Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 09, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | NOBLE ROMANS INC | |
Entity Central Index Key | 709,005 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 20,783,032 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,016 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash | $ 175,235 | $ 194,021 |
Accounts receivable - net | 2,323,301 | 2,007,751 |
Inventories | 743,022 | 492,222 |
Prepaid expenses | 869,853 | 634,016 |
Deferred tax asset - current portion | 925,000 | 925,000 |
Total current assets | 5,036,411 | 4,253,010 |
Property and equipment: | ||
Equipment | 1,829,736 | 1,376,190 |
Leasehold improvements | 88,718 | 88,718 |
Total | 1,918,454 | 1,464,908 |
Less accumulated depreciation and amortization | 1,157,927 | 1,092,785 |
Net property and equipment | 760,527 | 372,123 |
Deferred tax asset (net of current portion) | 8,536,518 | 8,158,523 |
Other assets including long-term portion of receivables-net | 4,545,092 | 5,681,272 |
Total assets | 18,878,548 | 18,464,928 |
Current liabilities: | ||
Current portion of term loan payable to bank | 1,530,385 | 601,081 |
Current portion of loan payable to Super G Funding, LLC | 1,250,000 | 0 |
Note payable to Kingsway America | 600,000 | 0 |
Accounts payable and accrued expenses | 337,254 | 847,418 |
Total current liabilities | 3,717,639 | 1,448,499 |
Long-term obligations: | ||
Term loans payable to bank – net of current portion | 0 | 1,366,454 |
Loan payable to Super G Funding, LLC (net of current portion) | 576,418 | 0 |
Notes payable to officers | 310,000 | 175,000 |
Note payable to Kingsway America, Inc. | 0 | 600,000 |
Total long-term liabilities | 886,418 | 2,141,454 |
Stockholders' equity: | ||
Common stock – no par value (25,000,000 shares authorized, 20,775,921 issued and outstanding as of December 31, 2015 and 20,783,032 issued and outstanding as of September 30, 2016) | 24,304,841 | 24,294,002 |
Accumulated deficit | (10,030,350) | (9,419,027) |
Total stockholders' equity | 14,274,491 | 14,874,975 |
Total liabilities and stockholders' equity | $ 18,878,548 | $ 18,464,928 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2016 | Dec. 31, 2015 |
Stockholders' equity: | ||
Common stock, par value | $ 0 | $ 0 |
Common stock, authorized shares | 25,000,000 | 25,000,000 |
Common stock, issued shares | 20,783,032 | 20,775,921 |
Common stock, outstanding shares | 20,783,032 | 20,775,921 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Statement [Abstract] | ||||
Royalties and fees | $ 1,953,843 | $ 1,848,207 | $ 5,544,389 | $ 5,647,290 |
Administrative fees and other | 12,459 | 18,544 | 34,168 | 45,178 |
Restaurant revenue | 55,691 | 51,689 | 162,737 | 148,763 |
Total revenue | 2,021,993 | 1,918,440 | 5,741,294 | 5,841,231 |
Operating expenses: | ||||
Salaries and wages | 275,694 | 287,972 | 759,603 | 859,846 |
Trade show expense | 124,209 | 143,016 | 383,086 | 405,601 |
Travel expense | 57,010 | 57,145 | 152,684 | 171,698 |
Broker commissions | 10,421 | 0 | 32,241 | 0 |
Other operating expenses | 200,367 | 202,624 | 575,651 | 604,215 |
Restaurant expenses | 51,270 | 47,539 | 141,175 | 148,974 |
Depreciation and amortization | 31,675 | 26,354 | 92,763 | 79,063 |
General and administrative | 415,487 | 418,784 | 1,205,961 | 1,228,611 |
Total expenses | 1,166,133 | 1,183,434 | 3,343,164 | 3,498,008 |
Operating income | 855,860 | 735,006 | 2,398,130 | 2,343,223 |
Interest | 153,882 | 50,412 | 291,822 | 138,641 |
Loss on restaurant discontinued | 0 | 45,548 | 36,776 | 139,220 |
Adjust evaluation of receivables | 0 | 250,000 | 750,659 | 850,000 |
Income before income taxes from continuing operations | 701,978 | 389,046 | 1,318,873 | 1,215,362 |
Income tax expense | 268,208 | 163,286 | 503,907 | 506,932 |
Net income from continuing operations | 433,770 | 225,760 | 814,966 | 708,430 |
Loss from discontinued operations net of tax benefit of $881,902 for 2016 | (1,426,289) | 0 | (1,426,289) | 0 |
Net income (loss) | $ (992,519) | $ 225,760 | $ (611,323) | $ 708,430 |
Earnings per share - basic: | ||||
Operating income | $ 0.04 | $ 0.04 | $ 0.12 | $ 0.11 |
Net income from continuing operations | 0.02 | 0.01 | 0.04 | 0.03 |
Net loss from discontinued operations net of tax benefit | (.07) | 0 | (.07) | 0 |
Net income (loss) | $ (.05) | $ 0.01 | $ (.03) | $ 0.03 |
Weighted average number of common shares outstanding | 20,783,032 | 20,722,497 | 20,781,501 | 20,436,846 |
Diluted earnings per share: | ||||
Operating income | $ 0.04 | $ 0.03 | $ 0.11 | $ 0.11 |
Net income from continuing operations | 0.02 | 0.01 | 0.04 | 0.03 |
Net loss from discontinued operations net of tax benefit | (.07) | 0 | (.07) | 0 |
Net income (loss) | $ (.05) | $ 0.01 | $ (.03) | $ 0.03 |
Weighted average number of common shares outstanding | 20,924,077 | 22,012,769 | 20,922,546 | 21,727,118 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - 9 months ended Sep. 30, 2016 - USD ($) | Common Stock | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2015 | $ 24,294,002 | $ (9,419,027) | $ 14,874,975 |
Beginning Balance, Shares at Dec. 31, 2015 | 20,775,921 | ||
Net loss | (611,323) | (611,323) | |
Cashless exercise of employee stock options | 7,111 | ||
Amortization of value of employee stock options | $ 10,839 | 10,839 | |
Ending Balance, Amount at Sep. 30, 2016 | $ 24,304,841 | $ (10,030,350) | $ 14,274,491 |
Ending Balance, Shares at Sep. 30, 2016 | 20,783,032 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
OPERATING ACTIVITIES | ||
Net income | $ (611,323) | $ 708,430 |
Adjustments to reconcile net income to net cash provided (used) by operating activities: | ||
Depreciation and amortization | 75,982 | 91,446 |
Non-cash expense for the valuation of Heyser receivable | 750,659 | 850,000 |
Deferred income taxes | (377,995) | 506,932 |
(Increase) decrease in: | ||
Accounts receivable | (315,551) | (565,507) |
Inventories | (250,800) | (75,305) |
Prepaid expenses | (235,837) | (319,231) |
Other assets | 239,816 | (899,541) |
Increase (decrease) in: | ||
Accounts payable and accrued expenses | (446,851) | 183,746 |
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES | (1,171,900) | 480,970 |
INVESTING ACTIVITIES | ||
Purchase of property and equipment | (9,699) | (11,843) |
NET CASH USED IN INVESTING ACTIVITIES | (9,699) | (11,843) |
FINANCING ACTIVITIES | ||
Payment of principal on bank term loans | (437,150) | (1,106,632) |
Payment of principal on Super G Funding, LLC loan | (89,000) | 0 |
Proceeds from insurance company loan | 0 | 600,000 |
Proceeds from Super G Funding, LLC loan | 1,915,417 | 0 |
Proceeds from the exercise of employee stock options | 0 | 201,386 |
Proceeds from officers loan | 135,000 | 0 |
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES | 1,524,267 | (305,246) |
DISCONTINUED OPERATIONS | ||
Payment of obligations from discontinued operations | (361,454) | (172,796) |
Decrease in cash | (18,786) | (8,915) |
Cash at beginning of period | 194,021 | 200,349 |
Cash at end of period | 175,235 | 191,434 |
Supplemental schedule of investing and financing activities | ||
Cash paid for interest | $ 266,412 | $ 117,666 |
1. Basis of Presentation
1. Basis of Presentation | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
1. Basis of Presentation | 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, 2015 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, 2016, respectively, are not necessarily indicative of the results to be expected for the full year ending December 31, 2016. |
2. Royalties and Fees
2. Royalties and Fees | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
2. Royalties and Fees | Royalties and fees include initial franchise fees of $87,000 and $153,000 for the three-month and nine-month periods ended September 30, 2015 and $76,000 and $204,000 for the three-month and nine-month periods ended September 30, 2016, respectively. Royalties and fees included equipment commissions of $23,000 and $60,000 for the three-month and nine-month periods ended September 30, 2015, and $7,000 and $17,000 for the three-month and nine-month periods ended September 30, 2016, respectively. Royalties and fees including interest per franchise agreements, less initial franchise fees and equipment commissions, were $1.7 million and $5.4 million for the respective three-month and nine-month periods ended September 30, 2015, and $1.9 million and $5.3 million for the respective three-month and nine-month periods ended September 30, 2016. 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. A significant amount of the Company’s royalty income is paid by the Company initiating a draft on the franchisee’s account by electronic withdrawal. There were 2,562 franchises/licenses on December 31, 2015 and 2,736 franchises/licenses on September 30, 2016. During the nine-month period ended September 30, 2016, there were 201 new outlets opened and 27 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 licensed grocery store units included in the count above have left the system. |
3. Earnings per Share
3. Earnings per Share | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
3. Earnings per Share | 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, 2015: Three Months Ended September 30, 2015 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 225,760 20,722,497 $ .01 Effect of dilutive securities Options - 1,290,272 Diluted earnings per share Net income $ 225,760 22,012,769 $ .01 Nine Months Ended September 30, 2015 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 708,430 20,436,846 $ .03 Effect of dilutive securities Options - 1,290,272 Diluted earnings per share Net income $ 708,430 21,727,118 $ .03 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, 2016: Three Months Ended September 30, 2016 Income (Numerator) Shares (Denominator) Per-Share Amount Net loss $ (992,519 ) 20,783,032 $ (.05 ) Effect of dilutive securities Options - 141,045 Diluted earnings per share Net loss $ (992,519 ) 20,924,077 $ (.05 ) Nine Months Ended September 30, 2016 Income (Numerator) Shares (Denominator) Per-Share Amount Net loss $ (611,323 ) 20,781,501 $ (.03 ) Effect of dilutive securities Options - 141,045 Diluted earnings per share Net loss $ (611,323 ) 20,922,546 $ (.03 ) |
4. Discontinued Operations
4. Discontinued Operations | 9 Months Ended |
Sep. 30, 2016 | |
Discontinued Operations and Disposal Groups [Abstract] | |
4. Discontinued Operations | At the end of December 2015, the Company determined to close a restaurant that had previously been used for demonstration and training purposes. This restaurant was a part of the discontinued operations in 2008, but the Company decided to continue operating this location until the lease expired. Since the restaurant was closed, the related revenue and expense were taken out of 2015 operating income at the end of the year for the full year and the net expense shown as a loss on restaurant closed separate from the ongoing operations. The results for the three-month and nine-month periods ended September 30, 2015 have been reclassified to remove those operations from ongoing operations consistent with the full year 2015 presentation for comparison purposes to the three-month and nine-month periods ended September 30, 2016. |
5. Note Payable
5. Note Payable | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
5. Note Payable | In June 2016, the Company borrowed $2.0 million from Super G Funding, LLC ("Super G") and used those funds: (1) to repay the $500,000 revolving bank loan and (2) for working capital purposes. This loan is to be repaid in the total amount of $2.7 million in regular bi-monthly payments over a two-year period. |
6. Note 6
6. Note 6 | 9 Months Ended |
Sep. 30, 2016 | |
Note 6 | |
6. Note 6 | In the second quarter ended June 30, 2016, the Company recorded a valuation allowance of $750,659. This valuation allowance reflected the charge off of certain receivables from the operations discontinued in 2008 and was the remaining receivable from the various plaintiffs in the Heyser lawsuit which the Company won by summary judgment dismissing the Company from any liability and after numerous appeals including an appeal to the Indiana Supreme Court by the Heyser plaintiffs, in which the summary judgment was upheld. The Company also won summary judgment on its counterclaims against the various plaintiffs and was awarded a judgment against the plaintiffs in excess of $2 million, which included damages and attorneys' fees. The Company has been pursuing collection since that time. During the second quarter the Company made the decision that it was in its best interest to cease incurring additional legal fees and to settle its pending claims for $350,000, which is evidenced by a promissory note secured by a mortgage on two pieces of real estate. |
7. Note 7
7. Note 7 | 9 Months Ended |
Sep. 30, 2016 | |
Note 7 | |
7. Note 7 | During the quarter ended September 30, 2016, the Company made the decision to discontinue the stand-alone take-n-bake concept and devote its efforts to its next generation stand-alone prototype, Noble Roman's Craft Pizza & Pub. As a result of that decision, the Company is charging off all assets related to those discontinued operations, including $504,000 after tax benefit invested in three franchised locations, partially owned by certain officers of the Company which were not involved in the management of the operations, which had been used primarily to support research and development by the Company in those three franchised locations. The Company was using those franchised locations for testing and development in an attempt to improve the stand-alone take-n-bake concept for future franchising before the Company made the decision in the third quarter to discontinue that concept. In addition, $883,000 of the after-tax benefit reflected the charge-off of various receivables due from unrelated former franchisees of the stand-alone take-n-bake concept. This resulted in the net loss on discontinued operations $1,426,289, net of tax benefit of $881,902, for the three-month and nine-month periods ended September 30, 2016, respectively, compared to none in the corresponding periods in 2015. That loss also included a loss of $39,000, after the tax benefit, for settlement of rent on a former location that was part of the discontinued operations in 2008. |
8. Subsequent Events
8. Subsequent Events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
6. Subsequent Events | The Company evaluated subsequent events through the date the financial statements were issued and filed with SEC. On November 2, 2016 and November 8, 2016, the Company issued convertible, subordinated, unsecured promissory notes (the “Notes”) in an aggregate principal amount of $950,000 and warrants (the “Warrants”) to purchase up to 950,000 shares of the Company’s common stock, no par value per share (the “Common Stock”). The Company issued Notes and the Warrants to each of the following investors: Paul W. Mobley, the Company’s Executive Chairman, Chief Financial Officer and a director of the Company; Herbst Capital Management, LLC, the principal of which is Marcel Herbst, a director of the Company; and Roger and Darla Weissenberg, Lawrence and Susan Stanton, Neal and Maria Stanton, James and Cornelia Sullivan, Robert H. Paul, Barry W. Blank, Donald Miles, Nolan and Pamela Schabacker and Cleveland Family Limited Partnership (collectively, the “Investors”). The Company may issue additional Notes and Warrants. |
3. Earnings per Share (Tables)
3. Earnings per Share (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share Tables | |
Earnings Per Share | Three Months Ended September 30, 2015 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 225,760 20,722,497 $ .01 Effect of dilutive securities Options - 1,290,272 Diluted earnings per share Net income $ 225,760 22,012,769 $ .01 Nine Months Ended September 30, 2015 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 708,430 20,436,846 $ .03 Effect of dilutive securities Options - 1,290,272 Diluted earnings per share Net income $ 708,430 21,727,118 $ .03 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, 2016: Three Months Ended September 30, 2016 Income (Numerator) Shares (Denominator) Per-Share Amount Net loss $ (992,519 ) 20,783,032 $ (.05 ) Effect of dilutive securities Options - 141,045 Diluted earnings per share Net loss $ (992,519 ) 20,924,077 $ (.05 ) Nine Months Ended September 30, 2016 Income (Numerator) Shares (Denominator) Per-Share Amount Net loss $ (611,323 ) 20,781,501 $ (.03 ) Effect of dilutive securities Options - 141,045 Diluted earnings per share Net loss $ (611,323 ) 20,922,546 $ (.03 ) |
2. Royalties and Fees (Details
2. Royalties and Fees (Details Narrative) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016USD ($)Integer | Sep. 30, 2015USD ($) | Sep. 30, 2016USD ($)Integer | Sep. 30, 2015USD ($) | Dec. 31, 2015Integer | |
Royalties and Fees | $ | $ 1,900,000 | $ 1,700,000 | $ 5,300,000 | $ 5,400,000 | |
Number of Franchisee | Integer | 2,736 | 2,736 | 2,562 | ||
Outlets opened | Integer | 201 | ||||
Outlets closed | Integer | 27 | ||||
Initial Franchisee Fees | |||||
Royalties and Fees | $ | $ 76,000 | 87,000 | $ 204,000 | 153,000 | |
Equipment Commission | |||||
Royalties and Fees | $ | $ 7,000 | $ 23,000 | $ 17,000 | $ 60,000 |
3. Earnings Per Share (Details)
3. Earnings Per Share (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income (Numerator) | ||||
Net income | $ (992,519) | $ 225,760 | $ (611,323) | $ 708,430 |
Shares (Denominator) | ||||
Shares, basic | 20,783,032 | 20,722,497 | 20,781,501 | 20,436,846 |
Effect of dilutive securities | 141,045 | 1,290,272 | 141,045 | 1,290,272 |
Dilutive earnings per share: Income available to common stockholders and assumed conversions | 20,924,077 | 22,012,769 | 20,922,546 | 21,727,118 |
Per-Share (Amount) | ||||
Earnings per share | $ (.05) | $ 0.01 | $ (.03) | $ 0.03 |
Diluted earnings per share Income available to common stockholders and assumed conversions | $ (.05) | $ 0.01 | $ (.03) | $ 0.03 |