UNITED STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549

FORM 10-K





(Mark One)



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



For the fiscal year ended August
31, 2014



or



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



For the transition period from _______________
to _______________



Commission file number 333-170662



DIXIE
FOODS INTERNATIONAL, 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.)



|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



Securities registered pursuant to
Section 12(b) of the Act: None



Securities registered pursuant to
section 12(g) of the Act:



Common Stock

(Title of class)



Indicate by
check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 ̈Yes  x  No



Indicate by
check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

 ̈Yes  x  No



Indicate by
check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.

xYes   ̈  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).

xYes   ̈  No



Indicate by
check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.



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 |  ̈ | Accelerated filer         |  ̈
|----------------------- | - | ------------------------- | -
|Non-accelerated filer   |  ̈ | 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)

 ̈Yes  x  No





As of December 18, 2014 issuer had 43,030,976
shares of common stock issued and outstanding.



As of February 28, 2014 the aggregate market value of our common stock held by non-affiliates
of registrant was $2,802,100 based on the last stock sale.





DOCUMENTS INCORPORATED
BY REFERENCE



None.











CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION



The Business
section and other parts of this Annual Report on Form 10-K (“Form 10-K”) contain forward-looking statements that involve
risks and uncertainties. Many of the forward-looking statements are located in “Management’s Discussion and Analysis
of Financial Condition and Results of Operations.” Forward-looking statements provide current expectations of future events
based on certain assumptions and include any statement that does not directly relate to any current or historical fact. Forward-looking
statements can also be identified by words such as “anticipates,” “believes,” “estimates,”
“expects,” “intends,” “plans,” “predicts,” and similar terms. Forward-looking
statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results
discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those
discussed in the subsection entitled “Risk Factors” under Part I, Item 1A of this Form 10-K. The Company assumes no
obligation to revise or update any forward-looking statements for any reason, except as required by law.



2







Table of
Contents



Contents





|PART I                                                                                                                    | 4 
|------------------------------------------------------------------------------------------------------------------------- | --
|Item 1.  Business                                                                                                         | 4 
|Item 1A.  Risk Factors                                                                                                    | 7 
|Item 1B.  Unresolved Staff Comments                                                                                       | 7 
|Item 2.  Properties                                                                                                       | 7 
|Item 3.  Legal Proceedings                                                                                                | 7 
|PART II                                                                                                                   | 7 
|Item 5.  Market for Registrant’s Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity Securities | 7 
|Item 6.  Selected Financial Data                                                                                          | 8 
|Item 7.  Management’s Discussions and Analysis of Financial
    Condition and Results of Operations                       | 8 
|Item 7a.  Quantitative and Qualitative Disclosures About Market
    Risk                                                  | 9 
|Item 8.  Financial Statements and Supplementary Data                                                                      | 9 
|PART III                                                                                                                  | 10
|Item 10.  Directors and Executive Officers and Corporate Governance                                                       | 11
|Item 13.  Certain Relationships and Related Transactions,
    and Director Independence                                   | 13
|PART IV                                                                                                                   | 15





3







PART
I



Item 1.  Business



Dixie Foods International, Inc.
(the “Company”; OTCQB:”DIXI”) was formed in May 2010 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 is in process of filing the necessary documents
with the FINRA, the SEC and other relevant regulatory authorities to effect this change. The Company’s fiscal year-end is
August 31. We operate from our office at 4033 South Dean Martin Drive; Las Vegas, NV 89013; and, our phone number is (702) 834-7101.



On January 6, 2012, the Company
formed Dixie Sauce Co, Inc. (“Dixie Sauce”) a corporation 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 and operates
various other restaurant concepts.  KCI and its various subsidiaries, currently operate 15 restaurants: 12, franchised Capriotti's
Sandwich Shops; two franchised Papa John’s pizza restaurants, and Elements Kitchen & Martini Bar.  Additionally,
the Company has in various stages of development and construction: four Capriottis; nine Papa John’s; a tapas restaurant,
and the Italian Steakhouse, all of which it anticipates opening over the next 12 months.



|Locations                    |  |      |   |  |      |  |   |      |  |  |      |  |  |              |   
|---------------------------- |  | ---- | - |  | ---- |  | - | ---- |  |  | ---- |  |  | ------------ | --
|                             |  |      |   |  |      |  |   |      |  |  |      |  |  |              |   
|Fiscal Year (August 31, FYE) |  | 2011 |   |  | 2012 |  |   | 2013 |  |  | 2014 |  |  | 2015 To Date |   
|Opened in Year               |  |      | 0 |  |      |  | 3 |      |  |  | 5    |  |  |              | 4 
|Acquired in Year             |  |      | 0 |  |      |  | 1 |      |  |  | 1    |  |  |              | 0 
|Total Added In Year          |  |      | 0 |  |      |  | 4 |      |  |  | 6    |  |  |              | 4 
|                             |  |      |   |  |      |  |   |      |  |  |      |  |  |              |   
|Closed                       |  |      | 0 |  |      |  | 0 |      |  |  | 0    |  |  |              | 0 
|                             |  |      |   |  |      |  |   |      |  |  |      |  |  |              |   
|Total Open                   |  |      | 0 |  |      |  | 4 |      |  |  | 10   |  |  |              | 14



Capriotti’s

The Company’s Capriotti’s
Sandwich shops are located throughout its contractual development areas - consisting of: parts of Dallas/Fort Worth, Southern
California markets (Orange County, San Diego County and parts of Los Angeles County), as well as parts of Las Vegas. The Company
has committed, per its various Area Development Agreements with its Capriotti’s franchisor to open at least five new locations
per year.



4







Capriotti’s Sandwich Shop,
Inc. (the “Capriotti’s Franchisor”), a Nevada corporation, operates and franchises dine-in and carryout restaurants
under the trademark “Capriotti’s”. Capriotti’s began operations in 1976. Capriotti’s franchisor
currently reports more than 100 company-owned and franchised restaurants operating domestically in 13 states. Capriotti’s
Sandwich Shop is a chain of submarine sandwich restaurants focused on the growing fast casual market. Capriotti’s concept
is a dine-in or take-out, fast casual restaurant, offering an upbeat and comfortable atmosphere. Founded in Wilmington, Delaware,
Capriotti’s has over 35 years of experience servicing local markets with gourmet products. Capriotti’s prides itself
on using the freshest ingredients in order to provide customers with a taste of home in every bite. Capriotti’s features
freshly made sandwiches where patrons can enjoy and experience a superior quality product with a gourmet taste. Capriotti’s
prides itself on its excellent reputation using the freshest ingredients in order to provide customers with a taste of home in
every bite, and thus the restaurants compete on the basis of quality and service and not price. Where most sandwich chains use
highly processed deli meats for all of their sandwiches, Capriotti’s roasts whole turkeys and roast beefs each night.



Papa John’s

The Company also currently operates
two, franchised Papa John’s restaurants in connection with its exclusive rights to develop Papa John's in trade areas stretching
from Fresno to north of Sacramento, California. The Company has committed, per its March 2014 Area Development Agreement with
Papa John's, to build 27 locations by the end of 2015.



Papa John’s International,
Inc., a Delaware corporation, operates and franchises pizza delivery and carryout restaurants and, in certain international markets,
dine-in and delivery restaurants under the trademark “Papa John’s.” Papa John’s began operations in 1984.
At December 29, 2013, there were 4,428 Papa John’s restaurants in operation, consisting of 723 PJ Franchisor-owned and 3,705
franchised restaurants operating domestically in all 50 states and in 34 countries. The PJ Franchisor-owned restaurants include
191 restaurants operated under four joint venture arrangements and 58 units in Beijing and North China.



Papa John's franchises are typically
retail restaurants devoted primarily to the sale of high-quality pizza and related food products such as breadsticks, cheese sticks,
chicken poppers and wings, dessert items and canned or bottled beverages. They make high-quality pizzas by using fresh, hand-tossed
dough (from a proprietary recipe), fresh-sliced vegetables, fresh-packed pizza sauce made from vine-ripened tomatoes (not from
concentrate), a proprietary mix of savory spices, and a choice of high-quality meat (100% beef and pork with no fillers).



Other Concepts

The Company currently manages Elements
Kitchen & Martini Bar (“Elements’); is planning to open a tapas restaurant (“TAPAS”), and plans to
open its first Italian Steakhouse early in 2015. The Company previously announced that it would be opening those and other concept
restaurants in partnership with Chef Alex Stratta. In early December 2014, the Company ended its relationship with Stratta. The
Company still intends to open these restaurants and explore opening other, unique concepts that it can open and then replicable
in multiple locations and multiple markets.



Industry Segments

Our Capriotti’s Sandwich Shop
and Papa John’s Restaurants will operate in different segments of the restaurant industry.



| | · | Capriotti’sare “fast casual” restaurants. Technomic Information Services, a consulting
                                         and research firm serving the food industry, defines fast casual restaurants as those
                                         meeting the following criteria: limited-service or self-service format; average meal
                                         price between $7 and $11; made-to-order food with more complex flavors than fast food
                                         restaurants, and upscale, unique or highly developed décor, and, most often, no
                                         drive thru service.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Papa
                                         John’s are fast food or “quick service” restaurants (“QSRs”),
                                         meaning those where patrons pay for quickly-prepared food products before eating and
                                         either consume them onsite, take them to eat elsewhere or have them delivered.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | (“TAPAS”)is a “fine casual” restaurant (better quality and higher prices than
                                         a fast casual restaurant but not as expensive or high quality as a “fine dining”
                                         restaurant). TAPAS offers modern ‘tapas’ with prominent Spanish accents in
                                         a variety of selections ranging from seafood, , meat, poultry, paella and vegetable preparations.
                                         It also will offer a full bar with specialty drinks and ‘signature’ sangria
                                         selections; bottled and tap artisan beers, wines both by the carafe and by the glass),
                                         and non-alcoholic offerings. TAPAS occupies an approximately 2,700 square foot, indoor/outdoor
                                         space at the intersection of the existing Tivoli Village development and its phase two
                                         (which currently is under construction and scheduled to open by the spring of 2015).
                                         Tivoli Village (www.tivolivillagelv.com), which promotes itself as "the ultimate
                                         shopping and dining destination" off the Las Vegas Strip, is located in one of the
                                         most affluent sections of Southern Nevada, near the master planned community of Summerlin
                                         - just 11 miles from the Las Vegas Strip
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Elementsoperates as a fine casual, bistro-style restaurant and bar located on a busy intersection
                                         is Southwest Las Vegas near a densely-populated residential area. Elements serves various
                                         liquor drinks, including a selection of more than 500 martinis, and reasonably-priced
                                         appetizers, dinners and deserts. It has live music a number of nights a week and at Sunday
                                         brunch.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The
                                         Italian Steakhouse will be a fine dining restaurant offing Las Vegas strip-quality
                                         food at an off-the-strip location. The restaurant’s Italian elements will include:
                                         fresh pasta and flatbreads, and also will feature a shellfish and raw bar and have extensive
                                         steak offerings. The Italian Steakhouse will be located in The Gramercy, a new development
                                         in Southwest Las Vegas, just off Interstate 215 near Russell Road. The Gramercy is owned
                                         by New Russell One, LLC, and is being developed by SWLV LLC, which consists of representatives
                                         of The Krausz Companies, Inc. and WGH Partners. New Russell One, LLC purchased the site
                                         re-titling it the Gramercy in the process - after New York’s famed park of the
                                         same name. The owner’s stated aim to re-create the neighborhood feel of that tree-lined
                                         community with the project’s: four-story luxury lofts (160 units) and mixed-use
                                         dining, retail and office space, and a nine-story condo tower with 85 units scheduled
                                         for a later phase of development. In all, the Gramercy encompasses 500,000 square feet
                                         over 20 acres plus underground parking and is scheduled to complete Phase 1 sometime
                                         in 2015.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



5







Competition

The restaurant business is highly
competitive with respect to price, service, location, convenience, food quality and presentation, and is affected by changes in
local and national economic conditions, taste and eating habits of the public and population and traffic patterns. We compete
with a variety of restaurants offering moderately priced food to the public, including large, national QSRs and fast casual restaurants.
Our competitors also include a variety of mid-price, full-service, casual dining restaurants (including those that offer take-out
services); health and nutrition-oriented restaurants; delicatessens and prepared food restaurants; supermarkets; convenience stores;
and other franchised and other multi-establishment operators. Our product success is dependent on the product success of the national
brands that we associate ourselves with in addition to providing customer satisfaction in each of our Restaurants. There is also
active competition for competent employees and for the type of real estate sites suitable for our Restaurants. Company management
believes that 80% of the customers of each of our Restaurants will come from within a three to five mile radius of the Restaurant’s
location and that the demographics of the locations that we have selected for our Restaurants are extremely attractive.



Capriotti’s

Capriotti’s
restaurants compete with other restaurant companies and food outlets, primarily through the quality, variety, convenience, price,
and value perception of food products offered. We compete directly with numerous restaurants, including, but not limited to: Subway,
Quiznos, ToGo’s, McDonald’s, Burger King, Hardee’s and Chick-fil-A. The location of units, quality and speed
of service, attractiveness of facilities, effectiveness of marketing and new product development by Capriotti’s and its
competitors are also important factors.



Papa John’s

The United States Quick Service
Restaurant pizza industry (“QSR Pizza”) is mature and highly competitive with respect to price, service, location,
food quality and variety. There are well-established competitors with substantially greater financial and other resources than
Papa John’s. The category is largely fragmented and competitors include international, national and regional chains, as
well as a large number of local independent pizza operators. Some of its competitors have been in existence for substantially
longer periods than Papa John’s and can have higher levels of restaurant penetration and stronger, more developed brand
awareness in markets where it competes.



According to various industry sources,
domestic QSR Pizza category sales, which includes dine-in, carry-out and delivery, totaled approximately $32.5 billion in 2013,
or a decrease of 0.2% from the prior year. Additionally, in general, there is also active competition for management personnel
and attractive commercial real estate sites suitable for these restaurants. Within the QSR Pizza segment, there are well-established
competitors with substantially greater financial and other resources than Papa John’s. Some of our competitors have been
in existence for substantially longer periods than Papa John’s and can have higher levels of restaurant penetration and
stronger, more developed brand awareness in markets where we compete. Within the QSR Pizza segment, Papa John’s competes
directly with Domino’s Pizza, Pizza Hut, Little Caesars, Cici’s and numerous regional chains and locally-owned restaurants
which offer similar pizza, pasta and sandwich products. We do not compete with other operators in the Papa John’s system.
More broadly, we also compete in the food purchase industry against supermarkets and others such as Papa Murphy’s, who offer
“take-and-bake” pizza products. Consumers have become more value conscious and have reduced discretionary spending
in response to high levels of unemployment and other factors. As a result, frozen pizzas and take-and-bake pizzas are competitive
alternatives in the pizza segment. We believe that other companies can easily enter our market segment, which could result in
the market becoming saturated, thereby adversely affecting our revenues and profits.



| | · | TAPASintend to complete competes as a “Fine Casual” restaurant (better quality and higher prices
                                         than a fast casual restaurant but not as expensive or high quality as a fine dining restaurant).
                                         It competes against other restaurants that serve the communities around its location
                                         as well as other Tapas restaurants.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Elementscompete, as a Fine Casual restaurant and bar – against other restaurants and
                                         bars that serve the communities around its location.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The
                                         Italian Steakhouse intends to compete against other fine dining alternatives that
                                         serve the communities around its locations, as well as an alternative to fine dining
                                         on the Las Vegas strip.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Trademarks, Patents and Intellectual
Property

The Company’s Capriotti’s
and Papa John’s locations operate pursuant to those respective franchisor’s trademarks, patents.



Supply and Distribution

The Company’s restaurants
are substantial purchasers of a number of food and paper products; equipment, and other restaurant supplies. The principal items
purchased include: turkey, beef, chicken, cheese, bread, various vegetables, paper and packaging materials. For its Capriotti’s
and Papa John’s franchised restaurants, suppliers are dictated, for the most part, by the respective franchisors. The Company
has not experienced any significant continuous shortages of supplies; and, alternative sources for most of these products are
generally available. Prices paid for these supplies fluctuate. When prices increase the Company sometimes attempts to pass on
such increases to its restaurants’ consumers; although, there is no assurance this can be done practically.



6







Government Regulation

The Company, its subsidiaries and
its businesses are subject to various federal, state and local laws affecting its business. Each of its restaurants must comply
with licensing and regulation by a number of government authorities, including: health, sanitation, fire, tax and zoning authorities
in the state and/or municipality in which such restaurant is located. In addition, each restaurant must comply with various state
and federal laws that regulate the franchisor/franchisee relationship. To-date, the Company has not been materially adversely
affected by such licensing and regulation or by any difficulty or failure to obtain required licenses or approvals.



Employees

As of August
31, 2013, we had 51 full time and 103 part time employees. As of August 31, 2013, KCI had 17 full time and 51 part time employees



Item 1A.  Risk Factors



You should carefully consider each
of the following risks associated with an investment in our common stock and all of the other information in this 2014 Annual
Report on Form 10-K. Our business may also be adversely affected by risks and uncertainties not presently known to us or that
we currently believe to be immaterial. If any of the events contemplated by the following discussion of risks should occur, our
business, prospects, financial condition and results of operations may suffer.



Because most of our locations
have been opened within the past few years, our business may not be successful.



Our independent auditors have
raised substantial doubts about our ability to continue as a going concern.

Our independent auditors have raised
substantial doubts about our ability to continue as a going concern in their report on our financial statements. If we are unable
to continue as a going concern we would experience additional losses from the write-down of assets.



We may not be able to continue
operating our business without additional working capital.

We are currently
operating at a loss and are dependent on the availability of additional working capital to continue to operate our business.  We
have no current arrangements with respect to, or sources of any additional capital, and there can be no assurance that such additional
capital will be available to us when needed. If we are unable to obtain additional capital, this would cause us to be unable to
continue operating our business. To the extent that any such financing involves the sale of our equity securities, the interests
of our then existing stockholders could be diluted.



Item 1B.  Unresolved
Staff Comments



None



Item 2.  Properties



We lease space to operate our various
restaurants from non-affiliated landlords under multi-year leases. We anticipate that we will additional facilities when needed
in connection with the opening of additional restaurant locations.



Item 3.  Legal Proceedings



The
Company is not a party to, and its property is not the subject of, any material pending legal proceedings.



Item 4.  Mine Safety
Disclosures



Not
applicable.



PART
II



Item 5.  Market for
Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities



Market Information

As of
August 31, 2013, there were approximately 41 shareholders of record of the Company’s Common Stock.



7







Our common stock has been quoted
on the OTC Bulletin Board under the symbol “DIXI” since December 2012.  The reported high and low
last sale prices for the common stock are shown below for the periods indicated. The quotations reflect inter-dealer prices, without
retail mark-up, markdown or commission, and may not represent actual transactions.



|                                       |  | Low |     |  | High |  
|-------------------------------------- |  | --- | --- |  | ---- | -
|2014                                   |  |     |     |  |      |  
|1st Quarter - Nov 2013                 |  | $   | .20 |  |      | $
|2nd Quarter -Feb 2014                  |  | $   | .20 |  |      | $
|3rd Quarter - May 2014                 |  | $   | .25 |  |      | $
|4th Quarter - Aug 2014                 |  | $   | .80 |  |      | $
|                                       |  |     |     |  |      |  
|2013                                   |  |     |     |  |      |  
|1st Quarter - Nov 2012                 |  | $   | .00 |  |      | $
|2nd Quarter -Feb 2013                  |  | $   | .22 |  |      | $
|3rd Quarter - May 2013                 |  | $   | .25 |  |      | $
|4th Quarter - Aug 2013                 |  | $   | .25 |  |      | $
|                                       |  |     |     |  |      |  
|2012                                   |  |     |     |  |      |  
|First quarter ended November 30, 2013  |  | $   | .00 |  |      | $
|Second quarter ended February 28, 2013 |  | $   | .00 |  |      | $
|Third quarter ended May 31, 2013       |  | $   | .00 |  |      | $
|Fourth quarter ended August 31, 2013   |  | $   | .00 |  |      | $



The last sale price of our common
stock as reported on the OTC Bulletin Board on August 31, 2014 was $1.04 per share.



Dividends and Dividend Policy

The Company did not declare or pay
cash dividends in any of the fiscal years 2014, 2013 or 2012. The Company anticipates that, for the foreseeable future, it will
retain any earnings for use in the operation of its business.



Purchases of Equity Securities
by the Issuer and Affiliated Purchasers

None.



Equity Compensation Plan Information
as of August 31, 2014

We
have made individual grants of shares of our common stock from time to time as compensation to directors, officers and advisors.
Such grants are not approved by the shareholders but were made in accordance with the authority granted in the Company's bylaws
to the Company's Board of Directors.



In June 2012, our Board of Directors
approved the issuance of 20,000 shares of common stock to each of our directors, 100,000 shares in total, and 40,000 shares of
our common stock to our vice president as compensation. Such issuances were subject to our common stock being approved for broker
dealer market making by FINRA and initiation of trading. Such conditions were met as of December 12, 2012.



Item 6.  Selected
Financial Data.



Not applicable
to smaller reporting company.



Item 7.  Management’s
Discussions and Analysis of Financial Condition and Results of Operations.



Going Concern

The Company has yet to generate
internal cash flow sufficient to fund its growth, debt service and corporate expenses. Thus, 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. 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.



8







Results of Operations

Net Sales increased 40.8% ($1.83
million) due to: (1) the full year impact in fiscal 2014 of restaurants opened in fiscal 2013 (six); (2) same store sales growth,
and (3) the impact of the five locations opened during fiscal 2014 (although three of those locations were open for less than
two months of fiscal 2014).



Income From Operations increased
from a loss of approximately $136,000 in fiscal 2013 to approximately $1.25 million in fiscal 2014. This improvement resulted
from growth of restaurant revenues and continued focus on managing costs.



The Company's Loss From Operations
was largely due to:



| | · | a
                                         ramp up of General and Administrative Expenses and Corporate Salaries to support the
                                         past, current and expected store growth;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | significant
                                         pre-opening and one-time marketing expenses related to building the Capriotti's brand
                                         in the Company's markets;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | interest
                                         expenses and other-financing-related fees incurred in connection with the Company's borrowings
                                         to support operations and growth, and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | various
                                         noncash expenses related to the issuance of equity in consideration of: services rendered
                                         to employees and consultants, debt issued and extensions, modifications and guarantees
                                         thereto.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Liquidity and Capital Resources

As of August 31, 2014 and 2013, the Company
had working capital deficits of $8,256,066 and $7,810,530, respectively. The Company has funded its recent growth with: equity
and debt investments and advances from its CEO. 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
and/or equity financing, and generate profitable operations from the Company’s future operations. Management's plan is to
obtain such resources for the Company by obtaining equity and/or debt capital from existing shareholders and/or creditors and/or
new investors and/or creditors 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.



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.



Cash flows

The Company generated negative cash
flow from operations during fiscal 2014, all of which was funded from additional equity and debt investments.



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.



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.



Recent Financing Transactions

The Company, as noted in the Subsequent
Events section of the Report of Independent Registered Public Accounting Firm, has secured additional equity and loans subsequent
to August 31, 2014.



Item 7a.  Quantitative
and Qualitative Disclosures About Market Risk



Not applicable
for a smaller reporting company.



Item 8.  Financial
Statements and Supplementary Data



Please
see our Financial Statements beginning on page F-1 of this annual report



9







DIXIE
FOODS INTERNATIONAL, INC.



REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

AND

CONSOLIDATED FINANCIAL STATEMENTS



For the Years Ended

August 31, 2014 and 2013



F-1







TABLE OF CONTENTS



|Report of Independent Registered Public Accounting Firm | F-3       
|------------------------------------------------------- | ----------
|                                                        |           
|Consolidated Balance Sheets                             | F-4       
|                                                        |           
|Consolidated Statements of Operations                   | F-5       
|                                                        |           
|Consolidated Statements of Stockholders’ Deficit        | F-6       
|                                                        |           
|Consolidated Statements of Cash Flows                   | F-7 - F-8 
|                                                        |           
|Notes to Consolidated Financial Statements              | F-9 - F-26



F-2











REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM



To the Board of Directors

Dixie Foods International, Inc.



We have audited the accompanying consolidated
balance sheets of Dixie Foods International, Inc. (“the Company”) as of August 31, 2014 and 2013, and the related consolidated
statements of operations, stockholders’ deficit and cash flows for the years then ended. These consolidated financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.



We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.



In our opinion the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of Dixie Foods International, Inc.
as of August 31, 2014 and 2013, and the results of its operations and cash flows for the years then ended, in conformity with U.S.
generally accepted accounting principles.



The accompanying
consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has
a working capital deficit of $8,256,066 and an accumulated deficit of $20,463,967 and will need additional working capital to
service its debt and for its planned activities, which raises substantial doubt about its ability to continue as a going concern.
Management’s plans concerning these matters are also described in the notes to the consolidated financial statements. The
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/s/
Sadler Gibb, LLC



Salt Lake City, UT

December 18, 2014







F-3









DIXIE FOODS INTERNATIONAL,
INC.

Consolidated Balance Sheets



|                                                                                                                                     |  | August 31, |             |   | August 31, |  
|------------------------------------------------------------------------------------------------------------------------------------ |  | ---------- | ----------- | - | ---------- | -
|                                                                                                                                     |  | 2014       |             |   | 2013       |  
|                                                                                                                                     |  |            |             |   |            |  
|ASSETS                                                                                                                               |  |            |             |   |            |  
|                                                                                                                                     |  |            |             |   |            |  
|CURRENT ASSETS                                                                                                                       |  |            |             |   |            |  
|Cash                                                                                                                                 |  | $          | 24,033      |   |            | $
|Accounts receivable                                                                                                                  |  |            | 75,216      |   |            |  
|Other receivables                                                                                                                    |  |            | 4,632       |   |            |  
|Food inventory                                                                                                                       |  |            | 103,367     |   |            |  
|Prepaid expenses and other current assets                                                                                            |  |            | 111,678     |   |            |  
|Total Current Assets                                                                                                                 |  |            | 318,926     |   |            |  
|                                                                                                                                     |  |            |             |   |            |  
|OTHER ASSETS                                                                                                                         |  |            |             |   |            |  
|Prepaid franchise and territory rights fees, net                                                                                     |  |            | 897,846     |   |            |  
|Property and equipment, net                                                                                                          |  |            | 3,418,743   |   |            |  
|Debt issuance costs, net                                                                                                             |  |            | -           |   |            |  
|                                                                                                                                     |  |            |             |   |            |  
|TOTAL ASSETS                                                                                                                         |  | $          | 4,635,515   |   |            | $
|                                                                                                                                     |  |            |             |   |            |  
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                |  |            |             |   |            |  
|                                                                                                                                     |  |            |             |   |            |  
|CURRENT LIABILITIES                                                                                                                  |  |            |             |   |            |  
|Accounts payable and accrued expenses                                                                                                |  | $          | 709,109     |   |            | $
|Checks issued in excess of cash                                                                                                      |  |            | 104,398     |   |            |  
|Deferred income                                                                                                                      |  |            | 95,186      |   |            |  
|Related party notes payable                                                                                                          |  |            | -           |   |            |  
|Short-term notes payable                                                                                                             |  |            | 7,366,299   |   |            |  
|Short-term convertible notes payable                                                                                                 |  |            | 300,000     |   |            |  
|Derivative liability                                                                                                                 |  |            | -           |   |            |  
|Total Current Liabilities                                                                                                            |  |            | 8,574,992   |   |            |  
|                                                                                                                                     |  |            |             |   |            |  
|LONG-TERM LIABILITIES                                                                                                                |  |            |             |   |            |  
|Long-term notes payable                                                                                                              |  |            | 500,000     |   |            |  
|Long-term convertible notes payable                                                                                                  |  |            | 550,000     |   |            |  
|Total Liabilities                                                                                                                    |  |            | 9,624,992   |   |            |  
|                                                                                                                                     |  |            |             |   |            |  
|Class B membership units, no par value, 4 units authorized, 2 and -0- units issued and outstanding, respectively                     |  |            | 1,000,000   |   |            |  
|                                                                                                                                     |  |            |             |   |            |  
|STOCKHOLDERS' DEFICIT                                                                                                                |  |            |             |   |            |  
|Class B membership units, no par value, 4 units authorized, 2 and -0- units issued and outstanding, respectively                     |  |            | 1,120,000   |   |            |  
|Preferred stock, $0.001 par value, 15,000,000 shares authorized, no shares issued or oustanding                                      |  |            | -           |   |            |  
|Common stock, $0.001 par value, 150,000,000 shares authorized, 42,570,975 and 15,611,146 shares issued and outstanding, respectively |  |            | 42,572      |   |            |  
|Additional paid-in capital                                                                                                           |  |            | 14,311,918  |   |            |  
|Accumulated deficit                                                                                                                  |  |            | (20,463,967 | ) |            |  
|Total Stockholders' Deficit                                                                                                          |  |            | (4,989,477  | ) |            |  
|                                                                                                                                     |  |            |             |   |            |  
|TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                          |  | $          | 4,635,515   |   |            | $





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



F-4







DIXIE FOODS INTERNATIONAL,
INC.

Consolidated Statements of Operations





|                                                                       |  | For the Years Ended |            
|---------------------------------------------------------------------- |  | ------------------- | -----------
|                                                                       |  | August 31,          |            
|                                                                       |  | 2014                |            
|                                                                       |  |                     |            
|REVENUE                                                                |  | $                   | 6,369,754  
|                                                                       |  |                     |            
|OPERATING EXPENSES                                                     |  |                     |            
|Restaurant operating costs:                                            |  |                     |            
|Food, beverage and packaging                                           |  |                     | 2,345,621  
|Labor and related                                                      |  |                     | 1,675,281  
|Occupancy                                                              |  |                     | 278,178    
|Other restaurant operating                                             |  |                     | 805,922    
|Total Restaurant Operating Expenses                                    |  |                     | 5,105,002  
|                                                                       |  |                     |            
|Income (Loss) from Restaurant Operations                               |  |                     | 1,264,752  
|                                                                       |  |                     |            
|General and administrative                                             |  |                     | 3,157,567  
|Depreciation and amortization                                          |  |                     | 482,767    
|Salary and wages                                                       |  |                     | 5,173,991  
|Royalty and franchise fees                                             |  |                     | 433,359    
|Pre-opening costs                                                      |  |                     | 522,839    
|Total                                                                  |  |                     | 9,770,523  
|                                                                       |  |                     |            
|LOSS FROM OPERATIONS                                                   |  |                     | (8,505,771 
|                                                                       |  |                     |            
|OTHER INCOME (EXPENSES)                                                |  |                     |            
|Interest expense                                                       |  |                     | (2,801,329 
|Derivative income (expense)                                            |  |                     | 604,553    
|Total Other Income (Expenses)                                          |  |                     | (2,196,776 
|                                                                       |  |                     |            
|LOSS BEFORE INCOME TAXES                                               |  |                     | (10,702,547
|PROVISION FOR INCOME TAXES                                             |  |                     | -          
|                                                                       |  |                     |            
|NET LOSS                                                               |  | $                   | (10,702,547
|                                                                       |  |                     |            
|BASIC AND DILUTED LOSS PER COMMON SHARE                                |  | $                   | (0.38      
|                                                                       |  |                     |            
|BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |  |                     | 27,896,390 





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



F-5







DIXIE FOODS INTERNATIONAL, INC.

Consolidated Statement of Changes in Stockholders'
Deficit

|                                                             |  |                              |   |  |              |   |           |         |  |  |               |  |  | Additional  |        |  | Stock      |   |            |         |  |   |            |  
|------------------------------------------------------------ |  | ---------------------------- | - |  | ------------ | - | --------- | ------- |  |  | ------------- |  |  | ----------- | ------ |  | ---------- | - | ---------- | ------- |  | - | ---------- | -
|                                                             |  | Class B Membership
    Units |   |  | Common Stock |   |           | Paid-in |  |  | Subscriptions |  |  | Accumulated |        |  |            |  
|                                                             |  | Units                        |   |  | Amount       |   |           | Shares  |  |  | Amount        |  |  | Capital     |        |  | Receivable |   |            | Deficit |  |   | Total      |  
|                                                             |  |                              |   |  |              |   |           |         |  |  |               |  |  |             |        |  |            |   |            |         |  |   |            |  
|Balance, August 31, 2012                                     |  |                              | - |  |              | $ | -         |         |  |  | 11,453,135    |  |  | $           | 11,453 |  |            | $ | 3,346,654  |         |  | $ | (1,119,278 | )
|                                                             |  |                              |   |  |              |   |           |         |  |  |               |  |  |             |        |  |            |   |            |         |  |   |            |  
|Cash and services received for subscriptions receivable      |  |                              | - |  |              |   | -         |         |  |  | -             |  |  |             | -      |  |            |   | -          |         |  |   | 1,119,278  |  
|Cash received for exercise of warrants                       |  |                              | - |  |              |   | -         |         |  |  | 1,878,846     |  |  |             | 1,879  |  |            |   | 4,121      |         |  |   | -          |  
|Common stock issued for debt issuance costs                  |  |                              | - |  |              |   | -         |         |  |  | 1,574,598     |  |  |             | 1,575  |  |            |   | 1,004,105  |         |  |   | -          |  
|Common stock issued for services                             |  |                              | - |  |              |   | -         |         |  |  | 704,567       |  |  |             | 705    |  |            |   | 449,295    |         |  |   | -          |  
|Fair value of stock options issued for debt                  |  |                              | - |  |              |   | -         |         |  |  | -             |  |  |             | -      |  |            |   | 111,191    |         |  |   | -          |  
|Fair value of vested stock options                           |  |                              | - |  |              |   | -         |         |  |  | -             |  |  |             | -      |  |            |   | 456,943    |         |  |   | -          |  
|Net loss for the year ended August 31, 2013                  |  |                              | - |  |              |   | -         |         |  |  | -             |  |  |             | -      |  |            |   | -          |         |  |   | -          |  
|                                                             |  |                              |   |  |              |   |           |         |  |  |               |  |  |             |        |  |            |   |            |         |  |   |            |  
|Balance, August 31, 2013                                     |  |                              | - |  |              |   | -         |         |  |  | 15,611,146    |  |  |             | 15,612 |  |            |   | 5,372,309  |         |  |   | -          |  
|                                                             |  |                              |   |  |              |   |           |         |  |  |               |  |  |             |        |  |            |   |            |         |  |   |            |  
|Class B membership units issued for cash                     |  |                              | 2 |  |              |   | 1,000,000 |         |  |  | -             |  |  |             | -      |  |            |   | 120,000    |         |  |   | -          |  
|Common stock issued for cash, pre-recapitalization           |  |                              | - |  |              |   | -         |         |  |  | 7,137,654     |  |  |             | 7,138  |  |            |   | 3,342,862  |         |  |   | -          |  
|Common stock issued for services                             |  |                              | - |  |              |   | -         |         |  |  | 2,045,163     |  |  |             | 2,045  |  |            |   | 909,524    |         |  |   | -          |  
|Cash received for exercise of warrants                       |  |                              | - |  |              |   | -         |         |  |  | 3,909,226     |  |  |             | 3,909  |  |            |   | 96,091     |         |  |   | -          |  
|Common stock issued for debt issuance costs                  |  |                              | - |  |              |   | -         |         |  |  | 1,587,738     |  |  |             | 1,588  |  |            |   | 1,012,484  |         |  |   | -          |  
|Common stock issued for debt modifications                   |  |                              | - |  |              |   | -         |         |  |  | 1,373,914     |  |  |             | 1,374  |  |            |   | 745,593    |         |  |   | -          |  
|Cash received and services credited for exercise of warrants |  |                              | - |  |              |   | -         |         |  |  | 2,844,134     |  |  |             | 2,844  |  |            |   | 72,158     |         |  |   | -          |  
|Fair value of stock options issued for debt                  |  |                              | - |  |              |   | -         |         |  |  | -             |  |  |             | -      |  |            |   | 2,669,846  |         |  |   | -          |  
|Fair value of vested stock options, pre-recapitalization     |  |                              | - |  |              |   | -         |         |  |  | -             |  |  |             | -      |  |            |   | 133,767    |         |  |   | -          |  
|Recapitalization                                             |  |                              | - |  |              |   | -         |         |  |  | 8,006,000     |  |  |             | 8,006  |  |            |   | (79,648    | )       |  |   | -          |  
|Common stock issued for cash, post-recapitalization          |  |                              | - |  |              |   | -         |         |  |  | 56,000        |  |  |             | 56     |  |            |   | 27,944     |         |  |   | -          |  
|Fair value of vested stock options, post-recapitalization    |  |                              | - |  |              |   | -         |         |  |  | -             |  |  |             | -      |  |            |   | 8,988      |         |  |   | -          |  
|Net loss for the year ended August 31, 2014                  |  |                              | - |  |              |   | -         |         |  |  | -             |  |  |             | -      |  |            |   | -          |         |  |   | -          |  
|                                                             |  |                              |   |  |              |   |           |         |  |  |               |  |  |             |        |  |            |   |            |         |  |   |            |  
|Balance, August 31, 2014                                     |  |                              | 2 |  |              | $ | 1,120,000 |         |  |  | 42,570,975    |  |  | $           | 42,572 |  |            | $ | 14,311,918 |         |  | $ | -          |  

|                                                             |  |                              |   |  |              |   |           |         |  |  |               |  |  | Additional  |        |  | Stock      |   |            |         |  |   |            |  
|------------------------------------------------------------ |  | ---------------------------- | - |  | ------------ | - | --------- | ------- |  |  | ------------- |  |  | ----------- | ------ |  | ---------- | - | ---------- | ------- |  | - | ---------- | -
|                                                             |  | Class B Membership
    Units |   |  | Common Stock |   |           | Paid-in |  |  | Subscriptions |  |  | Accumulated |        |  |            |  
|                                                             |  | Units                        |   |  | Amount       |   |           | Shares  |  |  | Amount        |  |  | Capital     |        |  | Receivable |   |            | Deficit |  |   | Total      |  
|                                                             |  |                              |   |  |              |   |           |         |  |  |               |  |  |             |        |  |            |   |            |         |  |   |            |  
|Balance, August 31, 2012                                     |  |                              | - |  |              | $ | -         |         |  |  | 11,453,135    |  |  | $           | 11,453 |  |            | $ | 3,346,654  |         |  | $ | (1,119,278 | )
|                                                             |  |                              |   |  |              |   |           |         |  |  |               |  |  |             |        |  |            |   |            |         |  |   |            |  
|Cash and services received for subscriptions receivable      |  |                              | - |  |              |   | -         |         |  |  | -             |  |  |             | -      |  |            |   | -          |         |  |   | 1,119,278  |  
|Cash received for exercise of warrants                       |  |                              | - |  |              |   | -         |         |  |  | 1,878,846     |  |  |             | 1,879  |  |            |   | 4,121      |         |  |   | -          |  
|Common stock issued for debt issuance costs                  |  |                              | - |  |              |   | -         |         |  |  | 1,574,598     |  |  |             | 1,575  |  |            |   | 1,004,105  |         |  |   | -          |  
|Common stock issued for services                             |  |                              | - |  |              |   | -         |         |  |  | 704,567       |  |  |             | 705    |  |            |   | 449,295    |         |  |   | -          |  
|Fair value of stock options issued for debt                  |  |                              | - |  |              |   | -         |         |  |  | -             |  |  |             | -      |  |            |   | 111,191    |         |  |   | -          |  
|Fair value of vested stock options                           |  |                              | - |  |              |   | -         |         |  |  | -             |  |  |             | -      |  |            |   | 456,943    |         |  |   | -          |  
|Net loss for the year ended August 31, 2013                  |  |                              | - |  |              |   | -         |         |  |  | -             |  |  |             | -      |  |            |   | -          |         |  |   | -          |  
|                                                             |  |                              |   |  |              |   |           |         |  |  |               |  |  |             |        |  |            |   |            |         |  |   |            |  
|Balance, August 31, 2013                                     |  |                              | - |  |              |   | -         |         |  |  | 15,611,146    |  |  |             | 15,612 |  |            |   | 5,372,309  |         |  |   | -          |  
|                                                             |  |                              |   |  |              |   |           |         |  |  |               |  |  |             |        |  |            |   |            |         |  |   |            |  
|Class B membership units issued for cash                     |  |                              | 2 |  |              |   | 1,000,000 |         |  |  | -             |  |  |             | -      |  |            |   | 120,000    |         |  |   | -          |  
|Common stock issued for cash, pre-recapitalization           |  |                              | - |  |              |   | -         |         |  |  | 7,137,654     |  |  |             | 7,138  |  |            |   | 3,342,862  |         |  |   | -          |  
|Common stock issued for services                             |  |                              | - |  |              |   | -         |         |  |  | 2,045,163     |  |  |             | 2,045  |  |            |   | 909,524    |         |  |   | -          |  
|Cash received for exercise of warrants                       |  |                              | - |  |              |   | -         |         |  |  | 3,909,226     |  |  |             | 3,909  |  |            |   | 96,091     |         |  |   | -          |  
|Common stock issued for debt issuance costs                  |  |                              | - |  |              |   | -         |         |  |  | 1,587,738     |  |  |             | 1,588  |  |            |   | 1,012,484  |         |  |   | -          |  
|Common stock issued for debt modifications                   |  |                              | - |  |              |   | -         |         |  |  | 1,373,914     |  |  |             | 1,374  |  |            |   | 745,593    |         |  |   | -          |  
|Cash received and services credited for exercise of warrants |  |                              | - |  |              |   | -         |         |  |  | 2,844,134     |  |  |             | 2,844  |  |            |   | 72,158     |         |  |   | -          |  
|Fair value of stock options issued for debt                  |  |                              | - |  |              |   | -         |         |  |  | -             |  |  |             | -      |  |            |   | 2,669,846  |         |  |   | -          |  
|Fair value of vested stock options, pre-recapitalization     |  |                              | - |  |              |   | -         |         |  |  | -             |  |  |             | -      |  |            |   | 133,767    |         |  |   | -          |  
|Recapitalization                                             |  |                              | - |  |              |   | -         |         |  |  | 8,006,000     |  |  |             | 8,006  |  |            |   | (79,648    | )       |  |   | -          |  
|Common stock issued for cash, post-recapitalization          |  |                              | - |  |              |   | -         |         |  |  | 56,000        |  |  |             | 56     |  |            |   | 27,944     |         |  |   | -          |  
|Fair value of vested stock options, post-recapitalization    |  |                              | - |  |              |   | -         |         |  |  | -             |  |  |             | -      |  |            |   | 8,988      |         |  |   | -          |  
|Net loss for the year ended August 31, 2014                  |  |                              | - |  |              |   | -         |         |  |  | -             |  |  |             | -      |  |            |   | -          |         |  |   | -          |  
|                                                             |  |                              |   |  |              |   |           |         |  |  |               |  |  |             |        |  |            |   |            |         |  |   |            |  
|Balance, August 31, 2014                                     |  |                              | 2 |  |              | $ | 1,120,000 |         |  |  | 42,570,975    |  |  | $           | 42,572 |  |            | $ | 14,311,918 |         |  | $ | -          |  



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



F-6







DIXIE FOODS INTERNATIONAL, INC.

Consolidated Statements of Cash Flows



|                                                                                |  | For the Years Ended |            
|------------------------------------------------------------------------------- |  | ------------------- | -----------
|                                                                                |  | August 31,          |            
|                                                                                |  | 2014                |            
|                                                                                |  |                     |            
|CASH FLOWS FROM OPERATING ACTIVITIES                                            |  |                     |            
|Net loss                                                                        |  | $                   | (10,702,547
|Adjustments to reconcile net loss to net cash used in
    operating activities: |  |                     |            
|Depreciation and amortization                                                   |  |                     | 1,031,947  
|Amortization of debt discounts and debt issuance costs                          |  |                     | 1,491,237  
|Change in derivative liability                                                  |  |                     | (604,553   
|Services credited for exercise of warrants and stock options                    |  |                     | 75,000     
|Common stock issued for services                                                |  |                     | 836,569    
|Fair value of stock options vested                                              |  |                     | 142,755    
|Fair value of warrants issued for debt                                          |  |                     | 3,466,667  
|Changes in operating assets and liabilities:                                    |  |                     |            
|Accounts receivable                                                             |  |                     | (35,150    
|Inventories                                                                     |  |                     | 863        
|Prepaid expenses and other current assets                                       |  |                     | 18,416     
|Accounts payable and accrued expenses                                           |  |                     | (77,747    
|Deferred revenue                                                                |  |                     | 59,357     
|Related party payables                                                          |  |                     | -          
|Net Cash Used in Operating Activities                                           |  |                     | (4,297,186 
|                                                                                |  |                     |            
|CASH FLOWS FROM INVESTING ACTIVITIES                                            |  |                     |            
|Purchases of property and equipment                                             |  |                     | (1,167,223 
|Cash paid for territory and franchise rights                                    |  |                     | (214,000   
|Cash paid for asset acquisitions                                                |  |                     | (107,187   
|Net Cash Used in Investing Activities                                           |  |                     | (1,488,410 
|                                                                                |  |                     |            
|CASH FLOWS FROM FINANCING ACTIVITIES                                            |  |                     |            
|Change in bank overdraft                                                        |  |                     | 104,398    
|Net proceeds from related party debt                                            |  |                     | 72,940     
|Net proceeds from notes payable                                                 |  |                     | 778,998    
|Cash received for subscriptions receivable                                      |  |                     | -          
|Proceeds from Class B membership units issued for cash                          |  |                     | 1,120,000  
|Proceeds from common stock issued for cash                                      |  |                     | 3,378,000  
|Cash received for exercise of warrants and stock options                        |  |                     | 100,000    
|Net Cash Provided by Financing Activities                                       |  |                     | 5,554,336  
|                                                                                |  |                     |            
|NET INCREASE (DECREASE) IN CASH                                                 |  |                     | (231,260   
|CASH AT BEGINNING OF PERIOD                                                     |  |                     | 255,293    
|                                                                                |  |                     |            
|CASH AT END OF PERIOD                                                           |  | $                   | 24,033     



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



F-7







DIXIE FOODS INTERNATIONAL, INC.

Consolidated Statements of Cash Flows



|                                                  |  | For the Years Ended |          
|------------------------------------------------- |  | ------------------- | ---------
|                                                  |  | August 31,          |          
|                                                  |  | 2014                |          
|                                                  |  |                     |          
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |  |                     |          
|                                                  |  |                     |          
|CASH PAID FOR:                                    |  |                     |          
|Interest                                          |  | $                   | 1,176,590
|Income Taxes                                      |  | $                   | -        
|                                                  |  |                     |          
|NON-CASH INVESTING AND FINANCING ACTIVITIES       |  |                     |          
|Note payable executed for asset acquisitions      |  | $                   | -        
|Debt discounts on notes payable                   |  | $                   | 169,200  
|Services credited for subscriptions receivable    |  | $                   | -        
|Common stock issued for debt issuance costs       |  | $                   | 1,014,072



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





F-8











DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013



NOTE 1—ORGANIZATION AND NATURE OF BUSINESS



Dixie Foods International, Inc. (the “Company”;
OTCQB:”DIXI”) was formed in May 2010 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 is in process of effecting that change with the Financial Industry Regulatory
Authority (“FINRA”), the Securities and Exchange Commission (“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”).  In connection with the
Reverse Acquisition, the Company acquired 100 percent 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.



KCI and its various subsidiaries, currently operate 15 restaurants:
12, franchised Capriotti's Sandwich Shops; two franchised Papa John’s Pizza restaurants, and Elements Kitchen & Martini
Bar.  Additionally, the Company has in various stages of development and construction: four Capriottis; nine Papa John’s;
a tapas restaurant, and the Italian Steakhouse, all of which it anticipates opening over the next 12 months.



NOTE 2—GOING CONCERN



These consolidated 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 August 31, 2014, the Company has a working capital deficit of $8,256,066
and an accumulated deficit of $20,463,967. 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.



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



Principles of Consolidation and Basis
of Presentation



The consolidated financial statements include
the accounts of the Company, including wholly-owned subsidiaries and investees that the Company controls. All intercompany balances
and transactions have been eliminated.



F-9







DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013



NOTE 3—SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)



Use of Estimates



The preparation of consolidated 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.



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.



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 third party gift card distributors, tenant improvement receivables, 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.



Property and Equipment



Property and equipment, including leasehold
improvements, are recorded at cost, except for individual items costing less than $2,500, which are expensed as incurred. Internal
costs directly associated with the acquisition, development and construction of a restaurant are expensed as incurred and included
are pre–opening expenses. Expenditures for major renewals and improvements are capitalized while expenditures for minor replacements,
maintenance and repairs are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are amortized over the shorter of the lease term, which generally includes reasonably
assured options periods, or the estimated useful lives of the assets. Upon retirement or disposal of assets, the accounts are relieved
of cost and accumulated depreciation and the related gain or loss, if any, is reflected in loss on disposal of assets in the consolidated
statement of income and comprehensive income.



At least annually, the Company evaluates,
and adjusts when necessary, the estimated useful lives. The changes in estimated useful lives did not have a material impact on
depreciation in any period. The estimated useful lives are:



|Leasehold improvements and buildings | 3-20 years
|------------------------------------ | ----------
|Furniture and fixtures               | 4-10 years
|Equipment                            | 3-7 years 



F-10







DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013





NOTE 3—SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)



Impairment of Long-Lived Assets



Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For the purpose
of reviewing restaurant assets to be held and used for potential impairment, assets are grouped together at the market level, or
in the case of a potential relocation or closure, at the restaurant level. The Company manages its restaurants as a group with
significant common costs and promotional activities. As such, an individual restaurant’s cash flows are not generally independent
of the cash flows of others in a market. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount
of an asset exceeds its estimated future cash flows, an impairment charge is recognized as the amount by which the carrying amount
of the asset exceeds the fair value of the asset. No impairment expense was recognized on long-lived assets during the years ended
August 31, 2014, and 2013, respectively.



Income Taxes



Under the asset and liability method prescribed
under ASC 740, Income Taxes, The Company uses the liability method of accounting for income taxes.  The liability method
measures  deferred income taxes by applying  enacted  statutory rates in effect at the  balance  sheet
date to the  differences  between the tax basis of assets and  liabilities  and their  reported  amounts
on the financial statements.  The resulting deferred tax assets or liabilities are adjusted to reflect changes in tax
laws as they occur.  A valuation allowance is provided when it is more likely than not that a deferred tax asset will
not be realized.



The Company recognizes the financial statement
benefit of an uncertain tax position only after considering the probability that a tax authority would sustain the position in
an examination. For tax positions meeting a “more-likely-than-not” threshold, the amount recognized in the financial
statements is the benefit expected to be realized upon settlement with the tax authority. For tax positions not meeting the threshold,
no financial statement benefit is recognized. As of August 31, 2013, the Company has had no uncertain tax positions. The Company
recognizes interest and penalties, if any, related to uncertain tax positions as general and administrative expenses. The Company
currently has no federal or state tax examinations nor has it had any federal or state examinations since its inception. All of
the Company’s tax years are subject to federal and state tax examination.



Advertising and Marketing Costs



Advertising and marketing costs are expensed
as incurred and totaled $381,717 and $360,309 for the years ended August 31, 2014 and 2013, respectively. Advertising and marketing
costs are included in other operating costs in the consolidated statements of operations.



Rent



Rent expense for the Company’s leases,
which generally have escalating rentals over the term of the lease, is recorded on a straight-line basis over the lease term. The
lease term is the lesser of 20 years inclusive of reasonably assured renewal periods, or the lease term. The lease term begins
when the Company has the right to control the use of the property, which is typically before rent payments are due under the lease.
The difference between the rent expense and rent paid is recorded as deferred rent in the consolidated balance sheet. Pre-opening
rent is included in pre-opening costs in the consolidated income statement. Tenant incentives used to fund leasehold improvements
are recorded in deferred rent and amortized as reductions of rent expense over the term of the lease.



Additionally, certain of the Company’s
operating leases contain clauses that provide additional contingent rent based on a percentage of sales greater than certain specified
target amounts. The Company recognizes contingent rent expense provided the achievement of that target is considered probable.



F-11







DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013



NOTE 3—SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)



Basic and Diluted Loss per Share



Basic loss per 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 1,500,000 common stock equivalents outstanding as of August 31, 2014, which were excluded from the
calculation of diluted loss per share as their effect would have been anti-dilutive.



Fair Value Measurements



The fair value of a financial instrument
is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked
to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize
the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy
is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined
into the following three categories:



Level 1: Quoted market
prices in active markets for identical assets or liabilities

Level 2: Observable
market-based inputs or inputs that are corroborated by market data

Level 3: Unobservable
inputs that are not corroborated by market data



Stock-Based Compensation



The Company follows the provisions of ASC
718, “Share-Based Payment”, which requires all share-based payments to employees, including grants of employee stock
options, to be recognized in the income statement based on their fair values.  The Company uses the Black-Scholes pricing
model for determining the fair value of stock based compensation.



The Company accounts for non-employee share-based
awards based upon ASC 505-50, “Equity-Based Payments to Non-Employees.”  ASC 505-50 requires the costs of
goods and services received in exchange for an award of equity instruments to be recognized using the fair value of the goods and
services or the fair value of the equity award, whichever is more reliably measurable. The fair value of the equity award is determined
on the measurement date, which is the earlier of the date that a performance commitment is reached or the date that performance
is complete.  Generally, our awards do not entail performance commitments.  When an award vests over time such
that performance occurs over multiple reporting periods, we estimate the fair value of the award as of the end of each reporting
period and recognize an appropriate portion of the cost based on the fair value on that date.  When the award vests,
we adjust the cost previously recognized so that the cost ultimately recognized is equivalent to the fair value on the date the
performance is complete.



The Company recognizes the cost associated
with share-based awards that have a graded vesting schedule on a straight-line basis over the requisite service period of the entire
award.



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.



F-12







DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013



NOTE 4—PROPERTY AND EQUIPMENT



As of August 31, 2014 and 2013 the Company’s
property and equipment consisted of the following:



|                                    |  | 2014 |            |   | 2013 |  
|----------------------------------- |  | ---- | ---------- | - | ---- | -
|Building and leasehold improvements |  | $    | 3,161,646  |   |      | $
|Machinery and equipment             |  |      | 1,022,299  |   |      |  
|Furniture and fixtures              |  |      | 358,390    |   |      |  
|Less: Accumulated depreciation      |  |      | (1,123,592 | ) |      |  
|Property and equipment, net         |  | $    | 3,418,743  |   |      | $



Depreciation expense included as a charge
to income (including restaurant-related depreciation recorded in “Other operating costs”) was $621,916 and $400,323
for the years ended August 31, 2014 and 2013, respectively.



NOTE 5—ASSET PURCHASES



Mission Valley, San Diego



On October 19, 2011, the Company, entered
into an asset purchase agreement with Capriotti of SD, Mission Valley, LLC, to purchase the assets of Capriotti of SD, Mission
Valley, LLC, as well as territory rights owned by that entity. Pursuant to the asset purchase agreement, the purchase price of
the assets consisted of a one-time payment of $100,000 in cash and a loan of $400,000. The Company also paid a security deposit
of $5,644 to the landlord of the space occupied by the location acquired.



The total purchase price was allocated
as follows:



|Consideration paid:            |  |   |         | 
|------------------------------ |  | - | ------- | 
|Cash paid                      |  | $ | 100,000 | 
|Notes payable                  |  |   | 400,000 | 
|Transfer fees paid             |  |   | 20,000  | 
|Total purchase price           |  | $ | 520,000 | 
|                               |  |   |         | 
|Consideration received:        |  |   |         | 
|Territory and franchise rights |  | $ | 383,410 | 
|Property and equipment         |  |   | 136,590 | 
|Total Assets Acquired          |  | $ | 520,000 | 



San Marcos, San Diego and Green Valley
Ranch, Las Vegas



On September 30, 2012, the Company, entered
into an asset purchase agreement with BBC Holdings, LLC, to purchase the assets of BBC Holdings LLC, as well as territory rights
owned by that entity. Pursuant to the asset purchase agreement, the purchase price of the assets consisted of a one-time payment
of $50,000 in cash, and a loan of $620,000.



F-13







DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013





NOTE 5—ASSET PURCHASES (CONTINUED)



San Marcos, San Diego and Green
Valley Ranch, Las Vegas (Continued)



The total purchase price was allocated
as follows:



|Consideration paid:                                     |  |   |         | 
|------------------------------------------------------- |  | - | ------- | 
|Cash paid                                               |  | $ | 50,000  | 
|Notes payable                                           |  |   | 620,000 | 
|Total purchase price                                    |  | $ | 670,000 | 
|                                                        |  |   |         | 
|Consideration received:                                 |  |   |         | 
|Property and equipment                                  |  | $ | 117,215 | 
|Territory and franchise rights – San Marcos             |  |   | 267,950 | 
|Territory and franchise rights – Green
    Valley Ranch |  |   | 284,835 | 
|Total assets acquired                                   |  | $ | 670,000 | 





F-14







DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013



NOTE 6—INTANGIBLE ASSETS



Intangible assets consist of 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 August 31, 2014 and 2013 the Company’s
territory and franchise rights consisted of the following:



|                                    |  | August 31, 2014 |            |   | August 31, 2013 |  
|----------------------------------- |  | --------------- | ---------- | - | --------------- | -
|Territory and franchise rights      |  | $               | 1,926,194  |   |                 | $
|Less: Accumulated amortization      |  |                 | (1,028,348 | ) |                 |  
|Territory and franchise rights, net |  | $               | 897,846    |   |                 | $



Amortization expense on intangible
assets included as a charge to income was $419,033 and $375,249 for the years ended August 31, 2014 and 2013, respectively.



NOTE 7—DEBT ISSUANCE COSTS



Debt issuance costs represent common stock
issued to note holders at the execution of note payable agreements. The Company has capitalized the fair value of member interests
issued with an offset to debt issuance costs. Such discounts are then amortized to interest expense over the estimated life of
the note.



As of August 31, 2014 and 2013 the Company’s
debt issuance costs consisted of the following:



|                                |  | August  31, |            |   | August  31, |  
|------------------------------- |  | ----------- | ---------- | - | ----------- | -
|                                |  | 2014        |            |   | 2013        |  
|Capitalized debt issuance costs |  | $           | 1,969,898  |   |             | $
|Less: Accumulated amortization  |  |             | (1,969,898 | ) |             |  
|Debt issuance costs, net        |  | $           | -          |   |             | $



Interest expense on debt issuance costs
included as a charge to income was $1,483,936 and $485,962 for the years ended August 31, 2014 and 2013, respectively.



F-15







DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013



NOTE 9—NOTES PAYABLE



As of August 31, 2014 and 2013 the Company’s
notes payable consisted of the following:



|                                                                                                                                                                      |  | August 31, |           |  | August 31, |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | --------- |  | ---------- | -
|                                                                                                                                                                      |  | 2014       |           |  | 2013       |  
|Note payable bearing interest at 13.5% per annum, originated June 22, 2012, original maturity date of June 22, 2013, modified maturity date of January 19, 2014       |  | $          | 2,700,000 |  |            | $
|                                                                                                                                                                      |  |            |           |  |            |  
|Note payable bearing interest at 12.0% per annum, originated December 27, 2012, original maturity date of December 27, 2013, modified maturity date of March 27, 2014 |  |            | 1,000,000 |  |            |  
|                                                                                                                                                                      |  |            |           |  |            |  
|Note payable bearing interest at 12.0% per annum, originated February 1, 2013, original maturity date of August 1, 2014                                               |  |            | 550,000   |  |            |  
|                                                                                                                                                                      |  |            |           |  |            |  
|Note payable bearing interest at 12.0% per annum, originated February 1, 2013, original maturity date of August 1, 2014                                               |  |            | 650,000   |  |            |  
|                                                                                                                                                                      |  |            |           |  |            |  
|Note payable bearing interest at 12.0% per annum, originated February 1, 2013, original maturity date of August 1, 2014                                               |  |            | 800,000   |  |            |  
|                                                                                                                                                                      |  |            |           |  |            |  
|Note payable bearing interest at 12.0% per annum, originated October 3, 2013, original maturity date of November 2, 2013                                              |  |            | 100,000   |  |            |  
|                                                                                                                                                                      |  |            |           |  |            |  
|Note payable bearing interest at 15.0% per annum, originated July 29, 2013, due on demand                                                                             |  |            | -         |  |            |  
|                                                                                                                                                                      |  |            |           |  |            |  
|Note payable bearing interest at 15.0% per annum, originated July 29, 2013, due on demand                                                                             |  |            | -         |  |            |  
|                                                                                                                                                                      |  |            |           |  |            |  
|Note payable bearing interest of $2,500 per year, originated August 8, 2013, original maturity date of November 6, 2013                                               |  |            | -         |  |            |  
|                                                                                                                                                                      |  |            |           |  |            |  
|Note payable bearing interest at 13.3% per annum, originated August 28, 2013, original maturity date of February 28, 2014                                             |  |            | 90,000    |  |            |  
|                                                                                                                                                                      |  |            |           |  |            |  
|Note payable bearing interest at 13.3% per annum, originated August 28, 2013, original maturity date of February 28, 2014                                             |  |            | 10,000    |  |            |  
|                                                                                                                                                                      |  |            |           |  |            |  
|Note payable bearing interest at 10.0% per annum, originated December 4, 2013, due on demand                                                                          |  |            | 560,000   |  |            |  
|                                                                                                                                                                      |  |            |           |  |            |  
|Note payable bearing interest at 12.0% per annum, originated June 7, 2013, original maturity date of June 7, 2016                                                     |  |            | 500,000   |  |            |  
|                                                                                                                                                                      |  |            |           |  |            |  
|Note payable bearing no interest, originated August 31, 2013, due on demand                                                                                           |  |            | -         |  |            |  
|                                                                                                                                                                      |  |            |           |  |            |  
|Note payable bearing interest at 5.0%, originated August 31, 2014, due on demand                                                                                      |  |            | 80,000    |  |            |  
|                                                                                                                                                                      |  |            |           |  |            |  
|Note payable bearing interest at 18%, originated May 8, 2014, due on demand                                                                                           |  |            | 250,000   |  |            |  



F-16







DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013



NOTE 9—NOTES PAYABLE (CONTINUED)



|                                                                                                             |  | August 31, |            |   | August 31, |  
|------------------------------------------------------------------------------------------------------------ |  | ---------- | ---------- | - | ---------- | -
|                                                                                                             |  | 2014       |            |   | 2013       |  
|                                                                                                             |  |            |            |   |            |  
|Note payable bearing interest at 7.4%, originated April 13, 2014, due on demand                              |  |            | 126,577    |   |            |  
|                                                                                                             |  |            |            |   |            |  
|Balance due on sales of future accounts receivable, net of debt discounts of $161,899                        |  |            | 449,722    |   |            |  
|                                                                                                             |  |            |            |   |            |  
|Installment loan on asset acquisition, originated September 18, 2012,
    maturity date of September 5, 2013 |  |            | -          |   |            |  
|                                                                                                             |  |            |            |   |            |  
|Total notes payable                                                                                          |  | $          | 7,866,299  |   |            | $
|Less: current portion                                                                                        |  |            | (7,366,299 | ) |            |  
|                                                                                                             |  |            |            |   |            |  
|Long-term note payable                                                                                       |  | $          | 500,000    |   |            | $



Secured Borrowing



On August 11, 2014, the Company entered
three financing arrangements with a third party for a combined principal amount of $470,000.  The terms of the arrangement
require the Company to pay the $470,000 principal balance plus an additional $169,200 for total remittance of $639,200. 
The terms of repayment require the Company to remit to the lender 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.  This borrowing is secured
by the assets of the Company.



The additional $169,200 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 approximately 11 months.



F-17









DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013



NOTE 10—CONVERTIBLE NOTES PAYABLE



As of August 31, 2014 and 2013 the Company’s
convertible notes payable consisted of the following:



|                                                                                                                                                                                                                                                                   |  | August 31, |          |   | August  31, |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------- | -------- | - | ----------- | -
|                                                                                                                                                                                                                                                                   |  | 2014       |          |   | 2013        |  
|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 KCI Investments, LLC member units of the
    Company at $1.00 per unit.                        |  | $          | 500,000  |   |             | $
|                                                                                                                                                                                                                                                                   |  |            |          |   |             |  
|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 KCI Investments, LLC member units of the Company at $1.50 per
    unit.                           |  |            | 50,000   |   |             |  
|                                                                                                                                                                                                                                                                   |  |            |          |   |             |  
|Convertible note payable bearing interest at the market interest rate
    plus 6.0% per annum, originated May 1, 2012, original maturity date of May 1, 2015. The note is convertible into KCI Investments,
    LLC member units of the Company at $0.30 per unit. |  |            | 300,000  |   |             |  
|                                                                                                                                                                                                                                                                   |  |            |          |   |             |  
|Total convertible notes payable                                                                                                                                                                                                                                    |  | $          | 850,000  |   |             | $
|Less: current portion                                                                                                                                                                                                                                              |  |            | (300,000 | ) |             |  
|                                                                                                                                                                                                                                                                   |  |            |          |   |             |  
|Total long-term convertible notes payable                                                                                                                                                                                                                          |  | $          | 550,000  |   |             | $



On December 15, 2011, the Company executed
a note payable with a face value of $150,000, bearing interest at 12 percent per annum with a maturity date of April 15, 2012.
The note was convertible at any time into a 10 percent equity interest in the Company. The note along with all accrued interest
was paid in full as of the maturity date.



The intrinsic value of the beneficial conversion
feature and the debt discount associated with all 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 $150,000 on December 15, 2011. During the years ended December 31, 2013 and 2012, the Company recognized amortization
on debt discounts of $-0- and $130,328, respectively leaving unamortized debt discounts of $-0- and $-0-.



NOTE 11—DERIVATIVE LIABILITY



Effective July 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 conversion price of certain convertible notes and exercise price of certain warrants are variable and subject to the fair value
of the Company’s shares on the date of conversion or exercise. As a result, the Company has determined that the conversion
and exercise features are not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity
treatment. In accordance with ASC 815, the Company has bifurcated the conversion and exercise features of the instruments to be
recorded as a derivative liability.



ASC 815 requires Company management to
assess the fair market value of certain 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 convertible notes payable and warrants.



F-18







DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013



NOTE 11—DERIVATIVE LIABILITY
(CONTINUED)



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



|                          |  | 2014          |  | 2013         
|------------------------- |  | ------------- |  | -------------
|                          |  |               |  |              
|Risk-free interest rate   |  | 0.59% - 1.37% |  | 0.59% - 1.31%
|Expected life             |  | 4.46 - 6.22   |  | 4.13 - 5.89  
|Expected dividend yield   |  | -             |  | -            
|Expected price volatility |  | 518% - 643%   |  | 391% - 643%  



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 and subsequent revaluations
of existing derivative liabilities.



During the year ended August 31, 2013,
the Company’s derivative liability decreased from $295,825 to $604,553 and recognized a loss on derivative liability of
$308,728 in conjunction with settlement of convertible notes payable, additions of new derivative liabilities and subsequent revaluations
of existing derivative liabilities.



NOTE 12—STOCKHOLDERS’
EQUITY



Our authorized capital stock consists of
100,000,000 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 August 31, 2014 and August 31, 2013, there were and 42,570,976 and 15,611,146shares of common stock issued and outstanding, respectively, and zero shares of preferred stock issued and outstanding,
respectively.



Preferred Stock



Our board of directors has the authority,
without stockholder approval, to issue up to 15,000,000 shares of preferred stock, $.001 par value. 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.



At August 31, 2013 and August 31, 2012,
the Company had -0- shares outstanding, respectively of its Series A Convertible Preferred Stock (“Series A”). Series
A has a stated liquidation preference value of $15 per share, and each preferred share is convertible to 100 shares of the Company’s
common stock upon written notice of the record holder to the Company at any time.



Class B Membership Units – KCI
Restaurant I, LLC and KCI Restaurant II, LLC



The Company’s subsidiaries, KCI
Restaurant I, LLC (“Restaurant I”) and KCI Restaurant II, LLC (“Restaurant II”) are authorized to issue
up to 2 Class B membership units with no par value each, of which 2 and -0- units were issued and outstanding as of August 31,
2014 and 2013, respectively.



Each Class B membership unit was sold for
$500,000, plus $60,000 for administrative costs payable to third parties. Each unit carries equal voting rights to Restaurant I
and Restaurant II’s Class A membership units. Each Class B unit is entitled to receive distributions equal to 0.5 percent
of the value of the units held each year.



F-19







DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013



NOTE 12—STOCKHOLDERS’ EQUITY
(CONTINUED)



Class B Membership Units – KCI
Restaurant I, LLC and KCI Restaurant II, LLC (Continued)



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 a five-year life but that, 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.



As Class B units are not entitled to the
distribution of profits and losses, and as they are not mandatorily redeemable, the shares have been presented as permanent equity
on the face of the balance sheet and no adjustments for noncontrolling interests have been made.



During the year ended August 31, 2014,
the Restaurant I issued one (1) Class B membership unit in exchange for total cash proceeds of $560,000 (inclusive of $60,000 received
for administrative fees). During the year ended August 31, 2014, Restaurant II also issued one (1) Class B membership unit in exchange
for total cash proceeds of $560,000 (inclusive of $60,000 received for administrative fees).



Common Stock



The holders of our common stock are entitled
to one vote for each share held of record on all matters to be voted on by stockholders. There is no cumulative voting with respect
to the election of directors, with the result that the holders of more than 50 percent of the shares voting for the election of
directors can elect all of the directors then up for election. The holders of our common stock are entitled to receive dividends
when, as and if declared by the Board of Directors out of funds legally available therefore. In the event of liquidation, dissolution
or winding up of the Company, the holders of common stock are entitled to share ratably in all assets remaining which are available
for distribution to them after payment of liabilities and after provision has been made for each class of stock, if any, having
preference over the common stock. Holders of shares of our common stock, as such, have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to the common stock. All of the outstanding shares of common stock are
fully paid and non-assessable.



The
Company is authorized to issue up to 150,000,000 shares of common stock at $0.001 par value, of which 42,570,975 and 15,611,146
shares of common stock were issued and outstanding as of August 31, 2014 and 2013, respectively.



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



F-20







DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013



NOTE 12—STOCKHOLDERS’ EQUITY
(CONTINUED)



During the year ended August 31, 2013,
the Company issued 4,158,011 shares of common stock as follows:



|Description                                                            |  | Shares Issued |          
|---------------------------------------------------------------------- |  | ------------- | ---------
|Cash received for exercise of options and warrants at $0.003 per share |  |               | 1,878,846
|Common stock issued for debt issuance costs                            |  |               | 1,574,598
|Common stock issued for services valued at $450,000                    |  |               | 704,567  
|Total                                                                  |  |               | 4,158,011



NOTE 13—STOCK OPTIONS AND WARRANTS



Stock Options



During the year ended August 31, 2014 (prior
to the Reverse Acquisition), the Company granted 6,900,000 options to purchase Units in KCI @ $0.13 per KCI Unit. In connection
with the Reverse Acquisition, which took effect on June 4, 2014, these and all other options previously granted by KCI to purchase
membership units in KCI Investments, LLC were cancelled. During the year ended August 31, 2014, 947,825 stock options to purchase
KCI Units were exercised for cash proceeds of $948.



Post-reverse acquisition and the cancellation
of the aforementioned options, the Company issued 9,573.604 options to purchase common stock at $0.50 per share to the Company
employees and consultants.



During the year ended August 31, 2013,
the Company did not grant any new stock options.



Stock compensation expense is recognized
on a pro-rata basis over the vesting period of the options. During the period from inception through August 31, 2014 the Company
recognized $1,579,636 in compensation expense arising from options issued, leaving $9,911,411 of compensation expense on stock
options to be recognized subsequent to August 31, 2014. The Company recognized stock compensation expense of $185,251 and $456,943
for the years ended August 31, 2014 and 2013, respectively.



A summary of the status of the Company’s
member unit and common stock options as of August 31, 2014 and changes during the periods ended August 31, 2014 and 2013 is presented
below:



|                                                     |  | Number of Options and Warrants |            
|---------------------------------------------------- |  | ------------------------------ | -----------
|                                                     |  |                                |            
|Outstanding at August 31, 2012                       |  |                                | 14,000,000 
|                                                     |  |                                |            
|Options and warrants granted                         |  |                                | 5,615,073  
|Options and warrants exercised                       |  |                                | (3,000,000 
|Options and warrants forfeited, cancelled or expired |  |                                | -          
|Outstanding at August 31, 2013                       |  |                                | 16,615,073 
|Exercisable 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  
|Exercisable at August 31, 2014                       |  |                                | -          



F-21







DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013



NOTE 13—STOCK OPTIONS AND WARRANTS
(CONTINUED)



Warrants



During the year ended August 31, 2014,
the Company issued 25,358,996 warrants to acquire its common stock. The warrants were issued in connection with existing debt arrangements
and the fair value of the warrants were recorded as interest expense during the period. In connection with the reverse recapitalization
which took effect on June 4, 2014, 28,824,069 options to purchase membership units in KCI Investments, LLC were cancelled.



During the year ended August 31, 2013,
the Company issued 1,985,948 warrants to acquire its common stock. The warrants were issued in connection with existing debt arrangements
and the fair value of the warrants were recorded as interest expense during the period.



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



|                          |  | 2014          |  | 2013         
|------------------------- |  | ------------- |  | -------------
|                          |  |               |  |              
|Risk-free interest rate   |  | 0.71% - 1.33% |  | 1.33% - 1.62%
|Expected options life     |  | 2.50 - 5.00   |  | 2.50 - 5.00  
|Expected dividend yield   |  | -             |  | -            
|Expected price volatility |  | 201% - 549%   |  | 136% - 201%  



The
following table summarizes information about options and warrants as of August 31, 2014:



|                         |  | Options and Warrants Outstanding |           |  | Options and Warrants Exercisable                        | 
|------------------------ |  | -------------------------------- | --------- |  | ------------------------------------------------------- | 
|Range of Exercise
Prices |  | Number
 Outstanding              |           |  | Weighted
Average
Remaining
Contractual
Life (in
 years) | 
|                         |  |                                  |           |  |                                                         | 
|$0.001 to $0.01          |  |                                  | -         |  |                                                         | 
|$0.02 to $0.05           |  |                                  | -         |  |                                                         | 
|$0.06 to $0.50           |  |                                  | 9,573,604 |  |                                                         | 
|                         |  |                                  | 9,573,604 |  |                                                         | 



F-22







DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013



NOTE 13—STOCK OPTIONS AND WARRANTS
(CONTINUED)



The
following table summarizes information about options and warrants as of August 31, 2013:



|                         |  | Options and Warrants Outstanding |            |  | Options and Warrants Exercisable                        | 
|------------------------ |  | -------------------------------- | ---------- |  | ------------------------------------------------------- | 
|Range of Exercise
Prices |  | Number
 Outstanding              |            |  | Weighted
Average
Remaining
Contractual
Life (in
 years) | 
|                         |  |                                  |            |  |                                                         | 
|$0.001 to $0.01          |  |                                  | 8,253,534  |  |                                                         | 
|$0.02 to $0.05           |  |                                  | 5,000,000  |  |                                                         | 
|$0.06 to $0.50           |  |                                  | 3,361,539  |  |                                                         | 
|                         |  |                                  | 16,615,073 |  |                                                         | 



NOTE 14—LEASES



The Company operates all its restaurants
in leased premises. Lease terms for building leases generally include combined initial and option terms of between 5 and 10 years.
The options terms in each of these leases are typically in five-year increments. Typically, the lease includes rent escalation
terms every five years including fixed rent escalations, escalations based on inflation indexes, and fair market value adjustments.
Certain leases contain contingent rental provisions based upon the sales of the underlying restaurants. The leases generally provide
for the payment of common area maintenance, property taxes, insurance and various other use and occupancy costs by the Company.
In addition, the Company is the lessee under non-cancelable leases covering certain offices.



Future minimum lease payments required
under existing operating leases as of August 31, 2014 are as follows:



|2015                                |  | $ | 1,170,098  | 
|----------------------------------- |  | - | ---------- | 
|2016                                |  |   | 1,615,135  | 
|2017                                |  |   | 1,631,971  | 
|2018                                |  |   | 1,518,735  | 
|2019                                |  |   | 1,396,321  | 
|Thereafter                          |  |   | 7,279,228  | 
|Total future minimum lease payments |  | $ | 14,611,488 | 



Rent expense was $862,809 and $460,686
for the years ended August 31, 2014 and 2013, respectively.



NOTE 15—COMMITMENTS AND CONTINGENCIES



The Company President and 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 obligations to franchisors.



F-23







DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013



NOTE 16—FAIR VALUE MEASUREMENTS



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 August 31, 2014 and 2013, consisted of the following:



|                     |  |                                     |   |  | Fair Value Measurements Using             |  
|-------------------- |  | ----------------------------------- | - |  | ----------------------------------------- | -
|Description          |  | Total Fair Value at
August 31, 2014 |   |  | Quoted Prices in Active Markets (Level 1) |  
|                     |  |                                     |   |  |                                           |  
|Derivative liability |  | $                                   | - |  |                                           | $



|                     |  |                                     |         |  | Fair Value Measurements Using                 |  
|-------------------- |  | ----------------------------------- | ------- |  | --------------------------------------------- | -
|Description          |  | Total Fair Value at August 31, 2013 |         |  | Quoted Prices in Active Markets
    (Level 1) |  
|                     |  |                                     |         |  |                                               |  
|Derivative liability |  | $                                   | 604,553 |  |                                               | $



Note
17—Income taxES



Net deferred tax assets consist of the following components:



|                                 |  | August 31, 2014 |            |   | August 31, 2013 |  
|-------------------------------- |  | --------------- | ---------- | - | --------------- | -
|Deferred tax asset:              |  |                 |            |   |                 |  
|Net operating loss carryforwards |  | $               | (8,287,907 | ) |                 | $
|Valuation allowance              |  |                 | 8,287,907  |   |                 |  
|Net deferred tax asset           |  | $               | -          |   |                 | $



The income tax provision differs from the
amount of income tax determined by applying the U.S. federal and state income statutory tax rates to pretax income (loss) from
continuing operations as follows:



|                               |  | August 31, 2014 |            |   | August 31, 2013 |  
|------------------------------ |  | --------------- | ---------- | - | --------------- | -
|                               |  |                 |            |   |                 |  
|Tax benefit at statutory rates |  | $               | (4,334,532 | ) |                 | $
|Change in valuation allowance  |  |                 | 4,334,532  |   |                 |  
|Net provision for income taxes |  | $               | -          |   |                 | $



The Company has accumulated net operating
loss carryovers of approximately $8,287,907 as of August 31, 2014 which are available to reduce future taxable income.  Due
to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for federal income tax
reporting purposes may be subject to annual limitations. A change in ownership may limit the utilization of the net operating
loss carry forwards in future years. The tax losses begin to expire in 2033. The fiscal years 2014 and 2013 remains open to examination
by federal tax authorities and other tax jurisdictions.



F-24







DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013



NOTE 18—SUBSEQUENT EVENTS



New Store Openings



Subsequent to August 31, 2014, the Company:



| | § | Opened its first two franchised Papa John's locations:
| | - | ------------------------------------------------------



| | 1. | Papa John's Sunset (in Rocklin, California) on November 13, 2014, and
| | -- | ---------------------------------------------------------------------



| | 2. | Papa John's Foothills (in Roseville, California) on November 29, 2014.
| | -- | ----------------------------------------------------------------------



Other Pending Operating-Related Transactions



Subsequent to August 31, 2014 the Company:



| | § | Signed leases to open nine franchised Papa John's locations in Northern California;
| | - | -----------------------------------------------------------------------------------



| | § | Entered into a definitive agreement to acquire two franchised Papa John's locations in Northern
California, both of which currently are open and operating, and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | § | Entered into a series of definitive agreements: to take over a previously-closed restaurant space
in high-end retail center in the Summerlin area of Las Vegas, Nevada; enter into a new lease with the landlord, and open up a new
restaurant: TAPAS. Upon completion of various requirements of the Seller, the Company shall issue to the Seller 50,000 share of
the Company’s Common Stock.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Note that, as of this date:



| | § | Construction has commenced for three of the Papa John's locations under lease (in addition to the
two already operating);
| | - | -------------------------------------------------------------------------------------------------------------------------



| | § | The Company currently anticipated consummating the pending acquisition of the two operating Papa
John's locations before the end of this calendar year - subject to access to financing, and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | § | The Company currently anticipates opening TAPAS before the end of January 2015.
| | - | -------------------------------------------------------------------------------



The Company, in December 2015, closed one
of its locations in Texas. The Company is in negotiations to sublet the space to another business and is moving the equipment and
as much as possible of the tenant improvements to another Capriotti's location currently under construction.



The Company previously announced that it
would be opening various concept restaurants in partnership with Chef Alex Stratta. In early December 2014, the Company ended its
relationship with Stratta. The Company still intends to open these restaurants and explore opening other, unique concepts that
it can open and then replicable in multiple locations and multiple markets.



Name Change



The Company, on November 17, 2014, announced
that it has changed its name to "Preferred Restaurant Brands". As of this date, the Company is in the process of filing
documents with FINRA, the Securities and Exchange Commission and other required regulatory bodies to effect this change. The Company
intends to submit this change to a vote of shareholders either at its next-scheduled shareholder meeting or through an information
statement (which will note that shareholders representing more than 95% of the Company's Common Stock have approved the name change.



F-25







DIXIE FOODS INTERNATIONAL, INC.

Notes to the Consolidated Financial Statements

August 31, 2014 and 2013



NOTE 18—SUBSEQUENT EVENTS (CONTINUED)



Capriotti's Area Development Agreements



Subsequent to August 31, 2014, the Company
entered into amended Area Development Agreements with the franchisor of Capriotti's Sandwich Shops. Pursuant to those agreements,
the Company relinquished the exclusive right to develop Capriotti's Sandwich Shops in its five contractual territories, in return
for which the Company's contractual obligations to open stores in each territory were decreased to one per year per territory.



Financings



Each of Restaurant I and Restaurant II
issued one (1) Class B membership unit in exchange for total cash proceeds of $560,000 (inclusive of $60,000 received for administrative
fees).



The Company’s subsidiary PRB I, LLC,
issued one (1) Class B membership unit in exchange for total cash proceeds of $505,000 (inclusive of $5,000 received for administrative
fees). In total, PRB II, LLC is authorized to issue up to five Class B membership units with no par value each.



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.



In connection with short-term loans made
to the Company by two separate entities, the Company agreed to issue shares of Common Stock to those two lenders. To-date, the
Company has issued 225,000 shares to each of these two lenders. For each two weeks that each such loan remains outstanding, the
Company is required to issue another 37,500 shares of its Common Stock.



In connection with his assistance
with facilitating EB-5 funding for the Company, as well as in consideration of other advice and services rendered, the
Company issued to a Company Director a Warrant entitling him, any time for five years after issuance, to
acquire 400,000 shares of the Company's Common Stock at an exercise price of $0.84 per share.



In connection with assistance with facilitating
EB-5 funding for the Company, as well as in consideration of other advise and services rendered, the Company issued to an individual
a Warrant entitling that investor, any time for five years after issuance, to acquire $500,000 of Company Common Stock at an exercise
price equal to 95% of the average trading price of the Company's Common Stock for the 30 days prior to any exercise.



F-26







PART
III



Item
9.                    Changes in
and Disagreements with Accountants on Accounting and Financial Disclosure



None.



Item 9A.                 
Controls and Procedures



Evaluation of Disclosure Controls
and Procedures



As of the end of the period covered
by this annual report on Form 10-K, management performed, with the participation of our Chief Executive Officer and our Chief
Financial Officer, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) of the Exchange Act).  Based on this evaluation, our principal
executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as
of such date.



Management’s Report on
Internal Control over Financial Reporting



Our management is responsible for
establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) promulgated
under the Exchange Act.) Internal control over financial reporting is a process designed by, or under the supervision of, the
company’s principal executive officer and principal financial officer and effected by an entity’s board of directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of consolidated financial statements for external purposes in accordance with generally accepted accounting principles and includes
those policies and procedures that:



| | · | pertain
                                         to the maintenance of records that, in reasonable detail, accurately and fairly reflect
                                         the transactions and dispositions of the assets of the entity;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | provide
                                         reasonable assurance that transactions are recorded as necessary to permit preparation
                                         of financial statements in accordance with generally accepted accounting principles,
                                         and that receipts and expenditures of the entity are being made only in accordance with
                                         authorizations of management and directors of the entity; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | provide
                                         reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
                                         use or disposition of the entity’s assets that could have a material effect on
                                         its consolidated financial statements.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.



Under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer, the Company’s management conducted an assessment
of the effectiveness of our internal control over financial reporting based on the criteria set forth in the Internal Control
— Integrated Framework issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based upon
this assessment, the Company’s management concluded that our internal control over financial reporting was effective as
of the end of August 31, 2014.



Attestation Report of Independent
Registered Public Accounting Firm



This annual report on Form 10-K
does not include an attestation report of our independent registered public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our independent registered public accounting
firm pursuant to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer
Protection Act.



Management’s Remediation
Initiatives



We will continue to monitor and
evaluate the effectiveness of our disclosure controls and procedures and our internal control over financial reporting.  However,
because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements
due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
 These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can
occur because of simple error or mistake. The design of any system of controls is based in part on certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all
potential future conditions.  Projections of any evaluation of controls effectiveness to future periods are subject to risks.



10







Changes
in Internal Control over Financial Reporting



There were no changes in our internal
control over financial reporting during the quarter ended August 31, 2014 that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.



Item 9B.                 Other
Information



None.



Item 10.  Directors
and Executive Officers and Corporate Governance



Our executive
officers and directors are:



|Name                                      |  | Position                                         
|----------------------------------------- |  | -------------------------------------------------
|Kenneth Antos                             |  | President, CEO, Director                         
|Richard Groberg                           |  | Vice President, Chief Financial Officer, Director
|Donald Porges                             |  | Director                                         
|Richard Doermer                           |  | Director                                         
|Michael Liu                               |  | Director                                         
|Herbert Press                             |  | Director                                         
|Paul Robichaux                            |  | Director                                         
|Louisiana State Senator Gary L. Smith Jr. |  | Director                                         



Profiles

Kenneth Antos
has served as our President, Chief Executive Officer, and a member of our Board of Directors, since June 4, 2014. Mr. Antos
also is the President and Chairman of the Board of KCI Investments. Mr. Antos brings more than thirty-five years of executive
level experience in restaurant and retail operations and management. Prior to founding KCI Investments, Mr. Antos partnered to
help launch Twin Towers Trading Site Management LLC (Twin Towers Trading Site Management, LLC) where he was instrumental in helping
to build out of approximately 1,800 Subway Franchisees. Mr. Antos sold his interest in this business in 2012 to focus on KCI Investments.



Mr. Antos’ career
also includes senior leadership positions with Circuit City Stores, which included Controller, Corporate Vice President and West
Coast Division President where he was responsible for building the division from its inception to $3 billion in revenue. In recognition
of this achievement Executive Magazine name Mr. Antos retailer of the decade and his tenure was featured in the novel Good
to Great where author Jim Collins acknowledged that during Mr. Antos’ time as Division President and Corporate Vice President
“Circuit City generated the highest total return to shareholders of any company on the New York Stock Exchange”. Mr. Antos
is also a co-founder of Signal Sites, a wireless tower business where he successfully led negotiations with numerous Fortune 500
businesses including Walgreens, Shell Oil, Texaco, and Kroger, and sold the business to a national site acquisition firm within
less than four years. Mr. Antos is a graduate of Syracuse University where he received a degree in Finance and Accounting he also
received his Master’s Degree in Business Administration from Harper College – now the State University of New York.



Richard Groberghas
served as DIXI’s Vice President, Treasurer and Chief Financial Officer since June 4, 2014. Mr. Groberg also serves
the Company's Board as its Secretary. Mr. Groberg is also the Chief Financial Officer of KCI Investments. Mr. Groberg has more
than 22 year of hands-on, senior operating experience starting, managing, growing (both organically and through acquisitions)
and effecting exit strategies for start-ups, turnarounds and multi-unit operations seeking to expand rapidly. Groberg also currently
serves as the President of Silver State Regional Center, a USCIS-approved EB5 Regional Center. Mr. Groberg is a graduate of Fordham
University, where he received a Master’s degree in Business, and Emory University where he received a Bachelor’s degree
in English.



Richard Doermer
has been involved as an investor and advisor to various early stage companies in the biotech, entertainment, restaurant and software
industries since 2006.  Doermer has been a Chicago attorney since 1979 and established his own, multi-attorney practice,
Richard Doermer, Ltd., in 1989 focusing on civil litigation.  In 2010, Doermer founded McNabb, LLC. a marketing consumer
products - notably Cate McNabb Cosmetics and Sunology Suncare. He is an active Board member on various Chicago charities including
Allendale School (youth), Luminarts Cultural Foundation at the Union League Club of Chicago and Chicago International Film Festival
(arts) and PAWS (Pets Are Worth Saving).



Michael Liu is
a native Chinese professional with extensive business and financial experience working on cross-cultural business projects involving
Chinese companies. Since 2009, Liu has work in an Investment Advisory and International Business Consultation role for a Fortune
500 company. In that position, Liu provides various financial advisory services and manages a large portfolio of client assets.
Liu, a California resident, has a MPhil in Business and Management (in the United Kingdom) and is a Securities-licensed broker
in the United States.



11







Donald Porges became
a member of our Board of Directors in June. Since November 2011, Mr. Porges has been providing various accounting services to
KCI and its subsidiaries. Mr. Porges is a Certified Public Accountant licensed in the State of Florida and has been self-employed
since June 1981. Presently, he practices as the member manager of Donald K. Porges, CPA, LLC, a position he has held since 1981.
His clients are located thought the United States, Canada, Australia and Great Britain. Mr. Porges is also a licensed Certified
Forensic Accountant. Mr. Porges is a Member of the American Institute of Certified Public Accountants, Florida Institute of Certified
Public and the Institute of Certified Forensic Accountants. He is also active in community services, including serving in various
officer or management capacities with Rotary International, Waterford Education Foundation, Mizner Falls Homeowners Association
and Boynton Beach Chamber of Commerce. Mr. Porges is a graduate of C.W. Post College of Long Island University where he received
a degree in Accounting.



Herbert Press currently
serves as SVP of Real Estate and Construction for DIXI’s KCI Investments, LLC subsidiary. Since graduating from The State
University of New York in 1963 with a degree in Industrial Engineering and Business Management Press has been involved in the
design and construction of hundreds of projects, including more than 100 restaurants, and has won numerous awards.



Paul Robichaux
currently serves as the CEO of Robichaux Equipment, and also serves in various executive and/or Board member roles for various
for-profit and not-for-profit entities roles, including with: Magnolia Financial Group, a privately-owned and managed financial/investment
group, and the Port of Southern Louisiana Commission - as its President and Chairman; and, he has founded multiple businesses
generating sales across Africa, Asia, Europe, South America and the Caribbean. Mr. Robichaux attended Nichols State University
majoring in marketing and psychology, with a minor in business. Mr. Robichaux chairs the Company's Audit Committee.



Louisiana State Senator
Gary L. Smith Jr. currently serves as the State Senator for Distract 19 of the state of Louisiana. He divides the rest of
his professional time among: his legal practice, his family's privately-held dredging business and serving as: co-Founder of Magnolia
Financial Group (a privately-owned and managed financial/investment group) and Vice President of Acquisitions and Investments
for the Magnolia Companies of LA, LLC. Senator Smith was elected State Senator in 2012 after serving as a Louisiana State Representative
for 12 years. Senator Smith previously worked in Washington D.C. for former Congressman Billy Tauzin and U.S. Senator John Breaux.



Our officers
are elected annually by the board of directors and may be replaced or removed by the Board at any time. Our Directors are elected
by our shareholders annually and serve until the election and qualification of their successors or their earlier resignation or
removal.



Board
of Director Committees

Five members of our Board (Ken Antos,
Richard Groberg, Mike Liu, Donald Porges and Paul Robichaux (as Chairman)) also serve as our Audit Committee. Currently, we do
not compensate any of our Directors in connection with their service in this regard.



Code
of Ethics

We
have adopted a code of ethics that applies to all of our employees, officers and directors, including those officers responsible
for financial reporting. We will provide a copy to any person without charge upon written request to Richard Groberg, Vice President,
Dixie Foods International, Inc.; c/o KCI Investments, LLC; 4033 South Dean Martin Drive; Las Vegas, NV 89103.



Item 11.  Executive
Compensation

Currently, CEO Ken Antos receives
an annual salary of $150,000 per year. Vice President and Chief Financial Officer Richard Groberg receives an annual salary of
$125,000 per year. Both Antos and Groberg also hold options to acquire common stock of the Company, which (except for a portion
of Antos' options) vest over time and are forfeited under certain conditions.



Other
Compensation Arrangements

None of our
executive officers have any written employment agreements or any arrangements for employee benefits, severance payments or change
of control payments. We have not established any long term compensation plans, stock based compensation plans, incentive compensation
plans or other compensation or benefit plans. We anticipate that such plans will be established as our business develops. The
Company has granted stock options to its Executive Officers, other key employees and key advisors.



Director
Compensation

Currently,
no Director receives any compensation in connection with his role as Director. We do anticipate setting up a plan to compensate
Directors in connection with their services.



Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The
following table sets forth, as of December xx, 2014, the beneficial ownership of our 43,030,976 outstanding shares of Common Stock,
by (1) the only persons who own of record or are known to own beneficially, more than 5% of our Common Stock; (2) each director
and executive officer; and (3) all directors and officers as a group.



12







|                                 |  |                      |            |  | Percentage of     | 
|-------------------------------- |  | -------------------- | ---------- |  | ----------------- | 
|                                 |  |                      |            |  | Outstanding       | 
|Name and Address *               |  | Number
    of Shares |            |  | Common
    Shares | 
|5% Holders                       |  |                      |            |  |                   | 
|KCI Holding I, LLC (1)           |  |                      | 40,814,376 |  |                   | 
|Executive Officers and Directors |  |                      |            |  |                   | 
|Kenneth Antos (1)                |  |                      | 40,814,376 |  |                   | 
|Donald Porges(1)                 |  |                      | 40,814,376 |  |                   | 
|Richard Groberg                  |  |                      | 0          |  |                   | 
|Richard Doermer (**)             |  |                      | 0          |  |                   | 
|Mike Liu                         |  |                      | 0          |  |                   | 
|Herb Press                       |  |                      | 0          |  |                   | 
|Paul Robichauz                   |  |                      | 0          |  |                   | 
|Gary Smith Jr.                   |  |                      | 0          |  |                   | 
|Directors/Officers               |  |                      | 40,814,376 |  |                   | 
|As a group (8 persons)           |  |                      |            |  |                   | 














| | '(1) | Includes 40,814,376 shares held of
                                         record by KCI Holding I, LLC. Kenneth Antos and Donald Porges are Co-Managers of KCI
                                         Holding I, LLC and have shared voting and dispositive power with respect to the shared
                                         held of record by KCI Holding I, LLC. Each of Mr. Antos and Mr. Porges disclaims beneficial
                                         ownership of all of the shares of our common stock held of record by KCI Holding I, LLC,
                                         except to the extent of their respective pecuniary interests therein. KCI Holding I,
                                         LLC, Mr. Antos and Mr. Porges are a member of a group under Section 13(d) of the Securities
                                         and Exchange Act of 1934, as amended.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | * | The address for all is: c/o Dixie Foods
                                         International, Inc.; c/o KCI Investments, LLC; 4033 South Dean Martin Drive; Las Vegas,
                                         NV 89103.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Item 13.  Certain
Relationships and Related Transactions, and Director Independence



Director
Independence

The following
information concerning director independence is based on the director independence standards of The NASDAQ Stock Market Corporate
Governance Rules, although our common stock is not listed on The NASDAQ Stock Market.



The Board has determined that Directors
Donald Porges, Richard Doermer, Michael Liu, Paul Robichaux and Louisiana State Senator Gary L. Smith Jr. are independent directors
within The NASDAQ Stock Market’s director independence standards. Directors Kenneth Antos, Richard Groberg and Herb Press
are not independent. In determining independence, the Board reviews and seeks to determine whether directors have any material
relationship with the Company, direct or indirect, which would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director. The Board reviews business, professional, charitable and familial relationships of the
directors in determining independence. The Board has not designated a separate compensation or nominating committee.



Our Board of
Directors requires that all related party transactions be reviewed and approved by Audit Committee of the Board.



Audit Committee

The Board of
Directors has designated a separate Audit Committee, whose members are named above, which conducts the functions of such a committee.
None of the directors is an audit committee financial expert.



Item 14.  Principal
Accountant Fees and Services.

The following
table shows the fees that were billed for the audit and other services provided by Sadler, Gibb and Associates, for fiscal years
2014 and 2013



|                                         |  | August 31, 
2014 |        |  | August 31, 
2013 |  
|---------------------------------------- |  | ---------------- | ------ |  | ---------------- | -
|Audit Fees - Sadler, Gibb and Associates |  | $                | 33,500 |  |                  | $
|Audit Related Fees                       |  |                  | —      |  |                  |  
|Tax Fees                                 |  |                  | —      |  |                  |  
|All Other Fees                           |  |                  | —      |  |                  |  
|Total                                    |  | $                | 33,500 |  |                  | $



Audit Fees — This
category includes the audit of our annual financial statements, review of financial statements included in our Annual Reports
on Form 10-K and services that are normally provided by the independent registered public accounting firm in connection with engagements
for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of,
the audit or the review of interim financial statements.



Audit-Related Fees —
This category consists of assurance and related services by the independent registered public accounting firm that are reasonably
related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.”
The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities
and Exchange Commission and other accounting consulting.



13







Tax Fees — This
category consists of professional services rendered by our independent registered public accounting firm for tax compliance and
tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.



All Other Fees —
This category consists of fees for other miscellaneous items.



The accounting firm owned by Director
Donald Porges provides various accounting and tax services to the Company. During fiscal year 2014, the Company paid Porges’
firm approximately $82,000 in connection with those services.



Historically, Company Management,
based on authority granted by the Board, approves the engagement letter with respect to audit, tax and review services.  Historically,
Other Fees are subject to pre-approval Company Management.  Going forward, all such engagements and fees shall be subject
to the approval of the Audit Committee of the Board. The audit and tax fees paid to the auditors with respect to fiscal 2014 were
pre-approved by Company Management.



Pre-approved Policies

Currently the Audit Committee and,
prior to June 4, 2014, the Board of Directors acting as the Audit Committee, considered whether, and determined that, the auditor’s
provision of non-audit services was compatible with maintaining the auditor’s independence.  All of the services
described above for the years ended August 31, 2014 and 2013 were approved by Company Management, based on authority granted by
the Board pursuant to its policies and procedures.



Board of Directors Report

The Audit Committee of the Board
has reviewed and discussed with the Company’s management and independent auditor the audited consolidated financial statements
of the Company contained in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2014. The Audit
Committee has also discussed with the independent auditor the matters required to be discussed pursuant to SAS No. 61 (Codification
of Statements on Auditing Standards, AU Section 380), which includes, among other items, matters related to the conduct of the
audit of the Company’s consolidated financial statements.



The Audit Committee has received
and reviewed the written disclosures and the letter from the independent auditor required by the applicable requirements of the
Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Board concerning independence,
and has discussed with its independent auditor its independence from the Company.



The
Audit Committee has considered whether the provision of services other than audit services is compatible with maintaining auditor
independence. Based on the review and discussions referred to above, the Board approved the inclusion of the audited consolidated
financial statements in the Company’s Annual Report on Form 10-K for its fiscal year ended August 31, 2014 for filing with
the SEC.



14







PART
IV



Item 15. Exhibits Filed



|      | Capriotti's Corp. Area Development Agreements                                
|----- | -----------------------------------------------------------------------------
|10.1  | ·Las
    Vegas*                                                              
|10.2  | ·Northern
    San Diego                                                      
|10.3  | ·Northern
    San Diego Addendum                                             
|10.4  | ·Orange
    County                                                           
|10.5  | ·South
    Bay*                                                              
|10.6  | ·Sothern
    San Diego                                                       
|10.7  | ·South
    San Diego Transfer Agreement                                      
|10.8  | ·Texas*                                                                      
|      |                                                                              
|      | Amendments to Capriotti's Corp. Area Development Agreements                  
|10.9  | ·Amendment-Las
    Vegas                                                     
|10.10 | ·Amendment_Northern
    San Diego                                            
|10.11 | ·Amendment_Orange
    County                                                 
|10.12 | ·Amendment_South
    Bay                                                     
|10.13 | ·Amendment_Southern
    San Diego                                            
|10.14 | ·Amendment_Texas                                                             
|10.15 | ·Mission
    Valley Transfer and Assignment Agreement                        
|10.16 | ·GVR
    and San Marcos Acquisition Agreement                                
|      |                                                                              
|10.17 | Capriotti's Corp Franchise Agreement Fountain Valley (Representative Example)
|      |                                                                              
|10    | Papa John's Area Development Agreements                                      
|10.18 | ·Papa
    John's Fresno Franchise Agreement                                  
|10.19 | ·Papa
    John's Amendment_ March 2014                                       
|10.20 | ·Papa
    John's Amendment_ September 2014                                   
|      |                                                                              
|10.21 | Papa John's Franchise Agreement Roseville (Representative Example)           
|      |                                                                              
|      | Papa John's Acquisition Documents                                            
|10.22 | ·Fresno
    Acquisition Agreement                                            
|10.23 | ·Fresno
    Acquisition Transfer Approval By Papa John's                     
|      |                                                                              
|10.24 | Italian Steakhouse Lease                                                     
|      |                                                                              
|99.1  | Dixie Stock Option Plan August 2014                                          
|      |                                                                              
|      | Elements                                                                     
|10.25 | ·Elements
    Purchase Agreement                                             
|10.26 | ·Elements
    Purchase Agreement Amendment                                   
|10.27 | ·Elements
    Management Agreement*                                          
|      |                                                                              
|      | TAPAS                                                                        
|10.28 | ·Agreement
    with former Tenant                                            
|10.29 | ·Tivoli
    Lease Assumption Agreement*                                      
|10.30 | ·Tivoli
    Lease Guarantee*                                                 
|10.31 | ·Tivoli
    Lease_1-48*                                                      
|10.32 | ·Tivoli
    Lease_Part II*                                                   
|10.33 | ·Agreement
    To Purchase Liquor License                                    
|      |                                                                              
|14.1  | ·Officer
    Code Of Conduct                                                 
|      |                                                                              
|99.2  | ·Audit
    Committee Charter                                                 
|      |                                                                              
|      | Notes                                                                        
|4.1   | ·Caprock
    Future Receivables Sale Agreement                               
|4.2   | ·Quarterspot
    Note*                                                       
|4.3   | ·Brandt
    Note                                                             
|4.4   | ·Brandt
    Guarantee                                                        



15







|4.5   | ·Michael
    Lee Note                                                            
|----- | ---------------------------------------------------------------------------------
|4.6   | ·Michael
    Lee Guarantee                                                       
|4.7   | ·Davinci
    Note*                                                               
|4.8   | ·Donald
    Porges Note                                                          
|4.9   | ·Kibbe
    Note                                                                  
|      | ·CBC
    Note, Guarantee, Security Agreement, Amendments and Warrant Agreements*.
|4.10  | üLoan
    Document;                                                              
|4.11  | üSecurity
    Agreement;                                                         
|4.12  | üGuarantee
    Agreement                                                         
|4.13  | üAmendments
    1-6                                                              
|4.14  | üWarrant
    Agreements                                                          
|4.15  | ·Stelzner
    Note                                                               
|4.16  | ·Yellowstone
    Capital Note                                                    
|4.17  | ·Doermer
    Related Notes*                                                      
|4.18  | üTurpin
    Brown Note, Related Agreements and Modifications                     
|4.19  | üRDD
    2006 CRUT                                                               
|4.20  | üRDD
    2006 CLUT Note, Related Agreements and Modifications                    
|4.21  | üRDD
    1999 CRUT Note, Related Agreements and Modifications                    
|4.22  | üSimpson
    VIII Note, Related Agreements and Modifications                     
|4.23  | üSimpson
    IV Note, Related Agreements and Modifications                       
|4.24  | üDoermer
    Personal Note, Related Agreements and Modifications                 
|      |                                                                                  
|      | Other Significant Documents                                                      
|10.34 | ·Dixi
    Warrant to Mike Liu                                                    
|10.34 | ·Generic
    Subscription Agreement *                                            



'*         To
be filed as an Amendment to this filing.








**   Pursuant
to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed
to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”),
or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed
under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.



16







SIGNATURES



Pursuant to
the requirements of Section 13 or 15(d) 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.



|                  | DIXIE FOODS INTERNATIONAL, INC.                       
|----------------- | ------------------------------------------------------
|                  |                                                       
|December 18, 2014 | By:                                                   
|                  | Richard Groberg                                       
|                  | President (principal executive and accounting officer)



Pursuant to
the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.



|Signature           |  | Title                                                |  | Date             
|------------------- |  | ---------------------------------------------------- |  | -----------------
|                    |  |                                                      |  |                  
|/s/ Kenneth Antos   |  | President and Director (principal executive officer) |  | December 18, 2014
|                    |  |                                                      |  |                  
|/s/ Richard Groberg |  | Vice President, CFO and Director (principal and      |  | December 18, 2014
|                    |  | principal accounting officer)                        |  |                  



17