Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Apr. 15, 2020 | Jun. 28, 2019 | |
Document And Entity Information | |||
Entity Registrant Name | NOBLE ROMANS INC | ||
Entity Central Index Key | 0000709005 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
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? | No | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation, State or Country Code | IN | ||
Entity File Number | 0-11104 | ||
Entity Public Float | $ 11,200,000 | ||
Entity Common Stock, Shares Outstanding | 22,215,413 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2019 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash | $ 218,132 | $ 76,194 |
Accounts receivable - net | 978,408 | 1,573,600 |
Inventories | 880,660 | 962,783 |
Prepaid expenses | 784,650 | 688,259 |
Total current assets | 2,861,850 | 3,300,836 |
Property and equipment: | ||
Equipment | 2,899,611 | 2,872,494 |
Leasehold improvements | 1,187,100 | 1,180,050 |
Construction and equipment in progress | 374,525 | 119,340 |
Total | 4,461,236 | 4,171,884 |
Less accumulated depreciation and amortization | 1,689,520 | 1,399,435 |
Net property and equipment | 2,771,716 | 2,772,449 |
Deferred tax asset | 3,900,221 | 4,817,309 |
Deferred contract costs | 817,763 | 698,935 |
Goodwill | 278,466 | 278,466 |
Operating lease right of use assets | 4,242,416 | 0 |
Other assets including long-term portion of notes receivable - net | 4,232,655 | 3,808,957 |
Total assets | 19,105,087 | 15,676,952 |
Current liabilities: | ||
Current portion of long-term notes payable to bank | 871,429 | 871,429 |
Accounts payable and accrued expenses | 731,059 | 523,315 |
Current portion of operating lease liability | 333,763 | 0 |
Total current liabilities | 1,936,251 | 1,394,744 |
Long-term obligations: | ||
Term loans payable to bank (net of current portion) | 2,999,275 | 3,898,733 |
Convertible notes payable | 1,501,282 | 1,539,204 |
Operating lease liabilities | 4,016,728 | 0 |
Deferred contract income | 817,763 | 698,935 |
Total long-term liabilities | 9,335,048 | 6,136,872 |
Stockholders' equity: | ||
Common stock - no par value (40,000,000 shares authorized, 21,783,131 issued and outstanding as of December 31, 2018 and 22,215,512 issued and outstanding as of December 31, 2019) | 24,858,311 | 24,739,482 |
Accumulated deficit | (17,024,523) | (16,594,146) |
Total stockholders' equity | 7,833,788 | 8,145,336 |
Total liabilities and stockholders' equity | $ 19,105,087 | $ 15,676,952 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
Stockholders' equity: | ||
Common stock, par value | $ .00 | $ .00 |
Common stock, authorized shares | 40,000,000 | 40,000,000 |
Common stock, issued shares | 22,215,512 | 21,783,131 |
Common stock, outstanding shares | 22,215,512 | 21,783,131 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Total revenue | $ 11,704,624 | $ 12,447,947 | $ 9,838,408 | |
Operating expenses: | ||||
Total operating expenses | 6,968,860 | 7,681,993 | 4,987,843 | |
Depreciation and amortization | 382,793 | 440,240 | 240,854 | |
General and administrative expenses | 1,739,383 | 1,668,718 | 1,665,980 | |
Total expenses | 9,091,036 | 9,790,951 | 6,894,677 | |
Operating income | 2,613,588 | 2,656,996 | 2,943,732 | |
Interest expense | 774,565 | 655,203 | 1,474,027 | |
Adjust valuation of receivables | 1,300,000 | 4,095,805 | 440,000 | |
Change in fair value of derivatives | 0 | 0 | 174,737 | |
Net income (loss) before income taxes | 539,023 | (2,094,012) | 854,968 | |
Income tax expense | 917,088 | 930,397 | 4,146,459 | |
Net loss from continuing operations | (378,065) | (3,024,409) | (3,291,491) | |
Income (loss) from discontinued operations net of tax benefit of $57,431 for 2017 and $12,200 for 2018 | 0 | (37,800) | (93,436) | |
Net loss | $ (378,065) | $ (3,062,209) | $ (3,384,927) | |
Earnings (loss) per share - basic: | ||||
Net income (loss) from continuing operations | $ (.02) | $ (0.14) | $ (0.16) | |
Net loss from discontinued operations net of tax benefit | .00 | 0 | 0 | |
Net income (loss) | $ (.02) | $ (0.14) | $ (0.16) | |
Weighted average number of common shares outstanding | 22,052,859 | 21,249,607 | 20,783,032 | |
Diluted earnings (loss) per share: | ||||
Net income (loss) from continuing operations | [1] | $ (0.02) | $ (0.14) | $ (0.16) |
Net loss from discontinued operations net of tax benefit | 0 | .00 | .00 | |
Net income (loss) | [1] | $ (0.02) | $ (0.14) | $ (0.16) |
Weighted average number of common shares outstanding | 23,315,695 | 26,094,292 | 25,704,286 | |
Company-Owned Restaurants | ||||
Total revenue | $ 4,830,199 | $ 4,815,842 | $ 1,820,737 | |
Operating expenses: | ||||
Total operating expenses | 4,250,406 | 3,909,142 | 1,389,410 | |
Company-Owned Non-Traditional | ||||
Total revenue | 673,647 | 1,156,347 | 1,173,728 | |
Operating expenses: | ||||
Total operating expenses | 626,453 | 1,145,106 | 1,155,074 | |
Franchising | ||||
Total revenue | 6,162,576 | 6,422,315 | 6,798,213 | |
Operating expenses: | ||||
Total operating expenses | 2,092,001 | 2,627,745 | 2,443,359 | |
Administrative Fees and Other | ||||
Total revenue | $ 38,202 | $ 53,443 | $ 45,730 | |
[1] | Net loss per share is shown the same as basic loss per share because the underlying dilutive securities have anti-dilutive effect. |
Consolidated Statements of Op_2
Consolidated Statements of Operations (Parenthetical) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | |||
Tax benefit, discontinued operations | $ 0 | $ 12,200 | $ 57,431 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Common Stock | Deficit | Total |
Beginning balance, shares at Dec. 31, 2016 | 20,783,032 | ||
Beginning balance, amount at Dec. 31, 2016 | $ 24,308,297 | $ (10,289,867) | $ 14,018,430 |
Net loss | (3,384,927) | (3,384,927) | |
Amortization of value of stock options | $ 14,588 | 14,588 | |
Ending balance, shares at Dec. 31, 2017 | 20,783,032 | ||
Ending balance, amount at Dec. 31, 2017 | $ 24,322,885 | (13,674,794) | 10,648,091 |
Net loss | (3,062,209) | (3,062,209) | |
Remove derivatives in accordance with ASU 2017-11 | 142,857 | 142,857 | |
Amortization of value of stock options | $ 16,597 | 16,597 | |
Conversion of convertible notes to common stock, shares | 800,000 | ||
Conversion of convertible notes to common stock, amount | $ 400,000 | 400,000 | |
Ending balance, shares at Dec. 31, 2018 | 21,583,032 | ||
Ending balance, amount at Dec. 31, 2018 | $ 24,739,482 | (16,594,146) | 8,145,336 |
Net loss | (378,065) | (378,065) | |
Adjustment for the adoption of ASU 2016-02 accounting for leases | (52,312) | (52,312) | |
Amortization of value of stock options | $ 18,829 | 18,829 | |
Cashless exercise of warrants, shares | 232,381 | ||
Cashless exercise of warrants, amount | 0 | ||
Conversion of convertible notes to common stock, shares | 200,000 | ||
Conversion of convertible notes to common stock, amount | $ 100,000 | 100,000 | |
Ending balance, shares at Dec. 31, 2019 | 22,215,512 | ||
Ending balance, amount at Dec. 31, 2019 | $ 24,858,311 | $ (17,024,523) | $ 7,833,788 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
OPERATING ACTIVITIES | |||
Net loss | $ (378,065) | $ (3,062,209) | $ (3,384,927) |
Adjustments to reconcile net loss to net cash provided (used) by operating activities: | |||
Depreciation and amortization | 469,804 | 558,277 | 604,481 |
Amortization of lease cost in excess of cash paid | 134,545 | 0 | 0 |
Deferred income taxes | 917,088 | 918,195 | 3,886,366 |
Change in fair value of derivatives | 0 | 0 | 174,737 |
(Increase) decrease in: | |||
Accounts receivable | (377,151) | 223,157 | (575,302) |
Inventories | 82,123 | (106,539) | (25,572) |
Prepaid expenses | (96,392) | (7,933) | 112,028 |
Other assets including long-term portion of accounts receivable | 548,648 | 3,059,197 | (1,084,680) |
Increase (decrease) in: | |||
Accounts payable and accrued expenses | 207,745 | (101,286) | 585,869 |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 1,508,345 | 1,480,859 | 293,000 |
INVESTING ACTIVITIES | |||
Purchase of property and equipment | (289,351) | (1,161,168) | (1,372,674) |
NET CASH USED BY INVESTING ACTIVITIES | (289,351) | (1,161,168) | (1,372,674) |
FINANCING ACTIVITIES | |||
Payment of principal outstanding on former bank loan | 0 | 0 | (1,366,454) |
Payment of principal on Super G loan | 0 | 0 | (2,066,283) |
Payment of principal on First Financial Bank loan | (998,271) | (812,292) | (160,714) |
Payment of principal on Kingsway America loan | 0 | 0 | (600,000) |
Net proceeds from new financings net of closing costs | 0 | 157,727 | 5,792,132 |
Lease liabilities | (78,785) | 0 | 0 |
Net proceeds (repayment of) from officers loans | 0 | 0 | (310,000) |
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES | (1,077,056) | (654,565) | 1,288,681 |
DISCONTINUED OPERATIONS | |||
Payment of obligations from discontinued operations | 0 | (50,000) | (225,867) |
Increase (decrease) in cash | 141,938 | (384,874) | (16,860) |
Cash at beginning of year | 76,194 | 461,068 | 477,928 |
Cash at end of year | $ 218,132 | $ 76,194 | $ 461,068 |
1. Summary of Significant Accou
1. Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Organization: The Company, with two wholly-owned subsidiaries, sells and services franchises and licenses and operates Company-owned foodservice locations for one non-traditional location and five traditional restaurants called Craft Pizza & Pub under the trade names “Noble Roman’s Pizza”, “Noble Roman’s Craft Pizza & Pub” and “Tuscano’s Italian Style Subs". Unless the context otherwise indicates, reference to the “Company” are to Noble Roman’s, Inc. and its two wholly-owned subsidiaries. Principles of Consolidation: The consolidated financial statements include the accounts of Noble Roman’s, Inc. and its wholly-owned subsidiaries, Pizzaco, Inc. and RH Roanoke, Inc. Inter-company balances and transactions have been eliminated in consolidation. Inventories: Inventories consist of food, beverage, restaurant supplies, restaurant equipment and marketing materials and are stated at the lower of cost (first-in, first-out) or net realizable value. Property and Equipment: Equipment and leasehold improvements are stated at cost. Depreciation and amortization are computed on the straight-line method over the estimated useful lives ranging from five years to 20 years. Leasehold improvements are amortized over the shorter of estimated useful life or the term of the lease including likely renewals. Construction and equipment in progress are stated at cost for leasehold improvements, equipment for a new restaurant being constructed and for pre-opening costs of any restaurant not yet open as of the date of the statements. Significant Accounting Policies: There have been no significant changes in the Company's accounting policies from those disclosed in its Annual Report on Form 10-K except for those policies described below in relation to the adoption of Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842). The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use assets ("ROU"), and lease liability obligations are included in the Company's balance sheets. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liability obligations represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company's leases typically do not provide an implicit rate, the Company estimates its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The ROU asset also includes in the lease payments made and excludes lease incentives and lease direct costs. The Company's lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. The Company adopted the new standard to all material leases existing on January 1, 2019 and recognized a cumulative effect adjustment to the opening balance of accumulated deficit on that date. Cash and Cash Equivalents: Includes actual cash balance. The cash is not pledged nor are there any withdrawal restrictions. Advertising Costs: The Company records advertising costs consistent with the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”)“Other Expense” topic and “Advertising Costs” subtopic. This statement requires the Company to expense advertising production costs the first time the production material is used. Fair Value Measurements and Disclosures: The Fair Value Measurements and Disclosures topic of the FASB’s ASC requires companies to determine fair value based on the price that would be received to sell the assets or paid to transfer to liability to a market participant. The fair value measurements and disclosure topic emphasis that fair value is a market based measurement, not an entity specific measurement. The guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories: Level One: Quoted market prices in active markets for identical assets or liabilities. Level Two: Observable market –based inputs or unobservable inputs that are corroborated by market data. Level Three: Unobservable inputs that are not corroborated by market data. Use of Estimates: The preparation of the consolidated financial statements in conformity with United States 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 could differ from those estimates. After a thorough review by management in 2018, the Company permanently wrote off $1.3 million and created an additional reserve for possible non-collection of $2.8 million. After a review in 2019 and also considering the impact of the COVID-19 pandemic, it was decided to add an additional reserve for possible non-collections of $1.3 million. The actual amount the Company eventually collects may differ from this estimation. The Company evaluates its property and equipment and related costs periodically to assess whether any impairment indications are present, including recurring operating losses and significant adverse changes in legal factors or business climate that affect the recovery of recorded value. If any impairment of an individual asset is evident, a loss would be provided to reduce the carrying value to its estimated fair value. Debt Issuance Costs: Debt issuance cost is presented on the balance sheet as a direct reduction from the carrying amount of the associated liability. Debt issuance costs are amortized to interest expense ratably over the term of the applicable debt. The unamortized debt issuance cost at December 31, 2019 was $800,000. Intangible Assets: The Company recorded goodwill of $278,000 as a result of the acquisition of RH Roanoke, Inc. of certain assets of a former franchisee of the Company. Goodwill has an indeterminable life and is assessed for impairment at least annually and more frequently as triggering events may occur. In making this assessment, management relies on a number of factors including operating results, business plans, economic projections, anticipated future cash flows, and transactions and marketplace data. Any impairment losses determined to exist are recorded in the period the determination is made. There are inherent uncertainties related to these factors and management’s judgment is involved in performing goodwill and other intangible assets valuation analyses, thus there is risk that the carrying value of goodwill and other intangible assets may be overstated or understated. The Company has elected to perform the annual impairment assessment of recorded goodwill as of the end of the Company’s fiscal year. The results of this annual impairment assessment indicated that the fair value of the reporting unit as of December 31, 2019, exceeded the carrying or book value, including goodwill, and therefore recorded goodwill was not subject to impairment. Royalties, Administrative and Franchise Fees: Royalties are generally recognized as income monthly based on a percentage of monthly sales of franchised or licensed restaurants and from audits and other inspections as they come due and payable by the franchisee. Fees from the retail products in grocery stores are recognized monthly based on the distributors’ sale of those retail products to the grocery stores or grocery store distributors. Administrative fees are recognized as income monthly as earned. The Company adopted Accounting Standards Update 2014-09 effective January 2018 which did not materially affect the Company's recognition of royalties, fees from the sale of retail products in grocery stores, administrative fees or sales from Company-owned restaurants. However, initial franchise fees and related contract costs are now deferred and amortized on a straight-line basis over the term of the franchise agreements, generally five to ten 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 cost, and the franchise fees and contract costs initially incurred and paid approximate the relative amortized franchise fees and contract costs for those same periods. Exit or Disposal Activities Related to Discontinued Operations: The Company records exit or disposal activity for discontinued operations when management commits to an exit or disposal plan and includes those charges under results of discontinued operations, as required by the ASC “Exit or Disposal Cost Obligations” topic. Income Taxes: The Company provides for current and deferred income tax liabilities and assets utilizing an asset and liability approach along with a valuation allowance as appropriate. The Company evaluated its deferred tax assets in 2018 and determined that $1,422,960 of the deferred tax credits may expire in 2019 and 2020 before they are fully utilized, which increased the Company’s tax expense for 2018 and reduced the deferred tax credit on the balance sheet. The Company again evaluated its deferred tax assets in 2019 and determined that $1.7 million of its net operating loss carry-forward may expire before they are used resulting in an additional $400 thousand in tax expense in 2019. As of December 31, 2019, the net operating loss carry-forward was approximately $11.8 million which expires between the years 2020 and 2036. As a result of the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”), the Company reduced the carrying value of the tax impact of the net operating loss carry-forward to reflect the new highest corporate income tax rate of 21% versus the old rate of 34%. U.S. generally accepted accounting principles require the Company to examine its tax positions for uncertain positions. Management is not aware of any tax positions that are more likely than not to change in the next 12 months, or that would not sustain an examination by applicable taxing authorities. The Company’s policy is to recognize penalties and interest as incurred in its Consolidated Statements of Operations. None were included for the years ended December 31, 2017, 2018 and 2019. The Company’s federal and various state income tax returns for 2016 through 2019 are subject to examination by the applicable tax authorities, generally for three years after the later of the original or extended due date. Basic and Diluted Net Income Per Share: Net income per share is based on the weighted average number of common shares outstanding during the respective year. When dilutive, stock options and warrants are included as share equivalents using the treasury stock method. The following table sets forth the calculation of basic and diluted loss per share for the year ended December 31, 2017: Income (Numerator) Shares (Denominator) Per Share Amount Loss per share – basic Net loss $ (3,384,927 ) 20,783,032 $ (.16 ) Effect of dilutive securities Options - 222,624 Convertible notes 345,208 4,698,630 Diluted loss per share Net loss $ (3,039,719 ) 25,704,286 $ (.16 ) (1) Net loss per share is shown the same as basic loss per share because the underlying dilutive securities have an anti-dilutive effect. The following table sets forth the calculation of basic and diluted loss per share for the year ended December 31, 2018: Income (Numerator) Shares (Denominator) Per Share Amount Net loss per share – basic Net loss $ (3,062,209 ) 21,249,607 $ (.14 ) Effect of dilutive securities Options - 511,260 Convertible notes 213,125 4,333,425 Diluted net income per share Net loss (1) $ (2,849,084 ) 26,094,292 $ (.14 ) (1) Net loss per share is shown the same as basic loss per share because the underlying dilutive securities have an anti-dilutive effect. The following table sets forth the calculation of basic and diluted loss per share for the year ended December 31, 2019: Income (Numerator) Shares (Denominator) Per Share Amount Net loss per share – basic Net loss $ (378,605 ) 22,052,859 $ (.02 ) Effect of dilutive securities Options - 12,836 Convertible notes 62,500 1,250,000 Diluted net loss per share Net loss $ (316,105 ) 23,315,695 $ (.02 ) (1) Net loss per share is shown the same as basic loss per share because the underlying dilutive securities have an anti-dilutive effect. Subsequent Events: The Company evaluated subsequent events through the date the consolidated statements were issued and filed with the annual report on Form 10-K. On February 7, 2020, the Company entered into a Senior Secured Promissory Note and Warrant Purchase Agreement (the “Agreement”) with Corbel Capital Partners SBIC, L.P. (the “Purchaser”). Pursuant to the Agreement, the Company issued to the Purchaser a senior secured promissory note (the “Senior Note”) in the initial principal amount of $8.0 million. The Company has used or will use the net proceeds of the Agreement as follows: (i) $4.2 million was used to repay the Company’s then-existing bank debt which was in the original amount of $6.1 million; (ii) $1,275,000 was used to repay the portion of the Company’s existing subordinated convertible debt the maturity date of which most had not previously been extended; (iii) debt issuance costs; and (iv) the remaining net proceeds will be used for working capital or other general corporate purposes, including development of new Company-owned Craft Pizza & Pub locations. The Senior Note bears cash interest of LIBOR, as defined in the Agreement, plus 7.75%. In addition, the Senior Note requires payment-in-kind interest (“PIK Interest”) of 3% per annum, which will be added to the principal amount of the Senior Note. Interest is payable in arrears on the last calendar day of each month. The Senior Note matures on February 7, 2025. The Senior Note does not require any fixed principal payments until February 28, 2023, at which time required monthly payments of principal in the amount of $33,333 begin and continue until maturity. The Senior Note requires the Company to make additional payments on the principal balance of the Senior Note based on its consolidated excess cash flow, as defined in the Agreement. In conjunction with the borrowing under the Senior Note, the Company issued to the Purchaser a warrant (the “Corbel Warrant”) to purchase up to 2,250,000 shares of Common Stock. The Corbel Warrant entitles the Purchaser to purchase from the Company, at any time or from time to time: (i) 1,200,000 shares of Common Stock at an exercise price of $0.57 per share (“Tranche 1”), (ii) 900,000 shares of Common Stock at an exercise price of $0.72 per share (“Tranche 2”), and (iii) 150,000 shares of Common Stock at an exercise price of $0.97 per share (“Tranche 3”). The Purchaser is required to exercise the Corbel Warrant with respect to Tranche 1 if the Common Stock is trading at $1.40 per share or higher for a specified period, and is further required to exercise the Corbel Warrant with respect to Tranche 2 if the Common Stock is trading at $1.50 per share or higher for a specified period. Cashless exercise of the Corbel Warrant is only permitted with respect to Tranche 3. The Purchaser has the right, within six months after the issuance of any shares under the Corbel Warrant, to require the Company to repurchase such shares for cash or for Put Notes, at the Company's discretion. The Corbel Warrant expires on the sixth anniversary of the date of its issuance. On March 16, 2020, by order of the Governor of the State of Indiana (the “Governor”), all restaurants within Indiana were ordered to close for inside dining. Due to the Order, all Craft Pizza & Pub restaurants have been open for carry-out only primarily through the Company’s Pizza Valet system and third-party delivery providers. On May 1, 2020, the Governor issued another order allowing restaurants to be open for inside dining for up to 50% of capacity as of May 11, 2020, and on June 14, 2020 up to 75% of capacity, plus bars may open up to 50% of capacity, and on July 4, 2020 restaurants and bars may resume at 100% capacity. As the duration and scope of the pandemic is uncertain, these Orders are subject to further modification which could adversely affect the Company. On April 25, 2020, the Company borrowed under the Payroll Protection Program in the amount of $715,000. The Company anticipates this note will be forgiven. The funds, according to the provision in the CARES Act, may be used for payroll costs including payroll benefits, interest on mortgage obligations incurred before February 15, 2020, rent under lease agreements in force before February 15, 2020 and utilities for which service began before February 15, 2020. In February 2020, as discussed in Item 2. Properties, a lease for the Brownsburg location became effective which expires in February 2030. The obligation under this lease is included in future obligations of $7 million under operating leases, as described in Note 5. No subsequent event required recognition or disclosure except as discussed above. |
2. Accounts Receivable
2. Accounts Receivable | 12 Months Ended |
Dec. 31, 2019 | |
Accounts and Financing Receivable, after Allowance for Credit Loss [Abstract] | |
Accounts Receivable | At December 31, 2018 and 2019, the carrying value of the Company’s accounts receivable has been reduced to anticipated realizable value. As a result of this reduction of carrying value, the Company anticipates that substantially all of its net receivables reflected on the Consolidated Balance Sheets as of December 31, 2018 and 2019 will be collected. The allowance to reduce the receivables to anticipated net realizable value at December 31, 2018 was $4.3 million and at December 31, 2019 was $5.6 million. Adjustments for the valuation of receivables has been $440,000 in 2017, $4.1 million in 2018 and $1.3 million in 2019. Other assets, as of December 31, 2019, includes security deposit of $14,600, cash value of life insurance of $199,000 and long-term accounts receivables of $4.0 million, which is net of $5.6 million valuation allowance. Long-term receivables from franchisees represent receivables from approximately 80 different non-traditional franchisees (Noble Romans 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 Noble Roman’s trademark. In addition, some receivables arose from the Company incurring legal fees to enforce the franchise agreements and other collection cost which adds to the receivables in accordance with the agreements. 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. |
3. Notes Payable
3. Notes Payable | 12 Months Ended |
Dec. 31, 2019 | |
Notes Payable [Abstract] | |
Notes Payable | In September 2017, the Company entered into a loan agreement (the “Bank Agreement”) with First Financial Bank (the “Bank”). The Bank Agreement provided for a senior credit facility (the “Credit Facility”) to be provided by the Bank consisting of: (i) a term loan in the amount of $4.5 million (the “Term Loan”); and (ii) a development line of credit of up to $1.6 million (the “Development Line of Credit”). Borrowings under the Credit Facility bore interest at a variable annual rate equal to the London Interbank Offer Rate (“LIBOR”) plus 7.25%. The Term Loan and the Development Line of Credit were to be repaid monthly based on a seven-year term. All outstanding amounts owed under the Bank Agreement were to mature on September 13, 2022. In conjunction with a new credit facility entered into on February 7, 2020, all money still owed to the Bank was repaid in full. At December 31, 2019, the balance of the Credit Facility was comprised of: Principal Due $ 4,272,023 Unamortized Loan Closing Cost (401,320 ) Carrying Value $ 3,870,703 The Bank Agreement contained affirmative and negative covenants, including, among other things, covenants requiring the Company to maintain certain financial ratios. The Company’s obligations under the Bank Agreement were secured by first priority liens on all of the Company’s and its subsidiaries’ assets and a pledge of all of the Company’s equity interest in such 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 was to be released upon achieving certain financial ratios by the Company’s Craft Pizza & Pub locations. These loans were repaid in full on February 7, 2020. In the fourth quarter of 2016, the Company issued 32 Units, for a purchase price of $50,000 per Unit, or $1,600,000 in the aggregate and, in January 2017, the Company issued another 16 Units, or an additional $800,000 in the aggregate. Each $50,000 Unit consisted of a convertible, subordinated, unsecured promissory note (the “Notes”) in an aggregate principal amount of $50,000 and warrants (the “Warrants”) to purchase up to 50,000 shares of the Company’s common stock, no par value per share. The Company issued Units to investors including the following related parties: Paul W. Mobley, the Company’s Executive Chairman, Chief Financial Officer and a director of the Company ($150,000); and Herbst Capital Management, LLC, the principal of which is Marcel Herbst, a director of the Company ($200,000). Interest on the Notes accrued at the annual rate of 10% and is payable quarterly in arrears. Initially, the Notes mature, and the Warrants expire, three years after issuance. However, in December 2018, the Company offered to extend the maturity of the Notes and the expiration date of the Warrants to January 2023. Certain of the holders of the Notes and Warrants accepted the Company’s offer. Accordingly, of the principal amount of the Notes, holders of $775,000 in principal amount extended their Notes until January 31, 2023. In 2018 and 2019, holders of $500,000 in principal amount of the Notes converted those Notes to 1,000,000 shares of the Company’s common stock in accordance with the terms of the Note. In February 2020, in conjunction with the Company’s refinancing of its debt, $1,275,000 in principal amount of those Notes was repaid leaving a balance of $625,000 which mature on January 31, 2023. The holders of the remaining $625,000 principal amount of Notes can elect, at their option any time prior to maturity, convert those Notes to common stock in accordance with the terms of the Notes. The Warrants issued with the Notes provide for an exercise price of $1.00 per share of Common Stock (subject to anti-dilution adjustments). All warrants were canceled with the repayment of the Notes except Warrants issued with $625,000 principal amount of Notes that were extended to the new maturity of January 31, 2023. Subject to certain limitations, the Company may redeem the outstanding Warrants at a price of $0.001 per share of Common Stock subject to the Warrant upon 30 days’ notice if the daily average weighted trading price of the Common Stock equals or exceeds $2.00 per share for a period of 30 consecutive trading days. Placement agent fees and other origination costs 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. At December 31, 2019, the balance of the Notes is comprised of: Face Value $ 1,900,000 Unamortized OID (398,718 ) Carrying Value $ 1,501,282 On February 7, 2020, the Company entered into Agreement with the Purchaser pursuant to which the Company issued to the Purchaser a senior Note in the initial principal amount of $8.0 million. The Company has used or will use the net proceeds of the Agreement as follows: (i) $4.2 million was used to repay the Company’s then-existing bank debt which was in the original amount of $6.1 million; (ii) $1,275,000 was used to repay the portion of the Company’s existing subordinated convertible debt the maturity date of which most had not previously been extended; (iii) debt issuance cost; and (iv) the remaining net proceeds will be used for working capital or other general corporate purposes, including development of new Company-owned Craft Pizza & Pub locations. See Note 1 under the heading “Subsequent Events” for the description of the terms of the Agreement and Senior Note. Total cash and non-cash interest accrued on the Company’s indebtedness in 2019 was $775,000 and in 2018 was $655,000. |
4. Royalties and Fees
4. Royalties and Fees | 12 Months Ended |
Dec. 31, 2019 | |
Advance Royalties [Abstract] | |
Royalties and Fees | Approximately $242,000, $305,000 and $307,000 are included in 2017, 2018 and 2019, respectively, royalties and fees in the Consolidated Statements of Operations for amortized initial franchise fees. Also included in royalties and fees were approximately $44,000, $74,000 and $70,000 in 2017, 2018 and 2019, respectively, for equipment commissions. 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 contractual liability for the franchisee. Such incremental costs, include training, design and related travel cost to new franchisees. The deferred contract income and costs both approximated $699,000 on December 31, 2018 and $818,000 on December 31, 2019. In conjunction with the development of Noble Roman’s Pizza and Tuscano’s Italian Style Subs, the Company has devised its own recipes for many of the ingredients that go into the making of its products (“Proprietary Products”). The Company contracts with various manufacturers to manufacture its Proprietary Products in accordance with the Company’s recipes and formulas and to sell those products to authorized distributors at a contract price which includes an allowance for use of the Company’s recipes. The manufacturing contracts also require the manufacturers to hold those allowances in trust and to remit those allowances to the Company on a periodic basis, usually monthly. The Company recognizes those allowances in revenue as earned based on sales reports from the distributors. There were 3,064 franchised/licensed or Company-owned outlets in operation on December 31, 2019 and 3,041 on December 31, 2018. During 2019, 35 new franchised/licensed were opened and 12 franchised outlets left the system. Grocery stores are accustomed to adding products for a period of time, removing them for a period of time and possibly re-offering them. Therefore, it is unknown how many grocery store licenses, out of the total count of 2,402, have left the system. |
5. Liabilities for Leased Facil
5. Liabilities for Leased Facilities | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Liabilities for Leased Facilities | The Company has future obligations of $7.0 million under current operating leases as follows: due in less than one year $771,000, due in one to three years $2.4 million, due in three to five years $1.7 million and due in more than five years $2.2 million. For implementing the new accounting policies for leases, the Company used a weighted average discount rate of 7% and the weighted average lease term of 7.3 years. The Company recorded $134,545 in lease expense more than cash actually paid in 2019 for the leases. |
6. Income Taxes
6. Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | The Company had a deferred tax asset, as a result of prior operating losses, of $4.8 million at December 31, 2018 and $3.9 million at December 31, 2019, which expires between the years 2020 and 2036. The net operating loss carry-forward is approximately $11.8 million so the Company will have no obligation to pay income tax on the amount of that operating loss carry-forward, however the carrying value of that deferred tax asset was significantly reduced by the 2017 Tax Act which lowered the highest corporate income tax rate from 34% to 21%. In 2017, 2018 and 2019, the Company used deferred benefits to offset its tax expense of $442,000, recorded a tax benefit of $503,000, and recorded a tax benefit of $468,000 respectively, and tax benefits from loss on discontinued operations of $57,000 in 2017 and $12,000 in 2018, however, the Company recorded a tax expense of $4.1 million in 2017 to lower the carrying value of the deferred tax credit as a result of the corporate tax rate being reduced from 34% to 21%, as explained above. The Company also recorded $1.4 million in additional tax in 2018 after evaluating its deferred tax assets and determined that $1.4 million of the deferred tax credits may expire in 2019 and 2020 before they are fully utilized. The Company also reviewed its operating loss carry-forward in 2019 and determined that $1.7 million of that loss may expire before it is used and, as a result, recorded an additional $400,000 in tax expense for 2019. As a result of the loss carry-forwards, the Company did not pay any income taxes in 2017, 2018 and 2019. There are no other material differences between reported income tax expense or benefit and the income tax expense or benefit that would result from applying the Federal and state statutory tax rates. |
7. Common Stock
7. Common Stock | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
Common Stock | During 2016 and 2017, the Company issued Notes in the aggregate principal amount of $2.4 million convertible to common stock within three years at the rate of $.50 per share and Warrants to purchase up to 2.4 million shares of the Company’s common stock at $1.00 per share. During 2018, holders of $400,000 in principal amount of Notes converted into 800,000 shares of common stock. In 2019, holders of $100,000 in principal amount of Notes converted into 200,000 shares of common stock. In February 2020, in conjunction with the Company’s refinancing, $1,275,000 in principal amount of Notes were repaid terminating the holders’ right to convert and canceling their warrants. Now outstanding are $625,000 principal amount of Notes convertible to stock at $0.50 per share and warrants to purchase 625,000 shares of stock at $1.00 per share. The Company has an incentive stock option plan for key employees, officers and directors. The options are generally exercisable three years after the date of grant and expire ten years after the date of grant. The option prices are the fair market value of the stock at the date of grant. At December 31, 2019, the Company had the following employee stock options outstanding: # Common Shares Issuable Exercise Price 46,500 $ 0.58 155,000 0.58 1,400,000 0.58 31,000 0.58 123,667 0.58 207,500 1.00 232,500 1.00 287,500 1.00 280,000 0.53 35,000 0.50 372,500 0.51 332,500 0.623 474,500 0.60 As of December 31, 2019, options for 3,488,834 shares were exercisable. The Company adopted the modified prospective method to account for stock option grants, which does not require restatement of prior periods. Under the modified prospective method, the Company is required to record compensation expense for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding at the date of adoption, net of an estimate of expected forfeitures. Compensation expense is based on the estimated fair values of stock options determined on the date of grant and is recognized over the related vesting period, net of an estimate of expected forfeitures which is based on historical forfeitures. The Company estimates the fair value of its option awards on the date of grant using the Black-Scholes option pricing model. The risk-free interest rate is based on external data while all other assumptions are determined based on the Company’s historical experience with stock options. The following assumptions were used for grants in 2017, 2018 and 2019: Expected volatility 30% to 20% Expected dividend yield None Expected term (in years) 3 Risk-free interest rate 1.68 to 2.82% The following table sets forth the number of options outstanding as of December 31, 2016, 2017, 2018 and 2019 and the number of options granted, exercised or forfeited during the years ended December 31, 2017, 2018 and 2019: Balance of employee stock options outstanding as of 12/31/16 2,957,667 Stock options granted during the year ended 12/31/17 410,500 Stock options exercised during the year ended 12/31/17 0 Stock options forfeited during the year ended 12/31/17 (34,000) Balance of employee stock options outstanding as of 12/31/17 3,334,167 Stock options granted during the year ended 12/31/18 415,000 Stock options exercised during the year ended 12/31/18 0 Stock options forfeited during the year ended 12/31/18 (105,500) Balance of employee stock options outstanding as of 12/31/18 3,643,667 Stock options granted during the year ended 12/31/19 529,500 Stock options exercised during the year ended 12/31/19 - Stock options forfeited during the year ended 12/31/19 (195,000) Balance of employee stock options outstanding as of 12/31/19 3,978,167 The following table sets forth the number of non-vested options outstanding as of December 31, 2016, 2017, 2018 and 2019, and the number of stock options granted, vested and forfeited during the years ended December 31, 2017, 2018 and 2019. Balance of employee non-vested stock options outstanding as of 12/31/16 791,668 Stock options granted during the year ended 12/31/17 410,500 Stock options vested during the year ended 12/31/17 (418,333) Stock options forfeited during the year ended 12/31/17 (34,000) Balance of employee non-vested stock options outstanding as of 12/31/17 749,835 Stock options granted during the year ended 12/31/18 415,000 Stock options vested during the year ended 12/31/18 (337,499) Stock options forfeited during the year ended 12/31/18 (105,500) Balance of employee non-vested stock options outstanding as of 12/31/18 721,836 Stock options granted during the year ended 12/31/19 529,500 Stock options vested during the year ended 12/31/19 (325,000) Stock options forfeited during the year ended 12/31/19 (195,000) Balance of employee non-vested stock options outstanding as of 12/31/19 731,336 During 2019, employee stock options were granted for 529,500 shares and options for 195,000 shares were forfeited. At December 31, 2019, the weighted average grant date fair value of non-vested options was $0.576 per share and the weighted average grant date fair value of vested options was $0.683 per share. The weighted average grant date fair value of employee stock options granted during 2017 was $0.51, during 2018 was $0.623 and during 2019 was $0.66. Total compensation cost recognized for share-based payment arrangements was $14,588 with a tax benefit of $5,808 in 2017, $16,597 with a tax benefit of $3,983 in 2018, and $18,829 in 2019 with a tax benefit of $4,995 in 2019. As of December 31, 2019, total unamortized compensation cost related to options was $48,477, which will be recognized as compensation cost over the next six to 36 months. No cash was used to settle equity instruments under share-based payment arrangements. |
8. Statements of Financial Acco
8. Statements of Financial Accounting Standards | 12 Months Ended |
Dec. 31, 2019 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Statements of Financial Accounting Standards | The Company does not believe that the recently issued Statements of Financial Accounting Standards will have any material impact on the Company’s Consolidated Statements of Operations or its Consolidated Balance Sheets. On February 25, 2016, the FASB issued Accounting Standards Update (“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 took effect in 2019 for public business entities and, therefore, is included in the current financial statements. This had the effect of increasing the value of the assets and liabilities of the Company and incurred an additional expense for rent on the Consolidated Statement of Operations by $134,545 in 2019. |
9. Loss from Discontinued Opera
9. Loss from Discontinued Operations | 12 Months Ended |
Dec. 31, 2019 | |
Discontinued Operation, Income (Loss) from Discontinued Operation Disclosures [Abstract] | |
Loss from Discontinued Operations | The Company made the decision in late 2008 to discontinue the business of operating traditional quick service restaurants. As a result, the Company charged off or dramatically lowered the carrying value of all receivables related to the traditional restaurants and accrued future estimated expenses related to the estimated cost to prosecute a lawsuit related to those discontinued operations. The ongoing right to receive passive income in the form of royalties is not a part of the discontinued segment. The Company reported a net loss on discontinued operations of $93,000 in 2017. This consisted primarily of rent and other costs related to a location that was part of the operations discontinued in 2008. The Company reported a net loss on discontinued operations of $37,800 in 2018. This consisted of rent related to a location that was a part of the operations discontinued in 2008. The obligation of rent on this location has been satisfied and no further loss is expected. There are no known contingencies with regard to the operations discontinued in 2008 that are expected to result in any loss. |
10. Contingencies
10. Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | The Company, from time to time, is or may become involved in litigation or regulatory proceedings arising out of its normal business operations. Currently, there are no such pending proceedings which the Company considers to be material. |
11. Certain Relationships and R
11. Certain Relationships and Related Transactions | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
Certain Relationships and Related Transactions | The following is a summary of transactions to which the Company and certain officers and directors of the Company are a party or have a financial interest. The Board of Directors of the Company has adopted a policy that all transactions between the Company and its officers, directors, principal shareholders and other affiliates must be approved by a majority of the Company’s disinterested directors, and be conducted on terms no less favorable to the Company than could be obtained from unaffiliated third parties. Of the 48 Units sold in the private placement which began in October 2016, three Units were purchased by Paul W. Mobley, Executive Chairman, and four Units were purchased by Marcel Herbst, Director. Each Unit consists of a Note in the principal amount of $50,000 and a Warrant to purchase 50,000 shares of the Company’s common stock. These transactions were all done on the same terms and conditions as all of the independent investors who purchased the other 41 Units. The Notes, at the time of issue, were to mature three years after issue date. In late 2018, the Company sent an offer to each remaining Note holder offering to extend the maturity of the Notes to January 31, 2023. Holders of $775,000 in principal amount of the Notes accepted that offer of extension including the Notes held by Paul W. Mobley and Herbst Capital Management, LLC. In conjunction with the refinancing of the Company in February 2020, Notes held by Paul Mobley were included in the $1,275,000 in principal amount of Notes that were repaid out of the proceeds of the new financing. |
12. Unaudited Quarterly Financi
12. Unaudited Quarterly Financial Information | 12 Months Ended |
Dec. 31, 2019 | |
Quarterly Financial Information Disclosure [Abstract] | |
Unaudited Quarterly Financial Information | Quarter Ended December 31 September 30 June 30 March 31 2019 (in thousands, except per share data) Total revenue $ 2,582 $ 3,079 $ 3,121 $ 2,923 Operating income 224 835 801 754 Net income (loss) before income taxes (1,283 ) 615 580 627 Net income (loss) (1,763 ) 467 441 476 Net income per common share Basic (.08 ) .02 .02 .02 Diluted (.08 ) .02 .02 .02 Quarter Ended December 31 September 30 June 30 March 31 2018 (in thousands, except per share data) Total revenue $ 3,043 $ 3,275 $ 3,177 $ 2,953 Operating income 541 714 703 699 Valuation allowance for receivables (2,800 ) (1,296 ) - - Net income (loss) before income taxes from continuing operations (2,428 ) (755 ) 550 539 Net income (loss) from continuing operations (3,277 ) (562 ) 412 403 Loss from discontinued operations (38 ) - - - Net income (loss) (3,315 ) (562 ) 412 403 Net income (loss) from continuing operations per common share Basic (.15 ) (.03 ) .02 ..02 Diluted (1) (.15 ) (.02 ) .02 .02 Net income (loss) per common share Basic (.15 ) (.03 ) .02 .02 Diluted (1) (.15 ) (.02 ) .02 .02 (1) Net loss per share is shown the same as basic loss per share because the underlying dilutive securities have an anti-dilutive effect. |
1. Summary of Significant Acc_2
1. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Organization | Organization: The Company, with two wholly-owned subsidiaries, sells and services franchises and licenses and operates Company-owned foodservice locations for one non-traditional location and five traditional restaurants called Craft Pizza & Pub under the trade names “Noble Roman’s Pizza”, “Noble Roman’s Craft Pizza & Pub” and “Tuscano’s Italian Style Subs". Unless the context otherwise indicates, reference to the “Company” are to Noble Roman’s, Inc. and its two wholly-owned subsidiaries. |
Principles of Consolidation | Principles of Consolidation: The consolidated financial statements include the accounts of Noble Roman’s, Inc. and its wholly-owned subsidiaries, Pizzaco, Inc. and RH Roanoke, Inc. Inter-company balances and transactions have been eliminated in consolidation. |
Inventories | Inventories: Inventories consist of food, beverage, restaurant supplies, restaurant equipment and marketing materials and are stated at the lower of cost (first-in, first-out) or net realizable value. |
Property and Equipment | Property and Equipment: Equipment and leasehold improvements are stated at cost. Depreciation and amortization are computed on the straight-line method over the estimated useful lives ranging from five years to 20 years. Leasehold improvements are amortized over the shorter of estimated useful life or the term of the lease including likely renewals. Construction and equipment in progress are stated at cost for leasehold improvements, equipment for a new restaurant being constructed and for pre-opening costs of any restaurant not yet open as of the date of the statements. |
Significant Accounting Policies | Significant Accounting Policies: There have been no significant changes in the Company's accounting policies from those disclosed in its Annual Report on Form 10-K except for those policies described below in relation to the adoption of Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842). The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use assets ("ROU"), and lease liability obligations are included in the Company's balance sheets. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liability obligations represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company's leases typically do not provide an implicit rate, the Company estimates its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The ROU asset also includes in the lease payments made and excludes lease incentives and lease direct costs. The Company's lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. The Company adopted the new standard to all material leases existing on January 1, 2019 and recognized a cumulative effect adjustment to the opening balance of accumulated deficit on that date. |
Cash and Cash Equivalents | Cash and Cash Equivalents: Includes actual cash balance. The cash is not pledged nor are there any withdrawal restrictions. |
Advertising Costs | Advertising Costs: The Company records advertising costs consistent with the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”)“Other Expense” topic and “Advertising Costs” subtopic. This statement requires the Company to expense advertising production costs the first time the production material is used. |
Fair Value Measurements and Disclosures | Fair Value Measurements and Disclosures: The Fair Value Measurements and Disclosures topic of the FASB’s ASC requires companies to determine fair value based on the price that would be received to sell the assets or paid to transfer to liability to a market participant. The fair value measurements and disclosure topic emphasis that fair value is a market based measurement, not an entity specific measurement. The guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories: Level One: Quoted market prices in active markets for identical assets or liabilities. Level Two: Observable market –based inputs or unobservable inputs that are corroborated by market data. Level Three: Unobservable inputs that are not corroborated by market data. |
Use of Estimates | Use of Estimates: The preparation of the consolidated financial statements in conformity with United States 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 could differ from those estimates. After a thorough review by management in 2018, the Company permanently wrote off $1.3 million and created an additional reserve for possible non-collection of $2.8 million. After a review in 2019 and also considering the impact of the COVID-19 pandemic, it was decided to add an additional reserve for possible non-collections of $1.3 million. The actual amount the Company eventually collects may differ from this estimation. The Company evaluates its property and equipment and related costs periodically to assess whether any impairment indications are present, including recurring operating losses and significant adverse changes in legal factors or business climate that affect the recovery of recorded value. If any impairment of an individual asset is evident, a loss would be provided to reduce the carrying value to its estimated fair value. |
Debt Issuance Costs | Debt Issuance Costs: Debt issuance cost is presented on the balance sheet as a direct reduction from the carrying amount of the associated liability. Debt issuance costs are amortized to interest expense ratably over the term of the applicable debt. The unamortized debt issuance cost at December 31, 2019 was $800,000. |
Intangible Assets | Intangible Assets: The Company recorded goodwill of $278,000 as a result of the acquisition of RH Roanoke, Inc. of certain assets of a former franchisee of the Company. Goodwill has an indeterminable life and is assessed for impairment at least annually and more frequently as triggering events may occur. In making this assessment, management relies on a number of factors including operating results, business plans, economic projections, anticipated future cash flows, and transactions and marketplace data. Any impairment losses determined to exist are recorded in the period the determination is made. There are inherent uncertainties related to these factors and management’s judgment is involved in performing goodwill and other intangible assets valuation analyses, thus there is risk that the carrying value of goodwill and other intangible assets may be overstated or understated. The Company has elected to perform the annual impairment assessment of recorded goodwill as of the end of the Company’s fiscal year. The results of this annual impairment assessment indicated that the fair value of the reporting unit as of December 31, 2019, exceeded the carrying or book value, including goodwill, and therefore recorded goodwill was not subject to impairment. |
Royalties, Administrative and Franchise Fees | Royalties, Administrative and Franchise Fees: Royalties are generally recognized as income monthly based on a percentage of monthly sales of franchised or licensed restaurants and from audits and other inspections as they come due and payable by the franchisee. Fees from the retail products in grocery stores are recognized monthly based on the distributors’ sale of those retail products to the grocery stores or grocery store distributors. Administrative fees are recognized as income monthly as earned. The Company adopted Accounting Standards Update 2014-09 effective January 2018 which did not materially affect the Company's recognition of royalties, fees from the sale of retail products in grocery stores, administrative fees or sales from Company-owned restaurants. However, initial franchise fees and related contract costs are now deferred and amortized on a straight-line basis over the term of the franchise agreements, generally five to ten 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 cost, and the franchise fees and contract costs initially incurred and paid approximate the relative amortized franchise fees and contract costs for those same periods. |
Exit or Disposal Activities Related to Discontinued Operations | Exit or Disposal Activities Related to Discontinued Operations: The Company records exit or disposal activity for discontinued operations when management commits to an exit or disposal plan and includes those charges under results of discontinued operations, as required by the ASC “Exit or Disposal Cost Obligations” topic. |
Income Taxes | Income Taxes: The Company provides for current and deferred income tax liabilities and assets utilizing an asset and liability approach along with a valuation allowance as appropriate. The Company evaluated its deferred tax assets in 2018 and determined that $1,422,960 of the deferred tax credits may expire in 2019 and 2020 before they are fully utilized, which increased the Company’s tax expense for 2018 and reduced the deferred tax credit on the balance sheet. The Company again evaluated its deferred tax assets in 2019 and determined that $1.7 million of its net operating loss carry-forward may expire before they are used resulting in an additional $400 thousand in tax expense in 2019. As of December 31, 2019, the net operating loss carry-forward was approximately $11.8 million which expires between the years 2020 and 2036. As a result of the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”), the Company reduced the carrying value of the tax impact of the net operating loss carry-forward to reflect the new highest corporate income tax rate of 21% versus the old rate of 34%. U.S. generally accepted accounting principles require the Company to examine its tax positions for uncertain positions. Management is not aware of any tax positions that are more likely than not to change in the next 12 months, or that would not sustain an examination by applicable taxing authorities. The Company’s policy is to recognize penalties and interest as incurred in its Consolidated Statements of Operations. None were included for the years ended December 31, 2017, 2018 and 2019. The Company’s federal and various state income tax returns for 2016 through 2019 are subject to examination by the applicable tax authorities, generally for three years after the later of the original or extended due date. |
Basic and Diluted Net Income Per Share | Basic and Diluted Net Income Per Share: Net income per share is based on the weighted average number of common shares outstanding during the respective year. When dilutive, stock options and warrants are included as share equivalents using the treasury stock method. The following table sets forth the calculation of basic and diluted loss per share for the year ended December 31, 2017: Income (Numerator) Shares (Denominator) Per Share Amount Loss per share – basic Net loss $ (3,384,927 ) 20,783,032 $ (.16 ) Effect of dilutive securities Options - 222,624 Convertible notes 345,208 4,698,630 Diluted loss per share Net loss $ (3,039,719 ) 25,704,286 $ (.16 ) (1) Net loss per share is shown the same as basic loss per share because the underlying dilutive securities have an anti-dilutive effect. The following table sets forth the calculation of basic and diluted loss per share for the year ended December 31, 2018: Income (Numerator) Shares (Denominator) Per Share Amount Net loss per share – basic Net loss $ (3,062,209 ) 21,249,607 $ (.14 ) Effect of dilutive securities Options - 511,260 Convertible notes 213,125 4,333,425 Diluted net income per share Net loss (1) $ (2,849,084 ) 26,094,292 $ (.14 ) (1) Net loss per share is shown the same as basic loss per share because the underlying dilutive securities have an anti-dilutive effect. The following table sets forth the calculation of basic and diluted loss per share for the year ended December 31, 2019: Income (Numerator) Shares (Denominator) Per Share Amount Net loss per share – basic Net loss $ (378,605 ) 22,052,859 $ (.02 ) Effect of dilutive securities Options - 12,836 Convertible notes 62,500 1,250,000 Diluted net loss per share Net loss $ (316,105 ) 23,315,695 $ (.02 ) (1) Net loss per share is shown the same as basic loss per share because the underlying dilutive securities have an anti-dilutive effect. |
Subsequent Events | Subsequent Events: The Company evaluated subsequent events through the date the consolidated statements were issued and filed with the annual report on Form 10-K. On February 7, 2020, the Company entered into a Senior Secured Promissory Note and Warrant Purchase Agreement (the “Agreement”) with Corbel Capital Partners SBIC, L.P. (the “Purchaser”). Pursuant to the Agreement, the Company issued to the Purchaser a senior secured promissory note (the “Senior Note”) in the initial principal amount of $8.0 million. The Company has used or will use the net proceeds of the Agreement as follows: (i) $4.2 million was used to repay the Company’s then-existing bank debt which was in the original amount of $6.1 million; (ii) $1,275,000 was used to repay the portion of the Company’s existing subordinated convertible debt the maturity date of which most had not previously been extended; (iii) debt issuance costs; and (iv) the remaining net proceeds will be used for working capital or other general corporate purposes, including development of new Company-owned Craft Pizza & Pub locations. The Senior Note bears cash interest of LIBOR, as defined in the Agreement, plus 7.75%. In addition, the Senior Note requires payment-in-kind interest (“PIK Interest”) of 3% per annum, which will be added to the principal amount of the Senior Note. Interest is payable in arrears on the last calendar day of each month. The Senior Note matures on February 7, 2025. The Senior Note does not require any fixed principal payments until February 28, 2023, at which time required monthly payments of principal in the amount of $33,333 begin and continue until maturity. The Senior Note requires the Company to make additional payments on the principal balance of the Senior Note based on its consolidated excess cash flow, as defined in the Agreement. In conjunction with the borrowing under the Senior Note, the Company issued to the Purchaser a warrant (the “Corbel Warrant”) to purchase up to 2,250,000 shares of Common Stock. The Corbel Warrant entitles the Purchaser to purchase from the Company, at any time or from time to time: (i) 1,200,000 shares of Common Stock at an exercise price of $0.57 per share (“Tranche 1”), (ii) 900,000 shares of Common Stock at an exercise price of $0.72 per share (“Tranche 2”), and (iii) 150,000 shares of Common Stock at an exercise price of $0.97 per share (“Tranche 3”). The Purchaser is required to exercise the Corbel Warrant with respect to Tranche 1 if the Common Stock is trading at $1.40 per share or higher for a specified period, and is further required to exercise the Corbel Warrant with respect to Tranche 2 if the Common Stock is trading at $1.50 per share or higher for a specified period. Cashless exercise of the Corbel Warrant is only permitted with respect to Tranche 3. The Purchaser has the right, within six months after the issuance of any shares under the Corbel Warrant, to require the Company to repurchase such shares for cash or for Put Notes, at the Company's discretion. The Corbel Warrant expires on the sixth anniversary of the date of its issuance. On March 16, 2020, by order of the Governor of the State of Indiana (the “Governor”), all restaurants within Indiana were ordered to close for inside dining. Due to the Order, all Craft Pizza & Pub restaurants have been open for carry-out only primarily through the Company’s Pizza Valet system and third-party delivery providers. On May 1, 2020, the Governor issued another order allowing restaurants to be open for inside dining for up to 50% of capacity as of May 11, 2020, and on June 14, 2020 up to 75% of capacity, plus bars may open up to 50% of capacity, and on July 4, 2020 restaurants and bars may resume at 100% capacity. As the duration and scope of the pandemic is uncertain, these Orders are subject to further modification which could adversely affect the Company. On April 25, 2020, the Company borrowed under the Payroll Protection Program in the amount of $715,000. The Company anticipates this note will be forgiven. The funds, according to the provision in the CARES Act, may be used for payroll costs including payroll benefits, interest on mortgage obligations incurred before February 15, 2020, rent under lease agreements in force before February 15, 2020 and utilities for which service began before February 15, 2020. In February 2020, as discussed in Item 2. Properties, a lease for the Brownsburg location became effective which expires in February 2030. The obligation under this lease is included in future obligations of $7 million under operating leases, as described in Note 5. No subsequent event required recognition or disclosure except as discussed above. |
1. Summary of Significant Acc_3
1. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Basic and diluted earnings per share | The following table sets forth the calculation of basic and diluted loss per share for the year ended December 31, 2017: Income (Numerator) Shares (Denominator) Per Share Amount Loss per share – basic Net loss $ (3,384,927 ) 20,783,032 $ (.16 ) Effect of dilutive securities Options - 222,624 Convertible notes 345,208 4,698,630 Diluted loss per share Net loss $ (3,039,719 ) 25,704,286 $ (.16 ) (1) Net loss per share is shown the same as basic loss per share because the underlying dilutive securities have an anti-dilutive effect. The following table sets forth the calculation of basic and diluted loss per share for the year ended December 31, 2018: Income (Numerator) Shares (Denominator) Per Share Amount Net loss per share – basic Net loss $ (3,062,209 ) 21,249,607 $ (.14 ) Effect of dilutive securities Options - 511,260 Convertible notes 213,125 4,333,425 Diluted net income per share Net loss (1) $ (2,849,084 ) 26,094,292 $ (.14 ) (1) Net loss per share is shown the same as basic loss per share because the underlying dilutive securities have an anti-dilutive effect. The following table sets forth the calculation of basic and diluted loss per share for the year ended December 31, 2019: Income (Numerator) Shares (Denominator) Per Share Amount Net loss per share – basic Net loss $ (378,605 ) 22,052,859 $ (.02 ) Effect of dilutive securities Options - 12,836 Convertible notes 62,500 1,250,000 Diluted net loss per share Net loss $ (316,105 ) 23,315,695 $ (.02 ) (1) Net loss per share is shown the same as basic loss per share because the underlying dilutive securities have an anti-dilutive effect. |
3. Notes Payable (Tables)
3. Notes Payable (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Notes Payable [Abstract] | |
Credit facility | Principal Due $ 4,272,023 Unamortized Loan Closing Cost (401,320 ) Carrying Value $ 3,870,703 |
Notes payable | Face Value $ 1,900,000 Unamortized OID (398,718 ) Carrying Value $ 1,501,282 |
7. Common Stock (Tables)
7. Common Stock (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
Employee stock options outstanding | # Common Shares Issuable Exercise Price 46,500 $ 0.58 155,000 0.58 1,400,000 0.58 31,000 0.58 123,667 0.58 207,500 1.00 232,500 1.00 287,500 1.00 280,000 0.53 35,000 0.50 372,500 0.51 332,500 0.623 474,500 0.60 |
Assumptions for grants | Expected volatility 30% to 20% Expected dividend yield None Expected term (in years) 3 Risk-free interest rate 1.68 to 2.82% |
Options outstanding | Balance of employee stock options outstanding as of 12/31/16 2,957,667 Stock options granted during the year ended 12/31/17 410,500 Stock options exercised during the year ended 12/31/17 0 Stock options forfeited during the year ended 12/31/17 (34,000) Balance of employee stock options outstanding as of 12/31/17 3,334,167 Stock options granted during the year ended 12/31/18 415,000 Stock options exercised during the year ended 12/31/18 0 Stock options forfeited during the year ended 12/31/18 (105,500) Balance of employee stock options outstanding as of 12/31/18 3,643,667 Stock options granted during the year ended 12/31/19 529,500 Stock options exercised during the year ended 12/31/19 - Stock options forfeited during the year ended 12/31/19 (195,000) Balance of employee stock options outstanding as of 12/31/19 3,978,167 |
Number of non-vested options outstanding | Balance of employee non-vested stock options outstanding as of 12/31/16 791,668 Stock options granted during the year ended 12/31/17 410,500 Stock options vested during the year ended 12/31/17 (418,333) Stock options forfeited during the year ended 12/31/17 (34,000) Balance of employee non-vested stock options outstanding as of 12/31/17 749,835 Stock options granted during the year ended 12/31/18 415,000 Stock options vested during the year ended 12/31/18 (337,499) Stock options forfeited during the year ended 12/31/18 (105,500) Balance of employee non-vested stock options outstanding as of 12/31/18 721,836 Stock options granted during the year ended 12/31/19 529,500 Stock options vested during the year ended 12/31/19 (325,000) Stock options forfeited during the year ended 12/31/19 (195,000) Balance of employee non-vested stock options outstanding as of 12/31/19 731,336 |
12. Unaudited Quarterly Finan_2
12. Unaudited Quarterly Financial Information (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Quarterly Financial Information Disclosure [Abstract] | |
Unaudited quarterly financial information | Quarter Ended December 31 September 30 June 30 March 31 2019 (in thousands, except per share data) Total revenue $ 2,582 $ 3,079 $ 3,121 $ 2,923 Operating income 224 835 801 754 Net income (loss) before income taxes (1,283 ) 615 580 627 Net income (loss) (1,763 ) 467 441 476 Net income per common share Basic (.08 ) .02 .02 .02 Diluted (.08 ) .02 .02 .02 Quarter Ended December 31 September 30 June 30 March 31 2018 (in thousands, except per share data) Total revenue $ 3,043 $ 3,275 $ 3,177 $ 2,953 Operating income 541 714 703 699 Valuation allowance for receivables (2,800 ) (1,296 ) - - Net income (loss) before income taxes from continuing operations (2,428 ) (755 ) 550 539 Net income (loss) from continuing operations (3,277 ) (562 ) 412 403 Loss from discontinued operations (38 ) - - - Net income (loss) (3,315 ) (562 ) 412 403 Net income (loss) from continuing operations per common share Basic (.15 ) (.03 ) .02 ..02 Diluted (1) (.15 ) (.02 ) .02 .02 Net income (loss) per common share Basic (.15 ) (.03 ) .02 .02 Diluted (1) (.15 ) (.02 ) .02 .02 (1) Net loss per share is shown the same as basic loss per share because the underlying dilutive securities have an anti-dilutive effect. |
1. Summary of Significant Acc_4
1. Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||||||||||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||||||||
Net loss | $ (1,763,000) | $ 467,000 | $ 441,000 | $ 476,000 | $ (3,315,000) | $ (562,000) | $ 412,000 | $ 403,000 | $ (378,065) | $ (3,062,209) | $ (3,384,927) | |||||||
Net loss per share with assumed conversions | $ (378,065) | $ (2,849,084) | $ (3,039,719) | |||||||||||||||
Weighted average number of common shares outstanding, basic | 22,052,859 | 21,249,607 | 20,783,032 | |||||||||||||||
Weighted average number of common shares outstanding, diluted | 23,315,695 | 26,094,292 | 25,704,286 | |||||||||||||||
Earnings per share, basic | $ (.08) | $ (0.02) | $ (0.02) | $ (0.02) | $ (0.15) | $ (0.03) | $ 0.02 | $ 0.02 | $ (.02) | $ (0.14) | $ (0.16) | |||||||
Earnings per share, diluted | $ (.08) | $ (0.02) | $ (0.02) | $ (0.02) | $ (0.15) | [1] | $ (0.02) | [1] | $ 0.02 | [1] | $ 0.02 | [1] | $ (0.02) | [1] | $ (0.14) | [1] | $ (0.16) | [1] |
Options | ||||||||||||||||||
Effect of dilutive securities | $ 0 | $ 0 | $ 0 | |||||||||||||||
Effect of dilutive securities | 12,836 | 511,260 | 222,624 | |||||||||||||||
Convertible Notes | ||||||||||||||||||
Effect of dilutive securities | $ 0 | $ 213,125 | $ 345,208 | |||||||||||||||
Effect of dilutive securities | 62,500 | 4,333,425 | 4,698,630 | |||||||||||||||
[1] | Net loss per share is shown the same as basic loss per share because the underlying dilutive securities have anti-dilutive effect. |
1. Summary of Significant Acc_5
1. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Unamortized debt issuance cost | $ 800,000 | |
Goodwill | 278,466 | $ 278,466 |
Net operating loss carry-forward | $ 11,800,000 | |
Minimum | ||
Property and equipment estimated useful life | 5 years | |
Maximum | ||
Property and equipment estimated useful life | 20 years |
2. Accounts Receivable (Details
2. Accounts Receivable (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Accounts and Financing Receivable, after Allowance for Credit Loss [Abstract] | |||||||
Allowance to reduce receivables | $ 4,300,000 | $ 5,600,000 | $ 4,300,000 | ||||
Adjust valuation of receivables | $ 2,800,000 | $ 1,296,000 | $ 0 | $ 0 | $ 1,300,000 | $ 4,095,805 | $ 440,000 |
3. Notes Payable (Details)
3. Notes Payable (Details) | Dec. 31, 2019USD ($) |
Notes Payable [Abstract] | |
Principal due | $ 4,272,023 |
Unamortized loan closing cost | (401,320) |
Carrying value | $ 3,870,703 |
3. Notes Payable (Details 1)
3. Notes Payable (Details 1) | Dec. 31, 2019USD ($) |
Notes Payable [Abstract] | |
Face value | $ 1,900,000 |
Unamortized OID | (398,718) |
Carrying value | $ 1,501,282 |
3. Notes Payable (Details Narra
3. Notes Payable (Details Narrative) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Notes Payable [Abstract] | ||
Interest accrued | $ 775,000 | $ 655,000 |
4. Royalties and Fees (Details
4. Royalties and Fees (Details Narrative) | 12 Months Ended | ||
Dec. 31, 2019USD ($)Outlets | Dec. 31, 2018USD ($)Outlets | Dec. 31, 2017USD ($) | |
Deferred contract income | $ | $ 817,763 | $ 698,935 | |
Number of franchisee | Outlets | 3,064 | 3,041 | |
Outlets opened | Outlets | 35 | ||
Outlets closed | Outlets | 12 | ||
Initial Franchisee Fees | |||
Royalties and fees | $ | $ 307,000 | $ 305,000 | $ 242,000 |
Equipment Commission | |||
Royalties and fees | $ | $ 70,000 | $ 74,000 | $ 44,000 |
5. Liabilities for Leased Fac_2
5. Liabilities for Leased Facilities (Details Narrative) | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Leases [Abstract] | |
Future obligations operating leases | $ 7,000,000 |
Due in less than one year | 771,000 |
Due in one to three years | 2,400,000 |
Due in three to five years | 1,700,000 |
Due in more than five years | $ 2,200,000 |
Weighted average discount rate | 7.00% |
Weighted average lease term | 7 years 3 months 18 days |
Lease expense | $ 134,545 |
6. Income Taxes (Details Narrat
6. Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |||
Deferred tax asset | $ 3,900,000 | $ 4,800,000 | |
Operating losses expiration year | 2020 and 2036 | ||
Deferred benefits | $ (468,000) | $ (503,000) | $ 442,000 |
Tax benefits from loss on discontinued operations | $ 12,000 | $ 57,000 |
7. Common Stock (Details)
7. Common Stock (Details) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Common shares issuable | 3,978,167 | 3,643,667 | 3,334,167 | 2,957,667 |
Employee Stock Option 1 | ||||
Common shares issuable | 46,500 | |||
Exercise price | $ 0.58 | |||
Employee Stock Option 2 | ||||
Common shares issuable | 155,000 | |||
Exercise price | $ 0.58 | |||
Employee Stock Option 3 | ||||
Common shares issuable | 1,400,000 | |||
Exercise price | $ 0.58 | |||
Employee Stock Option 4 | ||||
Common shares issuable | 31,000 | |||
Exercise price | $ .58 | |||
Employee Stock Option 5 | ||||
Common shares issuable | 123,667 | |||
Exercise price | $ 0.58 | |||
Employee Stock Option 6 | ||||
Common shares issuable | 207,500 | |||
Exercise price | $ 1 | |||
Employee Stock Option 7 | ||||
Common shares issuable | 232,500 | |||
Exercise price | $ 1 | |||
Employee Stock Option 8 | ||||
Common shares issuable | 287,500 | |||
Exercise price | $ 1 | |||
Employee Stock Option 9 | ||||
Common shares issuable | 280,000 | |||
Exercise price | $ 0.53 | |||
Employee Stock Option 10 | ||||
Common shares issuable | 35,000 | |||
Exercise price | $ 0.50 | |||
Employee Stock Option 11 | ||||
Common shares issuable | 372,500 | |||
Exercise price | $ 0.51 | |||
Employee Stock Option 12 | ||||
Common shares issuable | 332,500 | |||
Exercise price | $ 0.623 | |||
Employee Stock Option 13 | ||||
Common shares issuable | 474,500 | |||
Exercise price | $ 0.60 |
7. Common Stock (Details 1)
7. Common Stock (Details 1) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Equity [Abstract] | |||
Expected volatility, minimum | 20.00% | 20.00% | 20.00% |
Expected volatility, maximum | 30.00% | 30.00% | 30.00% |
Expected dividend yield | 0.00% | 0.00% | 0.00% |
Expected term (in years) | 3 years | 3 years | 3 years |
Risk-free interest rate, minimum | 1.68% | 1.68% | 1.68% |
Risk-free interest rate, maximum | 2.82% | 2.82% | 2.82% |
7. Common Stock (Details 2)
7. Common Stock (Details 2) - shares | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Equity [Abstract] | |||
Stock options outstanding, beginning | 3,643,667 | 3,334,167 | 2,957,667 |
Stock options granted | 529,500 | 415,000 | 410,500 |
Stock options exercised | 0 | 0 | 0 |
Stock options forfeited | (195,000) | (105,500) | (34,000) |
Stock options outstanding, ending | 3,978,167 | 3,643,667 | 3,334,167 |
7. Common Stock (Details 3)
7. Common Stock (Details 3) - shares | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Equity [Abstract] | |||
Non-vested stock options outstanding, beginning | 721,836 | 749,835 | 791,668 |
Non-vested stock options granted | 529,500 | 415,000 | 410,500 |
Non-vested stock options vested | (325,000) | (337,499) | (418,333) |
Non-vested stock options forfeited | (195,000) | (105,500) | (34,000) |
Non-vested stock options outstanding, ending | 731,336 | 721,836 | 749,835 |
7. Common Stock (Details Narrat
7. Common Stock (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Equity [Abstract] | |||
Stock options exercisable | 3,488,834 | ||
Stock options granted | 529,500 | 415,000 | 410,500 |
Stock options forfeited | 195,000 | 105,500 | 34,000 |
Weighted average grant date fair value of non-vested options | $ .576 | ||
Weighted average grant date fair value of vested options | .683 | ||
Weighted average grant date fair value of employee stock options granted | $ 66 | $ 0.623 | $ 0.51 |
Share based compensation | $ 18,829 | $ 16,597 | $ 14,704 |
Tax benefit | 4,995 | $ 3,983 | $ 5,808 |
Unamortized compensation cost related to options | $ 48,477 | ||
Unamortized compensation cost related to options recognition period | 36 months |
9. Loss from Discontinued Ope_2
9. Loss from Discontinued Operations (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Discontinued Operation, Income (Loss) from Discontinued Operation Disclosures [Abstract] | |||
Loss on discontinued operations | $ 0 | $ 37,800 | $ 93,000 |
12. Unaudited Quarterly Finan_3
12. Unaudited Quarterly Financial Information (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||||||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |||||||||
Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||
Total revenue | $ 2,582,000 | $ 3,079,000 | $ 3,121,000 | $ 2,923,000 | $ 3,043,000 | $ 3,275,000 | $ 3,177,000 | $ 2,953,000 | $ 11,704,624 | $ 12,447,947 | $ 9,838,408 | ||||||||
Operating income | 224,000 | 835,000 | 801,000 | 754,000 | 541,000 | 714,000 | 703,000 | 699,000 | 2,613,588 | 2,656,996 | 2,943,732 | ||||||||
Valuation allowance for receivables | (2,800,000) | (1,296,000) | 0 | 0 | (1,300,000) | (4,095,805) | (440,000) | ||||||||||||
Net income (loss) before income taxes from continuing operations | (1,283,000) | 615,000 | 580,000 | 627,000 | (2,428,000) | (755,000) | 550,000 | 539,000 | 539,023 | (2,094,012) | 854,968 | ||||||||
Net income (loss) from continuing operations | (3,277,000) | (562,000) | 412,000 | 403,000 | (378,065) | (3,024,409) | (3,291,491) | ||||||||||||
Loss from discontinued operations | (38,000) | 0 | 0 | 0 | 0 | (37,800) | (93,436) | ||||||||||||
Net income (loss) | $ (1,763,000) | $ 467,000 | $ 441,000 | $ 476,000 | $ (3,315,000) | $ (562,000) | $ 412,000 | $ 403,000 | $ (378,065) | $ (3,062,209) | $ (3,384,927) | ||||||||
Net income (loss) from continuing operations per common share | |||||||||||||||||||
Basic | $ (0.15) | $ (0.03) | $ 0.02 | $ 0.02 | $ (.02) | $ (0.14) | $ (0.16) | ||||||||||||
Diluted | [1] | (0.15) | (0.02) | 0.02 | 0.02 | (0.02) | (0.14) | (0.16) | |||||||||||
Net income (loss) per common share | |||||||||||||||||||
Basic | $ (.08) | $ (0.02) | $ (0.02) | $ (0.02) | (0.15) | (0.03) | 0.02 | 0.02 | (.02) | (0.14) | (0.16) | ||||||||
Diluted | $ (.08) | $ (0.02) | $ (0.02) | $ (0.02) | $ (0.15) | [1] | $ (0.02) | [1] | $ 0.02 | [1] | $ 0.02 | [1] | $ (0.02) | [1] | $ (0.14) | [1] | $ (0.16) | [1] | |
[1] | Net loss per share is shown the same as basic loss per share because the underlying dilutive securities have anti-dilutive effect. |