4,370,207	$0.64

NOTE 14—~~FAIR~~SUBSEQUENT ~~VALUE MEASUREMENTS~~EVENTS

The company uses the Black-Sholes model to calculate the fair value of the derivative liability.

Our financial assets and (liabilities) carried at fair value measured on a recurring basis as of February 28, 2015 and 2014, consisted of the following:

				Fair Value Measurements Using
Description	Total Fair Value at February 28, 2015			Quoted Prices in Active Markets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Derivative liability		$	1,562,718		$	-		$	1,562,718		-

Fair Value Measurements Using

Description

Total Fair Value at August 31, 2014

Quoted Prices in Active Markets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs (Level 3)

Derivative liability

NOTE 15—SUBSEQUENT EVENTS

Store Closings

On March 13, 2015, the Company closed its Capriotti's Sandwich Shop in San Marcos, California. On April 8, 2015, the Company closed its Capriotti's Sandwich Shop in San Diego, California. Neither location was profitable. The Company currently is exploring alternative restaurant concepts for those locations.

Capriotti's Relationship

On June 29, 2015, the Company consummated an agreement with Capriotti's Sandwich Shops, Inc., the franchisor of the Company's ~~Capriotti~~Capriottti's Sandwich ~~Sho+ps~~Shops, whereby:

·	Capriotti's Sandwich Shops, Inc. and the Company have agreed to terminate the Franchise Agreements and Area Development Agreements between these two parties;

·	the Company will continue to operate its existing Capriotti's Sandwich Shops during a mutually-agreed transition period, and

·	the Company will have an agreed time-frame to either sell its existing Capriotti's Sandwich Shops (some of which Capriotti's Sandwich Shops, Inc. has expressed interest in acquiring) or convert some of them to restaurants not under the Capriotti’s brand but under a brand proprietary to the Company.

Financing-Related Transactions

OnSubsequent ~~April~~to ~~21,~~quarter ~~2015~~end, the Company ~~entered~~received ~~into a~~ $~~190~~660,000 ~~short~~in EB-~~term~~5 ~~convertible~~funding ~~note,~~from ~~bearing~~two ~~interest~~investors, at$120,000 ~~22 percent and convertible at the lower~~ of ~~$0.0001~~which ~~per~~amounts ~~share~~to ordeposits 50for ~~percent~~legal ofand ~~the~~other ~~lowest~~expenses ~~intra-day~~to ~~trading~~be ~~price~~remitted ~~for~~by the Company’s ~~common~~on ~~stock~~behalf ~~during~~those ~~ten~~investors. The ~~(10)~~Company ~~trading~~also ~~days~~received ~~immediately~~a ~~prior~~advance toin the ~~date~~amount of ~~conversion. As additional consideration for this loan the Company issued to the lenders~~ $250,000 ~~shares~~from a relative of ~~the~~another, ~~Company's~~pending ~~common~~EB5 ~~stock~~investor. Such Onadvance ~~May~~(to ~~31,~~be ~~2015,~~treated ~~this~~as ~~note~~a ~~went~~bridge ~~into~~loan) ~~default~~is due to ~~non-payment~~be ~~and~~repaid, ~~the~~along ~~Company~~with ~~issued~~interest an@ ~~additional 150~~8.0%,~~000~~ ~~shares~~on ofor ~~common~~before ~~stock~~June to30, ~~the lender to extend the maturity date~~2015.

On April 21, 2015, the Company issued 60,000 shares of common stock to various entities and individuals for services valued at approximately $18,000. The value of the common stock was based on the market price of the stock on the date of issuance.17

OnSubsequent ~~April~~to 24May 31, 2015, the Company ~~issued~~entered ~~one~~into ~~(1)~~a ~~share~~$190,000 short term loan, convertible under certain circumstances into shares of ~~Class~~the BCompany's ~~membership~~Common ~~units~~Stock. This inloan ~~exchange~~was ~~for~~issued ~~$500,000~~with ~~plus~~a $6040,000 ~~for~~original ~~administrative~~issue ~~expenses~~discount ~~due~~- to ~~third~~be ~~parties,~~charged ~~$250,000~~as interest expense over the life of ~~which~~the ~~has~~loan. As ~~been~~additional ~~received~~consideration asfor ofthis ~~filing~~loan ~~date~~the Company issued to the lenders 250,000 shares of ~~these~~the ~~financial~~Company's ~~statements.~~Common Stock. The Company ~~also~~subsequently ~~received~~issued ~~$600~~an additional 150,000 shares of the Company's Common Stock to that lender in ~~full~~consideration ~~satisfaction~~of its extension of ~~subscriptions~~the ~~receivable~~maturity ~~outstanding~~date. This atloan ~~February~~was ~~28,~~repaid ~~2015~~out of proceeds of the loan noted immediately below.

On ~~April~~June 282, 2015, the Company ~~granted~~entered ~~250~~into an agreement with an existing financing source pursuant to which the Company received $178,000 ~~five-year~~and ~~warrants~~agreed to ~~acquire~~repay ~~common~~that ~~shares~~amount of principal balance plus an additional $78,320 (for total remittance of $256,320) by remitting to the ~~Company~~lender at16% anof ~~exercise~~all ~~price~~future receivables arising from credit card, debit card and prepaid transactions from some of its bank account until such time as the total remittance is paid in full. The additional $078,320 will be recognized as interest expense over the estimated term of the agreement.50 The ~~per~~term ~~share~~is not fixed due to anthe ~~employee~~variable ~~for~~repayment ~~services~~terms; ~~provided~~however, management currently estimates such term to be less than one year. Note that, out of the proceeds of this funding, as well as Company funds, the Company repaid the $190,000 short term loan noted immediately above.

On June 1915, 2015, the Company entered into aanother $190,000 short- term loan, convertible ~~note,~~under ~~bearing~~certain ~~interest~~circumstances atinto 22shares ~~percent~~of ~~and~~the ~~convertible~~Company's atCommon ~~the~~Stock ~~lower~~with ofthe ~~$0.0001~~same ~~per~~lender ~~share~~as orthe 50loan ~~percent~~noted oftwo ~~the~~paragraphs ~~lowest~~above. Stock. This ~~intra-day~~loan ~~trading~~was ~~price~~issued ~~for~~with ~~the~~a ~~Company’s~~$40,000 ~~common~~original ~~stock~~issue ~~during~~discount ~~ten~~- ~~(10)~~to ~~trading~~be ~~days~~charged ~~immediately~~as ~~prior~~interest toexpense over the ~~date~~life of ~~conversion.~~the loan. As additional consideration for this loan the Company issued to the lenders 400,000 shares of the Company's ~~common~~Common ~~stock~~Stock. ~~Cash proceeds from the loan were $150,000 due to an original issuance discount on the note of $40,000.~~

OnIn ~~June~~March 2,of 2015, the Company ~~has~~granted ~~entered into an accounts receivable financing arrangement with third party for a principal amount received in cash of $71~~361,~~000.~~759 ~~The~~shares ~~terms~~ of ~~the~~Common ~~arrangements~~Stock ~~require the Company~~ to ~~repay~~CEO ~~the~~Ken ~~principal~~Antos ~~balance plus~~in anconnection ~~additional~~with ~~$26,980~~both: ~~for~~investments ~~total~~he'd ~~remittance~~previously ofmade ~~$97,980. The~~to ~~terms of repayment require~~ the Company toand ~~remit~~third-party toloans ~~the~~guaranteed ~~lender~~by 14Antos. This ~~percent~~grant ofwas ~~all~~on ~~future~~terms ~~receivables~~consistent ~~arising~~with ~~from credit card~~similar, ~~debit~~prior ~~card and prepaid~~ transactions ~~until such time as the total remittance is paid in full~~. ~~These borrowing is secured by the assets of the Company.~~

21On June 29, 2015, On June 29, 2015, the Company entered into a short term loan agreement with the relative of a pending EB5 subscriber pursuant to which he advanced to the Company $235,000. The loan, plus interest @ 8.0%, is repayable August 1, 2015.

On June 30, 2015, the Company entered into an agreement with a new financing source pursuant to which the Company received $71,000 and agreed to repay that amount of principal balance plus an additional $26,980 (for total remittance of $97,980) by remitting to the lender 16% of all future receivables arising from credit card, debit card and prepaid transactions from one of its subsidiary bank account until such time as the total remittance is paid in full. The additional $26,980 will be recognized as interest expense over the estimated term of the agreement. The term is not fixed due to the variable repayment terms; however, management currently estimates such term to be less than six months.

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

FORWARD LOOKING INFORMATION

The following discussion and analysis of the Company’s financial condition and results of operations should be read with the condensed financial statements and related notes contained in this quarterly report on Form 10-Q (“Form 10-Q”). All statements other than statements of historical fact included in this Form 10-Q are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different than any expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include: 1. General economic factors including, but not limited to, changes in interest rates and trends in disposable income; 2. Information and technological advances; 3. Cost of products sold; 4. Competition; and 5. Success of marketing, advertising and promotional campaigns. The Company is subject to specific risks and uncertainties related to its business model, strategies, markets and legal and regulatory environment. You should carefully review the risks described in this Form 10-Q and in other documents the Company files from time to time with the SEC. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Form 10-Q. The Company undertakes no obligation to publicly release any revisions to the forward-looking statements to reflect events or circumstances after the date of this document.

OVERVIEW

Business

The Company was formed in May 2010 as Dixie Foods International, Inc. to operate a specialty food business for salad dressing, sauces and condiments. The Company was organized and still operates under the laws of the State of Florida. In November of 2014, the Company changed its name to “Preferred Restaurant Brands” and recently completed the necessary documents with the FINRA, the SEC and other relevant regulatory authorities to effect this change. The Company's common stock now trades under the stock symbol "PRBI". The Company’s fiscal year-end is August 31. The Company operates from offices at 4033 South Dean Martin Drive; Las Vegas, NV 89013; and, its phone number is (702) 834-7101.

On January 6, 2012, the Company formed Dixie Sauce Co, Inc. (“Dixie Sauce”) as a wholly-owned subsidiary of the Company and transferred all assets and liabilities related to its specialty foods business to this subsidiary. Dixie Sauce currently conducts no operations.

Acquisition

On June 4, 2014, the Company completed the purchase (the “Reverse Acquisition”) of KCI Investments, LLC (“KCI”). In connection with the Reverse Acquisition, the Company acquired 100% of the issued and outstanding membership interests of KCI from KCI Holding I, LLC ("KCI Holding"), an entity that, until the consummation of the Reverse Acquisition, held 100% of the membership interests in KCI.

In exchange for the purchase of KCI by the Company, the Company issued to KCI Holding an aggregate of 34,508,976 shares of the Company's common stock. In addition, KCI Holding purchased and acquired from certain shareholders of the Company an aggregate of 6,305,400 shares of the Company's issued and outstanding common stock. As a result of the Reverse Acquisition, KCI became a wholly-owned subsidiary of the Company, and KCI Holding became a stockholder of the Company owning an aggregate of 40,814,376 shares of the Company's common stock, representing 96% of our issued and outstanding shares of common stock as of that date.

KCI’s Co-Manager and Chief Executive Officer, Ken Antos, now also serves as Chief Executive Officer and as Chairman of the Board of Directors of the Company. KCI’s Chief Financial Officer, Richard Groberg, now serves as the Company's Vice President, Chief Financial Officer and Board Secretary.

KCI Investments, LLC

KCI Investments, LLC, a Nevada limited liability company headquartered in Las Vegas, Nevada, was formed on November 8, 2004, but did not engage in any business operations until November 2010. Currently, KCI is engaged in developing, owning and operating a multi-brand chain of restaurants, currently under two franchise brands: Capriotti’s Sandwich Shops and Papa John’s. KCI also owns, operates and/or is developing various other restaurant concepts. KCI and its various subsidiaries, currently operate 17 restaurants:

·	9, franchised Capriotti's Sandwich Shops;

·	six (6) franchised Papa John's pizza shops: two of which it opened during the first quarter of fiscal 2015; two of which it opened December 27, 2014 and two of which it acquired on February 17, 2015), and

·	two proprietary, fine casual restaurants: Elements Kitchen & Martini Bar and Social Bistro & Wine Bar.

2219

Additionally, the Company has in various stages of development and construction eight Papa John’s - all of which it anticipates opening over the next 12 months – subject to access to additional financing.

Locations
Fiscal Year (August 31, FYE)	2011		2012		2013		2014		Q1 2015	Q2 2015	Q3 2015
Opened in Period		0		3		5		4	2	2	1
Acquired in Period		0		1		1		0	0	2	0
Total Added In Year		0		4		6		4	2	4	1
Cumulative Added		0		4		10		14	16	20	21
Closed In Period		0		0		0		0	1	1	2
Cumulative Closed		0		0		0		0	1	2	4
Total Open		0		4		10		14	15	18	17

Location

Fixed Year (August 31, FYE)	2011	2012	2013	2014	Q1 2015	Q2 2015	Q3 2015

Opened in Period	0	3	5	4	2	2	1
Acquired in Period	0	1	1	0	0	2	0
Total Added In Year	0	4	6	4	2	4	1

Cumulative Added	0	4	10	14	16	20	21

Closed in Period	0	0	0	0	1	1	2
Cumulative Closed	0	0	0	0	1	2	4

Total Open	0	4	10	14	15	18	17

Results of Operations

~~Six~~Three ~~Months~~months ~~Ended~~ended ~~February~~May 2831, 2015 ~~Compared~~vs. toMay ~~Six Months Ended February 28~~31, 2014

Income from Restaurant Operations

Largely resulting from Revenue growth and Management’s continues to focus on tightening cost controls and selling higher margin item, the Company recognized Income from restaurant operations of $225,780 Q3-15 compared with a net loss from restaurant operations of $32,656 during Q3-14.

Revenue

During the ~~six~~three months ended ~~February~~May 2831, 2015 (“~~1st6~~Q3-15”), the Company reported Revenues of $32,~~924~~185,~~646 in net sales~~433, ~~compared~~up to18.1% ~~net~~from ~~sales~~Revenues of $21,~~617~~851,~~819~~020 ~~for~~during the ~~six~~three months ended ~~February~~May 2831, 2014 (“~~1st6~~Q3-14”), anand ~~increase~~up 12.7% from Revenues of $1,~~306~~939,~~827~~412 orin ~~49.9%.~~Q2-15, This growth resulted mainly from the impact of the ~~six additional Papa John~~PJ's ~~locations~~Additions ~~opened~~ and ~~acquired between October 2014 and February 2015 and~~ two additional Capriotti's opened in ~~1st6~~1st9-15 - more than offsetting: (i) the loss of ~~net~~Revenues ~~sales~~ from the four Capriotti's locations not operating during the ~~1st6~~Q3-~~2015~~15 but operating during the ~~1st6~~Q3-14 and (ii) lower ~~Same~~same ~~Store~~store ~~Sales~~sales ~~growth~~ ("SSS":) growth ~~of net sales for restaurants open during the comparable periods)~~. With regard to lower ~~same store sales~~SSS, note that in the ~~1st6~~Q3-14 period, the Company utilized Groupon and other promotional efforts to gain brand awareness. These programs did generate additional sales; however, they were not profitable:. ~~thus~~Thus, the Company did not repeat these programs during ~~the 1st6~~Q3-15.

Food, Beverage and Packaging

Food, beverage and packaging ~~increased~~expenses decreased to $1689,~~548,784~~944 (31.6% of Revenues) in ~~1st6~~Q3-15, up from $~~954~~960,~~707~~394 ~~in 1st6-14~~ (an51.9% ~~increase~~ of ~~$594,077~~Revenues) orin 62Q3-14.~~2%)~~ This improvement, ~~resulting~~in ~~largely~~absolute ~~from~~dollars ~~the~~and ~~impact~~as a percentage of ~~nonrecurring~~Revenues ~~expenses~~resulted ~~related~~from Management’s continued to ~~grand~~focus ~~opening~~on ~~and~~tightening ~~other~~cost ~~promotions~~controls ~~related~~and toselling ~~the~~higher ~~PJ's~~margin ~~Additions~~items.

Labor and Related

Labor and related expenses increased to $1829,~~398,817~~004 (37.9% of Revenues) in ~~1st6~~Q3-15, up from $~~689~~514,~~900~~259 ~~in 1ST6-14~~ (an27.8% ~~increase~~ of ~~$708,917~~Revenues) orin ~~102.8%)~~Q3-14, largely because of the impact of labor for new locations, which must maintain minimum staffing levels during their ramp-up period, ~~especially~~as ~~during~~well overall management for the Papa John’s brand. Note though that Labor and related expenses were improved from Q2-15 levels (38.8% of Revenues) due to significant reductions in payroll at the Company’s Capriotti’s locations and post-grand opening ~~promotions.~~stabilization of the labor at the Company’s Papa John’s locations

Occupancy

Occupancy expenses ~~increased~~decreased to $~~795~~169,~~314~~607 (7.8% of Revenues) in ~~1st6~~Q3-15, up from $~~296~~164,~~474~~579 ~~in 1ST6-14~~ (an8.9% ~~increase~~ of ~~$498~~Revenues) in Q3-14,~~840~~ ordue ~~168.3%)~~largely to ~~also~~the ~~largely~~improving ~~because~~performances of ~~the~~operating ~~burden~~locations (all of ~~fixed~~which ~~rent~~had ~~and~~high ~~related~~occupancy ~~overhead~~costs ~~related~~relative to ~~the new locations~~Revenues).

Other Restaurant Expenses

Other restaurant expenses increased to $1271,~~164,835~~098 (12.4% of Revenues) in ~~1st6~~Q3-15, up from $~~531~~179,~~469~~132 ~~in 1st6-14~~ (an9.7% ~~increase~~ of ~~$633,366~~Revenues) orin ~~119.2%)~~Q3-14, resulting largely from: ~~significantly~~fixed ~~increased~~costs ~~depreciation~~associated ~~expenses~~with ~~and from marketing expenses related to~~ the ~~new~~Papa John’s locations.

~~Net~~General ~~Loss~~and ~~from Restaurant Operations~~Administrative,

AsThe aCompany ~~result,~~recorded ~~the~~general ~~Company~~and ~~incurred~~administrative aexpenses ~~net~~of ~~loss~~$2,401,136 ~~from~~in ~~restaurant~~Q3-15 ~~operations~~compared ofto $~~983~~131,~~104~~088 ~~during~~in ~~the~~Q3-14,. ~~six~~The ~~months~~increase ~~ended~~from ~~February~~resulted ~~28,~~largely ~~2015~~from: ~~compared~~(i) tononrecurring ~~income~~and/or ~~from~~noncash ~~restaurant~~expenses ~~operations~~related ofto ~~$145,269~~fees ~~during~~paid ~~the~~in ~~six~~equity ~~months~~for ~~ended~~professional ~~February~~services ~~28,~~rendered; ~~2014,~~and a(ii) ~~decrease~~the value of ~~$1,128,373~~the orvesting ~~776~~of options previously granted.~~7%.~~

General and Administrative

The Company recorded general and administrative expenses of $4,621,334 in 1ST6-15 compared to $1,062,848 in 1ST6-14, an increase of $3,558,486 or 334.8%. This increase resulted largely from: (i) more than 1,567,184 of nonrecurring and/or noncash expenses related to fees paid in equity for professional services rendered; and (ii) the value of the vesting of options previously granted, which totaled approximately $1,627,015.

Depreciation

Depreciation and amortization ~~increased~~decreased to $~~206~~135,~~019~~416 in ~~1ST6~~Q3-15, up from $~~119~~239,~~967~~112 in ~~1ST6~~Q3-14, ~~(an~~due ~~increase~~to ofthe ~~$86,052~~impact oron ~~71.7%)~~depreciation ~~due~~from write offs related to locations closed more than offsetting new ~~restaurant~~depreciation ~~openings~~related to new and pending restaurant openings.

Pre-opening Expenses

Pre-opening expenses ~~increased~~equaled to $~~473~~35,~~404~~573 in ~~1ST6~~Q3-15, up from $~~309~~8,~~560~~512 in ~~1ST6~~Q3-14, ~~(an~~but ~~increase~~down ofsignificantly ~~$163,844~~from orprior ~~52.9%)~~quarters of fiscal 2015 as athe ~~result~~Company ofdid not open any new ~~restaurant~~locations ~~openings~~other than its Social Bistro in April and, thus, didn’t incur significant Pre-opening Expenses.

Other Income and Expense

Total other ~~income and~~ expenses were $4143,~~139,731~~600 in ~~1ST6~~Q3-15, upcompared ~~from~~to other expense of $480,~~302~~679 in ~~1ST6~~Q3-14 ~~(an increase of $4~~,~~135,429),~~ ~~due~~as toInterest anExpenses ~~increase in interest expense~~ of $4874,~~541,299~~664 ~~stemming~~were ~~from~~partially increases in interest bearing notes to fund operations and include significant noncash charges related to the value of warrants and equity granted in connection with loans and extensions and modifications thereto. This increase was offset by a$688,197 ~~gain on changes in derivative liabilities~~ of ~~$808,240~~Derivative Gains.

Net Loss

As a result, the Company incurred a net loss of $102,~~423~~489,~~592~~945 during the ~~six~~three months ended ~~February~~May 2831, 2015 compared to a net loss of $1426,~~351,408~~735 during the ~~six~~three months ended ~~February~~May 2831, 2014~~, an increase of $9,072,184 or 671~~.~~3%.~~

~~Three Months Ended February 28, 2015 Compared to Three Months Ended February 28, 2014~~20

Nine months ended May 31, 2015 vs May 31, 2014

Revenue

During the ~~three~~nine months ended ~~February~~May 2831, 2015 (“Q21st9-15”), the Company reported Revenues of $16,~~939~~110,~~412 in net sales~~079, ~~compared~~up to36.7% ~~net~~from ~~sales~~Revenues of $14,~~336~~468,~~391~~839 for the ~~three~~nine months ended ~~February~~May 2831, 2014 (“Q21st9-14”)~~, an increase of $603,021 or 45~~.~~1%.~~ This growth resulted mainly from the impact of the PJsix additional Papa John's ~~Additions~~locations opened and acquired between October 2014 and February 2015 and two additional Capriotti's open induring ~~1st6~~all of 1st9-15 but only partially during 1st9-14 - more than offsetting: (i) the loss of ~~net~~Revenues ~~sales~~ from the four Capriotti's locations not operating during the Q21st9-15 but operating during the Q21st9-14 and (ii) lower Same Store Sales growth ("SSS": growth. of Revenues for restaurants open during the comparable periods). With regard to lower ~~SSS~~same store sales, note that in the Q21st9-14 period, the Company utilized Groupon and other promotional efforts to gain brand awareness. These programs did generate additional sales; however, they were not profitable:. ~~thus~~Thus, the Company did not repeat these programs during Q2the 1st9-15. ~~The net sales figures were also negatively impacted due to seasonality and the full quarter's impact of the Capriotti's locations closed during Q1 and Q2.~~

Food, Beverage and Packaging

Food, beverage and packaging expenses increased to $~~834~~2,~~470~~238,728 (36.5% of Revenues) in Q21st9-15, up from $~~503~~1,~~770~~915,101 (42.9% of Revenues) in Q21st9-14. While ~~(an~~the ~~increase~~total ~~of $330~~increased,~~700~~ orit ~~65.6%),~~decreased ~~resulting~~as ~~largely~~a ~~from~~percentage ~~the impact~~ of ~~nonrecurring~~Revenues ~~expenses~~as ~~related~~Management continues to ~~grand~~focus ~~opening~~on ~~and~~tightening ~~other~~cost ~~promotions~~controls ~~related~~and toselling ~~the~~higher ~~PJ's~~margin ~~additions~~items.

Labor and Related

Labor and related expenses increased to $~~751~~2,~~865~~227,821 (36.5% of Revenues) in Q21st9-15, up from $~~340~~1,~~998~~204,159 ~~in Q2-14~~ (an26.9% ~~increase~~ of ~~$410,867~~Revenues) orin ~~120.5%)~~1st9-14, largely because of the impact of labor for new locations, which must maintain minimum staffing levels during their ramp-up period, especially during grand opening promotions.

Occupancy

Occupancy expenses increased to $~~516~~964,~~781~~921 (15.8% of Revenues) in Q21st9-15, up from $~~111~~461,~~357~~053 ~~in Q2-14~~ (an10.3% ~~increase~~ of ~~$405,424 or 364.1%~~Revenues) in 1st9-14, also largely because of the burden of fixed rent and related overhead related to the new locations.

Other Restaurant Expenses

Other restaurant expenses increased to $~~541~~1,~~939~~435,933 (23.5% of Revenues) in Q21st9-15, up from $~~304~~710,~~118~~601 ~~in Q2-14~~ (an15.9% ~~increase~~ of ~~$237,821~~Revenues) orin ~~78.2%)~~1st9-14, resulting largely from: significantly increased depreciation expenses and from largely nonrecurring marketing expenses related to the new locations~~, but lower than the 31~~.~~4% reported in. Q1-15~~

Net Loss from Restaurant Operations

~~Largely~~As as a result ~~of the increased expenses associated with the new locations~~, the Company incurred a ~~net~~Net loss from restaurant operations of $~~705~~757,~~643~~324 ~~Q2-15~~during ~~compared~~the ~~with~~nine amonths ~~net~~ended May 31, 2015 compared to income from restaurant operations of $76177,~~148~~925 during ~~Q2-14,~~the anine ~~decrease~~months ofended ~~$781,791~~May ~~or 1~~31,~~026~~ 2014.~~7%.~~

General and Administrative,

The Company recorded general and administrative expenses of $27,~~312~~022,~~551~~470 in Q21st9-15 compared to $~~484~~1,~~909~~193,936 in Q21st9-14, anresulting ~~increase of $1,827,642 or 376.9%. The increase from resulted~~ largely from: (i) ~~more than $1,106,542 of~~ nonrecurring and/or noncash expenses related to fees paid in equity for professional services rendered; and (ii) the value of the vesting of options previously granted~~, which totaled approximately $809,014~~.

Depreciation

Depreciation and amortization ~~increased~~decreased to $~~100~~341,~~804~~435 in Q11st9-15, updown from $72359,~~306~~079 in Q21st9-14, ~~(an~~due ~~increase~~to ofthe ~~$28,498~~impact oron ~~39.4%)~~depreciation ~~due~~from write offs related to locations closed more than offsetting new ~~restaurant~~depreciation ~~openings~~related to new and pending restaurant openings.

Pre-opening Expenses

Pre-opening expenses increased to $~~266~~508,~~957~~977 in Q11st9-15, up from $~~211~~318,~~660~~072 in Q21st9-14 ~~(an increase of $55,297 or 26.1%)~~ as a result of new restaurant openings.

Other Income and Expense

Total other income and expenses were $24,~~805~~283,~~361~~231 in Q11st9-15, ~~compared~~up tofrom ~~other income of~~ $~~280~~84,~~687~~981 in Q21st9-14 ~~(an increase in other expenses of $3~~,~~086,048)~~ due to an increase in interest ~~expense~~expenses ~~of $3,482,360~~ stemming from: (i) increases in interest bearing notes to fund operations and ~~include~~(ii) significant noncash charges related to the value of warrants and equity granted in connection with loans and extensions and modifications thereto. This increase was offset in part by a gain on changes in derivative liabilities of $~~808~~1,~~240~~496,437.

Net Loss

As a result, the Company incurred a net loss of $612,~~191~~913,~~316~~437 during the ~~three~~nine months ended ~~February~~May 2831, 2015 compared to a net loss of $~~412~~1,~~040~~878,143 during the ~~three~~nine months ended ~~February~~May 2831, 2014~~, an increase of $5,779,276 or 1,402~~.~~6%.~~

Liquidity and Capital Resources

During the ~~six~~nine months ended ~~February~~May 2831, 2015, the Company's working capital deficit increased $6,~~069~~518,~~696~~801 ~~(72.5%)~~ to $14,~~445~~894,~~762~~867, from a deficit of $8,376,066 at August 31, 2014. The primary reasons for the increase in the working capital deficit were: (i) increased short term debt and payables resulting from delays in receiving subscribed financings and the cost of opening new locations, and (ii) the recognition of derivative liabilities related to certain equity issuances.

Cash Flows

Net cash used in operating activities was $23,~~404~~129,~~185~~673 during the ~~six~~nine months ended ~~February~~May 2831, 2015, largely due to the reported net loss of $1012,~~317~~913,~~710~~437, which was partially offset by various noncash items including: Depreciation and amortization; Loss on sale of assets; Amortization of debt discounts and debt issuance costs; Change in derivative liability, Stock issued in connection with execution of notes payable, Vesting of stock options granted and Common stock issued for services. During this period, net cash used in investing activities was $1,~~458~~479,~~665~~563, mostly related to the construction and acquisition of new restaurants, offset by the sale of one store for cash. Cash used in operating and investing activities was offset by $14,~~957~~619,~~245~~444 in Net Cash Provided by Financing Activities, which included approximately $2.1 million net proceeds from new debt, (after debt repayments) and $~~1,900,000~~2.5million of proceeds from the sale of Class B membership units in the Company’s EB-5-financed subsidiaries.

Recent Financing Transactions

During the three months ended ~~February~~May 2831, 2015, the Company secured additional debt funds to support ongoing operations. On February 17, 2015, the Company borrowed $1,000,000 from TCA Global Credit Master Fund LLC 1 ("TCA"). The "TCA Loan" bears interest @ 12% per annum and has and original maturity date of February 17, 2016. The TCA Loan is scheduled to amortize monthly over one year. The Company utilized the proceeds of the TCA Loan, net of related transaction fees, to: fund the acquisition of two Papa John's locations; repay some obligations, and provide additional working capital.

Also, as noted above in Section 10: Subsequent Events, subsequent to quarter-end:

·	The Company received $660,000 in EB-5 funding from two investors, $120,000 of which amounts to deposits for legal and other expenses to be remitted by the Company on behalf those investors. The Company also received a advance in the amount of $250,000 from a relative of another, pending EB5 investor. Such advance (to be treated as a bridge loan) is due to be repaid, along with interest @ 8.0%, on or before June 30, 2015.

·	The Company entered into a $190,000 short term loan, convertible under certain circumstances into shares of the Company's Common Stock. This loan was issued with a $40,000 original issue discount - to be charged as interest expense over the life of the loan. As additional consideration for this loan the Company issued to the lenders 250,000 shares of the Company's Common Stock. The Company subsequently issued an additional 150,000 shares of the Company's Common Stock to that lender in consideration of its extension of the maturity date.

·	The Company entered into an agreement with an existing financing source pursuant to which the Company received $178,000 and agreed to repay that amount of principal balance plus an additional $78,320 (for total remittance of $256,320) by remitting to the lender 16% of all future receivables arising from credit card, debit card and prepaid transactions from some of its bank account until such time as the total remittance is paid in full. The additional $78,320 will be recognized as interest expense over the estimated term of the agreement. The term is not fixed due to the variable repayment terms; however, management currently estimates such term to be less than one year. Note that, out of the proceeds of this funding, as well as Company funds, the Company repaid the $190,000 short term loan noted immediately above.

·	The Company entered into another $190,000 short term loan, convertible under certain circumstances into shares of the Company's Common Stock with the same lender as the loan noted two paragraphs above. Stock. This loan was issued with a $40,000 original issue discount - to be charged as interest expense over the life of the loan. As additional consideration for this loan the Company issued to the lenders 400,000 shares of the Company's Common Stock.

·	The Company entered into a short term loan agreement with the relative of a pending EB5 subscriber pursuant to which he advanced to the Company $235,000. The loan, plus interest @ 8.0%, is repayable August 1, 2015.

·	The Company entered into an agreement with a new financing source pursuant to which the Company received $71,000 and agreed to repay that amount of principal balance plus an additional $26,980 (for total remittance of $97,980) by remitting to the lender 16% of all future receivables arising from credit card, debit card and prepaid transactions from one of its subsidiary bank account until such time as the total remittance is paid in full. The additional $26,980 will be recognized as interest expense over the estimated term of the agreement. The term is not fixed due to the variable repayment terms; however, management currently estimates such term to be less than six months.

Recent Acquisitions

On February 18, 2015, the Company consummated the acquisition of two, franchised Papa John's locations in the Company's existing trade area in Northern California: one in Fresno and the other in Clovis. In total the Company paid the seller $~~392~~320,~~032~~000 in cash. The Company also acquired those locations inventory as of the closing date.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that we are required to disclose pursuant to these regulations. In the ordinary course of business, we enter into operating lease commitments, purchase commitments and other contractual obligations. These transactions are recognized in our financial statements in accordance with generally accepted accounting principles in the United States.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of its financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to the reported amounts of revenues and expenses and the valuation of our assets and contingencies. We believe our estimates and assumptions to be reasonable under the circumstances. However, actual results could differ from those estimates under different assumptions or conditions. Our financial statements are based on the assumption that we will continue as a going concern. If we are unable to continue as a going concern we would experience additional losses from the write-down of assets.

2622

Going Concern

The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to: identify future investment opportunities and obtain the necessary debt or equity financing and generate profitable operations from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

New Accounting Pronouncements

The company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a "smaller reporting company" defined in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of November 30, 2014. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded such controls and procedures were not effective as of November 30, 2014 to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms and to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

There were no changes in our internal controls over financial reporting that occurred during the ~~six~~quarter ~~month period~~ ended ~~February~~November 2830, ~~2015~~2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

2723

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are currently not a party to any pending legal proceeding. From time to time, we may receive claims of and become subject to routine litigation that is incidental to the business..

Item 1A. Risk Factors

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

Unregistered Sale of Equity Securities

During the ~~six~~nine ~~months~~month period ended ~~February~~May 2831, 2015,; the Company issued ~~3,063,890~~ the following shares of its Common Stock ~~to lenders in connection with new loans and services.~~:

· In connection with the extension of certain agreements related to the reverse acquisition, the Company issued to certain shareholders of the Company, all of whom were shareholders prior to the reverse acquisition, 10,000 shares of common stock of the Company valued at $8,800. The ~~sale~~value of the common stock was ~~exempt~~based ~~from~~on ~~registration~~the ~~under~~market ~~Section~~price 4of the stock on the date of issuance. · In connection with short-term loans made to the Company by two separate entities (Aone of which was repaid in full during the period ended May 31, 2015)~~(2)~~, the Company agreed that, for each two weeks that each such loan remains outstanding, the Company is required to issue 37,500 shares of its common stock - in addition to an initial grant of 37,500 shares to each lender. During the ~~Securities~~nine-month ~~Act~~period ended May 31, 2015, the Company issued 1,074,844 shares valued at $965,017 in connection with these two loans. The value of ~~1933~~the common stock was based on the market price of the stock on the date of issuance and has been recorded as interest expense in the Company’s statement of operations. · In connection with a short-term convertible loan made to the Company, the Company issued to the lenders 250,000 shares of the Company's common stock. On May 31, 2015, this note went into default due to non-payment and the Company issued an additional 150,000 shares of common stock to the lender to extend the maturity date. · The ~~securities~~Company ~~were~~issued ~~not~~2,283,547 ~~offered~~shares ~~publicly~~of common stock to various entities and individuals for services valued at $983,023. The value of the common stock was based on the market price of the stock on the date of issuance.

The sales were exempt from registration under Section 4(A)(2) of the Securities Act of 1933. The securities were not offered publicly.

Item 3. Defaults upon Senior Securities

None other than as disclosed herein.

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

Item 6. Exhibits

4.25	~~Mammoth~~RBB ~~Loan~~Note ~~Documents~~and Securities Purchase Agreement
4.26	~~CBC~~New ~~Extension~~Caprock ~~Documents~~Loan
4.27	~~2015~~2nd ~~Magnolia~~Convertible ~~Loan~~Promissory Note
4.28	~~TCA~~Xiao Bridge Loans (includes most recent and April Loan~~-related~~ ~~Documents~~documents)
4.35	Rapid Advance Loan
10.354	Capriotti’s Corp Termination Agreement
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS	XBRL Instance Document.

101.SCH	XBRL Taxonomy Extension Schema Document.

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

2924

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: July 20, 2015	PREFERRED RESTAURANT BRANDS, INC.
Dated: August 19, 2015	PREFERRED RESTAURANT BRANDS, INC.
	/s/ KENNETH M. ANTOS
	/s/ KENNETH ANTOS
	Kenneth A. Antos,
	Kenneth Antos,
	President and Chief Executive Officer
	(Principal Executive Officer)

3025

Filing Compare · Preferred Restaurant Brands, Inc.