Blueprint
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2018
Commission file number: 0-11104
NOBLE ROMAN’S, INC.
(Exact name of registrant as specified in its charter)
|
Indiana
|
|
35-1281154
|
|
(State or other jurisdiction of organization)
|
|
(I.R.S. Employer Identification No.)
|
|
One Virginia Avenue, Suite 300
Indianapolis, Indiana
|
|
46204
|
|
(Address of principal executive offices)
|
|
(Zip Code)
|
(317) 634-3377
(Registrant's telephone number, including area code)
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. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted
electronically, every Interactive Data File required to be
submitted 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 such files). Yes
☑ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See definition of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act.
|
Large
Accelerated Filer ☐
|
Accelerated
Filer ☐
|
|
Non-Accelerated
Filer ☐
|
Smaller
Reporting Company ☑
|
|
Emerging
Growth Company ☐
|
|
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company(as defined
in Rule 12b-2 of the Exchange Act). Yes ☐ No
☑
As of
November 9, 2018, there were 21,583,032shares of Common Stock, no
par value, outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
The
following unaudited condensed consolidated financial statements are
included herein:
|
Condensed
consolidated balance sheets as of December 31, 2017 and September
30, 2018 (unaudited)
|
Page 3
|
|
|
|
|
Condensed consolidated statements of operations for the three-month
and nine-month periods ended September 30, 2017 and 2018
(unaudited)
|
Page 4
|
|
|
|
|
Condensed consolidated statements of changes in stockholders'
equity for the nine-month period ended September 30, 2018
(unaudited)
|
Page 5
|
|
|
|
|
Condensed consolidated statements of cash flows for the nine-month
periods ended September 30, 2017 and 2018 (unaudited)
|
Page 6
|
|
|
|
|
Notes to condensed consolidated financial statements
(unaudited)
|
Page 7
|
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$461,068
|
$232,399
|
|
Accounts receivable
- net
|
1,796,757
|
1,847,683
|
|
Inventories
|
779,989
|
836,468
|
|
Prepaid
expenses
|
680,326
|
743,658
|
|
Total current
assets
|
3,718,140
|
3,660,208
|
|
|
|
|
|
Property and
equipment:
|
|
|
|
Equipment
|
2,533,848
|
3,066,711
|
|
Leasehold
improvements
|
581,197
|
1,268,769
|
|
Construction and
equipment in progress
|
558,602
|
90,691
|
|
|
3,673,647
|
4,426,171
|
|
Less accumulated
depreciation and amortization
|
1,372,821
|
1,530,183
|
|
Net property and
equipment
|
2,300,826
|
2,895,988
|
|
Deferred tax
asset
|
5,735,504
|
5,653,872
|
|
Deferred contract
cost
|
-
|
592,160
|
|
Goodwill
|
278,466
|
278,466
|
|
Other assets
including long-term portion of receivables-net
|
6,851,697
|
6,055,630
|
|
Total
assets
|
$18,884,633
|
$19,136,323
|
|
|
|
|
|
Liabilities
and Stockholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Current portion of
term loan payable to bank
|
$754,173
|
$871,429
|
|
Accounts payable
and accrued expenses
|
674,600
|
589,380
|
|
Total current
liabilities
|
1,428,773
|
1,460,809
|
|
|
|
|
|
Long-term
obligations:
|
|
|
|
Term loans payable
to bank (net of current portion)
|
4,246,375
|
4,091,887
|
|
Convertible notes
payable
|
1,131,982
|
1,531,502
|
|
Deferred contract
income
|
-
|
592,160
|
|
Derivative warrant
liability
|
503,851
|
-
|
|
Derivative
conversion liability
|
925,561
|
-
|
|
Total long-term
liabilities
|
6,807,769
|
6,215,549
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock
– no par value (40,000,000 shares authorized, 20,783,032 issued and outstanding as of
December 31, 2017 and 21,583,032 issued and outstanding as of
September 30, 2018)
|
24,322,885
|
24,739,482
|
|
Accumulated
deficit
|
(13,674,794)
|
(13,279,517)
|
|
Total stockholders'
equity
|
10,648,091
|
11,459,965
|
|
Total liabilities
and stockholders’ equity
|
$18,884,633
|
$19,136,323
|
See accompanying notes to condensed consolidated financial
statements (unaudited).
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
|
|
Three-Months
Ended
September
30,
|
Nine-Months
Ended
September
30,
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
Royalties and
fees
|
$1,733,956
|
$1,656,074
|
$5,062,549
|
$4,831,305
|
|
Administrative fees
and other
|
10,992
|
26,548
|
34,933
|
47,177
|
|
Restaurant revenue
- Craft Pizza & Pub
|
457,133
|
1,308,890
|
1,223,351
|
3,663,255
|
|
Restaurant revenue
- non-traditional
|
310,840
|
283,135
|
871,192
|
862,777
|
|
Total
revenue
|
2,512,921
|
3,274,647
|
7,192,025
|
9,404,514
|
|
Operating
expenses:
|
|
|
|
|
|
Salaries and
wages
|
216,432
|
245,581
|
698,326
|
774,397
|
|
Trade show
expense
|
126,361
|
121,200
|
371,472
|
365,739
|
|
Travel
expense
|
37,589
|
23,945
|
146,017
|
76,515
|
|
Other operating
expenses
|
222,045
|
282,742
|
649,778
|
791,055
|
|
Restaurant expenses
- Craft Pizza & Pub
|
347,342
|
1,048,566
|
902,459
|
2,877,957
|
|
Restaurant expenses
- non-traditional
|
307,583
|
279,079
|
855,980
|
851,766
|
|
Depreciation and
amortization
|
60,127
|
125,399
|
171,890
|
298,155
|
|
General and
administrative
|
434,532
|
434,458
|
1,246,620
|
1,252,781
|
|
Total
expenses
|
1,757,011
|
2,560,970
|
5,042,542
|
7,288,365
|
|
Operating
income
|
760,910
|
713,676
|
2,149,483
|
2,116,149
|
|
Interest
|
601,192
|
172,639
|
1,220,945
|
486,292
|
|
Adjust valuation of
receivables
|
350,000
|
1,295,805
|
350,000
|
1,295,805
|
|
Change in fair
value of derivatives
|
929,810
|
-
|
632,537
|
-
|
|
Income (loss)
before income taxes from continuing operations
|
(1,120,092)
|
(754,768)
|
(53,999)
|
334,052
|
|
Income tax expense
(benefit)
|
(72,388)
|
(192,489)
|
220,089
|
81,632
|
|
Net income (loss)
from continuing operations Loss from discontinued operations net
of
|
(1,047,704)
|
(562,279)
|
(274,088)
|
252,420
|
|
tax benefits
$79,228for 2017
|
(129,037)
|
-
|
(129,037)
|
-
|
|
Netincome(loss)
|
$(1,176,741)
|
$(562,279)
|
$(403,125)
|
$252,420
|
|
|
|
|
|
|
|
Earnings
per share - basic
|
|
|
|
|
|
Net income
(loss)from continuing operations
|
$(.05)
|
$(.03)
|
$(.01)
|
$.01
|
|
Net loss from
discontinued operations net of tax benefit
|
(.01)
|
|
(.01)
|
|
|
Net income
(loss)
|
(.06)
|
(.03)
|
(.02)
|
.01
|
|
Weighted average
number of common shares outstanding
|
20,783,032
|
21,428,684
|
20,783,032
|
21,153,728
|
|
|
|
|
|
|
|
Diluted
earnings per share:
|
|
|
|
|
|
Net income (loss)
from continuing operations
|
$(.04)
|
$(.02)
|
$(.01)
|
$.01
|
|
Net loss from
discontinued operations net of tax benefit
|
(.01)
|
|
(.01)
|
|
|
Net
income (loss)
|
(.05)
|
(.02)
|
(.02)
|
.02
|
|
Weighted average
number of common shares outstanding
|
25,792,995
|
26,294,754
|
25,657,464
|
26,294,754
|
See accompanying notes to condensed consolidated financial
statements (unaudited).
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in
Stockholders' Equity
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2017
|
20,783,032
|
$24,322,885
|
$(13,674,794)
|
$10,648,091
|
|
|
|
|
|
|
|
Remove
derivatives in accordance with
ASU 2017-11
|
|
|
142,857
|
142,857
|
|
|
|
|
|
|
|
Net
income for nine months ended September
30, 2018
|
|
|
252,420
|
252,420
|
|
|
|
|
|
|
|
Amortization
of value of employee stock
options
|
|
16,597
|
|
16,597
|
|
|
|
|
|
|
|
Conversion
of convertible note to
common stock
|
800,000
|
400,000
|
-
|
400,000
|
|
|
|
|
|
|
|
Balance
at September 30, 2018
|
21,583,032
|
$24,739,482
|
$(13,279.517)
|
$11,459,965
|
See accompanying notes to condensed consolidated financial
statements (unaudited).
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
Nine Months
Ended September 30,
|
|
OPERATING
ACTIVITIES
|
|
|
|
Net
income (loss)
|
$(403,125)
|
$252,420
|
|
Adjustments
to reconcile net loss to net cash provided (used) by
operating activities:
|
|
|
|
Depreciation
and amortization
|
444,410
|
433,139
|
|
Deferred income
taxes
|
140,862
|
81,632
|
|
Other non-cash
expenses
|
24,526
|
-
|
|
Change
in fair value of derivatives
|
632,537
|
-
|
|
Changes in
operating assets and liabilities:
|
|
|
|
(Increase) decrease
in:
|
|
|
|
Accounts
receivable
|
(548,387)
|
(50,925)
|
|
Inventories
|
27,535
|
(56,479)
|
|
Prepaid
expenses
|
(18,222)
|
(63,332)
|
|
Other assets
including long-term portion of receivables
|
(557,527)
|
812,526
|
|
Increase
(decrease) in:
|
|
|
|
Accounts payable
and accrued expenses
|
276,392
|
(40,220)
|
|
NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
19,001
|
1,368,761
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
Purchase
of property and equipment
|
(341,023)
|
(1,125,886)
|
|
NET CASH USED IN
INVESTING ACTIVITIES
|
(341,023)
|
(1,125,886)
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
Payment
of principal - BMO term loans
|
(1,366,454)
|
-
|
|
Payment
of principal - Super G Funding, LLC loan
|
(2,066,282)
|
-
|
|
Payment
of principal - Kingsway America loan
|
(600,000)
|
-
|
|
Net
payment of officers loans
|
(310,000)
|
-
|
|
Net
proceeds from First Financial term loans
|
4,114,790
|
500,000
|
|
Payment of
principal - First Financial Bank
|
-
|
(594,434)
|
|
Additional loan
closing cost
|
-
|
(332,110)
|
|
Net
proceeds from convertible notes payable
|
647,119
|
-
|
|
NET CASH PROVIDED
(USED) BY FINANCINGACTIVITIES
|
419,173
|
(426,544)
|
|
DISCONTINUED
OPERATIONS
|
|
|
|
Payment of
obligations from discontinued operations
|
(193,265)
|
(45,000)
|
|
|
|
|
|
Decrease in
cash
|
(96,114)
|
(228,669)
|
|
Cash at beginning
of period
|
477,928
|
461,068
|
|
Cash at end of
period
|
$381,814
|
$232,399
|
Supplemental schedule of investing and financing
activities
|
|
|
|
|
Cash
paid for interest
|
$911,488
|
$367,905
|
See accompanying notes to condensed consolidated financial
statements (unaudited).
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - The accompanying unaudited interim condensed consolidated
financial statements, included herein, have been prepared by the
Company pursuant to the rules and regulations of the Securities and
Exchange Commission (“SEC”). Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules
and regulations. These condensed consolidated statements have been
prepared in accordance with the Company’s accounting policies
described in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2017 and should be read in conjunction with
the audited consolidated financial statements and the notes thereto
included in that report. Unless the context indicates otherwise,
references to the “Company” mean Noble Roman’s,
Inc. and its subsidiaries.
In the opinion of the management of the Company, the information
contained herein reflects all adjustments necessary for a fair
presentation of the results of operations and cash flows for the
interim periods presented and the financial condition as of the
dates indicated, which adjustments are of a normal recurring
nature. The results for the three-month and nine-month periods
ended September 30, 2018 are not necessarily indicative of the
results to be expected for the full year ending December 31,
2018.
Note 2
– Royalties and fees included initial franchise fees of
$42,000 and $164,000 for the three-month and nine-month periods
ended September 30, 2017, and $97,000 and $217,000 for the
three-month and nine-month periods ended September 30, 2018,
respectively. Royalties and fees included equipment commissions of
$16,000 and $34,000 for the three-month and nine-month periods
ended September 30, 2017, and $22,000 and $63,000 for the
three-month and nine-month periods ended September 30, 2018,
respectively. Royalties and fees, less initial franchise fees and
equipment commissions, were $1.7 million and $4.9 million for the
respective three-month and nine-month periods ended September 30,
2017, and $1.5 million and $4.5 million for the respective
three-month and nine-month periods ended September 30, 2018. Most
of the cost for the services required to be performed by the
Company are incurred prior to the franchise fee income being
recorded, which is based on a contractual liability of the
franchisee.
In
accordance with Accounting Standards Update ("ASU") 2014-09, the
Company adopted revenue and expense recognition as described in ASU
2014-09 effective January 2018. Initial franchise fees and related
contract costs are deferred and amortized on a straight-line basis
over the term of the franchise agreement, generally five to 10
years.
The
effect to comparable periods within the financial statements is not
material as the initial franchise fee for the non-traditional
franchise is intended to defray the initial contract costs, and the
franchisee fees and contract costs initially incurred and paid
approximate the relative amortized franchise fees and contract
costs for those same periods.
The
deferred contract income and costs both approximated $592,000 on
September 30, 2018.
At
December 31, 2017 and September 30, 2018, the Company reported net
accounts receivable from franchisees of $7.8 million and $6.9
million, respectively, which were both net of allowances of $1.5
million.
There
were 2,854 franchises/licenses in operation on December 31, 2017
and 2,886 franchises/licenses in operation on September 30, 2018.
During the nine-month period ended September 30, 2018, there were
47 new outlets opened and 15 outlets closed. In the ordinary
course, grocery stores from time to time add our licensed products,
remove them and may subsequently re-offer them. Therefore, it is
unknown how many of the 2,122 licensed grocery store units included
in the counts above have left the system.
Note 3
- The following table sets forth the calculation of basic and
diluted earnings per share for the three-month and nine-month
periods ended September 30, 2017:
|
|
Three Months
Ended September 30, 2017
|
|
|
|
|
|
|
Net
loss
|
$(1,176,741)
|
20,783,032
|
$(.06)
|
|
Effect
of dilutive securities
|
|
|
|
|
Options
and warrants
|
|
209,963
|
|
|
Convertible
notes
|
60,000
|
4,800,000
|
|
|
Dilutive
earnings per share
|
$(1,116,741)
|
25,792,995
|
$(.04)
|
|
Net
loss
|
|
|
|
|
|
Nine
Months Ended September 30, 2017
|
|
|
|
|
|
|
Net
loss
|
$(403,125)
|
20,783,032
|
$(.02)
|
|
Effect
of dilutive securities
|
|
|
|
|
Options
and warrants
|
|
209,963
|
|
|
Convertible
notes
|
131,303
|
4,664,469
|
|
|
Dilutive
earnings per share
|
|
|
|
|
Net
loss
|
$(271,822)
|
25,657,464
|
$(.01)
|
The
following table sets forth the calculation of basic and diluted
earnings per share for the three-month and nine-month periods ended
September 30, 2018:
|
|
Three Months
Ended September 30, 2018
|
|
|
|
|
|
|
Net
loss
|
$(562,279)
|
21,428,684
|
$(.03)
|
|
Effect
of dilutive securities
|
|
|
|
|
Options
and warrants
|
|
711,722
|
|
|
Convertible
notes
|
51,929
|
4,154,348
|
|
|
Dilutive
earnings per share
|
$(510,350)
|
26,294,754
|
$(.02)
|
|
Net
loss
|
|
|
|
|
|
Nine Months
Ended September 30, 2018
|
|
|
|
|
|
|
Net
income
|
$252,420
|
21,153,728
|
$.01
|
|
Effect
of dilutive securities
|
|
|
|
|
Options
and warrants
|
|
711,722
|
|
|
Convertible
notes
|
166,099
|
4,429,304
|
|
|
Dilutive
earnings per share
|
|
|
|
|
Net
income
|
$418,519
|
26,294,754
|
$.02
|
Note 4
– In 2016 and 2017, the Company conducted a private placement
(the "Offering") of convertible notes ("Notes") and warrants
("Warrants") in which it issued $2.4 million principal amount of
Notes and Warrants to purchase up to 2.4 million shares of the
Company's common stock at an exercise price of $1.00 per share
subject to adjustment. The accounting treatment of derivative
financial instruments formerly required that the Company record
these instruments at their fair values as of the inception date of
the agreement and at fair value as of each subsequent balance sheet
date. Any change in fair value was recorded as non-operating,
non-cash income or expense for each reporting period at each
balance sheet date. The Company reassessed the classification of
its derivative instruments at each balance sheet date. If the
classification changed as a result of events during the period, the
contract was reclassified as of the date of the event that caused
the reclassification.
In July
2017, the Financial Accounting Standards Board ("FASB") issued ASU
2017-11, which simplifies the accounting for certain accounting
instruments with down round features. This update changed the
classification analysis of certain equity-linked financial
instruments such as warrants and embedded conversion features such
that a down round feature is disregarded when assessing whether the
instrument is indexed to an entity's own stock. As a result of this
change in the quarter ended March 31, 2018, the Company removed all
of the derivative accounting from its financial statements
resulting in a gain of $142,857 recognized as a cumulative
adjustment to retained earnings on January 1, 2018.
Placement
agent fees and other origination cost of the Notes are deducted
from the carrying value of the Notes, as original issue discount
(“OID”). The OID is being amortized over the term of
the Notes.
As of
September 30, 2018, the holders of $400,000 of the Notes had
converted them to 800,000 shares of Noble Roman's common stock. The
Notes are subordinated to the Company's term loans payable to First
Financial Bank (the "Term Loans") which currently mature in 2022.
Pursuant to the loan agreement the Notes cannot be repaid while the
term loans are outstanding, however, the Notes can be converted to
common stock at any time. The Company intends to offer note holders
an opportunity to extend the maturity of the Notes to January, 2023
on the current interest rate and convertibility terms.
Note 5
- The Company has future obligations of $6.6 million under current
operating leases as follows: due in 2018, $159,000, due in 2019 and
2020, $1.3 million, due in 2021 and 2022, $1.3 million and due
after 2022, $3.9 million.
Note 6 - Other assets as of
September 30, 2018, include security deposits of $16,300, cash
surrender value of life insurance in the amount of $199,000,
long-term franchisee receivables in the amount of $5.8 million
which is net after a $1.5 million valuation
allowance.
Long-term receivable from franchisees represent receivables from
approximately 80 different non-traditional franchisees (Noble
Roman’s franchises located within a host facility). These
receivables originated from a variety of circumstances, including
where audits of a number of the non-traditional franchises’
reporting of sales found them to be underreporting their sales and,
therefore, underpaying their royalty obligations. In other
instances, some franchisees were selling non-Noble Roman’s
products under the Noble Roman’s trademark. In addition, some
receivables arose from the Company incurring legal fees to enforce
the franchise agreements and other collection costs which adds to
the receivables in accordance with the agreements totaling
approximately $2.3 million and some of the receivables were
generated by early termination of the franchise agreements. These
receivables have been classified as long-term since collections are
expected to extend over more than a one-year cycle. In the
three-month period ended September 30, 2018the Company wrote off
$1.3 million of receivables, of which approximately 70% were legal
fees, associated with two receivables which had been the subject of
a court cases pending over two years. Even though the Company believes
those receivables and collection cost may ultimately have been
collectable, the Company entered into settlement agreements to stop
the cash outlays which would have been required to litigate the
claims.
Note 7
- The Company evaluated subsequent events through the date the
financial statements were issued and filed with SEC. There were no
subsequent events that required recognition or disclosure beyond
what is disclosed in this report.
ITEM 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
General Information
Noble Roman’s, Inc., an Indiana corporation incorporated in
1972, sells and services franchises and licenses and operates
Company-owned foodservice locations for non-traditional foodservice
operations and stand-alone restaurants under the trade names
“Noble Roman’s Craft Pizza & Pub”,
“Noble Roman’s Pizza,” “Noble Roman’s
Take-N-Bake,” and “Tuscano’s Italian Style
Subs.” The concepts’ hallmarks include high quality
fresh pizza, pasta and salads along with other related menu items,
simple operating systems, fast service times, attractive food costs
and overall affordability.
Seeking more rapid growth in future revenue and net income, in 2017
the Company began adding Company-owned Craft Pizza & Pub
locations to its business and also intends to add franchised Craft
Pizza & Pub locations with qualified multi-unit operators.
Craft Pizza & Pub has already added significant revenue and
operating income and management anticipates that growth will
continue over time. The Company opened two Craft Pizza & Pub
locations in 2017, and added new locations in January 2018 and June
2018. Since 1997, the Company had concentrated its efforts and
resources primarily on franchising and licensing non-traditional
locations and has awarded franchise and/or license agreements in
all 50 states. The Company is continuing its focus on
franchising/licensing non-traditional locations, now with the added
revenue potential of Craft Pizza & Pub.
Pizzaco, Inc. currently owns and operates two Company-owned
non-traditional locations, RH Roanoke, Inc. operates a
Company-owned location and Noble Roman’s, Inc. owns and
operates four Craft Pizza & Pub locations. The Company intends
to use its Craft Pizza & Pub locations as a base to support the
franchising and continued future growth of that
concept.
References in this report to the “Company” and to
"Noble Roman's" are to Noble Roman’s, Inc. and its two
wholly-owned subsidiaries, Pizzaco, Inc. and RH Roanoke, Inc.,
unless the context indicates otherwise.
Noble Roman’s Craft Pizza & Pub
Noble Roman's Craft Pizza & Pub is intended to provide a fun,
pleasant atmosphere serving pizza and other related menu items, all
made fresh using fresh ingredients in the view of the customers. In
January 2017, the Noble Roman’s Craft Pizza & Pub opened
its first Company-owned restaurant in Westfield, Indiana, a
prosperous and growing community on the northwest side of
Indianapolis. Since that time three additional Craft Pizza &
Pubs have been opened as Company-owned restaurants. Noble
Roman’s Craft Pizza & Pub is designed to harken back to
the Company’s early history when it was known simply as
“Pizza Pub.” Like then, and like the new full-service
pizza concepts today, ordering takes place at the counter and food
runners deliver orders to the dining room for dine-in guests. The
Company believes that Noble Roman’s Craft Pizza & Pub
features many enhancements over the current competitive landscape.
The restaurant features two styles of hand-crafted,
made-from-scratch pizzas with a selection of 40 different toppings,
cheeses and sauces from which to choose. Beer and wine also are
featured, with 16 different beers on tap including both national
and local craft selections. Wines include 16 high quality,
affordably priced options by the bottle or glass in a range of
varietals. Beer and wine service is provided at the bar and
throughout the dining room.
The pizza offerings feature Noble Roman’s traditional
hand-crafted thinner crust as well as its signature deep-dish
Sicilian crust. After extensive research and development, the
system has been designed to enable fast cook times, with oven
speeds running approximately 2.5 minutes for traditional pies and
5.75 minutes for Sicilian pies. Traditional pizza favorites such as
pepperoni are options on the menu, but also offered is a selection
of Craft Pizza & Pub original creations like "Swims with the
Fishes" and "Pizza Margherita". The menu also features a selection
of contemporary and fresh, made-to-order salads and fresh-cooked
pasta. In addition, the menu includes baked subs, hand-sauced wings
and a selection of desserts, as well as Noble Roman’s famous
Breadsticks with Spicy Cheese Sauce.
Additional enhancements include a glass enclosed “Dough
Room” where Noble Roman’s Dough Masters hand make all
pizza and breadstick dough from scratch in customer view. Also in
the dining room is a “Dusting & Drizzle Station”
where guests can customize their pizzas after they are baked with a
variety of toppings and drizzles, such as rosemary-infused olive
oil, honey and Italian spices. Kids and adults enjoy Noble
Roman’s self-serve root beer tap, which is also part of a
special menu for customers 12 and younger. Throughout the dining
room and the bar area there are a large number of giant screen
television monitors for sports and the nostalgic black and white
shorts featured in Noble Roman’s earlier days.
Noble Roman’s Pizza for Non-Traditional
Locations
The hallmark of Noble Roman’s Pizza for non-traditional
locations is “Superior quality that our customers can
taste.” Every ingredient and process has been designed with a
view to produce superior results.
●
A
fully-prepared pizza crust that captures the made-from-scratch
pizzeria flavor which gets delivered to non-traditional locations
in a shelf-stable condition so that dough handling is no longer an
impediment to a consistent product, which otherwise is a challenge
in non-traditional locations.
●
Fresh
packed, uncondensed and never pre-cooked sauce made with secret
spices and vine-ripened tomatoes in all venues.
●
100%
real cheese blended from mozzarella and Muenster, with no soy
additives or extenders.
●
100%
real meat toppings, with no additives or extenders, a distinction
compared to many pizza concepts.
●
Vegetable
and mushroom toppings are sliced and delivered fresh, never
canned.
●
An
extended product line that includes breadsticks and cheesy stix
with dip, pasta, baked sandwiches, salads, wings and a line of
breakfast products.
●
The
fully-prepared crust also forms the basis for the Company's
Take-N-Bake pizza for use as an add-on component for its
non-traditional franchise base as well as an offering for its
grocery store license venue.
Tuscano’s Italian Style Subs
Tuscano’s Italian Style Subs is a separate non-traditional
location concept that focuses on sub sandwich menu items but only
in locations that also have a Noble Roman’s franchise. The
ongoing royalty for a Tuscano’s franchise is identical to
that charged for a Noble Roman’s Pizza
franchise.
Business Strategy
The
Company is focused on revenue expansion while continuing to
minimize overhead and other costs. To accomplish this the Company
will continue owning and operating a core of Craft Pizza & Pub
locations and develop what it believes to be a large growth
opportunity by franchising with qualified multi-unit franchisees.
At the same time, the Company will continue to focus on
franchising/licensing for non-traditional locations, especially
convenience stores and entertainment centers.
Business Operations
Distribution
The Company’s proprietary ingredients are manufactured
pursuant to the Company’s recipes and formulas by third-party
manufacturers under contracts between the Company and its various
manufacturers. These contracts require the manufacturers to produce
ingredients meeting the Company’s specifications and to sell
them to Company-approved distributors at prices negotiated between
the Company and the manufacturer.
At present, the Company has primary distributors strategically
located throughout the United States. The distributor agreements
require the primary distributors to maintain adequate inventories
of all ingredients necessary to meet the needs of the
Company’s franchisees and licensees in their distribution
areas for weekly deliveries to the franchisee/licensee locations
and to its grocery store distributors in their respective
territories. Each of the primary distributors purchase the
ingredients from the manufacturer at prices negotiated between the
Company and the manufacturers, but under payment terms agreed upon
by the manufacturer and the distributor, and distributes the
ingredients to the franchisee/licensee at a price determined by the
distributor agreement. Payment terms to the distributor are agreed
upon between each franchisee/licensee and the respective
distributor. In addition, the Company has agreements with numerous
grocery store distributors located in various parts of the country
which agree to buy the Company’s ingredients from one of the
Company’s primary distributors and to distribute those
ingredients only to their grocery store customers who have signed
license agreements with the Company.
Franchising
The Company sells franchises for both non-traditional and
traditional locations.
The
initial franchise fees are as follows:
|
Franchise
Format
|
Non-Traditional,
Except Hospitals
|
|
|
|
Noble Roman’s
Pizza
|
$7,500
|
$10,000
|
$30,000(1)
|
(1)
With the sale of multiple traditional stand-alone franchises to a
single franchisee, the franchise fee for the first unit is $30,000,
the franchise fee for the second unit is $25,000 and the franchise
fee for the third unit and any additional unit is
$20,000.
The
franchise fees are paid upon signing the franchise agreement and,
when paid, are non-refundable in consideration of the
administration and other expenses incurred by the Company in
granting the franchises and for the lost and/or deferred
opportunities to grant such franchises to any other
party.
Licensing
Noble Roman’s Take-n-Bake Pizza licenses for grocery stores
are governed by a supply agreement. The supply agreement generally
requires the licensee to: (1) purchase proprietary ingredients only
from a Noble Roman’s-approved distributor; (2) assemble the
products using only Noble Roman’s approved ingredients and
recipes; and (3) display products in a manner approved by Noble
Roman’s using Noble Roman’s point-of-sale marketing
materials. Pursuant to the distributor agreements, the primary
distributors place an additional mark-up, as determined by the
Company, above their normal selling price on the key ingredients as
a fee for the Company in lieu of royalty. The distributors agree to
segregate this additional mark-up upon invoicing the licensee, to
hold the fees in trust for the Company and to remit them to the
Company within ten days after the end of each month.
Financial Summary
The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and
accompanying notes. Actual results may differ from those estimates.
The Company periodically evaluates the carrying values of its
assets, including property, equipment and related costs, accounts
receivable and deferred tax assets, to assess whether any
impairment indications are present due to (among other factors)
recurring operating losses, significant adverse legal developments,
competition, changes in demand for the Company’s products or
changes in the business climate which affect the recovery of
recorded value. If any impairment of an individual asset is
evident, a charge will be provided to reduce the carrying value to
its estimated fair value.
The following table sets forth the percentage relationship to total
revenue of the listed items included in Noble Roman’s
consolidated statements of operations for the three-month and
nine-month periods ended September 30, 2017 and 2018,
respectively.
|
|
Three Months
Ended September 30
|
Nine Months
Ended September 30
|
|
|
|
|
|
|
|
Royalties and
fees
|
69.0%
|
50.5%
|
70.4%
|
51.3%
|
|
Administrative fees
and other
|
0.4
|
0.8
|
0.5
|
0.5
|
|
Restaurant revenue
– Craft Pizza & Pub
|
18.2
|
40.0
|
17.0
|
39.0
|
|
Restaurant revenue
– non-traditional
|
12.4
|
8.7
|
12.1
|
9.2
|
|
Total
revenue
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
|
Operating
expenses:
|
|
|
|
|
|
Salaries
and wages
|
8.6
|
7.5
|
9.7
|
8.2
|
|
Trade
show expense
|
5.0
|
3.7
|
5.2
|
3.9
|
|
Travel
expense
|
1.5
|
0.7
|
2.0
|
0.8
|
|
Other
operating expense
|
8.8
|
8.6
|
9.0
|
8.4
|
|
Restaurant
expenses – Craft Pizza & Pub
|
13.8
|
32.1
|
12.5
|
30.6
|
|
Restaurant
expenses – non-traditional
|
12.3
|
8.5
|
11.9
|
9.1
|
|
Depreciation and
amortization
|
2.4
|
3.8
|
2.4
|
3.2
|
|
General and
administrative
|
17.4
|
13.4
|
17.3
|
13.3
|
|
Total
expenses
|
69.8
|
78.3
|
70.0
|
77.5
|
|
Operating
income
|
30.2
|
21.7
|
30.0
|
22.5
|
|
Interest
|
23.9
|
5.3
|
17.0
|
5.2
|
|
Adjust valuation of
receivables
|
13.9
|
39.6
|
4.9
|
13.8
|
|
Change in fair
value of derivatives
|
37.0
|
-
|
8.8
|
-
|
|
Income
(loss)before income taxes
|
(44.6)
|
(23.2)
|
(.7)
|
3.5
|
|
Income tax expense
(benefit)
|
(2.9)
|
(5.9)
|
3.1
|
0.9
|
|
Net
income (loss)
|
(41.7)%
|
(17.3)%
|
(3.8)%
|
2.6%
|
Results of Operations
Total revenue increased from $2.5 million and $7.2 million to $3.3
million and $9.4 million during the respective three-month and
nine-month periods ended September 30, 2018 compared to the
corresponding periods in 2017. Franchise fees and equipment
commissions (“upfront fees”) increased from $58,000 to
$119,000 for the three-month period ended September 30, 2018 and
from $198,000 to $279,000 for the nine-month period ended September
30, 2018, compared to the corresponding periods in 2017. Royalties
and fees, less upfront fees, decreased from $1.7 million and $4.9
million to $1.5 million and $4.5 million for the respective
three-month and nine-month periods ended September 30, 2018,
compared to the corresponding periods in 2017. The breakdown of
royalties and fees less upfront fees, for the respective
three-month and nine-month periods ended September 30, 2018 and
2017 were: royalties and fees from non-traditional franchises other
than grocery stores were $1.2 million and $3.3 million in both
years; royalties and fees from the grocery store take-n-bake were
$311,000 and $1.1 million compared to $425,000 and $1.3 million;
there were no royalties and fees from stand-alone take-n-bake
franchises in 2018 compared to $2,000 and $34,000in the 2017
interim periods, as this venue was discontinued; and royalties and
fees from traditional locations were $45,000 and $148,000 compared
to $52,000 and $170,000, reflecting a lower number of traditional
locations open in 2018.
Since
2014, the Company has periodically audited the reporting of sales
for computing royalties by non-traditional franchisees and plans to
continue to do so periodically in the future, the effect of which
is unknown. When the audits are performed, the Company estimates
franchise sales based on product purchases as reflected on
distributor reports and, where under-reporting is identified, the
Company has invoiced franchisees on the unreported
amounts.
Restaurant
revenue – Craft Pizza & Pub was $1.3 million and $3.7
million for the three-month and nine-month periods ended September
30, 2018 compared to $457,000 and $1.2 million for the three-month
and nine-month periods ended September 30, 2017.
Restaurant
revenue – non-traditional decreased to $283,000 and $863,000
from $311,000 and $871,000 for the respective three-month and
nine-month periods ended September 30, 2018, compared to the
corresponding periods in 2017. The reason for the decrease was the
result of a slight decrease in same store sales. The Company
currently operates three non-traditional locations.
Salaries
and wages decreased from 8.6% to 7.5% of total revenue and from
9.7% to 8.2% of total revenue for the respective three-month and
nine-month periods ended September 30, 2018, compared to the
corresponding periods in 2017. Salaries and wages increased to
$246,000 and $774,000 from $216,000 and $698,000 for the respective
three-month and nine-month periods ended September 30, 2018,
compared to the corresponding periods in 2017. The increase was the
result of hiring sales staff to begin a program of franchising the
Craft Pizza & Pub concept, which was partially offset by
reduction of other staff. However the individuals hired to begin
the franchising program did not meet the Company's expectations and
the Company decided to move in a different direction to franchise
the Craft Pizza & Pub concept.
Trade
show expenses decreased from 5.0% to 3.7% of total revenue and from
5.2% to 3.9% of total revenue for the respective three-month and
nine-month periods ended September 30, 2018, compared to the
corresponding periods in 2017. Trade show expense decreased
slightly from $126,000 to $121,000 and from $371,000 to $366,000,
respectively for the three-month and nine-month periods ended
September 30, 2018, compared to the corresponding periods in
2017.The percentage decrease was primarily the result of increased
total revenue.
Travel
expenses decreased from 1.5% to 0.7% of total revenue and from 2.0%
to 0.8% of total revenue for the respective three-month and
nine-month periods ended September 30, 2018, compared to the
respective corresponding periods in 2017. Travel expense decreased
from $38,000 to $24,000 and from $146,000 to $77,000, respectively,
for the three-month and nine-month periods ended September 30,
2018, compared to the corresponding periods in 2017. Travel
expenses decreased as a result of opening more non-traditional
locations closer to our home base.
Other
operating expenses decreased from 8.8% to 8.6% of total revenue and
from 9.0% to 8.4% of total revenue for the respective three-month
and nine-month periods ended September 30, 2018, compared to the
corresponding periods in 2017. Operating expenses increased from
$222,000 to $283,000 and from $650,000 to $791,000, respectively,
for the three-month and nine-month periods ended September 30,
2018, compared to the corresponding periods in 2017.
Restaurant
expenses – Craft Pizza & Pub were $1.0 million and $2.9
million for the three-month and nine-month periods ended September
30, 2018 compared to $347,000 and $902,000 for the three-month and
nine-month periods ended September 30, 2017. While the Craft Pizza
& Pub expenses increased the revenue also increased as the
Company began the Craft Pizza & Pub with its first location in
January 2017, and added new locations in November 2017, January
2018 and June 2018.
Restaurant
expenses – non-traditional decreased from 12.3% to 8.5% and
from 11.9% to 9.1% of total revenue for the respective three-month
and nine-month periods ended September 30, 2018, compared to the
corresponding periods in 2017. The reason for the decrease was the
increase in total revenue. The Company currently operates three
non-traditional locations.
Depreciation
and amortization increased from 2.4% to 3.8% of total revenue and
from 2.4% to 3.2% for the respective three-month and nine-month
periods ended September 30, 2018, compared to corresponding periods
in 2017. The primary reason for the increase was the new Craft
Pizza & Pub locations that opened January 2017, November 2017,
January 2018 and June 2018.
General
and administrative expenses decreased from 17.4 to 13.4% and from
17.3% to 13.3% of total revenue for the respective three-month and
nine-month periods ended September 30, 2018, compared to the
corresponding periods in 2017. General and administrative expenses
remained approximately the same at $434,500 and $1.25 million,
respectively, for the three-month and nine-month periods ended
September 30, 2018, compared to the comparable periods in
2017.
Total
expenses increased from 69.8% to 78.3% and from 70.0% to 77.5% of
total revenue for the respective three-month and nine-month periods
ended September 30, 2018, compared to the corresponding periods in
2017. Total expenses increased from $1.8 million to $2.6 million
and from $5.0 million to $7.3 million, respectively, for the
three-month and nine-month periods ended September 30, 2018,
compared to the corresponding periods in 2017. These increases in
expenses were the result of adding the new Craft Pizza & Pub
locations in January 2017, November 2017, January 2018 and June
2018.
Operating
income decreased from 30.2% to 21.7% and from 30.0% to 22.5% of
total revenue for the respective three-month and nine-month periods
ended September 30, 2018, compared to the corresponding periods in
2017. The percentage decrease in operating income was a result of
transitioning from a largely fee-based revenue model to operating
restaurants by the name of Craft Pizza & Pub. However, the
Craft Pizza & Pub locations contributed $260,000 and $785,000
to operating income in the three-month and nine-month periods ended
September 30, 2018.
Interest
expense decreased from 23.9% to 5.3% and from 17.0% to 5.2% total
revenue for the respective three-month and nine-month periods ended
September 30, 2018, compared to the corresponding periods in 2017.
Interest expense decreased from $601,000 to $173,000 and from $1.2
million to $486,000, respectively, for the three-month and
nine-month periods ended September 30, 2018 compared to the
corresponding periods in 2017. The significant decrease was
primarily the result of refinancing of the Company's debt in
September 2017 modestly offset by the additional borrowing in
development loans to build and equip the new Craft Pizza & Pub
locations. For the nine-month period ended September 30, 2018, the
Company paid cash interest of $368,000 and reported non-cash
interest expense of $118,000 from amortization of loan closing
costs including the cost associated with issuance of the
Notes.
Net
loss for the three months ended September 30, 2018 was $562,000 and
net income for the nine-month period ended September 30, 2018 was
$252,000 compared to a net loss of $1.2 million and $403,000 for
the comparable three-month and nine-month periods in 2017. The loss
in the three-month period ended September 30, 2018 and net income
for the nine-month period reflected the write-off of $1.3 million
of receivables of which approximately 70% were legal fees
associated with two receivables which had been the subject of court
cases pending for over two years. Even though the Company believes
those receivables and collection cost may ultimately have been
collectable, the Company entered into settlement agreements to stop
the cash outlays which would have been required to litigate the
claims.
Liquidity and Capital Resources
The Company’s strategy in past years was to grow its business
by concentrating on franchising/licensing non-traditional locations
including grocery store delis to sell take-n-bake pizza. This
strategy was intended to not require significant increase in
expenses or investment. The focus on franchising/licensing
non-traditional locations will continue to be a primary element of
the Company’s strategy but, in addition, the Company has
developed a major business initiative by re-designing and
re-positioning its stand-alone franchise for the next generation
stand-alone prototype called “Noble Roman’s Craft Pizza
& Pub.” As a result, the Company opened its first Craft
Pizza & Pub on January 31, 2017, and added new locations in
November 2017, January 2018 and June 2018. During the first nine
months of this year the Company has invested resources with plans
to franchise the Craft Pizza &Pub concept as another primary
element of the Company's strategy going forward.
The Company is operating three non-traditional locations and does
not intend to operate any additional non-traditional
locations.
The Company’s current ratio was 2.5-to-1 as of September 30,
2018 compared to 2.6-to-1 as of December 31, 2017.
In January 2017, the Company completed the Offering of $2.4 million
principal amount of Notes and Warrants to purchase up to 2.4
million shares of the Company’s common stock at an exercise
price of $1.00 per share, subject to adjustment. The Company used
the net proceeds of the Notes to fund the opening of a Noble
Roman’s Craft Pizza & Pub restaurant and for general
corporate purposes. In February 2018, one of those Notes in the
principal amount of $100,000 was converted into 200,000 shares of
the Company's common stock and in April 2018, another Note in the
principal amount of $100,000 was converted into 200,000 shares of
the Company's common stock. In August 2018, two Notes totaling
$200,000 in the principal amount were converted into 400,000 shares
of the Company's common stock.
On September 13, 2017, the Company entered into a loan agreement
(the “Agreement”) with First Financial Bank (the
“Bank”). The Agreement provides for a senior credit
facility (the “Credit Facility”) by the Bank consisting
of: (1) a term loan in the amount of $4.5 million (the “Term
Loan”); and (2) a development line of credit of up to $1.6
million (the “Development Line of Credit”). Borrowings
under the Credit Facility bear interest at a variable annual rate
equal to the London Interbank Offer Rate (“LIBOR”) plus
4.25%. All outstanding amounts owed under the Agreement mature in
September 2022.
Proceeds of the Term Loan were used to repay the Company’s
existing indebtedness to BMO Harris Bank, Super G Capital, LLC, and
certain officers of the Company, to pay certain expenses related to
the Credit Facility and for general corporate
purposes.
As of September 30, 2018, the Company had drawn the $1.6 million
Development Line of Credit used in the development of the Craft
Pizza & Pubs that opened in November 2017, January 2018 and May
2018. Repayment of the Development Line of Credit began four months
following the final draw for each location in monthly installments
on a seven-year principal amortization schedule plus interest at
the rate of LIBOR plus 4.25%, with the balance due in September
2022.
The Agreement contains affirmative and negative covenants,
including, among other things, covenants requiring the Company to
maintain certain financial ratios. The Company’s obligations
under the Agreement are secured by first priority liens on all of
the Company’s assets and a pledge of all of the
Company’s equity interest in its subsidiaries. In addition,
Paul W. Mobley, the Company’s Executive Chairman and Chief
Financial Officer, executed a limited guarantee only of borrowings
under the Development Line of Credit which is to be released upon
achieving certain financial ratios by the Company's Craft Pizza
& Pub locations. The Company was in compliance with the
covenants as of September 30, 2018.
The refinancing, as described above, substantially lowered the
Company's debt service requirement and cash interest expense. The
Company will need to refinance or extend the maturity of the Notes
in the principal amount of $2.0 million if they are still
outstanding at maturity at the end of 2019. The Company intends to
offer the Note holders the opportunity to extend the maturity to
January 2023 on the current interest rate and convertibility
terms.
As a result of the financial arrangements described above and the
Company’s cash flow projections, the Company believes it will
have sufficient cash flow to meet its obligations and to carry out
its current business plan for the next 12 months. The
Company’s cash flow projections for the next two years are
primarily based on the Company’s strategy of growing the
non-traditional franchising/licensing venues, operating the open
Craft Pizza & Pub locations, plus an aggressive franchising
program for Noble Roman’s Craft Pizza & Pub
restaurants.
Except as noted below, the Company does not anticipate that any of
the recently issued Statement of Financial Accounting Standards
will have a material impact on its Consolidated Statement of
Operations or its Consolidated Balance Sheet. In February 2016, the
FASB issued ASU 2016-02, its leasing standard for both lessees and
lessors. Under its core principle, a lessee will recognize lease
assets and liabilities on the balance sheet for all arrangements
with terms longer than 12 months. The new standard takes effect in
2019 for public business entities.
The Company does not believe these accounting pronouncements will
have a material adverse effect on its financial condition or
results of operations.
Forward-Looking Statements
The statements contained above in Management’s Discussion and
Analysis concerning the Company’s future revenues,
profitability, financial resources, market demand and product
development are forward-looking statements (as such term is defined
in the Private Securities Litigation Reform Act of 1995) relating
to the Company that are based on the beliefs of the management of
the Company, as well as assumptions and estimates made by and
information currently available to the Company’s management.
The Company’s actual results in the future may differ
materially from those indicated by the forward-looking statements
due to risks and uncertainties that exist in the Company’s
operations and business environment, including, but not limited to:
competitive factors and pricing pressures, non-renewal of franchise
agreements, shifts in market demand, the success of new franchise
programs, including the new Noble Roman’s Craft Pizza &
Pub format, the Company’s ability to successfully operate an
increased number of Company-owned restaurants, general economic
conditions, changes in demand for the Company’s products or
franchises, the Company’s ability to service and refinance
its loans including the proposed extension of the maturity of the
Notes, the impact of franchise regulation, the success or failure
of individual franchisees and changes in prices or supplies of food
ingredients and labor as well as the factors discussed under
“Risk Factors” in our Annual Report on Form 10-K for
the year ended December 31, 2017. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions or
estimates prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated,
expected or intended.
ITEM 3. Quantitative and
Qualitative Disclosures about Market Risk
The
Company’s exposure to interest rate risk relates primarily to
its variable-rate debt. As of September 30, 2018, the Company had
outstanding variable interest-bearing debt in the aggregate
principal amount of $5.4 million. The Company’s current
borrowings are at a variable rate tied to LIBOR plus 4.25% per
annum adjusted on a monthly basis. Based on its current debt
structure, for each 1% increase in LIBOR the Company would incur
increased interest expense of approximately $50,000 over the
succeeding 12-month period.
ITEM
4. Controls and Procedures
Based on their evaluation as of the end of the period covered by
this report, A. Scott Mobley, the Company’s President and
Chief Executive Officer, and Paul W. Mobley, the Company’s
Executive Chairman and Chief Financial Officer, have concluded that
the Company’s disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934, as amended) are effective. There have been no changes in
internal controls over financial reporting during the period
covered by this report that have materially affected, or are
reasonably likely to materially affect, the Company’s
internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. Legal
Proceedings.
The Company is not involved in material litigation against
it.
ITEM
2. Unregistered Sales of Equity Securities and Use of
Proceeds.
None.
ITEM 6. Exhibits.
Index to Exhibits
|
Exhibit Number
|
|
Description
|
|
3.1
|
|
Amended
Articles of Incorporation of the Registrant, filed as an exhibit to
the Registrant’s Amendment No. 1 to the Post-Effective
Amendment No. 2 to Registration Statement on Form S-1 filed July 1,
1985 (SEC File No.2-84150), is incorporated herein by
reference.
|
|
|
|
Amended
and Restated By-Laws of the Registrant, as currently in effect,
filed as an exhibit to the Registrant’s Form 8-K filed
December 23, 2009, is incorporated herein by
reference.
|
|
3.3
|
|
Articles
of Amendment of the Articles of Incorporation of the Registrant
effective February 18, 1992 filed as an exhibit to the
Registrant’s Registration Statement on Form SB-2 (SEC File
No. 33-66850), ordered effective on October 26, 1993, is
incorporated herein by reference.
|
|
|
|
Articles
of Amendment of the Articles of Incorporation of the Registrant
effective May 11, 2000, filed as Annex A and Annex B to the
Registrant’s Proxy Statement on Schedule 14A filed March 28,
2000, is incorporated herein by reference.
|
|
|
|
Articles
of Amendment of the Articles of Incorporation of the Registrant
effective April 16, 2001 filed as Exhibit 3.4 to Registrant’s
annual report on Form 10-K for the year ended December 31, 2005, is
incorporated herein by reference.
|
|
|
|
Articles
of Amendment of the Articles of Incorporation of the Registrant
effective August 23, 2005, filed as Exhibit 3.1 to the
Registrant’s current report on Form 8-K filed August 29,
2005, is incorporated herein by reference.
|
|
|
|
Articles
of Amendment of the Articles of Incorporation of the Registrant
effective February 7, 2017, filed as Exhibit 3.7 to the
Registrant’s Registration Statement on Form S-1 (SEC File No.
33-217442) filed April 25, 2017, is incorporated herein by
reference.
|
|
4.1
|
|
Specimen
Common Stock Certificates filed as an exhibit to the
Registrant’s Registration Statement on Form S-18 filed
October 22, 1982 and ordered effective on December 14, 1982 (SEC
File No. 2-79963C), is incorporated herein by
reference.
|
|
|
|
Warrant
to purchase common stock, dated July 1, 2015, filed as Exhibit
10.11 to the Registrant’s Form 10-Q filed on August 11, 2015,
is incorporated herein by reference.
|
|
10.1*
|
|
Employment
Agreement with Paul W. Mobley dated January 2, 1999 filed as
Exhibit 10.1 to Registrant’s annual report on Form 10-K for
the year ended December 31, 2005, is incorporated herein by
reference.
|
|
10.2*
|
|
Employment
Agreement with A. Scott Mobley dated January 2, 1999 filed as
Exhibit 10.2 to Registrant’s annual report on Form 10-K for
the year ended December 31, 2005, is incorporated herein by
reference.
|
|
|
|
Loan
Agreement dated as of September 13, 2017 by and between the
Registrant and First Financial, filed as Exhibit 10.1 to the
Registrant's Form 8-K filed September 19, 2017, is incorporated
herein by reference.
|
|
|
|
Term
note dated September 13, 2017 to First Financial Bank filed as
Exhibit 10.4 to the Registrant's Form 10-Q filed November 14, 2017,
is incorporated herein by reference.
|
|
|
|
Development
line note dated September 13, 2017 to First Financial Bank filed as
Exhibit 10.5 to the Registrant's Form 10-Q filed November 14, 2017,
is incorporated herein by reference.
|
|
|
|
Agreement
dated April 8, 2015, by and among the Registrant and the
shareholder parties, filed as Exhibit 10.1 to Registrant’s
Form 8-K filed on April 8, 2015, is incorporated herein by
reference.
|
|
|
|
Form of
10% Convertible Subordinated Unsecured note filed as Exhibit 10.16
to the Registrant's Form 10-K filed on March 27, 2017, is
incorporated herein by reference.
|
|
|
|
Form of
Redeemable Common Stock Purchase Class A Warrant filed as Exhibit
10.21 to the Registrant's Registration Statement on Form S-1 (SEC
File No. 33-217442) on April 25, 2017, is incorporated herein by
reference.
|
|
|
|
Registration
Rights Agreement dated October 13, 2016, by and among the
Registrant and the investors signatory thereto, filed as Exhibit
10.22 to the Registrant's Registration Statement on Form S-1 (SEC
File No. 33-217442) on April 25, 2017, is incorporated herein by
reference.
|
|
|
|
First
Amendment to the Registration Rights Agreement dated February 13,
2017, by and among the Registrant and the investors signatory
thereto, filed as Exhibit 10.23 to the Registrant's Registration
Statement on Form S-1 (SEC File No. 33-217442) on April 25, 2017,
is incorporated herein by reference.
|
|
21.1
|
|
Subsidiaries
of the Registrant filed in the Registrant’s Registration
Statement on Form SB-2 (SEC File No. 33-66850) ordered effective on
October 26, 1993, is incorporated herein by reference.
|
|
|
|
C.E.O.
Certification under Rule 13a-14(a)/15d-14(a)
|
|
|
|
C.F.O.
Certification under Rule 13a-14(a)/15d-14(a)
|
|
|
|
C.E.O.
Certification under 18 U.S.C. Section 1350
|
|
|
|
C.F.O.
Certification under 18 U.S.C. Section 1350
|
|
101
|
|
Interactive
Financial Data
|
*Management
contract or compensation plan.
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.
|
|
NOBLE ROMAN'S,
INC.
|
|
|
|
|
|
|
|
Date: November 13,
2018
|
By:
|
/s/
Paul W.
Mobley
|
|
|
|
|
Paul W.
Mobley |
|
|
|
|
Executive Chairman,
Chief Financial Officer and Principal Accounting Officer
(Authorized Officer and Principal Financial
Officer)
|
|