Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 08, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | NOBLE ROMANS INC | |
Entity Central Index Key | 709,005 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
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 | Q1 | |
Document Fiscal Year Focus | 2,017 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash | $ 287,101 | $ 477,928 |
Accounts receivable - net | 2,025,138 | 1,828,534 |
Inventories | 846,871 | 754,418 |
Prepaid expenses | 719,380 | 568,386 |
Deferred tax asset - current portion | 0 | 925,000 |
Total current assets | 3,878,490 | 4,554,266 |
Property and equipment: | ||
Equipment | 2,232,218 | 1,963,957 |
Leasehold improvements | 282,310 | 88,718 |
Construction and equipment in progress | 0 | 351,533 |
Total | 2,514,528 | 2,404,208 |
Less accumulated depreciation and amortization | 1,236,298 | 1,194,888 |
Net property and equipment | 1,278,230 | 1,209,320 |
Deferred tax asset (net of current portion) | 9,503,647 | 8,696,870 |
Goodwill | 278,466 | 278,466 |
Other assets including long-term portion of receivables-net | 5,271,232 | 5,159,937 |
Total assets | 20,210,065 | 19,898,859 |
Current liabilities: | ||
Current portion of term loan payable to bank | 1,202,522 | 655,725 |
Current portion of loan payable to Super G Funding, LLC | 1,362,506 | 1,130,765 |
Notes payable to officers | 424,166 | 0 |
Accounts payable and accrued expenses | 198,399 | 339,125 |
Total current liabilities | 3,187,593 | 2,125,615 |
Long-term obligations: | ||
Term loans payable to bank – net of current portion | 0 | 710,729 |
Loan payable to Super G Funding, LLC (net of current portion) | 322,159 | 718,175 |
Notes payable to officers | 310,000 | 310,000 |
Note payable to Kingsway America, Inc. | 0 | 600,000 |
Convertible notes payable | 902,162 | 769,835 |
Derivative warrant liability | 461,507 | 210,404 |
Derivative conversion liability | 810,795 | 435,671 |
Total long-term liabilities | 2,806,623 | 3,754,814 |
Stockholders' equity: | ||
Common stock – no par value (40,000,000 shares authorized, 20,783,032 issued and outstanding as of December 31, 2016 and March 31, 2017) | 24,313,173 | 24,308,297 |
Accumulated deficit | (10,097,324) | (10,289,867) |
Total stockholders' equity | 14,215,849 | 14,018,430 |
Total liabilities and stockholders' equity | $ 20,210,065 | $ 19,898,859 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Stockholders' equity: | ||
Common stock, par value | $ 0 | $ 0 |
Common stock, authorized shares | 40,000,000 | 40,000,000 |
Common stock, issued shares | 20,783,032 | 20,783,032 |
Common stock, outstanding shares | 20,783,032 | 20,783,032 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement [Abstract] | ||
Royalties and fees | $ 1,612,920 | $ 1,716,311 |
Administrative fees and other | 12,069 | 11,074 |
Restaurant revenue – Craft Pizza & Pub | 306,311 | 0 |
Restaurant revenue – non-traditional | 281,318 | 51,494 |
Total revenue | 2,212,618 | 1,778,879 |
Operating expenses: | ||
Salaries and wages | 239,707 | 251,308 |
Trade show expense | 121,656 | 128,436 |
Travel expense | 60,295 | 61,267 |
Other operating expenses | 198,690 | 195,313 |
Restaurant expenses - Craft Pizza & Pub | 213,146 | 0 |
Restaurant expenses – non-traditional | 273,373 | 45,732 |
Depreciation and amortization | 51,893 | 29,412 |
General and administrative | 404,472 | 405,809 |
Total expenses | 1,563,232 | 1,117,277 |
Operating income | 649,386 | 661,602 |
Interest | 320,994 | 55,205 |
Loss on restaurant discontinued | 0 | 36,776 |
Change in fair value of derivatives | 17,627 | 0 |
Income before income taxes from continuing operations | 310,765 | 569,621 |
Income tax expense | 118,222 | 219,822 |
Net income | $ 192,543 | $ 349,799 |
Earnings per share - basic: | ||
Net income | $ 0.01 | $ 0.02 |
Weighted average number of common shares outstanding | 20,783,032 | 20,778,422 |
Diluted earnings per share: | ||
Net income | $ 0.01 | $ 0.02 |
Weighted average number of common shares outstanding | 25,419,967 | 20,835,847 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - 3 months ended Mar. 31, 2017 - USD ($) | Common Stock | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2016 | $ 24,308,297 | $ (10,289,867) | $ 14,018,430 |
Beginning Balance, Shares at Dec. 31, 2016 | 20,783,032 | ||
Net loss | 192,543 | 192,543 | |
Amortization of value of employee stock options | $ 4,876 | 4,876 | |
Ending Balance, Amount at Mar. 31, 2017 | $ 24,313,173 | $ (10,097,324) | $ 14,215,849 |
Ending Balance, Shares at Mar. 31, 2017 | 20,783,032 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
OPERATING ACTIVITIES | ||
Net income | $ 192,543 | $ 349,799 |
Adjustments to reconcile net income to net cash provided (used) by operating activities: | ||
Depreciation and amortization | 124,880 | 30,916 |
Deferred income taxes | 118,222 | 219,822 |
Change in fair value of derivatives | 17,627 | 0 |
Other non-cash expense | 24,526 | 0 |
Increase in: | ||
Accounts receivable | (196,605) | (92,944) |
Inventories | (92,452) | (138,697) |
Prepaid expenses | (72,285) | (56,001) |
Other assets | (111,295) | (375,481) |
Decrease in: | ||
Accounts payable and accrued expenses | (68,417) | (315,826) |
NET CASH USED IN OPERATING ACTIVITIES | (63,256) | (378,412) |
INVESTING ACTIVITIES | ||
Purchase of property and equipment | (213,555) | (3,825) |
NET CASH USED IN INVESTING ACTIVITIES | (213,555) | (3,825) |
FINANCING ACTIVITIES | ||
Payment of principal on bank term loans | (163,931) | (109,288) |
Payment of principal on Super G Funding, LLC loan | (176,775) | 0 |
Payment of Kingsway America loan | (600,000) | 0 |
Net proceeds from (repayment of) officer notes | 424,166 | (15,000) |
Net proceeds from issuance of convertible notes | 674,832 | 0 |
Proceeds from revolving bank line of credit | 0 | 500,000 |
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES | 158,292 | 375,712 |
DISCONTINUED OPERATIONS | ||
Payment of obligations from discontinued operations | (72,308) | (43,603) |
Decrease in cash | (190,827) | (50,128) |
Cash at beginning of period | 477,928 | 194,021 |
Cash at end of period | 287,101 | 143,893 |
Supplemental schedule of investing and financing activities | ||
Cash paid for interest | $ 197,138 | $ 77,919 |
1. Basis of Presentation
1. Basis of Presentation | 3 Months Ended |
Mar. 31, 2017 | |
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, 2016 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 period ended March 31, 2017 are not necessarily indicative of the results to be expected for the full year ending December 31, 2017. |
2. Royalties and Fees
2. Royalties and Fees | 3 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
2. Royalties and Fees | Royalties and fees included $51,490 and $55,500 for the three-month periods ended March 31, 2016 and 2017, respectively, of initial franchise fees. Royalties and fees included $4,108 and $8,382 for the three-month periods ended March 31, 2016 and 2017, respectively, of equipment commissions. Royalties and fees, less initial franchise fees and equipment commissions were $1,660,713 and $1,549,038 for the three-month periods ended March 31, 2016 and 2017, respectively. 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 for the franchisee. There were 2,768 franchises/licenses in operation on December 31, 2016 and 2,790 franchises/licenses in operation on March 31, 2017. During the three-month period ended March 31, 2017, there were 36 new outlets opened and 14 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 2,043 licensed grocery store units included in the count above have left the system. |
3. Earnings per Share
3. Earnings per Share | 3 Months Ended |
Mar. 31, 2017 | |
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 period ended March 31, 2016: Three Months Ended March 31, 2016 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 349,799 20,778,422 $ .02 Effect of dilutive securities Options - 57,425 - Diluted earnings per share Net income per share with assumed conversions $ 349,799 20,835,847 $ .02 The following table sets forth the calculation of basic and diluted earnings per share for the three-month period ended March 31, 2017: Three Months Ended March 31, 2017 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 192,543 20,783,032 $ .01 Effect of dilutive securities Options - 248,046 - Convertible notes - 4,388,889 - Diluted earnings per share Net income per share with assumed conversions $ 192,543 25,419,967 $ .01 |
4. Deferred Tax Asset
4. Deferred Tax Asset | 3 Months Ended |
Mar. 31, 2017 | |
Deferred Tax Asset | |
4. Deferred Tax Asset | The Financial Accounting Standards Board (the “FASB”) recently issued Accounting Standards Update (“ASU”) 2015-17 as part of its Simplification Initiative. The amendments eliminate the guidance in Topic 740, Income Taxes, that required an entity to separate deferred tax liabilities and assets between current and noncurrent amounts in a classified balance sheet. Rather, deferred taxes are now presented as noncurrent under the new standard. In the balance sheet ended December 31, 2016, under the previous guidance, $925,000 of the deferred tax asset was shown in current assets and with the current guidance, the deferred tax asset is all presented as non-current. |
5. Notes Payable
5. Notes Payable | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
5. Notes Payable | The accounting treatment of derivative financial instruments requires 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 is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. As described in Note 3 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, in 2016 and the first quarter of 2017, the Company conducted a private placement (the “Offering”) of Units with each Unit consisting of a convertible promissory note (collectively, the “Notes”) and a warrant to purchase shares of the Company’s common stock (collectively, the “Warrants”) for which Divine Capital Markets, LLC served as the placement agent (the “Placement Agent”). The Company issued in the Offering a total of $2.4 million principal amount of Notes and Warrants to purchase up to 2.4 million shares of the Company’s common stock. The fair value of the derivative instruments, along with the cash Placement Agent fees, are deducted from the carrying value of the Notes, as original issue discount (“OID”). The OID is amortized over the term of the Notes using the effective interest rate method. Activity related to the Units during the first quarter of 2017 is as follows: Gross Proceeds from additional convertible notes $ 800,000 Placement Agent Fees 104,000 Fair Value of Warrants 106,363 Fair Value of Conversion Features 447,586 Fair Value of Placement Agent Warrants 54,650 Net Amount Allocable to Notes $ 87,401 At March 31, 2017, the balance of the Notes is comprised of: Face Value $ 2,400,000 Unamortized OID 1,497,838 Carrying Value $ 902,162 To measure the fair value of derivative instruments, the Company utilizes Monte Carlo models that value a warrant issued to Kingsway America, Inc. (the “Kingsway Warrant”), the imbedded conversion feature in the Notes (the “Conversion Feature”), the Warrants and the warrants issued to the Placement Agent (the “Placement Agent Warrants”). The Monte Carlo models are based on future projections of the various potential outcomes of each instrument, giving consideration to the terms of each instrument. A discounted average cash flow over the various scenarios is completed to determine the value of the instrument. The table below provides a summary of the changes in fair value, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the quarter ended March 31, 2017: Kingsway Warrant Conversion Feature Warrants Placement Agent Warrants Total Balance - December 31, 2016 $ 68,335 $ 435,672 $ 93,387 $ 48,684 $ 646,078 Issuance during first quarter - 447,586 106,363 54,650 608,599 Change in Fair Value of Derivative Liabilities 131,508 (72,463 ) (26,219 ) (15,201 ) 17,625 Balance – March 31, 2017 $ 199,843 $ 810,795 $ 173,531 $ 88,133 $ 1,272,302 |
6. Subsequent Events
6. Subsequent Events | 3 Months Ended |
Mar. 31, 2017 | |
Subsequent Events [Abstract] | |
8. Subsequent Events | 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. |
3. Earnings per Share (Tables)
3. Earnings per Share (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share Tables | |
Earnings Per Share | Three Months Ended March 31, 2016 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 349,799 20,778,422 $ .02 Effect of dilutive securities Options - 57,425 - Diluted earnings per share Net income per share with assumed conversions $ 349,799 20,835,847 $ .02 Three Months Ended March 31, 2017 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 192,543 20,783,032 $ .01 Effect of dilutive securities Options - 248,046 - Convertible notes - 4,388,889 - Diluted earnings per share Net income per share with assumed conversions $ 192,543 25,419,967 $ .01 |
5. Notes Payable (Tables)
5. Notes Payable (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Notes Payable Tables | |
Activity related to the Units | Gross Proceeds from additional convertible notes $ 800,000 Placement Agent Fees 104,000 Fair Value of Warrants 106,363 Fair Value of Conversion Features 447,586 Fair Value of Placement Agent Warrants 54,650 Net Amount Allocable to Notes $ 87,401 |
Notes payable | Face Value $ 2,400,000 Unamortized OID 1,497,838 Carrying Value $ 902,162 |
Changes in fair value of all financial assets and liabilities | Kingsway Warrant Conversion Feature Warrants Placement Agent Warrants Total Balance - December 31, 2016 $ 68,335 $ 435,672 $ 93,387 $ 48,684 $ 646,078 Issuance during first quarter - 447,586 106,363 54,650 608,599 Change in Fair Value of Derivative Liabilities 131,508 (72,463 ) (26,219 ) (15,201 ) 17,625 Balance – March 31, 2017 $ 199,843 $ 810,795 $ 173,531 $ 88,133 $ 1,272,302 |
2. Royalties and Fees (Details
2. Royalties and Fees (Details Narrative) | 3 Months Ended | ||
Mar. 31, 2017USD ($)Integer | Mar. 31, 2016USD ($) | Dec. 31, 2016Integer | |
Royalties and Fees | $ | $ 1,549,038 | $ 1,660,713 | |
Number of Franchisee | Integer | 2,790 | 2,768 | |
Outlets opened | Integer | 36 | ||
Outlets closed | Integer | 14 | ||
Initial Franchisee Fees | |||
Royalties and Fees | $ | $ 55,500 | 51,490 | |
Equipment Commission | |||
Royalties and Fees | $ | $ 8,382 | $ 4,108 |
3. Earnings Per Share (Details)
3. Earnings Per Share (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income (Numerator) | ||
Net income | $ 192,543 | $ 349,799 |
Dilutive earnings per share: Income available to common stockholders and assumed conversions | $ 192,543 | $ 349,799 |
Shares (Denominator) | ||
Shares, basic | 20,783,032 | 20,778,422 |
Dilutive earnings per share: Income available to common stockholders and assumed conversions | 25,419,967 | 20,835,847 |
Per-Share (Amount) | ||
Earnings per share | $ 0.01 | $ 0.02 |
Diluted earnings per share Income available to common stockholders and assumed conversions | $ 0.01 | $ 0.02 |
Options | ||
Income (Numerator) | ||
Effect of dilutive securities | $ 0 | $ 0 |
Shares (Denominator) | ||
Effect of dilutive securities | 248,046 | 57,425 |
Per-Share (Amount) | ||
Income available to common stockholders | $ 0 | $ 0 |
Convertible Preferred Stock | ||
Income (Numerator) | ||
Effect of dilutive securities | $ 0 | |
Shares (Denominator) | ||
Effect of dilutive securities | 4,388,889 | |
Per-Share (Amount) | ||
Income available to common stockholders | $ 0 |
5. Notes Payable (Details)
5. Notes Payable (Details) | Mar. 31, 2017USD ($) |
Notes Payable Details | |
Gross Proceeds from additional convertible notes | $ 800,000 |
Placement Agent Fees | 104,000 |
Fair Value of Warrants | 106,363 |
Fair Value of Conversion Features | 447,586 |
Fair Value of Placement Agent Warrants | 54,650 |
Net Amount Allocable to Notes | $ 87,401 |
5. Notes Payable (Details 1)
5. Notes Payable (Details 1) | Mar. 31, 2017USD ($) |
Notes Payable Details 1 | |
Face Value | $ 2,400,000 |
Unamortized OID | 1,497,838 |
Carrying Value | $ 902,162 |
5. Notes Payable (Details 2)
5. Notes Payable (Details 2) | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Beginning Balance | $ 646,078 |
Issuance during first quarter | 608,599 |
Change in Fair Value of Derivative Liabilities | 17,625 |
Ending Balance | 1,272,302 |
Kingsway Warrant | |
Beginning Balance | 68,335 |
Issuance during first quarter | 0 |
Change in Fair Value of Derivative Liabilities | 131,508 |
Ending Balance | 199,843 |
Conversion Feature | |
Beginning Balance | 435,672 |
Issuance during first quarter | 447,586 |
Change in Fair Value of Derivative Liabilities | (72,463) |
Ending Balance | 810,795 |
Warrants | |
Beginning Balance | 93,387 |
Issuance during first quarter | 106,363 |
Change in Fair Value of Derivative Liabilities | (26,219) |
Ending Balance | 173,531 |
Placement Agent Warrants | |
Beginning Balance | 48,684 |
Issuance during first quarter | 54,650 |
Change in Fair Value of Derivative Liabilities | (15,201) |
Ending Balance | $ 88,133 |