Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | May 12, 2021 | |
Cover [Abstract] | ||
Entity Registrant Name | NOBLE ROMANS INC | |
Entity Central Index Key | 0000709005 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2021 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
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 Common Stock, Shares Outstanding | 22,215,512 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash | $ 1,872,714 | $ 1,194,363 |
Accounts receivable - net | 1,032,659 | 879,502 |
Inventories | 888,488 | 890,556 |
Prepaid expenses | 477,909 | 395,918 |
Total current assets | 4,271,770 | 3,360,339 |
Property and equipment: | ||
Equipment | 3,723,272 | 3,708,689 |
Leasehold improvements | 2,331,914 | 2,319,445 |
Construction and equipment in progress | 434,991 | 510,225 |
Total | 6,490,177 | 6,538,359 |
Less accumulated depreciation and amortization | 2,083,638 | 1,989,209 |
Net property and equipment | 4,406,539 | 4,549,150 |
Deferred tax asset | 3,104,904 | 3,104,904 |
Deferred contract cost | 834,018 | 834,018 |
Goodwill | 278,466 | 278,466 |
Operating lease right of use assets | 5,955,407 | 6,088,101 |
Other assets including long-term portion of receivables - net | 232,378 | 201,962 |
Total assets | 19,083,482 | 18,416,940 |
Current liabilities: | ||
Accounts payable and accrued expenses | 722,326 | 878,099 |
Current portion of operating lease liability | 413,243 | 412,005 |
Total current liabilities | 1,135,569 | 1,290,104 |
Long-term obligations: | ||
Term loan payable to Corbel | 7,574,829 | 7,468,709 |
Corbel warrant value | 29,037 | 29,037 |
Convertible notes payable | 580,542 | 574,479 |
Operating lease liabilities - net of short-term portion | 5,738,732 | 5,863,615 |
Deferred contract income | 834,018 | 834,018 |
Total long-term liabilities | 14,757,158 | 14,769,858 |
Stockholders' equity: | ||
Common stock - no par value (40,000,000 shares authorized, 22,215,512 issued and outstanding as of December 31, 2020 and as of March 31, 2021) | 24,769,816 | 24,763,447 |
Accumulated deficit | (21,579,061) | (22,406,469) |
Total stockholders' equity | 3,190,755 | 2,356,978 |
Total liabilities and stockholders' equity | $ 19,083,482 | $ 18,416,940 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2021 | Dec. 31, 2020 |
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 | 22,215,512 |
Common stock, outstanding shares | 22,215,512 | 22,215,512 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Revenue: | ||
Total revenue | $ 3,282,317 | $ 2,719,262 |
Operating expenses: | ||
Total operating expenses | 1,657,413 | 1,614,629 |
Depreciation and amortization | 164,717 | |
General and administrative expenses | 298,588 | |
Total expenses | 2,120,718 | |
Operating income | 1,161,599 | |
Interest expense | 334,191 | |
Income (loss) before income taxes | 827,408 | |
Income tax expense (benefit) | 0 | |
Net income (loss) | $ 827,408 | $ (255,041) |
Earnings (loss) per share - basic: | ||
Net income (loss) | $ 0.04 | $ (.01) |
Weighted average number of common shares outstanding | 22,215,512 | 22,215,512 |
Diluted earnings (loss) per share: | ||
Net income (loss) | $ 0.04 | $ (.01) |
Weighted average number of common shares outstanding | 23,465,512 | 23,465,512 |
Company-Owned Craft Pizza & Pub | ||
Revenue: | ||
Total revenue | $ 2,108,697 | $ 1,092,948 |
Operating expenses: | ||
Total operating expenses | 1,228,894 | 972,029 |
Company-Owned Non-traditional | ||
Revenue: | ||
Total revenue | 116,104 | 154,684 |
Operating expenses: | ||
Total operating expenses | 89,154 | 152,243 |
Franchising Revenue | ||
Revenue: | ||
Total revenue | 1,053,960 | 1,467,379 |
Operating expenses: | ||
Total operating expenses | 339,365 | 490,357 |
Depreciation and amortization | 65,947 | |
General and administrative expenses | 449,421 | |
Total expenses | 2,129,997 | |
Operating income | 589,265 | |
Interest expense | 926,289 | |
Income (loss) before income taxes | (337,024) | |
Income tax expense (benefit) | (81,983) | |
Net income (loss) | $ (255,041) | |
Earnings (loss) per share - basic: | ||
Net income (loss) | $ (.01) | |
Weighted average number of common shares outstanding | 22,215,512 | |
Diluted earnings (loss) per share: | ||
Net income (loss) | $ (.01) | |
Weighted average number of common shares outstanding | 22,853,349 | |
Administrative Fees and Other | ||
Revenue: | ||
Total revenue | $ 3,556 | $ 4,251 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) | Common Stock | Accumulated Deficit | Total |
Beginning balance, shares at Dec. 31, 2019 | 22,215,512 | ||
Beginning balance, amount at Dec. 31, 2019 | $ 24,858,311 | $ (17,024,523) | $ 7,833,788 |
Unamortized loan origination cost attributable to the 500,000 notes converted to 1,000,000 shares | (116,400) | (116,400) | |
Amortization of value of stock options | $ 5,312 | 5,312 | |
Net income (loss) | (255,041) | (255,041) | |
Ending balance, shares at Mar. 31, 2020 | 22,215,512 | ||
Ending balance, amount at Mar. 31, 2020 | $ 24,747,223 | (17,279,564) | 7,467,659 |
Beginning balance, shares at Dec. 31, 2020 | 22,215,512 | ||
Beginning balance, amount at Dec. 31, 2020 | $ 24,763,447 | (22,406,469) | 2,356,978 |
Amortization of value of stock options | 6,369 | 6,369 | |
Net income (loss) | 827,408 | 827,408 | |
Ending balance, shares at Mar. 31, 2021 | 22,215,512 | ||
Ending balance, amount at Mar. 31, 2021 | $ 24,769,816 | $ (21,579,061) | $ 3,190,755 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
OPERATING ACTIVITIES | ||
Net income (loss) | $ 827,408 | $ (255,041) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 283,268 | 860,743 |
Amortization of lease cost in excess of cash paid in accordance with ASU 2016-02 | 9,048 | 18,945 |
Deferred income taxes (benefit) | 0 | (81,983) |
(Increase) decrease in: | ||
Accounts receivable | (153,156) | (132,609) |
Inventories | 2,068 | (14,655) |
Prepaid expenses | (81,992) | (58,185) |
Other assets including long-term portion of receivables | (30,416) | (209,304) |
(Decrease) increase in: | ||
Accounts payable and accrued expenses | (155,772) | (147,794) |
Net cash provided by (used in) operating activities | 700,456 | (19,883) |
INVESTING ACTIVITIES | ||
Purchase of property and equipment | (22,105) | (555,637) |
Net cash (used) in investing activities | (22,105) | (555,637) |
FINANCING ACTIVITIES | ||
Payment of principal on bank term loans | 0 | (4,297,024) |
Payment of principal on convertible notes | 0 | (1,275,000) |
Proceeds of new loan - Corbel | 0 | 7,069,137 |
Net cash provided by financing activities | 0 | 1,497,113 |
Increase in cash | 678,351 | 921,593 |
Cash at beginning of period | 1,194,363 | 218,132 |
Cash at end of period | 1,872,714 | 1,139,725 |
Supplemental schedule of investing and financing activities | ||
Cash paid for interest | $ 221,220 | $ 198,560 |
1. Basis of Presentation and Su
1. Basis of Presentation and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | 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, 2020 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. Significant Accounting Policies On February 5, 2021, the Company borrowed $940,734 under the Paycheck Protection Program (the “PPP”). The funds, according to the provision of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), may be used for payroll costs including payroll benefits, interest on mortgage obligations, rent under lease agreements and utilities. Since the Company met all of the eligibility requirements to participate in the PPP and it was probable from the beginning that the Company’s PPP borrowing will be forgiven, the Company’s participation in the PPP program was accounted for as a government grant. Since the entire amount of the PPP participation was used to pay qualified expenses prior to March 31, 2021, the qualifying expenses are presented herein as a reduction of those related expenses in the quarter ended March 31, 2021. There have been no other significant changes in the Company's accounting policies from those disclosed in its Annual Report on Form 10-K. 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, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021, especially in light of recent volatility and uncertainty resulting from the coronavirus (“COVID-19) pandemic, the governmental response and the PPP funding. |
2. Royalties and Fees
2. Royalties and Fees | 3 Months Ended |
Mar. 31, 2021 | |
Revenue Recognition [Abstract] | |
Royalties and Fees | Royalties and fees included initial franchise fees of $25,000 for the three-month period ended March 31, 2020, and $55,000 for the three-month period ended March 31, 2021, Royalties and fees included equipment commissions of $4,000 for the three-month period ended March 31, 2020, and $10,000 for the three-month period ended March 31, 2021. Royalties and fees, including amortized initial franchise fees and equipment commissions, were $1.5 million for the three-month period ended March 31, 2020, and $1.1 million for the three-month period ended March 31, 2021. Most of the cost for the services required to be performed by the Company are incurred prior to the franchise fee income being recorded, which is based on a contractual liability of the franchisee. The effect on comparable periods within the financial statements is not material as the initial franchise fee for the non-traditional franchise is intended to defray the initial contract costs, and the franchise fees and contract costs initially incurred and paid approximate the relative amortized franchise fees and contract costs for those same periods. The deferred contract income and deferred costs were both $834,000 on March 31, 2021. At December 31, 2020 and March 31, 2021, the carrying value of the Company’s franchise receivables have been reduced to anticipated realizable value. As a result of this reduction of carrying value, the Company anticipates that substantially all of its accounts receivables reflected on the consolidated balance sheets as of December 31, 2020 and March 31, 2021, will be collected. In 2020, in light of the additional uncertainty created as a result of the COVID 19 pandemic, the Company decided to create a reserve for uncollectability on all long-term franchisee receivables. The Company will continue to pursue collection where circumstances are appropriate and all collections of these receivables in the future will result in additional royalty income at the time received. There were 3,064 franchises/licenses in operation on December 31, 2020 and 3,066 franchises/licenses in operation on March 31, 2021. During the three-month period ended March 31, 2021 there were seven new outlets opened and five 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 2,403 licensed grocery store units included in the counts above have left the system. |
3. Earnings (Loss) per Share
3. Earnings (Loss) per Share | 3 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
Earnings (Loss) per Share | The following table sets forth the calculation of basic and diluted earnings per share for the three-month period ended March 31, 2021: Three Months Ended March 31, 2021 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 827,408 22,215,512 $ .04 Effect of dilutive securities Options and warrants - - Convertible notes 15,625 1,250,000 Diluted earnings per share Net income per share with assumed conversions $ 843,033 23,465,512 $ .04 The following table sets forth the calculation of basic and diluted loss per share for the three-month period ended March 31, 2020: Three Months Ended March 31, 2020 Income (Numerator) Shares (Denominator) Per-Share Amount Net loss $ (255,041 ) 22,215,512 $ (.01 ) Effect of dilutive securities Options and warrants - - Convertible notes 47,500 1,250,000 Diluted loss per share Net loss per share with assumed conversions $ (207,541 ) 23,465,512 $ (.01 ) |
4. Notes Payable
4. Notes Payable | 3 Months Ended |
Mar. 31, 2021 | |
Debt Disclosure [Abstract] | |
Notes Payable | 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 the net proceeds of the Agreement as follows: (i) $4.2 million to repay the Company’s then-existing bank debt which was in the original amount of $6.1 million; (ii) $1,275,000 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 for working capital and 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. Impact of COVID-19 Pandemic In the first quarter of 2020, a novel strain of coronavirus (COVID-19) emerged and spread throughout the United States. The World Health Organization recognized COVID-19 as a pandemic in March 2020. In response to the pandemic, the U.S. federal government and various state and local governments, among other things, imposed travel and business restrictions, including stay-at-home orders and other guidelines that required restaurants and bars to close or restrict inside dining. The pandemic resulted in significant, economic volatility, uncertainty and disruption, reduced commercial activity and weakened economic conditions in the regions in which the Company and its franchisees operate. The pandemic and the governmental response had a significant adverse impact on the Company, due to, among other things, governmental restrictions, reduced customer traffic, staffing challenges and supply difficulties. All Company-owned Craft Pizza & Pub restaurants are located in the State of Indiana. 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 were open for carry-out only through April 30, 2020, 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 were allowed to open up to 50% of capacity, and on July 4, 2020 restaurants and bars were allowed to resume at 100% capacity. The Governor delayed the increase in capacity for a portion of the third quarter of 2020. Ultimately the Governor issued another order to allow 100% capacity for restaurants and bars but required certain social distancing rules which effectively limit capacity to much less than 100%. As the duration and scope of the pandemic is uncertain these orders are subject to further modification, which could adversely affect the Company. Further, the Company can provide no assurance the phase out of restrictions will have a positive effect on the Company's business. Many other states and municipalities in the United States also temporarily restricted travel and suspended the operation of dine-in restaurants and other businesses in light of COVID-19, which negatively affected our franchised operations. Host facilities for our non-traditional franchises were also adversely impacted by these developments. The uncertainty and disruption in the U.S. economy caused by the pandemic are likely to continue to adversely impact the volume and resources of potential franchisees for both the Company's Craft Pizza & Pub and non-traditional venues. In 2020, in light of the additional uncertainty created as a result of the COVID-19 pandemic, the Company decided to create a reserve for uncollectability on all long-term franchisee receivables. The Company will continue to pursue collection where circumstances are appropriate and all collections of these receivables in the future will result in additional royalty income at the time received. On April 25, 2020, the Company received a loan of $715,000 under the PPP. In accordance with the applicable accounting policy adopted, the Company accounted for the loan as a government grant and presented it in the Condensed Consolidated Statement of Operations as a reduction of certain qualifying expenses incurred during the three-month period ended June 30, 2020. The expenses included payroll costs and benefits, interest on mortgage obligations, rent under lease agreements and utilities and other qualifying expenses pursuant to the CARES ACT. On February 19, 2021, the Company received formal notice from the Small Business Administration ("SBA") that the entire $715,000 loan was forgiven in accordance with the provisions of the CARES ACT. On February 5, 2021, the Company received an additional loan of $940,734 under the PPP. In accordance with the applicable accounting policy adopted, the Company accounted for the loan as a government grant and presented it in the Condensed Consolidated Statement of Operations as a reduction of certain qualifying expenses incurred during the three-month period ended March 31, 2021. The expenses included payroll costs and benefits, interest on mortgage obligations, rent under lease agreements and utilities and other qualifying expenses pursuant to the CARES ACT. |
5. Subsequent Events
5. Subsequent Events | 3 Months Ended |
Mar. 31, 2021 | |
Subsequent Events [Abstract] | |
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 (Loss) per Share (T
3. Earnings (Loss) per Share (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Earnings Per Share [Abstract] | |
Earnings (loss) per share | The following table sets forth the calculation of basic and diluted earnings per share for the three-month period ended March 31, 2021: Three Months Ended March 31, 2021 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 827,408 22,215,512 $ .04 Effect of dilutive securities Options and warrants - - Convertible notes 15,625 1,250,000 Diluted earnings per share Net income per share with assumed conversions $ 843,033 23,465,512 $ .04 The following table sets forth the calculation of basic and diluted loss per share for the three-month period ended March 31, 2020: Three Months Ended March 31, 2020 Income (Numerator) Shares (Denominator) Per-Share Amount Net loss $ (255,041 ) 22,215,512 $ (.01 ) Effect of dilutive securities Options and warrants - - Convertible notes 47,500 1,250,000 Diluted loss per share Net loss per share with assumed conversions $ (207,541 ) 23,465,512 $ (.01 ) |
2. Royalties and Fees (Details
2. Royalties and Fees (Details Narrative) | 3 Months Ended | ||
Mar. 31, 2021USD ($)Outlets | Mar. 31, 2020USD ($) | Dec. 31, 2020USD ($)Outlets | |
Deferred contract income | $ 834,018 | $ 834,018 | |
Deferred contract cost | $ 834,018 | $ 834,018 | |
Number of franchisee | Outlets | 3,066 | 3,064 | |
Outlets opened | Outlets | 7 | ||
Outlets closed | Outlets | 5 | ||
Initial Franchisee Fees | |||
Royalties and fees | $ 55,000 | $ 25,000 | |
Equipment Commission | |||
Royalties and fees | $ 10,000 | $ 4,000 |
3. Earnings (Loss) per Share (D
3. Earnings (Loss) per Share (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Net income (loss) | $ 827,408 | $ (255,041) |
Net income (loss) per share with assumed conversions | $ 843,033 | $ (207,540) |
Weighted average number of common shares outstanding, basic | 22,215,512 | 22,215,512 |
Weighted average number of common shares outstanding, diluted | 23,465,512 | 23,465,512 |
Earnings per share, basic | $ 0.04 | $ (.01) |
Earnings per share, diluted | $ 0.04 | $ (.01) |
Options and Warrants | ||
Effect of dilutive securities | $ 0 | $ 0 |
Effect of dilutive securities | 0 | 0 |
Convertible Notes | ||
Effect of dilutive securities | $ 15,625 | $ 47,500 |
Effect of dilutive securities | 1,250,000 | 1,250,000 |