UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



(Mark One)



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



For the quarterly period ended November
30, 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 000-54536



DIXIE FOODS INTERNATIONAL, INC.

(Exact name of registrant as specified in
its charter)



|Florida                                                     |  | 80-0608195                         
|----------------------------------------------------------- |  | -----------------------------------
|State or other jurisdiction ofincorporation or organization |  | (I.R.S. EmployerIdentification No.)



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



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



Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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
oNo



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
o No





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



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



Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act)



oYes xNo



As of February 2, 2015 issuer had 43,293,726 shares of common
stock issued and outstanding.











TABLE OF CONTENTS



|                               |                                                                                        | PageNo.
|------------------------------ | -------------------------------------------------------------------------------------- | -------
|PART I - FINANCIAL INFORMATION
|Item 1.                        | Financial Statements.                                                                  | 4      
|Item 2.                        | Management's Discussion and Analysis of Financial Condition and Results of Operations. | 18     
|Item 3.                        | Quantitative and Qualitative Disclosures About Market Risk.                            | 21     
|Item 4.                        | Controls and Procedures.                                                               | 22     
|PART II - OTHER INFORMATION   
|Item 1.                        | Legal Proceedings.                                                                     | 23     
|Item 1A.                       | Risk Factors.                                                                          | 23     
|Item 2.                        | Unregistered Sales of Equity Securities and Use of Proceeds.                           | 23     
|Item 3.                        | Defaults Upon Senior Securities.                                                       | 23     
|Item 4.                        | Mine Safety Disclosures                                                                | 23     
|Item 5.                        | Other Information.                                                                     | 23     
|Item 6.                        | Exhibits.                                                                              | 23     



2







CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION



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



3







PART I - FINANCIAL INFORMATION



DIXIE FOODS INTERNATIONAL, INC.

Consolidated Balance Sheets



|                                                                                                                                     |  | November 30, |             |   | August 31, |  
|------------------------------------------------------------------------------------------------------------------------------------ |  | ------------ | ----------- | - | ---------- | -
|                                                                                                                                     |  | 2014         |             |   | 2014       |  
|                                                                                                                                     |  | (Unaudited)  |             |   | (Restated) |  
|ASSETS                                                                                                                               |  |              |             |   |            |  
|CURRENT ASSETS                                                                                                                       |  |              |             |   |            |  
|Cash                                                                                                                                 |  | $            | 42,301      |   |            | $
|Accounts receivable                                                                                                                  |  |              | 52,076      |   |            |  
|Other receivables                                                                                                                    |  |              | -           |   |            |  
|Food inventory                                                                                                                       |  |              | 119,001     |   |            |  
|Prepaid expenses                                                                                                                     |  |              | 131,508     |   |            |  
|Total Current Assets                                                                                                                 |  |              | 344,886     |   |            |  
|                                                                                                                                     |  |              |             |   |            |  
|OTHER ASSETS                                                                                                                         |  |              |             |   |            |  
|Prepaid franchise and territory rights fees, net                                                                                     |  |              | 774,996     |   |            |  
|Property and equipment, net                                                                                                          |  |              | 4,176,143   |   |            |  
|TOTAL ASSETS                                                                                                                         |  | $            | 5,296,025   |   |            | $
|                                                                                                                                     |  |              |             |   |            |  
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                |  |              |             |   |            |  
|                                                                                                                                     |  |              |             |   |            |  
|CURRENT LIABILITIES                                                                                                                  |  |              |             |   |            |  
|Accounts payable and accrued expenses                                                                                                |  | $            | 1,948,468   |   |            | $
|Checks issued in excess of cash                                                                                                      |  |              | 208,084     |   |            |  
|Deferred revenue                                                                                                                     |  |              | 68,605      |   |            |  
|Related party notes payable                                                                                                          |  |              | 379,073     |   |            |  
|Short-term notes payable, net of debt discounts                                                                                      |  |              | 7,496,681   |   |            |  
|Short-term convertible notes payable                                                                                                 |  |              | 300,000     |   |            |  
|Derivative liability                                                                                                                 |  |              | 526,316     |   |            |  
|Total Current Liabilities                                                                                                            |  |              | 10,927,227  |   |            |  
|                                                                                                                                     |  |              |             |   |            |  
|LONG-TERM LIABILITIES                                                                                                                |  |              |             |   |            |  
|Notes payable                                                                                                                        |  |              | 500,000     |   |            |  
|Convertible notes payable                                                                                                            |  |              | 550,000     |   |            |  
|Total Liabilities                                                                                                                    |  |              | 11,977,227  |   |            |  
|                                                                                                                                     |  |              |             |   |            |  
|Class B Membership Units, no par value, 6 units authorized, 5  and 2 units issued and outstanding, respectively                      |  |              | 2,500,000   |   |            |  
|                                                                                                                                     |  |              |             |   |            |  
|STOCKHOLDERS' DEFICIT                                                                                                                |  |              |             |   |            |  
|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, 42,993,475 and 42,570,975 shares issued and outstanding, respectively |  |              | 42,995      |   |            |  
|Additional paid-in capital                                                                                                           |  |              | 15,472,046  |   |            |  
|Accumulated deficit                                                                                                                  |  |              | (24,696,243 | ) |            |  
|Total Stockholders' Deficit                                                                                                          |  |              | (9,181,202  | ) |            |  
|                                                                                                                                     |  |              |             |   |            |  
|TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                          |  | $            | 5,296,025   |   |            | $



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



4







DIXIE FOODS INTERNATIONAL, INC.

Consolidated Statements of Operations

(Unaudited)



|                                                                |  | For the Three Months Ended |           
|--------------------------------------------------------------- |  | -------------------------- | ----------
|                                                                |  | November 30,               |           
|                                                                |  | 2014                       |           
|                                                                |  |                            |           
|REVENUE                                                         |  | $                          | 1,985,234 
|                                                                |  |                            |           
|OPERATING EXPENSES                                              |  |                            |           
|Restaurant operating costs:                                     |  |                            |           
|Food, beverage and packaging                                    |  |                            | 714,314   
|Labor and related                                               |  |                            | 646,952   
|Occupancy                                                       |  |                            | 278,533   
|Other operating costs                                           |  |                            | 622,896   
|Total Restaurant Operating Expenses                             |  |                            | 2,262,695 
|                                                                |  |                            |           
|Profit from Restaurant Operations                               |  |                            | (277,461  
|                                                                |  |                            |           
|General and administrative                                      |  |                            | 1,277,632 
|Depreciation and amortization                                   |  |                            | 105,215   
|Salaries and wages                                              |  |                            | 913,078   
|Royalty and franchise fees                                      |  |                            | 118,073   
|Pre-opening costs                                               |  |                            | 206,447   
|Total                                                           |  |                            | 2,620,445 
|                                                                |  |                            |           
|LOSS FROM OPERATIONS                                            |  |                            | (2,897,906
|                                                                |  |                            |           
|OTHER INCOME (EXPENSES)                                         |  |                            |           
|Interest expense                                                |  |                            | (1,334,370
|Other expense                                                   |  |                            | -         
|Total Other Income (Expenses)                                   |  |                            | (1,334,370
|                                                                |  |                            |           
|LOSS BEFORE INCOME TAXES                                        |  |                            | (4,232,276
|PROVISION FOR INCOME TAXES                                      |  |                            | -         
|                                                                |  |                            |           
|NET LOSS                                                        |  | $                          | (4,232,276
|                                                                |  |                            |           
|BASIC AND DILUTED LOSS PER SHARE                                |  | $                          | (0.10     
|                                                                |  |                            |           
|BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |  |                            | 42,867,185



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



5









DIXIE FOODS INTERNATIONAL, INC.

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                            |  | For the Three Months Ended |           
|--------------------------------------------------------------------------- |  | -------------------------- | ----------
|                                                                            |  | November 30,               |           
|                                                                            |  | 2014                       |           
|CASH FLOWS FROM OPERATING ACTIVITIES                                        |  |                            |           
|Net loss                                                                    |  | $                          | 4,232,276 
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                            |           
|Depreciation and amortization                                               |  |                            | 316,225   
|Amortization of debt discounts and debt issuance costs                      |  |                            | 96,448    
|Expenses paid on behalf of the Company by related parties                   |  |                            | 36,291    
|Change in derivative liability                                              |  |                            | -         
|Warrants granted for services                                               |  |                            | 526,316   
|Stock and warrants granted for loan modifications                           |  |                            | 8,800     
|Stock issued in connection with execution of notes payable                  |  |                            | 333,751   
|Fair value of stock options vested                                          |  |                            | 818,001   
|Changes in operating assets and liabilities:                                |  |                            |           
|Accounts receivable                                                         |  |                            | 27,774    
|Inventories                                                                 |  |                            | (15,634   
|Prepaid expenses and other current assets                                   |  |                            | (19,830   
|Accounts payable and accrued expenses                                       |  |                            | 1,107,356 
|Deferred revenue                                                            |  |                            | (14,581   
|Net Cash Used in Operating Activities                                       |  |                            | (1,011,359
|                                                                            |  |                            |           
|CASH FLOWS FROM INVESTING ACTIVITIES                                        |  |                            |           
|Purchase of property and equipment                                          |  |                            | (950,775  
|Net Cash Used in Investing Activities                                       |  |                            | (950,775  
|                                                                            |  |                            |           
|CASH FLOWS FROM FINANCING ACTIVITIES                                        |  |                            |           
|Change in bank overdraft                                                    |  |                            | 103,686   
|Proceeds on related party debt                                              |  |                            | 457,819   
|Payments on related party debt                                              |  |                            | (115,037  
|Proceeds on notes payable                                                   |  |                            | 400,000   
|Payments on notes payable                                                   |  |                            | (366,066  
|Proceeds from Class B membership units issued for cash                      |  |                            | 1,500,000 
|Net Cash Provided by Financing Activities                                   |  |                            | 1,980,402 
|                                                                            |  |                            |           
|NET INCREASE (DECREASE) IN CASH                                             |  |                            | 18,268    
|CASH AT BEGINNING OF PERIOD                                                 |  |                            | 24,033    
|                                                                            |  |                            |           
|CASH AT END OF PERIOD                                                       |  | $                          | 42,301    
|                                                                            |  |                            |           
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                           |  |                            |           
|                                                                            |  |                            |           
|CASH PAID FOR:                                                              |  |                            |           
|Interest                                                                    |  | $                          | 258,606   
|Income Taxes                                                                |  | $                          | -         
|                                                                            |  |                            |           
|NON-CASH FINANCING ACTIVITIES                                               |  |                            |           
|Discounts on notes payable                                                  |  | $                          | 83,450    



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



6







DIXIE FOODS INTERNATIONAL, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements



NOTE 1—ORGANIZATION AND NATURE OF BUSINESS



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



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



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 17 restaurants: 12, franchised Capriotti's Sandwich
Shops; four franchised Papa John’s pizza restaurants, and Elements Kitchen & Martini Bar.  Additionally, the Company
has in various stages of development and construction: four Capriottis; eight Papa John’s; a new restaurant concept, and
the Italian Steakhouse, all of which it anticipates opening over the next 12 months subject to access to additional capital.



NOTE 2—GOING CONCERN



These financial statements have been prepared
on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the
normal course of business. As of November 30, 2014, the Company has a working capital deficit of $10,582,341 and an accumulated
deficit of $24,696,243. The continuation of the Company as a going concern is dependent upon the continued financial support from
its management, and its ability to: identify future investment opportunities and obtain the necessary debt or equity financing
and generate profitable operations from the Company’s future operations. These factors raise substantial doubt regarding
the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability
and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable
to continue as a going concern.



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



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



7







NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Condensed Financial Statements



The accompanying financial statements have
been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at November 30,
2014 and for all periods presented have been made.



Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States
of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's August 31, 2014 audited financial statements.  The
results of operations for the periods ended November 30, 2014 and 2013 are not necessarily indicative of the operating results
for the full years.



Use of Estimates



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



Cash and Cash Equivalents



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



Accounts Receivable



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



Inventory



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



Revenue Recognition



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



Income Taxes



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



8







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



At the adoption date of November 1, 2007,
the Company had no unrecognized tax benefit which would affect the effective tax rate if recognized. The Company includes interest
and penalties arising from the underpayment of income taxes in the statements of operations in the provision for income taxes.
As of September 30, 2014 and December 31, 2013 the Company had no accrued interest or penalties related to uncertain tax positions.
The Company files an income tax return in the U.S. federal jurisdiction and the state of California. With few exceptions, the Company
is no longer subject to U.S. federal, state, and local, or non-U.S. income tax examinations by tax authorities for years before
2008.



Basic and Diluted Loss per Common Share



Basic loss per common share is calculated
by dividing the Company’s net loss applicable to shareholders by the weighted average number of shares during the period.
Diluted loss per share is calculated by dividing the Company’s net loss available to shareholders by the diluted weighted
average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is adjusted for
any potentially dilutive debt or equity. There were 1,177,322 such shares outstanding as of November 30, 2014, which were excluded
from the calculation of diluted loss per share as their effect would have been anti-dilutive.



New Accounting Pronouncements



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



NOTE 4—PROPERTY AND EQUIPMENT



As of November 30, 2014 and August 31,
2014 the Company’s property and equipment consisted of the following:



|                                    |  | November 30,
 2014 |            |   | August 31, 
2014 |  
|----------------------------------- |  | ------------------ | ---------- | - | ---------------- | -
|Building and leasehold improvements |  | $                  | 3,761,717  |   |                  | $
|Machinery and equipment             |  |                    | 1,026,345  |   |                  |  
|Furniture and fixtures              |  |                    | 692,548    |   |                  |  
|Less: Accumulated depreciation      |  |                    | (1,304,467 | ) |                  |  
|Property and equipment, net         |  | $                  | 4,176,143  |   |                  | $



Depreciation expense included as a charge
to income (including restaurant-related depreciation recorded in “Other operating costs (including Restaurant-Related Depreciation)”
was $180,875 and $140,595 for the three-months ended November 30, 2014 and 2013, respectively.



NOTE 5—INTANGIBLE ASSETS



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



9







NOTE 5—INTANGIBLE ASSETS (CONTINUED)



As of November 30, 2014 and August 31,
2014 the Company’s territory and franchise rights consisted of the following:



|                                    |  | November 30, 2014 |            |   | August 31, 2014 |  
|----------------------------------- |  | ----------------- | ---------- | - | --------------- | -
|Territory and franchise rights      |  | $                 | 1,931,194  |   |                 | $
|Less: Accumulated amortization      |  |                   | (1,156,198 | ) |                 |  
|Territory and franchise rights, net |  | $                 | 774,996    |   |                 | $



Amortization expense on intangible assets
included as a charge to income was $101,036 and $102,920 for the years ended November 30, 2014 and 2013, respectively.





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



|2015                      |  | $ | 332,122 | 
|------------------------- |  | - | ------- | 
|2016                      |  |   | 97,176  | 
|2017                      |  |   | 97,176  | 
|2018                      |  |   | 97,176  | 
|2019                      |  |   | 97,176  | 
|Thereafter                |  |   | 54,170  | 
|Total future amortization |  | $ | 774,996 | 



NOTE 6—RELATED PARTY TRANSACTIONS



As of August 31, 2014, the Company owed
$-0- to related parties. During the three month period ended November 30, 2014, related parties made cash loans of $457,819 and
paid for Company expenses of $36,291. The Company made cash repayments of $115,037, leaving an ending balance due of $379,073 due
to related parties at November 30, 2014. All related party loans bear no interest, are unsecured and are due on demand.



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



NOTE 7—NOTES PAYABLE



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



|                                                                                                                                                                                                           |  | November 30, |           |  | August 31, |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- |  | ---------- | -
|                                                                                                                                                                                                           |  | 2014         |           |  | 2014       |  
|Note payable bearing interest at 13.5% per annum, originated June 22, 2012, original maturity date of June 22, 2013. This note is in default and currently bears a default interest rate of 18.5%.         |  | $            | 2,700,000 |  |            | $
|                                                                                                                                                                                                           |  |              |           |  |            |  
|Note payable bearing interest at 12.0% per annum, originated December 27, 2012, original maturity date of December 27, 2013. This note is in default and currently bears a default interest rate of 17.0%. |  |              | 950,000   |  |            |  
|                                                                                                                                                                                                           |  |              |           |  |            |  
|Note payable originated October 2, 2014, original maturity date of October 16, 2014. This note is currently in default.                                                                                    |  |              | 100,000   |  |            |  
|                                                                                                                                                                                                           |  |              |           |  |            |  
|Note payable originated September 25, 2014, original maturity date of October 9, 2014. This note is currently in default.                                                                                  |  |              | 100,000   |  |            |  



10







NOTE 7—NOTES PAYABLE (CONTINUED)



|Note payable bearing interest at 12.0% per annum, originated February 1, 2013, original maturity date of August 1, 2014. This note is in default and currently bears a default interest rate of 17.0%.   |  |   | 550,000    |   |  |   | 550,000    |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ---------- | - |  | - | ---------- | -
|                                                                                                                                                                                                         |  |   |            |   |  |   |            |  
|Notes Payable bearing interest at 7.4% per annum, originated July 11, 2014 maturity date of April 13, 2015.                                                                                              |  |   | 85,801     |   |  |   | 126,577    |  
|                                                                                                                                                                                                         |  |   |            |   |  |   |            |  
|Note payable bearing interest at 12.0% per annum, originated February 1, 2013, original maturity date of August 1, 2014. This note is in default and currently bears a default interest rate of 17.0%.   |  |   | 650,000    |   |  |   | 650,000    |  
|                                                                                                                                                                                                         |  |   |            |   |  |   |            |  
|Notes payable bearing interest at 5.0% per annum, originated August 31, 2014, payable upon demand.                                                                                                       |  |   | 80,000     |   |  |   | 80,000     |  
|                                                                                                                                                                                                         |  |   |            |   |  |   |            |  
|Note payable bearing interest at 12.0% per annum, originated February 1, 2013, original maturity date of August 1, 2014. This note is in default and currently bears a default interest rate of 17.0%.   |  |   | 800,000    |   |  |   | 800,000    |  
|                                                                                                                                                                                                         |  |   |            |   |  |   |            |  
|Notes Payable bearing interest at 18.0% per annum originated May 8, 2014, payable upon demand.                                                                                                           |  |   | 225,000    |   |  |   | 250,000    |  
|                                                                                                                                                                                                         |  |   |            |   |  |   |            |  
|Note payable bearing interest at 12.0% per annum, originated October 3, 2013, original maturity date of November 2, 2013. This note is in default and currently bears a default interest rate of 17.0%.  |  |   | 100,000    |   |  |   | 100,000    |  
|                                                                                                                                                                                                         |  |   |            |   |  |   |            |  
|Note payable bearing interest at 13.3% per annum, originated August 28, 2013, original maturity date of February 28, 2014. This note is in default and currently bears a default interest rate of 18.3%. |  |   | 90,000     |   |  |   | 90,000     |  
|                                                                                                                                                                                                         |  |   |            |   |  |   |            |  
|Note payable bearing interest at 13.3% per annum, originated August 28, 2013, original maturity date of February 28, 2014. This note is in default and currently bears a default interest rate of 18.3%. |  |   | -          |   |  |   | 10,000     |  
|                                                                                                                                                                                                         |  |   |            |   |  |   |            |  
|Note payable bearing interest at 10.0% per annum, originated December 4, 2013, due on October 15, 2014.  This note is currently in default and bears a default interest rate of 15.0%.                   |  |   | 560,000    |   |  |   | 560,000    |  
|                                                                                                                                                                                                         |  |   |            |   |  |   |            |  
|Note payable bearing interest at 12.0% per annum, originated June 7, 2013, original maturity date of June 7, 2014                                                                                        |  |   | 500,000    |   |  |   | 500,000    |  
|                                                                                                                                                                                                         |  |   |            |   |  |   |            |  
|Total notes payable                                                                                                                                                                                      |  | $ | 7,490,801  |   |  | $ | 7,866,299  |  
|Less: current portion                                                                                                                                                                                    |  |   | (7,496,681 | ) |  |   | (7,366,299 | )
|                                                                                                                                                                                                         |  |   |            |   |  |   |            |  
|Long-term notes payable                                                                                                                                                                                  |  | $ | 500,000    |   |  | $ | 500,000    |  



11







NOTE 7—NOTES PAYABLE (CONTINUED)



Secured Borrowings



On August 11, 2014, the Company entered
into 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. The ending principal balance of these borrowings
at November 30, 2014 and August 31, 2013 was $400,346 and $611,621, respectively.



On October 28, 2014 and November 3, 2014,
the Company entered into two financing arrangements with two separate third parties for a combined principal amount of $200,000. 
The terms of the arrangements require the Company to pay the $200,000 principal balance plus an additional $83,450 for total
remittance of $283,450.  The terms of repayment require the Company to remit to the lender average of 15 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 $83,450 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. The ending principal balance of these borrowings
at November 30, 2014 was $254,435.



NOTE 8—CONVERTIBLE NOTES PAYABLE



As of November 30, 2014 and August 31,
2014 the Company’s convertible notes payable consisted of the following:



|                                                                                                                                                                                                                                        |  | November 30, |         |  | August 31, |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- |  | ---------- | -
|                                                                                                                                                                                                                                        |  | 2014         |         |  | 2014       |  
|Convertible note payable bearing interest at 10.0% per annum, originated April 23, 2012, original maturity date of April 23, 2017. The note is convertible into common shares of the Company at $1.00 per share.                        |  | $            | 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 common shares of the Company at $1.50 per share.                           |  |              | 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 common shares of the Company at $0.30 per share. |  |              | 300,000 |  |            |  
|                                                                                                                                                                                                                                        |  |              |         |  |            |  
|Total notes payable                                                                                                                                                                                                                     |  | $            | 850,000 |  |            | $
|Less: current portion                                                                                                                                                                                                                   |  |              | 300,000 |  |            |  
|                                                                                                                                                                                                                                        |  |              |         |  |            |  
|Long-term convertible notes payable                                                                                                                                                                                                     |  | $            | 550,000 |  |            | $



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 which had been fully amortization to interest expense as of the beginning of the periods
presented.



12







NOTE 9—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 exercise price of certain warrants granted during the period ended November 30, 2014 are variable and subject to the fair value
of the Company’s common stock on the date of exercise. As a result, the Company has determined that the exercise feature
is 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 exercise feature of the instruments to be recorded as a derivative liability.



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



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



|                          |  |  | November 30, 2014 | 
|------------------------- |  |  | ----------------- | 
|                          |  |  |                   | 
|Risk-free interest rate   |  |  | 1.45% – 1.49%     | 
|Expected options life     |  |  | 4.87 – 5.00       | 
|Expected dividend yield   |  |  | -                 | 
|Expected price volatility |  |  | 523% – 538%       | 



During the period ended November 30, 2014,
the Company’s derivative liability remained constant at $526,316 and recognized no gain or loss on derivative liability in
conjunction with settlement of convertible notes payable, additions of new derivative liabilities and subsequent revaluations of
existing derivative liabilities.



NOTE 10—CLASS B MEMBERSHIP UNITS



The Company’s subsidiaries, KCI Restaurant
I, LLC (“Restaurant I”), KCI Restaurant II, LLC (“Restaurant II”), PRB I, LLC (“PRB I”) and
PRB II, LLC (“PRB II”) are authorized to issue up to 2 Class B membership units with no par value each, of which 5
and 2 units were issued and outstanding as of November 30, 2014 and August 31, 2014, 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 the Class A
membership units of each subsidiary. Each Class B unit is entitled to receive distributions equal to 0.5 percent of the value of
the units held each year.



Adjudication and Redemption of Class
B Membership Units



The Class B membership units are linked
to approval of an EB-5 Visa, which requires a foreign investor to invest $1,000,000 (or at least $500,000 in a "Targeted Employment
Area" - high unemployment or rural area), in projects that create at least 10 jobs for U.S. workers.  The terms of the
instrument state that the Class B membership units have 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.



13







Denial of I-526 Petition



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



During the three months ended November
30, 2014, Company subsidiaries issued three (3) Class B membership units in exchange for total cash proceeds of $1,680,000 (inclusive
of $180,000 received for administrative fees due and payable to third parties).



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



NOTE 11—STOCKHOLDERS’ DEFICIT



The Company’s authorized capital
stock consists of 150,000,000 shares of common stock, $0.001 par value per share, and 15,000,000 shares of preferred stock, par
value $0.001 per share. As of November 30, 2014 and August 31, 2013, there were 42,993,475 and 42,570,975 shares 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, $0.001 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.



Common Stock



During the three months period ended November
30, 2014, 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 each lender. For each two weeks
that each such loan remains outstanding, the Company is required to issue another 37,500 shares of its Common Stock. To date, the
Company has issued 412,500 shares in connection with these loans.



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



14







NOTE 12—STOCK OPTIONS AND WARRANTS



Stock Options



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



Stock compensation expense is recognized
on a pro-rata basis over the vesting period of the options. During the three month period ended November 30, 2014 the Company recognized
$818,001 in compensation expense arising from options issued, leaving $9,064,973 of compensation expense on stock options to be
recognized subsequent to November 30, 2014.



Warrants



During the period ended November 30, 2014,
the Company issued 692,521 warrants to creditors to acquire its common stock:



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



|                          |  |  | November 30, 2014 | 
|------------------------- |  |  | ----------------- | 
|                          |  |  |                   | 
|Risk-free interest rate   |  |  | 1.45% – 1.49%     | 
|Expected options life     |  |  | 4.87 – 5.00       | 
|Expected dividend yield   |  |  | -                 | 
|Expected price volatility |  |  | 523% – 538%       | 



A summary of the status of the Company’s
stock options as of November 30, 2014 and changes during the periods ended November 30, 2014 and 2013 is presented below:



|                                          |  | Number of
 Options and 
Warrants |           
|----------------------------------------- |  | -------------------------------- | ----------
|                                          |  |                                  |           
|Outstanding at August 31, 2014            |  |                                  | 9,573,604 
|                                          |  |                                  |           
|Options and warrants granted              |  |                                  | 691,521   
|Options and warrants exercised            |  |                                  | -         
|Options and warrants forfeited or expired |  |                                  | (100,000  
|Outstanding at November 30, 2014          |  |                                  | 10,166,125
|Exercisable at November 30, 2014          |  |                                  | 2,170,207 



15







The
following table summarizes information about options and warrants as of November 30, 2014:



|                          |      |  | Options and Warrants Outstanding |  |            | Options and Warrants Exercisable                            | 
|------------------------- | ---- |  | -------------------------------- |  | ---------- | ----------------------------------------------------------- | 
|Range of Exercise 
Prices |      |  | Number
 Outstanding              |  |            | Weighted 
Average 
Remaining
 Contractual
 Life (in
 years) | 
|                          |      |  |                                  |  |            |                                                             | 
|$                         | 0.50 |  |                                  |  | 9,473,604  |                                                             | 
|$                         | 0.72 |  |                                  |  | 691,521    |                                                             | 
|                          |      |  |                                  |  | 10,166,125 |                                                             | 



NOTE 12—SUBSEQUENT EVENTS



New Store Openings



Subsequent to November 30, 2014, the Company,
on December 26, 2014, opened its third and fourth franchised Papa John's locations, 8300 Sierra College Blvd. in Roseville
California and 3842 West Shaw in Fresno, California.



Other Pending Operating-Related Transactions



Subsequent to November 30, 2014 the Company:



| | § | Signed leases to open what, as of this date, cumulatively totals eight additional, 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 concept. Upon completion of various requirements of the Seller, the Company shall issue to the Seller 50,000 share of
the Company’s Common Stock.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



16







Note that, as of this date:



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



| | § | The Company currently anticipated consummating the pending acquisition of the two operating Papa
John's locations within in the next few months - subject to access to financing, and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | § | The Company currently anticipates opening its new restaurant concept before the end of March 2015
– subject to access to additional financing.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



The Company, in December 2014, 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. The opening of these restaurants, as well as future
concepts, is subject to access to additional financing



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.



Capriotti's Area Development Agreements



Subsequent to November 30, 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



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. To date, the Company has issued 375,000 shares, subsequent
to November 30, 2014 in connection with these loans.



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 Company Director Mike Liu 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.



The Company currently owes approximately
$3.65 million to various entities directly or indirectly controlled by a Company Director. The Company currently is in discussions
with those entities to restructure some of their debt and extend maturities such that they no longer are past due. The resolution
of these issues will result in the granting of additional equity securities to these entities, the nature and amount of which has
not yet been determined. Note that those entities, through their ownership interest in KCI Holding I, LLC, indirectly own approximately
18.5% of the Company's Common Stock currently outstanding.



17







The Company, as of November 30, 2014 owed
approximately $2.7 million to CBC Partners I, LLC ("CBC"). The Company, subsequent to that date reached an agreement
with CBC to extend the maturity and make other modifications to this debt such that it no longer is past due. In connection with
that agreement, CBC also advanced to the Company on a short-term basis an additional $250,000. In partial consideration of that
advance, the Company has committed to issue to CBC warrants to acquire 1,450,000 shares of the Company's Common Stock at an exercise
price of $0.84 per share. Note that CBC, through its ownership interest in KCI Holding I, LLC, indirectly owns approximately 4%
of the Company's Common Stock currently outstanding.



On December 24, 2014, the Company entered
into a convertible loan in the amount of $110,000. This loan, due on demand is convertible, at the holder's option, into the Company's
common stock at a conversion price equal to 65% of the market price of the stock (defined in this case as equal to the average
of the 5 lowest trades of the Common Stock for any Trading Day(s) during the Pricing Period, or the closing bid price on the last
day of the pricing period - the fifteen trading days preceding the date of the conversion notice). The issue amount of this note,
prior to related fees and expenses, was $100,000. The $10,000 difference will be recorded by the Company as an Original Issue Discount
and amortized over the life of the loan.



In January 2015, an affiliate of one of
the Directors made two loans to the Company totaling $100,000. Those loans are repayable, with interest of 15% per year, by payments
over the next approximately two months, in the amount of $2,278 per day, five days per week.



NOTE 13 – RESTATEMENT OF FINANCIAL
STATEMENTS



The Company has restated the August 31,
2014 financial statements as originally presented in its Form 10-K filed on December 19, 2104. The changes and explanation of such
are as follows:



As of August 31, 2014:



|                                         |  | Originally Reported |           |  | Restatement Adjustment |   |           | As Restated | 
|---------------------------------------- |  | ------------------- | --------- |  | ---------------------- | - | --------- | ----------- | 
|Balance sheet:                           |  |                     |           |  |                        |   |           |             | 
|Accounts payable and accrued liabilities |  | $                   | 709,109   |  |                        | $ | 120,000   | (a)         | 
|Class B membership units                 |  | $                   | 1,120,000 |  |                        | $ | (120,000) | (a)         | 



Notes:



| | (a) | Reflects restatement due to adjustment of value of Class B membership units net of portion
                                                            due for administrative fees to third parties.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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



FORWARD LOOKING INFORMATION

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



18







OVERVIEW



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. The Company operates
from offices at 4033 South Dean Martin Drive; Las Vegas, NV 89013; and, its phone number is (702) 834-7101.



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



Acquisition

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



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



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



KCI Investments, LLC

KCI Investments, LLC, a Nevada limited liability company headquartered
in Las Vegas, Nevada, was formed on November 8, 2004, but did not engage in any business operations until November 2010. 
Currently, KCI is engaged in developing, owning and operating a multi-brand chain of restaurants, currently under two franchise
brands: Capriotti’s Sandwich Shops and Papa John’s.  KCI also owns, operates and/or is developing various other
restaurant concepts.  KCI and its various subsidiaries, currently operate 17 restaurants: 12, franchised Capriotti's Sandwich
Shops; four franchised Papa John’s pizza restaurants (all of which were opened during the first quarter of fiscal 2015),
and Elements Kitchen & Martini Bar.  Additionally, the Company has in various stages of development and construction:
four Capriottis; eight Papa John’s; a new restaurant concept, and the Italian Steakhouse - all of which it anticipates opening
over the next 12 months – subject to access to additional financing.





|Locations                    |  |      |   |  |      |  |   |      |  |  |      |  |  |         |   
|---------------------------- |  | ---- | - |  | ---- |  | - | ---- |  |  | ---- |  |  | ------- | --
|                             |  |      |   |  |      |  |   |      |  |  |      |  |  |         |   
|Fiscal Year (August 31, FYE) |  | 2011 |   |  | 2012 |  |   | 2013 |  |  | 2014 |  |  | Q1 2015 |   
|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





Results of Operations

During the three months ended November
30, 2014 (“Q1-15”), the Company had $1,985,234 - in net sales of products up 54.9% from the quarter ended November
30, 2013 (“Q1-14”). This growth resulted from: (i) six additional locations open in Q1-15 vs. Q1-14 and (ii) 8.1% Same
Store Sales growth (growth of net sales for restaurants open during Q1-15 and Q1-14)



19







Food, Beverage And Packaging (“COGS”)
increased slightly in Q1-15 vs. Q1-14 (36% of Net Sales vs. 35.2%), resulting largely from the impact of groupon sales and opening
promotions. Labor and related expenses were higher (32.6% vs. 27.2%), largely because of the impact of labor for new locations,
which must maintain minimum staffing levels during their ramp-up period, especially during grand opening promotions. Occupancy
expenses decreased (to 14% from 14.4%) as increasing revenues in existing stores reduced the burden of fixed rent and related overhead.
Other operating expenses increased significantly (to 31.4% from 17.7%), resulting largely from: significantly increased depreciation
expenses and from marketing expenses of approximately 9% of Net Sales. The Company, through December 2014, invested heavily in
various marketing and promotional efforts to build its brands.



As a result, the Company incurred a Net
Loss from Restaurant Operations of $277,461 during the three months ended November 30, 2014. This loss included approximately $175,000
of Depreciation charged to Restaurant Operations and more than to $119,000 in marketing and advertising-related expenses (6.0%
of Net Sales).



The Company recorded $2,620,445 of other
expenses (including General and administrative; Depreciation and amortization, Salary and wages, Royalty and franchise fees, and
Pre-opening costs), up nearly $1.8 million from Q1-14. This increase resulted largely from: (i) more than $860,000 of nonrecurring
and/or noncash expenses related to fees paid in equity for services rendered; (ii) the value of the vesting of options previously
granted, which totaled approximately $818,000; (iii) increased corporate overhead related to the new restaurant opened and pending
openings, and (iv) pre-opening expenses related to the new restaurant openings.



Including Interest expenses totaling $1,344,379,
the Company recorded a Net Loss of $4,242,276 during Q1-15. Interest expenses included more than $430,000 of amortization of original
issue discounts and stock issued for loan modifications.



Liquidity and Capital Resources

During the three months ended November
30, 2014, the Company's working capital deficit increased $2,216,275 to $10,592,341 from a deficit of $8,376,066 at August 31,
2014. The primary reasons for the increase in the working capital deficit were: (i) increased short term debt and payables resulting
from delays in receiving subscribed financings and the cost of opening new locations and (ii) the recognition of derivative liabilities
related to certain equity issuances.



During this same period, stockholders’
equity decreased $3,081,725 at November 30, 2014. The decrease in stockholders’ equity is due to the recorded losses.



Cash Flows

Net cash used in operating activities was
$1,021,359 during the three months ended November 30, 2014, of which more than a $1.1 million increase in payables and approximately
$2.1 million was various noncash charges (Depreciation and amortization, Amortization of debt discounts and debt issuance costs,
Change in derivative liability, Stock and warrants granted for loan modifications, and Stock issued in connection with execution
of notes payable) partially offset the Net Loss. During this period, the Company spent $950,755 on capital expenditures –
all related to the construction of new restaurants. During Q1-15, cash was used by our loss from operations and offset by: $1,990,402
in proceeds from debt and equity issuances, net of principal repayments.





Recent Financing Transactions

During the three months ended November,
2014, the Company secured additional debt funds to support ongoing operations (see "Note 6 - Subsequent Events ".)



20







Recent Financing Transactions

During the three months ended November,
2014, the Company secured additional debt funds to support ongoing operations (see "Note 6 - Subsequent Events ".)



Off Balance Sheet Arrangements

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



Critical Accounting Policies and Estimates

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



Going Concern

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



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



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.



New Accounting Pronouncements

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



Item 3. Quantitative and Qualitative Disclosures
about Market Risk

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



21







Item 4. Controls and Procedures.



Evaluation of Disclosure Controls and Procedures

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



22







Changes in internal control over financial reporting

There were no changes in our internal controls
over financial reporting that occurred during the quarter ended November 30, 2014 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.



PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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



Item 1A. Risk Factors

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



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

Unregistered Sale of Equity Securities

During the three months ended November
30, 2014, the Company issued 412,500 shares of Common Stock to lenders in connection with new loans.



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



Item 3. Defaults upon Senior Securities

None other than as disclosed herein.



Item 4. Mine Safety Disclosures

Not applicable



Item 5. Other Information

None



Item 6. Exhibits



|4.25 | Yellowstone Capital Loan Documents
|---- | ----------------------------------
|4.26 | Swift Loan Documents              
|4.27 | Mammoth Loan Documents            
|4.28 | CBC Extension Documents           
|4.29 | 2015 Magnolia Loan                



|101.INS | XBRL Instance Document.                                
|------- | -------------------------------------------------------
|        |                                                        
|101.SCH | XBRL Taxonomy Extension Schema Document.               
|        |                                                        
|101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. 
|        |                                                        
|101.DEF | XBRL Taxonomy Extension Definition Linkbase Document.  
|        |                                                        
|101.LAB | XBRL Taxonomy Extension Labels Linkbase Document.      
|        |                                                        
|101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document.





23







SIGNATURES



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



|Dated: February 1, 2015 | DIXIE FOODS INTERNATIONAL,
INC.      
|----------------------- | -------------------------------------
|                        |                                      
|                        | /s/ KENNETH A. ANTOS                 
|                        | Kenneth A. Antos,                    
|                        | President and Chief Executive Officer
|                        | (Principal Executive Officer)        



| | /s/ RICHARD S. GROBERG                    
| | ------------------------------------------
| | Richard S. Groberg,                       
| | Vice President and Chief Financial Officer
| | (Principal Financial Officer)             



24