Cover
Cover - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Mar. 18, 2022 | Jun. 30, 2021 | |
Cover [Abstract] | |||
Entity Registrant Name | NOBLE ROMAN’S, INC. | ||
Entity Central Index Key | 0000709005 | ||
Document Type | 10-K | ||
Amendment Flag | false | ||
Entity Voluntary Filers | No | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well Known Seasoned Issuer | No | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Emerging Growth Company | false | ||
Entity Current Reporting Status | Yes | ||
Document Period End Date | Dec. 31, 2021 | ||
Entity Filer Category | Non-accelerated Filer | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2021 | ||
Entity Common Stock Shares Outstanding | 22,215,512 | ||
Entity Public Float | $ 4.4 | ||
Document Annual Report | true | ||
Entity File Number | 0-11104 | ||
Entity Address State Or Province | IN | ||
Entity Tax Identification Number | 35-1281154 | ||
Entity Interactive Data Current | Yes | ||
Icfr Auditor Attestation Flag | false | ||
Document Transition Report | false | ||
Entity Address Address Line 1 | 6612 E. | ||
Entity Address Address Line 2 | 75th Street | ||
Entity Address Address Line 3 | Suite 450 | ||
City Area Code | 317 | ||
Local Phone Number | 634-3377 | ||
Entity Address City Or Town | Indianapolis | ||
Entity Address Postal Zip Code | 46250 | ||
Entity Incorporation State Country Code | IN | ||
Auditor Name | Somerset CPA’s, P.C. | ||
Auditor Location | Indianapolis, Indiana | ||
Auditor Firm Id | 752 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Assets | ||
Cash | $ 1,263,513 | $ 1,194,363 |
Accounts receivable - net | 904,474 | 879,502 |
Inventories | 994,085 | 890,556 |
Prepaid expenses | 415,309 | 395,918 |
Total current assets | 3,577,381 | 3,360,339 |
Property and equipment: | ||
Equipment | 4,216,246 | 3,708,689 |
Leasehold improvements | 3,065,644 | 2,319,445 |
Construction and equipment in progress | 235,051 | 510,225 |
Property Plant And Equipment Gross | 7,516,941 | 6,538,359 |
Less accumulated depreciation and amortization | 2,366,927 | 1,989,209 |
Net property and equipment | 5,150,014 | 4,549,150 |
Deferred tax asset | 3,232,406 | 3,104,904 |
Deferred contract costs | 810,044 | 834,018 |
Goodwill | 278,466 | 278,466 |
Operating lease right of use assets | 6,003,044 | 6,088,101 |
Other assets including long-term portion of accounts receivable - net | 324,402 | 201,962 |
Total assets | 19,375,757 | 18,416,940 |
Current liabilities: | ||
Accounts payable and accrued expenses | 919,157 | 878,099 |
Current portion of operating lease liability | 656,146 | 412,005 |
Total current liabilities | 1,575,303 | 1,290,104 |
Long-term obligations: | ||
Loan payable to Corbel | 7,898,941 | 7,468,709 |
Corbel warrant value | 29,037 | 29,037 |
Convertible notes payable | 597,229 | 574,479 |
Operating lease liabilities - net of current portion | 5,570,639 | 5,863,615 |
Deferred contract income | 810,044 | 834,018 |
Total long-term liabilities | 14,905,890 | 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 December 31, 2021) | 24,791,568 | 24,763,447 |
Accumulated deficit | (21,897,004) | (22,406,469) |
Total stockholders' equity | 2,894,564 | 2,356,978 |
Total liabilities and stockholders' equity | $ 19,375,757 | $ 18,416,940 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Consolidated Statements of Operations | |||
Restaurant revenue - company-owned restaurants | $ 8,939,569 | $ 6,209,279 | $ 4,830,199 |
Restaurant revenue - company-owned non-traditional | 485,595 | 470,846 | 673,647 |
Franchising revenue | 4,444,826 | 4,841,229 | 6,162,576 |
Administrative fees and other | 14,898 | 14,310 | 38,202 |
Total revenue | 13,884,888 | 11,535,664 | 11,704,624 |
Operating expenses: | |||
Restaurant expenses - company-owned restaurants | 7,224,833 | 4,938,133 | 4,250,406 |
Restaurant expenses - company-owned non-traditional | 466,469 | 447,040 | 626,453 |
Franchising expenses | 1,810,363 | 1,736,870 | 2,092,001 |
Total operating expenses | 9,501,665 | 7,122,043 | 6,968,860 |
Depreciation and amortization | 848,913 | 382,368 | 382,793 |
General and administrative | 1,790,722 | 1,717,209 | 1,739,383 |
Total expenses | 12,141,300 | 9,221,620 | 9,091,036 |
Operating income | 1,743,588 | 2,314,044 | 2,613,588 |
Interest expense | 1,361,625 | 1,914,344 | 774,565 |
Adjust valuation of receivables | 0 | 4,941,718 | 1,300,000 |
Net (loss) income before income taxes | 381,963 | (4,542,018) | 539,023 |
Income tax expense (benefit) | (127,502) | 839,928 | 917,088 |
Net (loss) income | $ 509,465 | $ (5,381,946) | $ (378,065) |
Income (loss) per share - basic: | |||
Net income (loss) | $ 0.02 | $ (0.24) | $ (0.02) |
Weighted average number of common shares outstanding | 22,215,512 | 22,215,512 | 22,052,859 |
Diluted income (loss) per share: | |||
Net income (loss) | $ 0.02 | $ (0.24) | $ (0.02) |
Weighted average number of common shares outstanding | 23,641,678 | 23,465,512 | 23,315,695 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Total | Common Stock | Retained Earnings (Accumulated Deficit) |
Balance, shares at Dec. 31, 2018 | 21,783,131 | ||
Balance, amount at Dec. 31, 2018 | $ 8,145,336 | $ 24,739,482 | $ (16,594,146) |
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 | 0 |
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 | |
Balance, shares at Dec. 31, 2019 | 22,215,512 | ||
Balance, amount at Dec 31, 2021 at Dec. 31, 2019 | 7,833,788 | $ 24,858,311 | (17,024,523) |
Net loss | (5,381,946) | (5,381,946) | |
Amortization of value of stock options | 21,536 | 21,536 | |
Write-off unamortized closing to sub-debt that was converted | (116,400) | $ (116,400) | |
Balance, shares at Dec. 31, 2020 | 22,215,512 | ||
Balance, amount at Dec 31, 2021 at Dec. 31, 2020 | 2,356,978 | $ 24,763,447 | (22,406,469) |
Net loss | 509,465 | 509,465 | |
Amortization of value of stock options | 28,121 | $ 28,121 | 0 |
Balance, shares at Dec. 31, 2021 | 22,215,512 | ||
Balance, amount at Dec 31, 2021 at Dec. 31, 2021 | $ 2,894,564 | $ 24,791,568 | $ (21,897,004) |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
OPERATING ACTIVITIES | |||
Net income (loss) | $ 509,465 | $ (5,381,946) | $ (378,065) |
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: | |||
Depreciation and amortization | 1,330,017 | 1,433,295 | 469,804 |
Amortization of lease cost in excess of cash paid | 36,223 | 46,994 | 134,545 |
Deferred income taxes | (127,502) | 839,928 | 917,088 |
Increase (decrease) in: | |||
Accounts receivable | (24,971) | (98,388) | (377,151) |
Inventories | (103,530) | (9,896) | 82,123 |
Prepaid expenses | (19,391) | 189,884 | (96,392) |
Other assets including long-term portion of accounts receivable | (122,440) | 4,508,836 | 548,648 |
Accounts payable and accrued expenses | 41,058 | 147,040 | 207,745 |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 1,518,929 | 1,675,747 | 1,508,345 |
INVESTING ACTIVITIES | |||
Purchase of property and equipment | (1,449,779) | (2,084,710) | (289,351) |
NET CASH USED BY INVESTING ACTIVITIES | (1,449,779) | (2,084,710) | (289,351) |
FINANCING ACTIVITIES | |||
Payment of principal on First Financial Bank loan | 0 | (4,379,024) | (998,271) |
Payment of principal on convertible notes | 0 | (1,275,000) | 0 |
Net proceeds from new financings net of closing costs | 0 | 7,039,218 | 0 |
Lease liabilities | 0 | 0 | (78,785) |
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES | 0 | 1,385,194 | (1,077,056) |
Increase (decrease) in cash | 69,150 | 976,231 | 141,938 |
Cash at beginning of year | 1,194,363 | 218,132 | 76,194 |
Cash at end of year | $ 1,263,513 | $ 1,194,363 | $ 218,132 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2021 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note l: Summary of Significant Accounting Policies Organization: The Company, with two wholly-owned subsidiaries, sells and services franchises and licenses and operates Company-owned stand-alone restaurants and non-traditional foodservice operations 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 wholly-owned subsidiaries. Principles of Consolidation: The consolidated financial statements include the accounts of Noble Roman’s, Inc. and its wholly-owned subsidiaries, RH Roanoke, Inc. and Pizzaco, 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 5 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 for the year ended December 31, 2020. Leases: 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. 29 Table of Contents 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 of $1.3 million for possible non-collections. 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 income at the time received. 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, 2021 was $574,776. 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 analysis, 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, 2021, exceeded the carrying or book value, including goodwill, and therefore recorded goodwill was not subject to impairment. 30 Table of Contents 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 Updated (“ASU”) 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 $400,000 in tax expense in 2019. In 2020, the Company again reviewed its deferred tax asset and determined that 2020 taxable income used up $267,528 and $572,400 deferred credits were expiring. 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, 2019, 2020 and 2021. The Company’s federal and various state income tax returns for 2018 through 2020 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. 31 Table of Contents 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 $ (378,065 ) 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 (1) $ (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. The following table sets forth the calculation of basic and diluted loss per share for the year ended December 31, 2020: Income (Numerator) Shares (Denominator) Per Share Amount Net loss per share - basic Net loss $ (5,381,946 ) 22,215,512 $ (.24 ) Effect of dilutive securities Options - - Convertible Notes 62,500 1,250,000 Diluted net loss per share Net loss (1) $ (5,319,446 ) 23,465,512 $ (.24 ) (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 income per share for the year ended December 31, 2021: Income (Numerator) Shares (Denominator) Per Share Amount Net income per share - basic Net income $ 509,465 22,215,512 $ .02 Effect of dilutive securities Options - 176,166 Convertible Notes 62,500 1,250,000 Diluted net loss per share Net income $ 571,965 23,641,678 $ .02 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. No subsequent event required recognition or disclosure. |
Accounts Receivable
Accounts Receivable | 12 Months Ended |
Dec. 31, 2021 | |
Accounts Receivable | |
Accounts Receivable | Note 2: Accounts Receivable At December 31, 2020 and 2021, 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, 2020 and 2021 will be collected. Other assets, as of December 31, 2021, include security deposit and cash value of life insurance. |
Notes Payable
Notes Payable | 12 Months Ended |
Dec. 31, 2021 | |
Notes Payable | |
Notes Payable | Note 3: 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 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 were 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 is being 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. 33 Table of Contents At December 31, 2021, the balance of the Senior Note was comprised of: Principal Due $ 8,474,985 Unamortized Loan Closing Cost 547,007 Carrying Value $ 7,927,978 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 matured, and the Warrants expired, 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). As a result of the February 7, 2020 financing with Corbel, the Warrants adjusted to $0.57 per share. All warrants were canceled with the repayment of the Notes except Warrants issued with $775,000 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, 2021, the balance of the Notes is comprised of: Face Value $ 625,000 Unamortized OID 27,771 Carrying Value $ 597,229 Total cash and non-cash interest accrued on the Company’s indebtedness in 2021 was $1.36 million and in 2020 was $1.9 million. 34 Table of Contents |
Royalties and Fees
Royalties and Fees | 12 Months Ended |
Dec. 31, 2021 | |
Royalties and Fees | |
Royalties and Fees | Note 4: Royalties and Fees Approximately $307,000, $198,000 and $204,000 are included in 2019, 2020 and 2021, respectively, royalties and fees in the Consolidated Statements of Operations for amortized initial franchise fees. Also included in royalties and fees were approximately $70,000, $45,000 and $32,000 in 2019, 2020 and 2021, 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 franchises. The deferred contract income and costs approximated $834,000 on December 31, 2020 and $810,000 on December 31, 2021. 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 3,069 franchised/licensed or Company-owned outlets in operation on December 31, 2021 and 3,064 on December 31, 2020. During 2021, 24 new franchised/licensed were opened and 19 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 2,403, have left the system. |
Liabilities for Leased Faciliti
Liabilities for Leased Facilities | 12 Months Ended |
Dec. 31, 2021 | |
Liabilities for Leased Facilities | |
Liabilities for Leased Facilities | Note 5: Liabilities for Leased Facilities The Company has future obligations of $15.37 million under long-term debt and current operating leases as follows: due in less than one year $656,000, due in one to three years $4.13 million, due in three to five years $9.13 million and due in more than five years $1.5 million. To implement 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 $36,222 more in lease expense than cash actually paid in 2021 for the leases. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2021 | |
Income Taxes | |
Income Taxes | Note 6: Income Taxes The Company had deferred tax assets, as a result of prior operating losses, of $3.1 million at December 31, 2020 and $3.2 million at December 31, 2021. The net operating loss carry-forward is approximately $12.0 million so the Company will have no obligation to pay income tax on income up to the amount of that operating loss carry-forward, prior to its expiration. |
Common Stock
Common Stock | 12 Months Ended |
Dec. 31, 2021 | |
Common Stock | |
Common Stock | Note 7: Common Stock Outstanding are $625,000 principal amount of Notes convertible into Common Stock at $0.50 per share and warrants to purchase 775,000 shares with an exercise price of $0.57 per share which expires in February 2023. The Company issued to the Purchaser the Corbel Warrant to purchase up to 2,250,000 shares of Common Stock, as described in Note 3 of these notes to the Company’s consolidated financial statements. 35 Table of Contents 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, 2021, the Company had the following employee stock options outstanding: # Common Shares Issuable Exercise Price 1,756,167 $ 0.58 727,500 1.00 280,000 0.53 35,000 0.50 372,500 0.51 332,500 0.623 474,500 0.60 413,500 0.40 463,500 0.70 As of December 31, 2021, options for 3,813,667 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 2019, 2020 and 2021: Expected volatility 20% Expected dividend yield None Expected term (in years) 3 Risk-free interest rate 1.68 to 2.82% 36 Table of Contents The following table sets forth the number of options outstanding as of December 31, 2018, 2019, 2020 and 2021 and the number of options granted, exercised or forfeited during the years ended December 31, 2019, 2020 and 2021: 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 0 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 Stock options granted during the year ended 12/31/20 443,500 Stock options exercised during the year ended 12/31/20 0 Stock options forfeited during the year ended 12/31/20 0 Balance of employee stock options outstanding as of 12/31/20 4,421,667 Stock options granted during the year ended 12/31/21 463,500 Stock options exercised during the year ended 12/31/21 0 Stock options forfeited during the year ended 12/31/21 (30,000 ) Balance of employee stock options outstanding as of 12/31/21 4,855,167 The following table sets forth the number of non-vested options outstanding as of December 31, 2018, 2019, 2020 and 2021, and the number of stock options granted, vested and forfeited during the years ended December 31, 2019, 2020 and 2021. 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 Stock options granted during the year ended 12/31/20 443,500 Stock options vested during the year ended 12/31/20 (212,500 ) Stock options forfeited during the year ended 12/31/20 0 Balance of employee non-vested stock options outstanding as of 12/31/20 962,336 Stock options granted during the year ended 12/31/21 463,500 Stock options vested during the year ended 12/31/21 (354,336 ) Stock options forfeited during the year ended 12/31/21 (30,000 ) Balance of employee non-vested stock options outstanding as of 12/31/21 1,041,500 During 2021, employee stock options were granted for 463,500 shares and options for 30,000 shares were forfeited. At December 31, 2021, the weighted average grant date fair value of non-vested options was $0.58 per share and the weighted average grant date fair value of vested options was $0.66 per share. The weighted average grant date fair value of employee stock options granted during 2019 was $0.66, during 2020 was $0.40 and during 2021 was $0.70. Total compensation cost recognized for share-based payment arrangements was $18,829 in 2019 with a tax benefit of $4,995 in 2019, $21,536 in 2020 with a tax benefit of $5,168 and $28,119 in 2021 with a tax benefit of $6,861. As of December 31, 2021, total unamortized compensation cost related to options was $50,941, 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. |
Statements of Financial Account
Statements of Financial Accounting Standards | 12 Months Ended |
Dec. 31, 2021 | |
Statements of Financial Accounting Standards | |
Statements of Financial Accounting Standards | Note 8: 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 ASU2016-02, 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 $36,222 in 2021. |
Contingencies
Contingencies | 12 Months Ended |
Dec. 31, 2021 | |
Contingencies | |
Contingencies | Note 9: 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. |
Certain Relationships and Relat
Certain Relationships and Related Transactions | 12 Months Ended |
Dec. 31, 2021 | |
Certain Relationships and Related Transactions | |
Certain Relationships and Related Transactions | Note 10: 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 completed on the same terms and conditions as all of the independent investors who purchased the other 41Units. 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. |
Unaudited Quarterly Financial I
Unaudited Quarterly Financial Information | 12 Months Ended |
Dec. 31, 2021 | |
Unaudited Quarterly Financial Information | |
Unaudited Quarterly Financial Information | Note 11: Unaudited Quarterly Financial Information 2021 Quarter Ended December 31 September 30 June 30 March 31 (in thousands, except per share data) Total revenue $ 3,594 $ 3,424 $ 3,585 $ 3,282 Operating income (106 ) 264 424 1,162 Net income (loss) before income taxes (451 ) (79 ) 85 827 Net income (loss) (324 ) (79 ) 85 827 Net income (loss) per common share Basic (.01 ) 0 0 .04 Diluted (.01 ) 0 0 .04 2020 Quarter Ended December 31 September 30 June 30 March 31 (in thousands, except per share data) Total revenue $ 3,268 $ 2,938 $ 2,610 $ 2,719 Operating income 295 411 1,019 589 Net income (loss)before income taxes (4,984 ) 83 696 (337 ) Net income (loss) (5,906 ) 83 696 (255 ) Net income (loss) per common share Basic (.26 ) .00 .03 (.01 ) Diluted (.26 ) .00 .03 (.01 ) |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2021 | |
Summary of Significant Accounting Policies | |
Leases | Leases: 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. |
Organization | Organization: The Company, with two wholly-owned subsidiaries, sells and services franchises and licenses and operates Company-owned stand-alone restaurants and non-traditional foodservice operations 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 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, RH Roanoke, Inc. and Pizzaco, 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 5 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 for the year ended December 31, 2020. |
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 of $1.3 million for possible non-collections. 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 income at the time received. 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, 2021 was $574,776. |
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 analysis, 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, 2021, 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 Updated (“ASU”) 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 $400,000 in tax expense in 2019. In 2020, the Company again reviewed its deferred tax asset and determined that 2020 taxable income used up $267,528 and $572,400 deferred credits were expiring. 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, 2019, 2020 and 2021. The Company’s federal and various state income tax returns for 2018 through 2020 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. 31 Table of Contents 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 $ (378,065 ) 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 (1) $ (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. The following table sets forth the calculation of basic and diluted loss per share for the year ended December 31, 2020: Income (Numerator) Shares (Denominator) Per Share Amount Net loss per share - basic Net loss $ (5,381,946 ) 22,215,512 $ (.24 ) Effect of dilutive securities Options - - Convertible Notes 62,500 1,250,000 Diluted net loss per share Net loss (1) $ (5,319,446 ) 23,465,512 $ (.24 ) (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 income per share for the year ended December 31, 2021: Income (Numerator) Shares (Denominator) Per Share Amount Net income per share - basic Net income $ 509,465 22,215,512 $ .02 Effect of dilutive securities Options - 176,166 Convertible Notes 62,500 1,250,000 Diluted net loss per share Net income $ 571,965 23,641,678 $ .02 |
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. No subsequent event required recognition or disclosure. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Summary of Significant Accounting Policies | |
Basic and diluted earnings per share | Income (Numerator) Shares (Denominator) Per Share Amount Net loss per share - basic Net loss $ (378,065 ) 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 (1) $ (316,105 ) 23,315,695 $ (.02 ) Income (Numerator) Shares (Denominator) Per Share Amount Net loss per share - basic Net loss $ (5,381,946 ) 22,215,512 $ (.24 ) Effect of dilutive securities Options - - Convertible Notes 62,500 1,250,000 Diluted net loss per share Net loss (1) $ (5,319,446 ) 23,465,512 $ (.24 ) Income (Numerator) Shares (Denominator) Per Share Amount Net income per share - basic Net income $ 509,465 22,215,512 $ .02 Effect of dilutive securities Options - 176,166 Convertible Notes 62,500 1,250,000 Diluted net loss per share Net income $ 571,965 23,641,678 $ .02 |
Notes Payable (Tables)
Notes Payable (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Notes Payable | |
Credit facility | Principal Due $ 8,474,985 Unamortized Loan Closing Cost 547,007 Carrying Value $ 7,927,978 |
Notes payable | Face Value $ 625,000 Unamortized OID 27,771 Carrying Value $ 597,229 |
Common Stock (Tables)
Common Stock (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Common Stock | |
Employee stock options outstanding | # Common Shares Issuable Exercise Price 1,756,167 $ 0.58 727,500 1.00 280,000 0.53 35,000 0.50 372,500 0.51 332,500 0.623 474,500 0.60 413,500 0.40 463,500 0.70 |
Assumptions for grants | Expected volatility 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 12/31/18 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 0 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 Stock options granted during the year ended 12/31/20 443,500 Stock options exercised during the year ended 12/31/20 0 Stock options forfeited during the year ended 12/31/20 0 Balance of employee stock options outstanding as of 12/31/20 4,421,667 Stock options granted during the year ended 12/31/21 463,500 Stock options exercised during the year ended 12/31/21 0 Stock options forfeited during the year ended 12/31/21 (30,000 ) Balance of employee stock options outstanding as of 12/31/21 4,855,167 |
Number of non-vested options outstanding | 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 Stock options granted during the year ended 12/31/20 443,500 Stock options vested during the year ended 12/31/20 (212,500 ) Stock options forfeited during the year ended 12/31/20 0 Balance of employee non-vested stock options outstanding as of 12/31/20 962,336 Stock options granted during the year ended 12/31/21 463,500 Stock options vested during the year ended 12/31/21 (354,336 ) Stock options forfeited during the year ended 12/31/21 (30,000 ) Balance of employee non-vested stock options outstanding as of 12/31/21 1,041,500 |
Unaudited Quarterly Financial_2
Unaudited Quarterly Financial Information (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Unaudited Quarterly Financial Information | |
Unaudited quarterly financial information | 2021 Quarter Ended December 31 September 30 June 30 March 31 (in thousands, except per share data) Total revenue $ 3,594 $ 3,424 $ 3,585 $ 3,282 Operating income (106 ) 264 424 1,162 Net income (loss) before income taxes (451 ) (79 ) 85 827 Net income (loss) (324 ) (79 ) 85 827 Net income (loss) per common share Basic (.01 ) 0 0 .04 Diluted (.01 ) 0 0 .04 2020 Quarter Ended December 31 September 30 June 30 March 31 (in thousands, except per share data) Total revenue $ 3,268 $ 2,938 $ 2,610 $ 2,719 Operating income 295 411 1,019 589 Net income (loss)before income taxes (4,984 ) 83 696 (337 ) Net income (loss) (5,906 ) 83 696 (255 ) Net income (loss) per common share Basic (.26 ) .00 .03 (.01 ) Diluted (.26 ) .00 .03 (.01 ) |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2021 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Net income (loss) | $ (324) | $ (79,000) | $ 85,000 | $ 827,000 | $ (5,906,000) | $ 83,000 | $ 696,000 | $ (255,000) | $ 509,465 | $ (5,381,946) | $ (378,065) |
Weighted average number of common shares outstanding, basic | 22,215,512 | 22,215,512 | 22,052,859 | ||||||||
Earnings per share, basic | $ (0.01) | $ 0 | $ 0 | $ 0.04 | $ (0.26) | $ 0 | $ 0.03 | $ (0.01) | $ 0.02 | $ (0.24) | $ (0.02) |
Net loss per share with assumed conversions | $ 571,965 | $ (5,319,446) | $ (316,105) | ||||||||
Weighted average number of common shares outstanding, diluted | 23,641,678 | 23,465,512 | 23,315,695 | ||||||||
Earnings per share, diluted | $ (0.01) | $ 0 | $ 0 | $ 0.04 | $ (0.26) | $ 0 | $ 0.03 | $ (0.01) | $ 0.02 | $ (0.24) | $ (0.02) |
Options | |||||||||||
Effect of dilutive securities | $ 0 | $ 0 | $ 0 | ||||||||
Effect of dilutive securities, shares | 176,166 | 12,836 | |||||||||
Convertible Notes | |||||||||||
Effect of dilutive securities | $ 62,500 | $ 62,500 | $ 62,500 | ||||||||
Effect of dilutive securities, shares | 1,250,000 | 1,250,000 | 1,250,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Permanently wrote off | $ 1,300,000 | ||
Additional reserve for non-collection | 2,800,000 | ||
Additional reserve | 1,300,000 | ||
Deferred tax credits | 1,422,960 | $ 572,400 | $ 1,422,960 |
Net operating loss carry-forward | 1,700,000 | ||
Additional tax expense | 267,528 | $ 400,000 | |
Unamortized debt issuance cost | 574,776 | ||
Goodwill | 278,466 | $ 278,466 | |
RH Roanoke, Inc | |||
Goodwill | $ 278,000 | ||
Minimum | |||
Property and equipment estimated useful life | 5 years | ||
Maximum | |||
Property and equipment estimated useful life | 20 years |
Notes Payable (Details)
Notes Payable (Details) | Dec. 31, 2021USD ($) |
Notes Payable | |
Principal due | $ 8,474,985 |
Unamortized loan closing cost | (547,007) |
Carrying value | $ 7,927,978 |
Notes Payable (Details 1)
Notes Payable (Details 1) | Dec. 31, 2021USD ($) |
Notes Payable | |
Face value | $ 625,000 |
Unamortized OID | (50,521) |
Carrying value | $ 597,229 |
Note payable (Details Narrative
Note payable (Details Narrative) | Feb. 07, 2020USD ($)$ / sharesshares | Dec. 31, 2021USD ($)$ / sharesshares | Dec. 31, 2016USD ($)integer | Dec. 31, 2020USD ($) | Jan. 31, 2017USD ($)integer |
Exercise price | $ / shares | $ 0.57 | ||||
Description of warrant price | 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. | ||||
Interest on Notes accrued description | 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. | ||||
Annual interest rate | 10.00% | ||||
Interest accrued | $ 1,360,000 | $ 1,900,000 | |||
Number of issued units | integer | 32 | 16 | |||
Purchase price shares | $ 50,000 | $ 800,000 | |||
Aggregate shares of note payable | $ 1,600,000 | ||||
Unsecured promissory note | $ 50,000 | ||||
Warrant purchase shares | shares | 50,000 | ||||
Aggregate principal amount of note payable | $ 50,000 | ||||
Purchase shares of common stock | shares | 2,250,000 | ||||
Note payable principle amount | $ 597,229 | $ 574,479 | |||
Maturity date | February 2023 | ||||
Paul Mobley | |||||
Aggregate principal amount of note payable | $ 200,000 | ||||
Holders | |||||
Aggregate principal amount of note payable | $ 150,000 | ||||
Note Warrant | |||||
Exercise price | $ / shares | $ 0.57 | ||||
Note payable principle amount | $ 775,000 | ||||
Maturity date | January 31, 2023 | ||||
Tranche 1 | |||||
Exercise price | $ / shares | $ 0.57 | ||||
Purchase shares of common stock | shares | 1,200,000 | ||||
Tranche 2 | |||||
Exercise price | $ / shares | $ 0.72 | ||||
Purchase shares of common stock | shares | 900,000 | ||||
Trading price per share | $ / shares | $ 1.50 | ||||
Tranche 3 | |||||
Exercise price | $ / shares | $ 0.97 | ||||
Purchase shares of common stock | shares | 150,000 | ||||
Secured Promissory Note [Member] | |||||
Purchase shares of common stock | shares | 2,250,000 | ||||
Note payable principle amount | $ 33,333 | ||||
Bank loan | 8,000,000 | ||||
Repay bank debt | 4,200,000 | ||||
Original amount | 6,100,000 | ||||
Convertible debt | $ 1,275,000 | ||||
Interest rate | 7.75% | ||||
Maturity date | February 7, 2025 | ||||
Trading price per share | $ / shares | $ 1.40 |
Royalties and Fees (Details Nar
Royalties and Fees (Details Narrative) | 12 Months Ended | ||
Dec. 31, 2021USD ($)integer | Dec. 31, 2020USD ($)integer | Dec. 31, 2019USD ($) | |
Deferred contract income and costs | $ | $ 810,000 | $ 834,000 | |
Number of franchisee | integer | 3,069 | 3,064 | |
Outlets opened | integer | 24 | ||
Outlets closed | integer | 19 | ||
Initial Franchisee Fees | |||
Royalties and fees | $ | $ 204,000 | $ 198,000 | $ 307,000 |
Equipment Commission | |||
Royalties and fees | $ | $ 32,000 | $ 45,000 | $ 70,000 |
Liabilities for Leased Facili_2
Liabilities for Leased Facilities (Details Narrative) | 12 Months Ended |
Dec. 31, 2021USD ($) | |
Liabilities for Leased Facilities | |
Due in less than one year | $ 656,000 |
Due in one to three years | 4,130,000 |
Due in three to five years | 9,130,000 |
Due in more than five years | $ 1,500,000 |
Weighted average discount rate | 7.00% |
Future obligations operating leases | $ 15,370,000 |
Lease expense | $ 36,222 |
Weighted average lease term | 7 years 3 months 18 days |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Income Taxes | ||
Deferred tax asset | $ 3,232,406 | $ 3,104,904 |
Net operating loss carry-forward | $ 12,000,000 |
Common Stock (Details)
Common Stock (Details) - $ / shares | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Common shares issuable | 4,855,167 | 4,421,667 | 3,978,167 | 3,643,667 | 3,334,167 |
Employee Stock Option 1 | |||||
Common shares issuable | 1,756,167 | ||||
Exercise price | $ 0.58 | ||||
Employee Stock Option 2 | |||||
Common shares issuable | 727,500 | ||||
Exercise price | $ 1 | ||||
Employee Stock Option 3 | |||||
Common shares issuable | 280,000 | ||||
Exercise price | $ 0.53 | ||||
Employee Stock Option 4 | |||||
Common shares issuable | 35,000 | ||||
Exercise price | $ 0.50 | ||||
Employee Stock Option 5 | |||||
Common shares issuable | 372,500 | ||||
Exercise price | $ 0.51 | ||||
Employee Stock Option 6 | |||||
Common shares issuable | 332,500 | ||||
Exercise price | $ 0.623 | ||||
Employee Stock Option 7 | |||||
Common shares issuable | 474,500 | ||||
Exercise price | $ 0.60 | ||||
Employee Stock Option 8 | |||||
Common shares issuable | 413,500 | ||||
Exercise price | $ 0.40 | ||||
Employee Stock Option 9 | |||||
Common shares issuable | 463,500 | ||||
Exercise price | $ 0.70 |
Common Stock (Details 1)
Common Stock (Details 1) | 12 Months Ended |
Dec. 31, 2021 | |
Common Stock | |
Expected volatility | 20.00% |
Expected dividend yield | 0.00% |
Expected term (in years) | 3 years |
Risk-free interest rate, minimum | 1.68% |
Risk-free interest rate, maximum | 2.82% |
Common Stock (Details 2)
Common Stock (Details 2) - shares | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Common Stock | |||
Stock options outstanding, ending | 4,855,167 | 4,421,667 | 3,978,167 |
Stock options granted | 463,500 | 443,500 | 529,500 |
Stock options exercised | 0 | 0 | 0 |
Stock options forfeited | (30,000) | 0 | (195,000) |
Common Stock (Details 3)
Common Stock (Details 3) - shares | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Common Stock | |||
Non-vested stock options outstanding, ending | 1,041,500 | 962,336 | 731,336 |
Non-vested stock options granted | 463,500 | 443,500 | 529,500 |
Non-vested stock options vested | (354,336) | (212,500) | (325,000) |
Non-vested stock options forfeited | (30,000) | 0 | (195,000) |
Common Stock (Details Narrative
Common Stock (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Common Stock | |||
Stock options exercisable | 3,813,667 | ||
Common stock price per shares | $ 0.50 | ||
Warrants purchase shares | 775,000 | ||
Stock options granted | 463,500 | 443,500 | 529,500 |
Purchase shares of common stock | 2,250,000 | ||
Stock options forfeited | 30,000 | 0 | 195,000 |
Weighted average grant date fair value of non-vested options | $ 0.58 | ||
Exercise price | 0.57 | ||
Weighted average grant date fair value of vested options | 0.66 | ||
Weighted average grant date fair value of employee stock options granted | $ 0.70 | $ 0.40 | $ 0.66 |
Share based compensation | $ 28,119 | $ 21,536 | $ 18,829 |
Tax benefit | 6,861 | $ 5,168 | $ 4,995 |
Unamortized compensation cost related to options | $ 50,941 | ||
Unamortized compensation cost related to options recognition period | 36 years | ||
Outstanding principal balance | $ 625,000 | ||
Maturity date | February 2023 |
Statements of Financial Accou_2
Statements of Financial Accounting Standards (Details Narrative) | 12 Months Ended |
Dec. 31, 2021USD ($) | |
Statements of Financial Accounting Standards | |
Additional expense for rent | $ 36,222 |
Certain Relationships and Rel_2
Certain Relationships and Related Transactions (Details Narrative) | Dec. 31, 2021USD ($)shares |
Warrant purchase shares | shares | 50,000 |
Aggregate principal amount of note payable | $ 50,000 |
Paul Mobley | |
Aggregate principal amount of note payable | 200,000 |
Aggregate principal amount of note payable | 1,275,000 |
Holders | |
Aggregate principal amount of note payable | 150,000 |
Aggregate principal amount of note payable | $ 775,000 |
Unaudited Quarterly Financial_3
Unaudited Quarterly Financial Information (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2021 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Unaudited Quarterly Financial Information | |||||||||||
Total revenue | $ 3,594 | $ 3,424,000 | $ 3,585,000 | $ 3,282,000 | $ 3,268,000 | $ 2,938,000 | $ 2,610,000 | $ 2,719,000 | $ 13,884,888 | $ 11,535,664 | $ 11,704,624 |
Operating income | (106) | 264,000 | 424,000 | 1,162,000 | 295,000 | 411,000 | 1,019,000 | 589,000 | 1,743,588 | 2,314,044 | 2,613,588 |
Net (loss) income before income taxes | (451) | (79,000) | 85,000 | 827,000 | (4,984,000) | 83,000 | 696,000 | (337,000) | |||
Net income (loss) | $ (324) | $ (79,000) | $ 85,000 | $ 827,000 | $ (5,906,000) | $ 83,000 | $ 696,000 | $ (255,000) | $ 509,465 | $ (5,381,946) | $ (378,065) |
Net income (loss) per common share | |||||||||||
Basic | $ (0.01) | $ 0 | $ 0 | $ 0.04 | $ (0.26) | $ 0 | $ 0.03 | $ (0.01) | $ 0.02 | $ (0.24) | $ (0.02) |
Earnings per share, diluted | $ (0.01) | $ 0 | $ 0 | $ 0.04 | $ (0.26) | $ 0 | $ 0.03 | $ (0.01) | $ 0.02 | $ (0.24) | $ (0.02) |