Attached files
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark
one)
_X_
Annual Report Pursuant to Section
13 or 15(d) of the Securities Exchange Act of
1934
for
the fiscal year ended December 31, 2020.
___
Transition Report Pursuant to
Section 13 or 15 (d) of the Securities Exchange Act of
1934
for
the transition period from ____ to____.
Commission file
number 0-11104
NOBLE ROMAN’S, INC.
(Exact name of registrant as specified in its charter)
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Indiana
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35-1281154
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(State
or other jurisdiction
of incorporation or organization)
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(I.R.S.
Employer
Identification No.)
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6612 E. 75th Street, Suite 450
Indianapolis, Indiana 46250
(Address of principal executive offices)
Registrant’s
telephone number, including area code: (317) 634-3377
Securities
registered pursuant to Section 12(b) of the Act:
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Title
of each class
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Trading
Symbol(s)
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Name of
each exchange on which registered
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N/A
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Securities
registered pursuant to Section 12(g) of the Act: Common
Stock
Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act.Yes No X
Indicate by check
mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes No X
Indicate by check
mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.Yes
__X__ No
_____
Indicate by check
mark whether the registrant has submitted electronically every
Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes _X_ No _____
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of
“large accelerated filer,”“accelerated
filer”,“smaller reporting company”and
“emerging growth company” in Rule 12b-2 of the Exchange
Act.
Large
Accelerated
Filer___
Accelerated Filer___
Non-Accelerated
Filer Smaller Reporting Company X
Emerging
Growth Company ___
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ___
Indicate by check
mark whether the registrant has filed a report on and attestation
to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of
the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit
report___
Indicate by check
mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes ___ No X
The
aggregate market value of the common stock held by non-affiliates
of the registrant as of
June
30, 2020, the last business day of the registrant’s most
recently completed second fiscal quarter, based on the closing
price of the registrant’s common shares on such date was
approximately $5.5 million.
Indicate the number
of shares outstanding of each of the registrant’s classes of
common stock, as of the latest practicable date: 22,215,512 shares
of common stock as of March 12, 2021.
Documents
Incorporated by Reference:
NOBLE
ROMAN’S, INC.
FORM
10-K
Year
Ended December 31, 2020
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PART 1
ITEM 1. BUSINESS
General Information
Noble
Roman’s, Inc., an Indiana corporation incorporated in 1972,
sells and services franchises and licenses and operates
Company-owned foodservice locations for stand-alone restaurants and
non-traditional foodservice operations under the trade names
“Noble Roman’s Craft Pizza & Pub,”
“Noble Roman’s Pizza,” “Noble Roman’s
Take-N-Bake,” and “Tuscano’s Italian Style
Subs.” References in this report to the “Company”
are to Noble Roman’s, Inc. and its two wholly-owned
subsidiaries, Pizzaco, Inc. and RH Roanoke, Inc., unless the
context requires otherwise. Pizzaco, Inc. currently does not own
any locations and has no income or expense. RH Roanoke, Inc.
operates a Company-owned non-traditional location.
The
Company has been operating, franchising and licensing Noble
Roman’s Pizza operations in a variety of stand-alone and
non-traditional locations across the country since 1972. Its first
Craft Pizza & Pub location opened in January 2017 as a
Company-operated restaurant in a northern suburb of Indianapolis,
Indiana. Since then, a total of six more Company-operated locations
were opened in 2017, 2018 and 2020 with additional locations under
consideration. The Company-operated locations serve as the base for
what it sees as the potential future growth driver franchising to
experienced, multi-unit restaurant operators with a track record of
success. In 2019 the Company executed an agreement with the first
such operator, Indiana’s largest Dairy Queen franchisee with
19 franchised Dairy Queen locations. The franchisee opened the
first franchised Craft Pizza & Pub location in May 2019 and
another location in November 2020. In November 2019, another
franchisee, with an operations background in McDonald's, opened a
Craft Pizza & Pub in Evansville, Indiana.
As
discussed below under “Impact of COVID-19 Pandemic” the
COVID-19 pandemic materially affected the Company’s business
in the past year.
Noble Roman’s Craft Pizza & Pub
The
Noble Roman’s Craft Pizza & Pub utilizes many of the
basic elements first introduced in 1972 but in a modern atmosphere
with up-to-date technology and equipment to maximize speed, enhance
quality and perpetuate the taste customers love and expect from a
Noble Roman’s.
The
Noble Roman’s Craft Pizza & Pub provides for a selection
of over 40 different toppings, cheeses and sauces from which to
choose. Beer and wine also are featured, with 16 different beers on
tap including both national and local craft selections. Wines
include 16 affordably priced options by the bottle or glass in a
range of varietals. Beer and wine service is provided at the bar
and throughout the dining room.
The
Company designed the system to enable fast cook times, with oven
speeds running approximately 2.5 minutes for traditional pizzas and
5.75 minutes for Sicilian pizzas. Traditional pizza favorites such
as pepperoni are options on the menu but also offered is a
selection of Craft Pizza & Pub original pizza creations. The
menu also features a selection of contemporary and fresh,
made-to-order salads and fresh-cooked pasta. The menu also
incorporates baked sub sandwiches, hand-sauced wings and a
selection of desserts, as well as Noble Roman’s famous
Breadsticks with Spicy Cheese Sauce, most of which has been offered
in its locations since 1972.
Additional
enhancements include a glass enclosed “Dough Room”
where Noble Roman’s Dough Masters hand make all pizza and
breadstick dough from scratch in customer view. Also in the dining
room is a “Dust & Drizzle Station” where guests can
customize their pizzas after they are baked with a variety of
toppings and drizzles, such as rosemary-infused olive oil, honey
and Italian spices. Kids and adults enjoy Noble Roman’s
self-serve root beer tap, which is also part of a special menu for
customers 12 and younger. Throughout the dining room and the bar
area there are many giant screen television monitors for sports and
the nostalgic black and white shorts featured in Noble
Roman’s since 1972.
The
Company designed its new curbside service for carry-out customers,
called “Pizza Valet Service,” to create added value and
convenience. With Pizza Valet Service, customers place orders
ahead, drive into the restaurant’s reserved valet parking
spaces and have their pizza run to their vehicle by specially
uniformed pizza valets. Customers who pay when they place their
orders are able to drive up and leave with their order very quickly
without stepping out of their vehicle. For those who choose to pay
after they arrive, pizza valets can take credit card payments on
their mobile payment devices right at the customer's vehicle. With
the fast baking times, the entire experience, from order to pick-up
can take as little as 12 minutes.
3
Noble Roman’s Pizza For Non-Traditional
Locations
In
1997, the Company started franchising non-traditional locations (a
Noble Roman’s pizza operation within some other business or
activity that had existing traffic) such as entertainment
facilities, hospitals, convenience stores and other types of
facilities. These locations utilize the two pizza styles the
Company started with in 1972, along with its great tasting, high
quality ingredients and menu extensions.
The
hallmark of Noble Roman’s Pizza for non-traditional locations
is “Superior quality that our customers can taste.”
Every ingredient and process has been designed with a view to
produce superior results.
●
A fully-prepared
pizza crust that captures the made-from-scratch pizzeria flavor
which gets delivered to non-traditional locations in a shelf-stable
condition so that dough handling is no longer an impediment to a
consistent product, which otherwise is a challenge in
non-traditional locations.
●
Fresh packed,
uncondensed and never cooked sauce made with secret spices,
parmesan cheese and vine-ripened tomatoes in all
venues.
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100% real cheese
blended from mozzarella and Muenster, with no soy additives or
extenders.
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100% real meat
toppings, with no additives or extenders, a distinction compared to
many pizza concepts.
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Vegetable and
mushroom toppings are sliced and delivered fresh, never
canned.
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An extended product
line that includes breadsticks and cheesy stix with dip, pasta,
baked sandwiches, salads, wings and a line of breakfast
products.
●
The fully-prepared
crust also forms the basis for the Company’s Take-N-Bake
pizza for use as an add-on component for its non-traditional
franchise base as well as an offering for its grocery store license
venue.
Business Strategy
The
Company is focused on revenue expansion while continuing to
minimize corporate-level overhead. To accomplish this the Company
will continue developing, owning and operating Craft Pizza &
Pub locations and franchising to qualified multi-unit franchisees.
At the same time, the Company will continue to focus on
franchising/licensing for non-traditional locations by franchising
primarily to convenience stores and entertainment
centers.
The
initial franchise fees are as follows:
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Non-Traditional
Except Hospitals
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Non-Traditional
Hospitals
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Traditional
Stand-Alone
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Noble Roman’s
Pizza or Craft Pizza & Pub
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$7,500
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$10,000
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$30,000(1)
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(1)
With the sale of multiple traditional stand-alone franchises to a
single franchisee, the franchise fee for the first unit is $30,000,
the franchise fee for the second unit is $25,000 and the franchise
fee for the third unit and any additional unit is
$20,000.
The
franchise fees are paid upon signing the franchise agreement and,
when paid, are non-refundable in consideration of the
administration and other expenses incurred by the Company in
granting the franchises and for the lost and/or deferred
opportunities to grant such franchises to any other
party.
The
Company’s proprietary ingredients are manufactured pursuant
to the Company’s recipes and formulas by third-party
manufacturers under contracts between the Company and its various
manufacturers. These contracts require the manufacturers to produce
ingredients meeting the Company’s specifications and to sell
them to Company-approved distributors at prices negotiated between
the Company and the manufacturer.
The
Company utilizes distributors it has strategically identified
across the United States. The distributor agreements require the
distributors to maintain adequate inventories of all ingredients
necessary to meet the needs of the Company’s franchisees and
licensees in their distribution areas for weekly
deliveries.
Competition
The
restaurant industry and the retail food industry in general are
very competitive with respect to convenience, price, product
quality and service. In addition, the Company competes for
franchise and license sales on the basis of product engineering and
quality, investment cost, cost of sales, distribution, simplicity
of operation and labor requirements. Actions by one or more of the
Company’s competitors could have an adverse effect on the
Company’s ability to sell additional franchises or licenses,
maintain and renew existing franchises or licenses, or sell its
products. Many of the Company’s competitors are very large,
internationally established companies.
4
Within
the environment in which the Company competes, management has
identified what it believes to be certain competitive advantages
for the Company. Many of the Company’s competitors in the
non-traditional venue were established with little or no
organizational history operating traditional foodservice locations.
This lack of operating experience may limit their ability to
attract and maintain non-traditional franchisees or licensees who,
by the nature of the venue, often have little exposure to
foodservice operations themselves. The Company’s background
in traditional restaurant operations has provided it experience in
structuring, planning, marketing, and controlling costs of
franchise or license unit operations which may be of material
benefit to franchisees or licensees.
The
Company’s Noble Roman’s Craft Pizza & Pub format
competes with similar restaurants in its service area. Some of the
competitors are company-owned, some are franchised locations of
large chains and others are independently owned. Some of the
competitors are larger and have greater financial resources than
the Company.
Seasonality of Sales
Severe
winter weather conditions tend to adversely affect sales,
especially those of the Craft Pizza & Pubs which are designed
for in-store dining and carry-out, which in turn affects Company
revenue. Sales of non-traditional franchises or licenses may be
affected by seasonalities and holiday periods. Sales to certain
non-traditional venues may be slower around major holidays such as
Thanksgiving and Christmas, and during the first quarter of the
year. Product sales of the non-traditional franchises/licenses may
be slower during the first quarter of the year and certain venues
such as grocery stores are typically slower during the summer
months.
Human Capital
As of
March 1, 2021, the Company employed approximately 36 persons
full-time and 199 persons on a part-time, hourly basis, of which 16
of the full-time employees are employed in sales and service of the
franchise/license units and 20 in restaurant locations. No
employees are covered under a collective bargaining agreement. The
Company believes that relations with its employees are
good.
Trademarks and Service Marks
The
Company owns and protects several trademarks and service marks.
Many of these, including NOBLE ROMAN’S®, Noble
Roman’s Pizza®, THE BETTER PIZZA PEOPLE®,
“Noble Roman’s Take-N-Bake Pizza,”“Noble
Roman’s Craft Pizza & Pub®,” “Pizza
Valet” and “Tuscano’s Italian Style
Subs®,” are registered with the U.S. Patent and
Trademark Office as well as with the corresponding agencies of
certain other foreign governments. The Company believes that its
trademarks and service marks have significant value and are
important to its sales and marketing efforts.
Government Regulation
The
Company and its franchisees and licensees are subject to various
federal, state and local laws affecting the operation of the
respective businesses. Each location, including the Company’s
Craft Pizza & Pub locations, are subject to licensing and
regulation by a number of governmental authorities, which include
health, safety, sanitation, building, employment, alcohol and other
agencies and ordinances in the state or municipality in which the
facility is located. The process of obtaining and maintaining
required licenses or approvals can delay or prevent the opening of
a location. Vendors, such as our third-party production and
distribution services, are also licensed and subject to regulation
by state and local health and fire codes, and U. S. Department of
Transportation regulations. The Company, its franchisees, licensees
and vendors are also subject to federal and state environmental
regulations, as well as laws and regulations relating to minimum
wage and other employment-related matters. In certain
circumstances, the Company is, or soon may be, subject to various
local, state and/or federal laws requiring disclosure of
nutritional and/or ingredient information concerning the
Company’s products, its packaging, menu boards and/or other
literature. Changes in the laws and rules applicable to the Company
or its franchisees or licensees, or their interpretation, could
have a material adverse effect on the Company’s
business.
The
Company is subject to regulation by the Federal Trade Commission
(“FTC”) and various state agencies pursuant to federal
and state laws regulating the offer and sale of franchises. Several
states also regulate aspects of the franchisor-franchisee
relationship. The FTC requires the Company to furnish to
prospective franchisees a disclosure document containing specified
information. Several states also regulate the sale of franchises
and require registration of a franchise disclosure document with
state authorities. Substantive state laws that regulate the
franchisor-franchisee relationship presently exist in a substantial
number of states and bills have been introduced in Congress from
time to time that would provide for additional federal regulation
of the franchisor-franchisee relationship in certain respects.
State laws often limit, among other things, the duration and scope
of non-competition provisions and the ability of a franchisor to
terminate or refuse to renew a franchise. Some foreign countries
also have disclosure requirements and other laws regulating
franchising and the franchisor-franchisee relationship, and the
Company is subject to applicable laws in each jurisdiction where it
seeks to market additional franchised units.
5
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 have, 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 has 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 has 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 may open up to 50%
of capacity, and on July 4, 2020 restaurants and bars were to be
allowed to resume at 100% capacity. The Governor delayed the
increase in capacity for a portion of the third quarter. 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 have also
temporarily restricted travel and suspended the operation of
dine-in restaurants and other businesses in light of COVID-19,
which has negatively affected our franchised operations. Host
facilities for our non-traditional franchises have also been
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 income at the time received.
On
April 25, 2020, the Company received a loan of $715,000 under the
Paycheck Protection Program (“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 Coronavirus
Aid, Relief and Securities Act (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. The Company intends to use the proceeds of this loan for
qualifying expenses under the CARES ACT. The Company anticipates
this loan will also be forgiven and accounts for it as a
grant.
Available Information
We make
available, free of charge through our Internet website
(http://www.nobleromans.com), our latest Annual Report on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K and amendments to these reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended, as soon as reasonably practicable after we electronically
file these reports with, or furnish them to, the Securities and
Exchange Commission. The information on our website is not
incorporated into this annual report.
ITEM 1A. RISK FACTORS
All
phases of the Company’s operations are subject to a number of
uncertainties, risks and other influences, many of which are
outside of its control, and any one or a combination of which could
materially affect its results of operations. Important factors that
could cause actual results to differ materially from the
Company’s expectations are discussed below. Prospective
investors should carefully consider these factors before investing
in our securities as well as the information set forth under
“Forward-Looking Statements” in Item 7 of this report.
These risks and uncertainties include:
6
Risks Related to Economic Conditions and Events.
Current COVID-19 pandemic.
The current COVID-19 pandemic, including the governmental response
to it, is having a significant adverse impact on the
Company’s business, including reduced customer traffic and
staffing challenges and could lead to supply difficulties.. All of
the Company’s Craft Pizza & Pub restaurants are located
in the State of Indiana, the Governor of which has implemented
significant restrictions on the operation of restaurants in
response to the pandemic. The Company has been addressing these
restrictions by (among other things) promoting the Company’s
Pizza Valet service, for carry-out, in order to replace a portion
of the lost revenue from the dining room, but those efforts may not
be fully successful. Many other states and municipalities in the
United States have also temporarily suspended the operation of
dine-in restaurants in light of COVID-19, which has impacted our
franchised operations. Moreover, host facilities for our
non-traditional franchises may be adversely impacted by these
developments. Additionally, viruses may be transmitted through
human contact, and the risk and perceived risk of contracting
viruses could cause potential customers to avoid gathering in
public places (including restaurants and non-traditional venues),
which could further have adverse effects on our non-traditional
business or the franchisee’s ability to adequately staff the
locations. If any of the Company’s employees are suspected of
having been exposed to COVID-19 or other similar illnesses, we
could be required to quarantine some or all such employees or close
and disinfect our facilities. The Company has experienced several
disruptions in supply including due to the temporary closure of
certain meat processors. The Company has implemented alternative
work-arounds for these disruptions but could face additional supply
disruptions to a minor or major degree which could impact the
Company’s ability to serve products with the impacted
ingredients. The potential of such disruptions has prompted the
Company-operated units to take on a larger than normal supply of
certain key ingredients. Depending on the duration of the COVID-19
pandemic, the Company’s ability to execute its growth plans
could be adversely affected. These risks and any additional risks
associated with COVID-19 or a similar outbreak may materially
adversely affect the Company’s business or results of
operations, and may impact the Company’s liquidity or
financial condition, particularly if these risks persist for a
significant amount of time. The COVID-19 pandemic has also
adversely affected the Company’s franchising business due to
its impact on the operations and financial condition of host
facilities as well as constraints on the Company’s historical
marketing efforts, including participation in trade
shows.
Competition from larger companies.
The
Company competes with large national companies and numerous
regional and local companies for franchise and license sales and
with respect to its Company-owned locations. Many of its
competitors have greater financial and other resources than the
Company. The restaurant industry in general is intensely
competitive with respect to convenience, price, product quality and
service. In addition, the Company competes for franchise and
license sales on the basis of several factors, including product
engineering and quality, investment cost, cost of sales,
distribution, simplicity of operation and labor requirements.
Activities of the Company’s competitors could have an adverse
effect on the Company’s ability to sell additional franchises
or licenses or maintain and renew existing franchises and licenses
or the operating results of the Company’s
system.
Dependence on growth strategy.
The
Company’s growth strategies include selling new franchises or
licenses for non-traditional locations and to expand Craft Pizza
& Pub locations by franchising to qualified franchisees and
gradually increasing the number of Company-owned Craft Pizza &
Pub locations. The opening and success of new locations will depend
upon various factors, which include: (1) the traffic generated by
and viability of the underlying activity or business in
non-traditional locations; (2) the viability of the Craft Pizza
& Pub locations; (3) the ability of the franchisees and
licensees of either venue to operate their locations effectively;
(4) the franchisee's ability to comply with applicable regulatory
requirements; and (5) the effect of competition and general
economic and business conditions including food and labor costs.
Many of the foregoing factors are not within the Company’s
control. There can be no assurance that the Company will be able to
achieve its plans with respect to the opening and/or operation of
new franchises/licenses for Craft Pizza & Pub or
non-traditional locations.
Risks Related to the Company’s Operations
Dependence on success of franchisees and licensees.
While
an increasing portion of its revenues are being generated by
Company-owned operations, a significant portion of the
Company’s revenues continues to come from royalties and other
fees generated by its franchisees and licensees which are
independent operators, and their employees are not the
Company’s employees. The Company is dependent on the
franchisees to accurately report their weekly sales and,
consequently, the calculation of royalties. If the franchisees do
not accurately report their sales, the Company’s revenue
could decline. The Company provides training and support to
franchisees and licensees but the quality of the store operations
and collectability of the receivables may be diminished by a number
of factors beyond the Company’s control. Consequently,
franchisees and licensees may not operate locations in a manner
consistent with the Company’s standards and requirements, or
may not hire and train qualified managers and other store
personnel. If they do not, the Company’s image and reputation
may suffer, and its revenues and stock price could decline. While
the Company attempts to ensure that its franchisees and licensees
maintain the quality of its brand and branded products, franchisees
and licensees may take actions that adversely affect the value of
the Company’s intellectual property or reputation.
Initiatives to increase the Federal minimum wage and/or shortage of
available labor could have an adverse financial effect on our
franchisees/licensees or the Company by increasing the labor
cost.
7
Dependence on distributors.
The
success of the Company’s license and franchise offerings
depends upon the Company’s ability to engage and retain
unrelated, third-party distributors. The Company’s
distributors collect and remit certain of the Company’s
royalties and must reliably stock and deliver products to the
Company’s licensees and franchisees. The Company’s
inability to engage and retain quality distributors, or a failure
by distributors to perform in accordance with the Company’s
standards, could have a material adverse effect on the Company. The
COVID-19 pandemic has had a materially adverse impact on many of
the Company’s current distributors as well as other potential
distributors, especially those located in or servicing states with
significant and/or prolonged restrictions. These potential
disruptions in distribution may result in loss of distribution to
some areas or result in distribution service under less favorable
terms to the Company and its franchisees and
licensees.
Dependence on consumer preferences and perceptions.
The
restaurant industry and the retail food industry is often affected
by changes in consumer tastes, national, regional and local
economic conditions, demographic trends, traffic patterns and the
type, number and location of competing restaurants. The Company
could be substantially adversely affected by publicity resulting
from food quality, illness, an infection pandemic, injury, other
health concerns or operating issues stemming from one restaurant or
retail outlet or a limited number of restaurants and retail
outlets.
Interruptions in supply or delivery of food products.
Dependence
on frequent deliveries of product from unrelated third-party
manufacturers through unrelated third-party distributors also
subjects the Company to the risk that shortages or interruptions in
supply caused by contractual interruptions, market conditions,
inclement weather or other conditions could adversely affect the
availability, quality and cost of ingredients. In addition, factors
such as inflation, market conditions for cheese, wheat, meats,
paper, labor and other items may also adversely affect the
franchisees and licensees and, as a result, can adversely affect
the Company’s ability to add new franchised or licensed
locations.
Federal, state and local laws with regard to the operation of the
businesses.
The
Company is subject to regulation by the FTC and various state
agencies pursuant to federal and state laws regulating the offer
and sale of franchises. Several states also regulate aspects of the
franchisor-franchisee relationship. The FTC requires the Company to
furnish to prospective franchisees a disclosure document containing
specified information. Several states also regulate the sale of
franchises and require registration of a franchise disclosure
document with state authorities. Substantive state laws that
regulate the franchisor-franchisee relationship presently exist in
a substantial number of states, and bills have been introduced in
Congress from time to time that would provide for federal
regulation of the franchisor-franchisee relationship in certain
respects. The state laws often limit, among other things, the
duration and scope of non-competition provisions and the ability of
a franchisor to terminate or refuse to renew a franchise. Some
foreign countries also have disclosure requirements and other laws
regulating franchising and the franchisor-franchisee relationship,
and the Company would be subject to applicable laws in each
jurisdiction where it seeks to market additional franchise
units.
Each
franchise and Company-owned location is subject to licensing and
regulation by a number of governmental authorities, which include
health, safety, sanitation, building, alcohol, employment and other
agencies and ordinances in the state or municipality in which the
facility is located. The process of obtaining and maintaining
required licenses or approvals can delay or prevent the opening of
a franchise location. Vendors, such as the Company’s
third-party production and distribution services, are also licensed
and subject to regulation by state and local health and fire codes,
and U. S. Department of Transportation regulations. The Company,
its franchisees and its vendors are also subject to federal and
state environmental regulations.
Risks Related to the Company’s Indebtedness
Ability to service our outstanding indebtedness and the dilutive
effect of our outstanding warrants.
As of
March 1, 2021, the Company has approximately $8.9 million in
principal amount debt obligations. Of that debt, $8.2 million is in
the form of a senior secured promissory note and $625,000 is in the
form of convertible subordinated notes.
On
February 7, 2020, the Company entered into a Senior Secured
Promissory Note and Warrant Purchase Agreement (the
“Agreement”) with Corbel Capital Partners SBIC, L.P.
(the “Purchaser”). Pursuant to the Agreement, the
Company issued to the Purchaser a senior secured promissory note
(the “Senior Note”) in the initial principal amount of
$8.0 million. The Company has used or will use the net proceeds of
the Agreement as follows: (i) $4.2 million was used to repay the
Company’s then-existing bank debt which was in the original
amount of $6.1 million; (ii) $1.275 million was used to repay the
portion of the Company’s outstanding subordinated convertible
debt the maturity date of which most had not previously been
extended; (iii) debt issuance costs; and (iv) the remaining net
proceeds will be used for working capital or other general
corporate purposes, including development of new Company-owned
Craft Pizza & Pub locations.
8
The
Senior Note bears cash interest of LIBOR, as defined in the
Agreement, plus 7.75%. In addition, the 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.
The
Agreement contains a number of covenants with which the Company
must comply, including financial covenants. The Company is
currently in compliance with its obligations under the
Agreement.
In
conjunction with 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.
Additionally,
the Company previously issued certain units (the
“Units”) consisting 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 at a price of $1.00 per share, no par
value per share. Following the refinancing described above,
$625,000 in principal amount of Notes and the associated Warrants
remain outstanding, however, per the terms of the agreement, the
Warrants were re-priced to $0.57 per share. These Notes mature, and
the associated Warrants expire, in January 2023.
Risks Related to Human Capital
Dependence on key executives.
The
Company’s business has been and will continue to be dependent
upon the efforts and abilities of its executive staff generally,
and particularly Paul W. Mobley, its Executive Chairman and Chief
Financial Officer, and A. Scott Mobley, its President and Chief
Executive Officer. The loss of either of their services could have
a material adverse effect on the Company.
Risks Related to the Company’s Common Stock
Indiana law with regard to purchases of the Company’s
stock.
Certain
provisions of Indiana law applicable to the Company could have the
effect of making it more difficult for a third party to acquire, or
of discouraging a third party from attempting to acquire, control
of the Company. Such provisions could also limit the price that
certain investors might be willing to pay in the future for shares
of its common stock. These provisions include prohibitions against
certain business combinations with persons or groups of persons
that become “interested shareholders” (persons or
groups of persons who are beneficial owners of shares with voting
power equal to 10% or more) unless the board of directors approves
either the business combination or the acquisition of stock before
the person becomes an “interested
shareholder.”
Inapplicability of corporate governance standards that apply to
companies listed on a national exchange.
The
Company’s stock is quoted on the OTCQB, a Nasdaq-sponsored
and operated inter-dealer automated quotation system for equity
securities not included on the Nasdaq Stock Market. The Company is
not subject to the same corporate governance requirements that
apply to exchange-listed companies. These requirements include: (1)
a majority of independent directors; (2) an audit committee of
independent directors; and (3) shareholder approval of certain
equity compensation plans or equity issuances. As a result,
quotation of the Company’s stock on the OTCQB limits the
liquidity and price of its stock more than if its stock was quoted
or listed on a national exchange. There is no assurance that the
Company’s stock will continue to be authorized for quotation
by the OTCQB or any other market in the future.
ITEM 1B. UNRESOLVED STAFF
COMMENTS
None.
ITEM 2. PROPERTIES
The
Company owns no real property. Its headquarters are located in
8,088 square feet of leased office space in Indianapolis, Indiana.
The lease for this property expires in April 2029.
The
Company also leases space for its Company-owned restaurants in
Westfield, Indiana which expires in January 2027, in Whitestown,
Indiana which expires in November 2027, in Fishers, Indiana which
expires in January 2028, in Carmel, Indiana which expires in June
2028, in Brownsburg, Indiana which expires February 2030, in
Greenwood, Indiana which expires in October 2030, and in
McCordsville, Indiana which expires in February 2031. The
Company’s lender holds a security interest in the leasehold
interest.
9
ITEM 3. LEGAL PROCEEDINGS
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.
ITEM 4. MINE SAFETY
DISCLOSURES
Not
applicable.
10
PART II
ITEM 5. MARKET FOR REGISTRANT’S
COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Market Information
The
Company’s common stock is included on the Nasdaq OTCQB and
trades under the symbol “NROM.” The over-the-counter
market quotations on the Nasdaq OTCQB
reflect inter-dealer prices without retail markup,
markdown or commission and may not necessarily represent actual
transactions.
Holders of Record
As of
March 1, 2021, there were approximately 230 holders of record of
the Company’s common stock. This excludes persons whose
shares are held of record by a bank, brokerage house or clearing
agency.
Dividends
The
Company has never declared or paid dividends on its common stock.
The Company’s current loan agreement, as described in Note 3
of the notes to the Company’s consolidated financial
statements included in Item 8 of this report, prohibits the payment
of dividends on common stock.
Sale of Unregistered Securities
None.
Repurchases of Equity Securities
None.
Equity Compensation Plan Information
The
following table provides information as of December 31, 2020 with
respect to the shares of the Company’s common stock that may
be issued under its existing equity compensation plan.
|
Plan
Category
|
Number of
Securities to be issued upon exercise of outstanding options,
warrants and rights
(a)
|
Weighted-average
exercise price of outstanding options, warrants and
rights
(b)
|
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(c)
|
|
Equity compensation
plans approved by stockholders
|
-
|
$-
|
-
|
|
Equity compensation
plans not approved by stockholders
|
4,421,667
|
$.63
|
(1)
|
|
Total
|
4,421,667
|
$.63
|
(1)
|
(1) The
Company may grant additional options under the employee stock
option plan. There is no maximum number of shares
available
for
issuance under the employee stock option plan.
11
The
Company maintains an employee stock option plan for its employees,
officers and directors. Any employee, officer and director of the
Company is eligible to be awarded options under the plan. The
employee stock option plan provides that any options issued
pursuant to the plan will generally have a three-year vesting
period and will expire ten years after the date of grant. Awards
under the plan are periodically made at the recommendation of the
Executive Chairman and the Chief Executive Officer and authorized
by the Board of Directors. The employee stock option plan does not
limit the number of shares that may be issued under the
plan.
ITEM 6. SELECTED
FINANCIAL DATA (In thousands except per share
data)
|
Year Ended December
31,
|
|||||
|
2016
|
2017
|
2018
|
2019
|
2020
|
|
|
Royalties and
fees
|
$7,351
|
$6,798
|
$6,422
|
$6,163
|
$4,841
|
|
Administrative fees
and other
|
42
|
45
|
53
|
38
|
15
|
|
Restaurant revenue
- Craft Pizza & Pub
|
-
|
1,821
|
4,816
|
4,830
|
6,209
|
|
Restaurant revenue
- non-traditional
|
443
|
1,174
|
1,157
|
674
|
471
|
|
Total
revenue
|
7,836
|
9,838
|
12,448
|
11,705
|
11,536
|
|
Franchising
operating expenses
|
2,549
|
2,443
|
2,628
|
2,092
|
1,737
|
|
Restaurant expenses
- Craft Pizza & Pub (1)
|
-
|
1,389
|
3,909
|
4,250
|
4,938
|
|
Restaurant expenses
- non-traditional
|
443
|
1,155
|
1,145
|
626
|
447
|
|
Depreciation and
amortization (2)
|
125
|
241
|
440
|
383
|
383
|
|
General and
administrative (1) (2)
|
1,642
|
1,666
|
1,669
|
1,739
|
1,717
|
|
Operating
income
|
3,077
|
2,944
|
2,657
|
2,614
|
2,314
|
|
Interest
|
615
|
1,474
|
655
|
775
|
1,914
|
|
Loss on restaurant
discontinued
|
37
|
-
|
-
|
-
|
-
|
|
Change in fair
value of derivatives
|
44
|
175
|
-
|
-
|
-
|
|
Adjust valuation of
receivables
|
1,104
|
440
|
4,096
|
1,300
|
4,942
|
|
Income (loss)
before income taxes from continuing
operations
|
1,277
|
855
|
(2,094)
|
539
|
(4,542)
|
|
Income taxes
(3)
|
488
|
4,147
|
930
|
917
|
840
|
|
Net
income (loss) from continuing operations
|
789
|
(3,292)
|
(3,024)
|
(378)
|
(5,382)
|
|
Loss from
discontinued operations
|
(1,660)
|
(93)
|
(38)
|
-
|
-
|
|
Net
loss
|
$(871)
|
$(3,385)
|
$(3,062)
|
$(378)
|
$(5,382)
|
|
Weighted average
number of common shares
|
20,782
|
20,783
|
21,250
|
22,053
|
22,216
|
|
Net
loss per share from continuing
operations
|
$(.04)
|
$(.16)
|
$(.14)
|
$(.02)
|
$(.24)
|
|
Net
loss per share
|
(.04)
|
(.16)
|
(.14)
|
(.02)
|
(.24)
|
|
Balance
Sheet Data:
|
2016
|
2017
|
2018
|
2019
|
2020
|
|
Working
capital
|
$2,429
|
$2,289
|
$1,906
|
$926
|
$2,070
|
|
Total
assets
|
19,899
|
18,885
|
15,677
|
19,105
|
18,417
|
|
Long-term
obligations, net of current portion
|
3,755
|
6,808
|
6,137
|
9,335
|
14,770
|
|
Stockholders’
equity
|
$14,018
|
$10,648
|
$8,145
|
$7,834
|
$2,357
|
(1)
In 2020, the
Company incurred $35,000 in rent expense in addition to rent paid
as a non-cash expense for new lease accounting rules.
(2)
In 2018, the
Company incurred $300,000 in various expenses related to initiating
a franchising program for Craft Pizza & Pub, $166,000 in
pre-opening costs for the Company’s Craft Pizza & Pub
locations and $39,000 for abandoned leasehold improvements. The
Company does not expect to incur any of these expenses in the
future.
(3)
The significant
increase in income tax expense for 2017 was a result of decreasing
the carrying value of the Company’s deferred tax assets as a
result of the 2017 Tax Cuts and Jobs Act (the “2017 Tax
Act”) lowering the highest corporate income tax rate from 34%
to 21%. The increase in tax expense for 2018 was the result of the
Company evaluating its deferred tax assets and determining that
$1.4 million of the deferred tax credits may expire in 2019 and
2020 before they are fully utilized, partially offset by the tax
benefit of $503,000 from the loss before income from continuing
operations which was primarily the result of the adjustment made to
the valuation of receivables. In 2019, after again evaluating its
deferred tax assets, it was determined that $1.7 million of the net
operating loss carry-forward may expire before it is used,
therefore the Company increased the tax expense in 2019 and reduced
the deferred tax asset by $400,000. 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.
12
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Introduction
The
Company currently owns and operates seven Craft Pizza & Pub
locations and one non-traditional location in a hospital. The
Company uses the Company-operated Craft Pizza & Pub locations
as a base to support the franchising of that concept. Craft Pizza
& Pub is designed to have a fun, pleasant atmosphere serving
pizza and other related menu items, all made fresh using fresh
ingredients in the view of the customers for inside dining and
offers Pizza Valet service for a quick, easy and fun way to provide
carry-out for those customers who want to dine elsewhere. These
units operate under the trade name “Noble Roman’s Craft
Pizza & Pub”.
The
Company also sells and services franchises and licenses for
non-traditional foodservice operations under the trade names
“Noble Roman’s Pizza" and “Noble Roman’s
Take-N-Bake.” The non-traditional concepts’ hallmarks
include high quality pizza along with other related menu items,
simple operating systems, fast service times, labor-minimizing
operations, attractive food costs and overall
affordability.
There were 3,064 franchised/licensed or Company-owned outlets in
operation on December 31, 2020 and
3,064 on December 31, 2019. During 2020, 22 new
franchised/licensed were opened and 22 franchised outlets left the
system. Grocery stores are accustomed to adding products for a
period of time, removing them for a period of time and possibly
re-offering them. Therefore, it is unknown how many grocery store
licenses, out of the total count of 2,402, have left the
system.
As
discussed in Note 1 to the Company’s consolidated financial
statements, the Company uses significant estimates in evaluating
its assets including such items as accounts receivable from
franchisees to reflect the actual amount that may be collected from
those receivables. To arrive at these estimates the Company
utilized multiple means of analysis, including management’s
own analysis and informed assessment of individual accounts. Based
on this approach, in 2018 the Company permanently wrote off $1.3
million and created an additional reserve for possible
non-collections of $2.8 million. Also, based on this approach and
with particular consideration of the potential impact of the
COVID-19 pandemic, as discussed under Risk Factors, may have on the
economic stability of the former franchisees who have unpaid
obligations to the Company it was decided to take 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. At December 31, 2018,
2019 and 2020, the Company reported net accounts receivable from
franchisees of $4.4 million, $4.0 million and none, respectively,
each of which were net of allowances, to reflect the amount the
Company expects to realize for the franchisee
receivables.
The
Company, at December 31, 2019 and December 31, 2020, had deferred
tax assets on its balance sheet totaling $3.9 million and $3.1
million, respectively, after reducing the carrying value in 2019 by
$400,000, and in 2020 by $668,000, respectively, based on the
Company’s review of its available tax credits, 2020 tax
expense and its adjusted taxable income. The Company believes it is
more likely than not that the remaining deferred tax assets will be
utilized prior to their expiration.
Financial Summary
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 may differ from those estimates.
The Company evaluates the carrying values of its assets, including
property, equipment and related costs, accounts receivable and
deferred tax assets, periodically to assess whether any impairment
indications are present due to (among other factors) recurring
operating losses, significant adverse legal developments,
competition, changes in demand for the Company’s products or
changes in the business climate that affect the recovery of
recorded values. If any impairment of an individual asset is
evident, a charge will be provided to reduce the carrying value to
its estimated fair value.
13
Condensed Consolidated Statement of Operations Data
Noble Roman’s, Inc. and Subsidiaries
|
|
Years Ended December
31,
|
||
|
|
2018
|
2019
|
2020
|
|
Revenue:
|
|
|
|
|
Restaurant
revenue - company-owned restaurants
|
$4,815,842
|
$4,830,199
|
$6,209,279
|
|
Restaurant
revenue - company-owned non-traditional
|
1,156,347
|
673,647
|
470,846
|
|
Franchising
revenue
|
6,422,315
|
6,162,576
|
4,841,229
|
|
Administrative
fees and other
|
53,443
|
38,202
|
14,310
|
|
Total
revenue
|
12,447,947
|
11,704,624
|
11,535,664
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Restaurant
expenses - company-owned restaurants
|
3,909,142
|
4,250,406
|
4,938,133
|
|
Restaurant
expenses - company-owned non-traditional
|
1,145,106
|
626,453
|
447,040
|
|
Franchising
expenses
|
2,627,745
|
2,092,001
|
1,736,870
|
|
Total
operating expenses
|
7,681,993
|
6,968,860
|
7,122,043
|
|
|
|
|
|
|
Depreciation and
amortization
|
440,240
|
382,793
|
382,368
|
|
General and
administrative expenses
|
1,668,718
|
1,739,383
|
1,717,209
|
|
Total
expenses
|
9,790,951
|
9,091,036
|
9,221,620
|
|
Operating
income
|
2,656,996
|
2,613,588
|
2,314,044
|
|
|
|
|
|
|
Interest
expense
|
655,203
|
774,565
|
1,914,344
|
|
Adjust valuation of
receivables
|
4,095,805
|
1,300,000
|
4,941,718
|
|
Income
(loss) before income taxes
|
(2,094,012)
|
539,023
|
(4,542,018)
|
|
Income tax
expense
|
930,397
|
917,088
|
839,928
|
|
Net
loss
|
$(3,024,409)
|
$(378,065)
|
$(5,381,946)
|
14
|
|
Quarter Ended December
31,
|
|
|
|
2019
|
2020
|
|
Revenue:
|
|
|
|
Restaurant
revenue – company-owned restaurants
|
$1,136,277
|
$2,126,214
|
|
Restaurant
revenue - company-owned non-traditional
|
173,703
|
105,474
|
|
Franchising
revenue
|
1,267,403
|
1,033,103
|
|
Administrative
fees and other
|
4,413
|
3,119
|
|
Total
revenue
|
2,581,796
|
3,267,910
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
Restaurant
expenses - company-owned restaurants
|
1,040,697
|
1,785,010
|
|
Restaurant
expenses - company-owned non-traditional
|
161,983
|
108,880
|
|
Franchising
expenses
|
543,446
|
496,491
|
|
Total
operating expenses
|
1,746,126
|
2,390,381
|
|
|
|
|
|
Depreciation and
amortization
|
145,875
|
119,863
|
|
General and
administrative expenses
|
465,423
|
463,023
|
|
Total
expenses
|
2,357,424
|
2,973,267
|
|
Operating
income
|
224,372
|
294,643
|
|
|
|
|
|
Interest
expense
|
207,720
|
337,059
|
|
Adjust valuation of
receivables
|
1,300,000
|
4,941,718
|
|
Loss
before income taxes
|
(1,283,348)
|
(4,984,134)
|
|
Income tax
expense
|
479,719
|
921,911
|
|
Net
loss
|
$(1,763,067)
|
$(5,906,045)
|
(1)
In 2018, the
Company incurred $300,000 in various expenses related to initiating
a franchising program for Craft Pizza & Pub, $166,000 in
pre-opening costs for the Company’s Craft Pizza & Pub
locations and $39,000 for abandoned leasehold improvements. The
Company does not expect to incur these expenses in the
future.
(2)
The significant
increase in income tax expense for 2017 was a result of decreasing
the carrying value of the Company’s deferred tax assets as a
result of the 2017 Tax Act lowering the highest corporate income
tax rate from 34% to 21%. The increase in tax expense for 2018 was
the result of the Company evaluating its deferred tax assets and
determining that $1.4 million of the deferred tax credits may
expire in 2019 and 2020 before they are fully utilized, partially
offset by the tax benefit of $503,000 from the loss before income
from continuing operations which was primarily the result of the
adjustment made to the valuation of receivables.
(3)
In 2020, the
Company incurred $34,986 in rent expense in addition to rent paid
as a non-cash expense for the new lease accounting rules. The
Company reviewed its net operating loss carry-forward and concluded
that $1.7 million of its net operating loss carry-forward may
expire before it is all used and therefore increased its income tax
expense by $400,000 to decrease its deferred tax assets for that
amount. The Company believes the remaining deferred tax assets will
be utilized completely.
15
The
following table sets forth the revenue, expense and margin
contribution of the Company's Craft Pizza & Pub locations and
the percent relationship to its revenue:
|
|
Three Months ended
December 31,
|
Year-Ended December
31,
|
||||||
|
Description
|
2019
|
2020
|
2019
|
2020
|
||||
|
Revenue
|
$1,136,276
|
100%
|
$2,126,214
|
100%
|
$4,830,199
|
100%
|
$6,209,279
|
100%
|
|
Cost of
sales
|
253,858
|
22.3
|
476,772
|
22.4
|
1,031,504
|
21.4
|
1,348,084
|
21.7
|
|
Salaries and
wages
|
341,431
|
30.0
|
583,000
|
27.4
|
1,448,246
|
30.0
|
1,354,795
|
21.8
|
|
Facility cost
including rent, common area and utilities
|
184,623
|
16.2
|
289,845
|
13.6
|
832,123
|
17.2
|
947,571
|
15.3
|
|
Packaging
|
31,469
|
2.8
|
58,792
|
2.8
|
130,708
|
2.7
|
176,267
|
2.8
|
|
All other operating
expenses
|
207,819
|
18.3
|
376,600
|
17.7
|
807,825
|
16.7
|
1,111,416
|
17.9
|
|
Total
expenses
|
1,019,200
|
89.7
|
1,785,009
|
84.0
|
4,250,406
|
88.0
|
4,938,133
|
79.5
|
|
Margin
contribution
|
$117,076
|
10.3%
|
$341,205
|
16.0%
|
$579,793
|
12.0%
|
$1,271,146
|
20.5%
|
Margin contribution from this venue for the year ended December 31,
2019 was decreased $134,545 for non-cash expense related to the
adoption of Accounting Standards Update (“ ASU”)
2016-02 accounting for leases which became effective after January
1, 2019 for publicly reporting companies.
The
following table sets forth the revenue, expense and margin
contribution of the Company's franchising venue and the percent
relationship to its revenue:
|
|
Three Months ended
December 31,
|
Year Ended December
31,
|
||||||
|
Description
|
2019
|
2020
|
2019
|
2020
|
||||
|
Royalties and fees
franchising
|
$966,145
|
76.2%
|
$845,509
|
81.8%
|
$5,026,305
|
81.6%
|
$4,102,304
|
84.7%
|
|
Royalties and fees
grocery
|
301,258
|
23.8
|
187,494
|
18.2
|
1,136,271
|
18.4
|
738,925
|
15.3
|
|
Total royalties and
fees
|
1,267,403
|
100.0
|
1,033,003
|
100%
|
6,162,576
|
100.0
|
4,841,229
|
100%
|
|
Salaries and
wages
|
199,839
|
15.8
|
205,631
|
19.9
|
751,961
|
12.2
|
625,954
|
12.9
|
|
Trade show
expense
|
105,000
|
8.3
|
105,000
|
10.2
|
420,000
|
6.8
|
420,000
|
8.7
|
|
Travel and
auto
|
25,745
|
2.0
|
16,348
|
1.6
|
108,375
|
1.8
|
86,323
|
1.8
|
|
All other op.
expenses
|
212,862
|
16.8
|
169,512
|
16.4
|
811,665
|
13.2
|
604,592
|
12.5
|
|
Total
expenses
|
543,446
|
42.9
|
496,491
|
48.1
|
2,092,001
|
33.9
|
1,736,869
|
35.9
|
|
Margin
contribution
|
$723,957
|
57.1%
|
$536,512
|
51.9%
|
$4,070,575
|
66.1%
|
$3,104,359
|
64.1%
|
The
following table sets forth the revenue, expense and margin
contribution of the Company-owned non-traditional venue and the
percent relationship to its revenue:
|
Description
|
Three Months ended
December 31,
|
Year Ended December
31,
|
||||||
|
|
2019
|
2020
|
2019
|
2020
|
||||
|
Revenue
|
$173,703
|
100%
|
$105,474
|
100%
|
$673,647
|
100%
|
$470,846
|
100%
|
|
Total
expenses
|
161,982
|
93.3
|
108,880
|
103.2
|
626,453
|
93.0
|
447,040
|
94.9
|
|
Margin
contribution
|
$11,721
|
6.7%
|
$(3,406)
|
(3.2)%
|
$47,194
|
7.0%
|
$23,806
|
5.1%
|
16
Results of Operations
Company-Owned Craft Pizza & Pub
The
revenue from this venue increased from $1.1 million to $2.1 million
for the fourth quarter and grew from $4.8 million to $6.2 million
for the 12 months ended December 31, 2020 compared to the
corresponding periods in 2019. The primary reason for the increase
in both the three-month period and the 12-month period were new
locations which opened in March, October and November 2020,
respectively.
Cost of
sales increased slightly from 22.3% to 22.4% in the fourth quarter
and from 21.4% to 21.7% for the comparable periods in 2020 compared
to 2019. This increase was the result of commodity price increases
which were mostly offset by efficiency gained as the restaurants
matured and as the staff gained experience.
Salaries
and wages improved from 30.0% to 27.4% and from 30.0% to 21.8% for
the three-month and 12-month periods ended December 31, 2020
compared to the corresponding periods in 2019. This improvement was
the result of improved efficiency as the restaurants matured.
However, the 12-month period, compared to the corresponding period
in 2019, improved also because the proceeds of the initial PPP loan
was used to reimburse the Company for payroll costs for retaining
employees. The improvement in both periods was partially the result
of all dining rooms being closed or restricted by order of the
Governor on March 16, 2020. During the period of closure, the
restaurants increased the use of Pizza Valet service for carry-out
which decreased the labor requirements to a greater extent in
percentage terms while sales were reduced by lack of dining room
service.
Facility
costs, including rent, common area maintenance and utilities,
decreased from 16.2% to 13.6% and from 17.2% to 15.3% of revenue
for the respective three-month and 12-month periods ended December
31, 2020 compared to the corresponding periods in 2019. The primary
reason for the decrease was the newer restaurants achieving higher
volumes with less rent expense including due to less square
footage.
All
other costs and expenses decreased from 18.3% to 17.7% for the
three-month period ended December 31, 2020 and increased from 16.7%
to 17.9% for the 12-month period ended December 31, 2020, both
compared to the corresponding periods in 2019.
Gross
margin contribution increased from 10.3% to 16.0% and from 12.0% to
20.5% for the respective three-month and 12-month periods ended
December 31, 2020 compared to the corresponding periods in 2019.
These increases were partially the result of the initial PPP loan
offsetting salaries and wages and, to some extent, reduction in
other costs during the recent year. Also, part of the improvement
was from the improvement in facility costs as a result of the newer
restaurants achieving higher volumes with less rent expense
including due to less square footage.
Franchising Revenue and Expense
Total
revenue from this venue declined from $1.27 million to $1.03
million and declined from $6.16 million to $4.84 million for the
three-month and 12-month periods ended December 31, 2020 compared
to the corresponding periods in 2019. Royalties and fees from
franchising decreased slightly in the fourth quarter in 2020
compared to the corresponding period in 2019, in addition royalties
and fees from grocery store take-n-bake for the same period
decreased from $301,000 to $187,000. Many of the grocery stores
that previously offered take-n-bake were not offering take-n-bake
at this time because of the increased volume demands on the grocery
stores and a shortage of available labor. Royalties and fees from
franchising during the 12-month period ended December 31, 2020
compared to the comparable period in 2019 decreased from $5.0
million to $4.1 million due to the temporary closings as a result
of the COVID pandemic and various restrictions and stay-at-home
orders throughout the country.
Gross
margin in this venue decreased from 57.1% to 51.9% and decreased
from 66.1% to 64.1% for the three-month and 12-month periods ended
December 31, 2020 compared to the corresponding periods in 2019.
This increased margin was the direct result of the Company’s
in-depth review of its operations to find ways to minimize costs
but at the same time to support revenue, however the temporary
closings of various locations throughout the country as a result of
the COVID pandemic resulted in lower revenue, as discussed above,
more than was achieved through the reduction of
expenses.
Company-Owned Non-Traditional Locations
Gross
revenue from this venue decreased from $174,000 to $105,000 and
from $674,000 to $471,000 for the respective three-month and
12-month periods ended December 31, 2020 compared to the
corresponding periods in 2019. This venue consists of one location
in a hospital. Access to the hospital has been very limited and
travel within the hospital between sections of the hospital are
prohibited because of the potential spread of COVID-19. The Company
does not intend to operate any more Company-owned non-traditional
locations except for the one location that is currently being
operated.
Total
expenses decreased from $162,000 to $109,000 and from $626,000 to
$447,000 for the three-month and 12-month periods ended December
31, 2020 compared to the corresponding periods in 2019. The primary
reason for these decreases were restrictions on access to the
hospital and on travel within the hospital, as discussed in the
previous paragraph, resulting from the COVID-19
pandemic.
17
Corporate Expenses
Depreciation
and amortization decreased from $146,000 to $120,000 and decreased
from $383,000 to $382,000 for three-month and 12-month periods
ended December 31, 2020 compared to the corresponding periods in
2019.
General
and administrative expenses decreased from $465,000 to $463,000 and
from $1.74 million to $1.72 million for the three-month and
12-month periods ended December 31, 2020 compared to the
corresponding periods in 2019.
Interest
expense increased from $208,000 to $337,000 and from $775,000 to
$1.9 million for the respective three-month and 12-month periods
ended December 31, 2020 compared to the corresponding periods in
2019. The primary reason for the increases was a result of the
financing that occurred in February 2020 resulting in non-cash
write-offs of the unamortized original loan cost for both First
Financial Bank and the private placement subordinated debt, which
in the aggregate was $658,000 and the non-cash PIK interest expense
of $221,000 in the period ended December 31, 2020. This non-cash
expense to obtain the new financing was necessary in order to
reduce cash outlays for principal repayments, provide liquidity and
to provide growth capital for more Craft Pizza & Pub
locations.
Impact of Inflation
The primary inflation factors affecting both Company and franchised
operations are food and labor costs. Cheese makes up the single
largest topping cost on a pizza. Cheese prices have fluctuated
substantially for the past several years. In 2015 through 2017,
cheese prices averaged 3% below the 10-year average. In 2018,
prices further decreased and averaged 6% below the 10-year average.
On April 15, 2020, cheese price hit a record low, since the Company
started tracking it in 1999. Since April 2020, cheese gradually
increased to a record high but declined somewhat over the latter
part of 2020 but remained above the average.
Labor costs across the country generally, through 2019, have seen
upward pressure on hourly rates as the unemployment rate decreased
and competition for hourly employees increased. The same
applies to salaried management. The Company’s Craft
Pizza & Pub operations currently pay well above minimum wage
rates to remain competitive, and has seen similar pressure on
management salaries. There is currently proposals before Congress
to increase the Federal minimum wage. It is unclear whether or not
any such proposal will be enacted. Although the Company
believes future labor cost increases for non-traditional
franchisees and licensees will be somewhat mitigated due to the
relatively low labor requirements of the Company’s franchise
concepts and the relatively high unemployment rate at the current
time brought about as a result of the COVID-19 pandemic. Mounting
pressures in the labor markets, with the return of an improved
economy, could be a factor in both franchised and Company
operations going forward. Should labor costs increase
substantially, or if commodity prices for cheese or other
ingredients rise significantly, or some combination thereof occurs,
restaurants and foodservice concepts, including the Company and its
franchisees, would face pressure to increase menu pricing, the
feasibility of which could be subject to competitive
concerns.
Liquidity and Capital Resources
The Company’s strategy is to grow its business by
concentrating on franchising/licensing non-traditional locations,
franchising its updated stand-alone concept, Craft Pizza & Pub
and operating a limited number of Company-owned Craft Pizza &
Pub restaurants. The Company added new Company-operated Craft Pizza
& Pub locations in January and November of 2017, January and
June of 2018 and March, October and November of 2020.
During 2018, the Company invested resources (approximately
$300,000) to commence franchising of the Craft Pizza & Pub
franchise. As of December 31, 2020, the Company had three Craft
Pizza & Pub locations under franchise agreements which were
open and one of those franchisees is exploring other locations for
an additional franchise location.
The Company is operating one non-traditional location in a hospital
and has no plans for operating any additional non-traditional
locations.
The Company’s current ratio was 2.6-to-1 as of December 31,
2020 compared to 1.5-to-1 as of December 31, 2019. The current
ratio was improved significantly with the new financing in February
2020 in addition to the initial PPP loan in April
2020.
In January 2017, the Company completed the offering of $2.4 million
principal amount of the Notes convertible to common stock at $0.50
per share and Warrants to purchase up to 2.4 million shares of the
Company’s common stock at an exercise price of $1.00 per
share, subject to adjustment. In 2018, $400,000 principal amount of
Notes was converted into 800,000 shares of the Company’s
common stock, in January 2019 another Note in the principal amount
of $50,000 was converted into 100,000 shares of the Company’s
common stock, and in August 2019 another Note in the principal
amount of $50,000 was converted into 100,000 shares of the
Company’s common stock, leaving principal amounts of Notes of
$1.9 million outstanding as of December 31, 2019. Holders of Notes
in the principal amount of $775,000 extended their maturity date to
January 31, 2023. In February 2020, $1,275,000 principal amount of
the Notes were repaid in conjunction with a new financing leaving a
principal balance of $625,000 of subordinated convertible notes
outstanding due January 31, 2023. These Notes bear interest at 10%
per annum paid quarterly and are convertible to common stock any
time prior to maturity at the option of the holder at $0.50 per
share. The remaining Warrants to purchase 775,000 shares were
re-priced to $0.57 per share as a result of the financing completed
in February 2020.
On
February 7, 2020, the Company entered into the Agreement with the
Purchaser, pursuant to which the Company issued to the Purchaser
the Senior Note in the initial principal amount of $8.0 million.
The Company has used or will use the net proceeds of the Agreement
as follows: (i) $4.2 million was used to repay the Company’s
then-existing bank debt which were in the original amount of $6.1
million; (ii) $1,275,000 was used to repay the portion of the
Company’s existing subordinated convertible debt the maturity
date of which most had not previously been extended, (iii) debt
issuance costs; and (iv) the remaining net proceeds will be used
for working capital or other general corporate purposes, including
development of new Company-owned Craft Pizza & Pub
locations.
18
The
Senior Note bears cash interest of LIBOR, as defined in the
Agreement, plus 7.75%. In addition, the Senior Note requires 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.
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. These expenses
included payroll costs including payroll 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 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. The Company intends to use the proceeds of
this loan for qualifying expenses under the CARES ACT. The Company
anticipates this loan will also be forgiven and , therefore, will
account for it as a grant.
As a result of the financial arrangements described above and the
Company’s cash flow projections, the Company believes it will
have sufficient cash flow to meet its obligations and to carry out
its current business plan. The Company’s cash flow
projections for the next two years are primarily based on the
Company’s strategy of growing the non-traditional
franchising/licensing venues, operating Craft Pizza & Pub
locations and pursuing an aggressive franchising program for Craft
Pizza & Pub restaurants. The Company intends to open additional
Company-owned Craft Pizza & Pub restaurants in the
future.
The Company does not anticipate that any of the recently issued
pronouncements relating to the Statement of Financial Accounting
Standards will have a material impact on its Consolidated Statement
of Operations or its Consolidated Balance Sheet.
Contractual Obligations
The following table sets forth the future contractual obligations
of the Company as of February 7, 2021:
|
|
|
Less
than
|
|
|
More
than
|
|
|
Total
|
1
Year
|
1-3
Years
|
3-5
Years
|
5
Years
|
|
Long-term debt
(1)
|
$8,625,000
|
$-
|
$991,667
|
$7,633,333
|
$-
|
|
Operating
leases
|
8,234,626
|
967,406
|
3,026,966
|
2,089,083
|
2,151,171
|
|
Total
|
$16,859,626
|
$967,406
|
$4,018,633
|
$9,722,416
|
$2,151,171
|
(1) The amounts do not include interest and do not include the PPP
loan as it is being accounted for as a grant.
Forward-Looking Statements
The statements contained above in Management’s Discussion and
Analysis concerning the Company’s future revenues,
profitability, financial resources, market demand and product
development are forward-looking statements (as such term is defined
in the Private Securities Litigation Reform Act of 1995) relating
to the Company that are based on the beliefs of the management of
the Company, as well as assumptions and estimates made by and
information currently available to the Company’s management.
The Company’s actual results in the future may differ
materially from those indicated by the forward-looking statements
due to risks and uncertainties that exist in the Company’s
operations and business environment, including, but not limited to
the effects of the COVID-19 pandemic, competitive factors and
pricing pressures, non-renewal of franchise agreements, shifts in
market demand, the success of new franchise programs, including the
Noble Roman’s Craft Pizza & Pub format, the
Company’s ability to successfully operate an increased number
of Company-owned restaurants, general economic conditions, changes
in demand for the Company’s products or franchises, the
Company’s ability to service its loans, the impact of
franchise regulation, the success or failure of individual
franchisees and changes in prices or supplies of food ingredients
and labor as well as the factors discussed under “Risk
Factors "above in this annual report. Should one or more of these
risks or uncertainties materialize, or should underlying
assumptions or estimates prove incorrect, actual results may vary
materially from those described herein as anticipated, believed,
estimated, expected or intended.
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The
Company’s exposure to interest rate risk relates primarily to
its variable-rate debt. As of December 31, 2020, the Company had
outstanding variable interest-bearing debt in the aggregate
principal amount of $8.2 million. The Company’s current
borrowings were at a variable rate tied to LIBOR plus 7.25 per
annum adjusted on a monthly basis. Based on its current debt
structure, for each 1% increase in LIBOR the Company would incur
increased interest expense of approximately $85,000 over the
succeeding 12-month period.
19
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
Consolidated Balance Sheets
Noble Roman’s, Inc. and Subsidiaries
|
|
December
31,
|
|
|
Assets
|
2019
|
2020
|
|
Current
assets:
|
|
|
|
Cash
|
$218,132
|
$1,194,363
|
|
Accounts
receivable - net
|
978,408
|
879,502
|
|
Inventories
|
880,660
|
890,556
|
|
Prepaid
expenses
|
784,650
|
395,918
|
|
Total
current assets
|
2,861,850
|
3,360,339
|
|
|
|
|
|
Property and
equipment:
|
|
|
|
Equipment
|
2,899,611
|
3,708,689
|
|
Leasehold
improvements
|
1,187,100
|
2,319,445
|
|
Construction
and equipment in progress
|
374,525
|
510,225
|
|
|
4,461,236
|
6,538,359
|
|
Less
accumulated depreciation and amortization
|
1,689,520
|
1,989,209
|
|
Net
property and equipment
|
2,771,716
|
4,549,150
|
|
Deferred tax
asset
|
3,900,221
|
3,104,904
|
|
Deferred contract
costs
|
817,763
|
834,018
|
|
Goodwill
|
278,466
|
278,466
|
|
Operating lease
right of use assets
|
4,242,416
|
6,088,101
|
|
Other assets
including long-term portion of accounts receivable -
net
|
4,232,655
|
201,962
|
|
Total
assets
|
$19,105,087
|
$18,416,940
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Current
portion of term loan payable to bank
|
$871,429
|
$-
|
|
Accounts
payable and accrued expenses
|
731,059
|
878,099
|
|
Current
portion of operating lease liability
|
333,763
|
412,005
|
|
Total
current liabilities
|
1,936,251
|
1,290,104
|
|
|
|
|
|
Long-term
obligations:
|
|
|
|
Term
loans payable to bank (net of current portion)
|
2,999,275
|
-
|
|
Loan
payable to Corbel
|
-
|
7,468,709
|
|
Corbel
warrant value
|
-
|
29,037
|
|
Convertible
notes payable
|
1,501,282
|
574,479
|
|
Operating
lease liabilities – net of current portion
|
4,016,728
|
5,863,615
|
|
Deferred
contract income
|
817,763
|
834,018
|
|
Total
long-term liabilities
|
9,335,048
|
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, 2019 and December 31,
2020)
|
24,858,311
|
24,763,447
|
|
Accumulated
deficit
|
(17,024,523)
|
(22,406,469)
|
|
Total
stockholders’ equity
|
7,833,788
|
2,356,978
|
|
Total
liabilities and stockholders’ equity
|
$19,105,087
|
$18,416,940
|
See accompanying notes to consolidated financial
statements.
20
Consolidated Statements of
Operations
Noble Roman’s, Inc. and Subsidiaries
|
|
Year Ended December
31,
|
||
|
|
2018
|
2019
|
2020
|
|
Restaurant revenue
- company-owned restaurants
|
$4,815,842
|
$4,830,199
|
$6,209,279
|
|
Restaurant revenue
- company-owned non-traditional
|
1,156,347
|
673,647
|
470,846
|
|
Franchising
revenue
|
6,422,315
|
6,162,576
|
4,841,229
|
|
Administrative fees
and other
|
53,443
|
38,202
|
14,310
|
|
Total
revenue
|
12,447,947
|
11,704,624
|
11,535,664
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Restaurant
expenses - company-owned restaurants
|
3,909,142
|
4,250,406
|
4,938,133
|
|
Restaurant
expenses - company-owned non-traditional
|
1,145,106
|
626,453
|
447,040
|
|
Franchising
expenses
|
2,627,745
|
2,092,001
|
1,736,870
|
|
Total
operating expenses
|
7,681,993
|
6,968,860
|
7,122,043
|
|
|
|
|
|
|
Depreciation and
amortization
|
440,240
|
382,793
|
382,368
|
|
General and
administrative
|
1,668,718
|
1,739,383
|
1,717,209
|
|
Total
expenses
|
9,790,951
|
9,091,036
|
9,221,620
|
|
Operating
income
|
2,656,996
|
2,613,588
|
2,314,044
|
|
|
|
|
|
|
Interest
expense
|
655,203
|
774,565
|
1,914,344
|
|
Adjust valuation of
receivables
|
4,095,805
|
1,300,000
|
4,941,718
|
|
Net
(loss) income before income taxes
|
(2,094,012)
|
539,023
|
(4,542,018)
|
|
Income tax
expense
|
930,397
|
917,088
|
839,928
|
|
Net
loss from continuing operations
|
$(3,024,409)
|
(378,065)
|
(5,381,946)
|
|
Loss from
discontinued operations net of tax
benefit
of $12,200 for 2018
|
(37,800)
|
-
|
-
|
|
Net
loss
|
$(3,062,209)
|
$(378,065)
|
$(5,381,946)
|
|
|
|
|
|
|
Loss per share -
basic:
|
|
|
|
|
Net loss from
continuing operations
|
$(.14)
|
$(.02)
|
$(.24)
|
|
Net
loss
|
$(.14)
|
$(.02)
|
$(.24)
|
|
Weighted average
number of common shares
outstanding
|
21,249,607
|
22,052,859
|
22,215,512
|
|
|
|
|
|
|
Diluted loss per
share:
|
|
|
|
|
Net
loss from continuing operations (1)
|
$(.14)
|
$(.02)
|
$(.24)
|
|
Net
loss (1)
|
$(.14)
|
$(.02)
|
$(.24)
|
|
Weighted average
number of common shares
outstanding
|
26,094,292
|
23,315,695
|
23,465,512
|
(1)
Net loss per share
is shown the same as basic loss per share because the underlying
dilutive securities have anti-dilutive effect.
See accompanying notes to consolidated financial
statements.
21
Consolidated Statements of Changes in
Stockholders’
Equity
Noble Roman’s, Inc. and Subsidiaries
|
|
Shares
|
Amount
|
Deficit
|
Total
|
|
Balance
at December 31, 2017
|
20,983,131
|
$24,322,885
|
$(13,674,794)
|
$10,648,091
|
|
2018 net
loss
|
|
|
(3,062,209)
|
(3,062,209)
|
|
|
|
|
|
|
|
Remove derivatives
in accordance
with
ASU 2017-11
|
|
|
142,857
|
142,857
|
|
Amortization of
value of
stock
options
|
|
16,597
|
|
16,597
|
|
Conversion of
convertible notes
to
common stock
|
800,000
|
400,000
|
|
400,000
|
|
|
|
|
|
|
|
Balance
at December 31, 2018
|
21,783,131
|
$24,739,482
|
$(16,594,146)
|
$8,145,336
|
|
2019 net
loss
|
|
|
(378,065)
|
(378,065)
|
|
Adjustment for the
adoption of
ASU
2016-02 accounting for leases
|
|
|
(52,312)
|
(52,312)
|
|
Amortization of
value of
stock
options
|
|
18,829
|
|
18,829
|
|
Cashless exercise
of warrants
|
232,381
|
|
|
|
|
Conversion of
convertible notes
to
common stock
|
200,000
|
100,000
|
________
|
100,000
|
|
|
|
|
|
|
|
Balance
at December 31, 2019
|
22,215,512
|
$24,858,311
|
$(17,024,523)
|
$7,833,788
|
|
2020 net
loss
|
|
|
(5,381,946)
|
(5,381,946)
|
|
Write-off
unamortized closing
to
sub-debt that was converted
|
|
(116,400)
|
|
(116,400)
|
|
Amortization of
value of
stock
options
|
-
|
21,536
|
-
|
21,536
|
|
|
|
|
|
|
|
Balance
at December 31, 2020
|
22,215,512
|
$24,763,447
|
$(22,406,469)
|
$2,356,978
|
See accompanying notes to consolidated financial
statements..
22
Consolidated Statements of Cash
Flows
Noble Roman’s, Inc. and Subsidiaries
|
|
Year ended December
31,
|
||
|
OPERATING
ACTIVITIES
|
2018
|
2019
|
2020
|
|
Net
loss
|
$(3,062,209)
|
$(378,065)
|
$(5,381,946)
|
|
Adjustments
to reconcile net loss to net cash
provided
(used) by operating activities:
|
|
|
|
|
Depreciation
and amortization
|
558,277
|
469,804
|
1,433,295
|
|
Amortization
of lease cost in excess of cash paid
|
-
|
134,545
|
46,994
|
|
Deferred
income taxes
|
918,195
|
917,088
|
839,928
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
(Increase)
decrease in:
|
|
|
|
|
Accounts
receivable
|
223,157
|
(377,151)
|
(98,388)
|
|
Inventories
|
(106,539)
|
82,123
|
(9,896)
|
|
Prepaid
expenses
|
(7,933)
|
(96,392)
|
189,884
|
|
Other
assets including long-term portion of accounts
receivable
|
3,059,197
|
548,648
|
4,508,836
|
|
Increase
(decrease) in:
|
|
|
|
|
Accounts
payable and accrued expenses
|
(101,286)
|
207,745
|
147,040
|
|
NET
CASH PROVIDED BY OPERATING
ACTIVITIES
|
1,480,859
|
1,508,345
|
1,675,747
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Purchase
of property and equipment
|
(1,161,168)
|
(289,351)
|
(2,084,710)
|
|
NET
CASH USED BY INVESTING ACTIVITIES
|
(1,161,168)
|
(289,351)
|
(2,084,710)
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Payment
of principal on First Financial Bank loan
|
(812,292)
|
(998,271)
|
(4,379,024)
|
|
Payment
of principal on convertible notes
|
-
|
-
|
(1,275,000)
|
|
Net
proceeds from new financings net of closing costs
|
157,727
|
-
|
7,039,218
|
|
Lease
liabilities
|
-
|
(78,785)
|
-
|
|
|
|
|
|
|
NET
CASH (USED) PROVIDED BY FINANCING
ACTIVITIES
|
(654,565)
|
(1,077,056)
|
1,385,194
|
|
|
|
|
|
|
DISCONTINUED
OPERATIONS
|
|
|
|
|
Payment
of obligations from discontinued operations
|
(50,000)
|
-
|
-
|
|
|
|
|
|
|
Increase (decrease)
in cash
|
(384,874)
|
141,938
|
976,231
|
|
Cash at beginning
of year
|
461,068
|
76,194
|
218,132
|
|
Cash at end of
year
|
$76,194
|
$218,132
|
$1,194,363
|
Supplemental Schedule of Non-Cash Investing and Financing
Activities:
During
2018, holders of $400,000 principal amount of Notes converted the
Notes to 800,000 shares of common stock, in accordance with the
terms of the Notes.
During
2019, holders of $100,000 principal amount of Notes converted the
Notes to 200,000 shares of common stock, in accordance with the
terms of the Notes.
During
2019, options to purchase 1,080,000 shares at $0.63 and at $0.70
per share were exercised and the holders received 232,381 shares of
common stock, pursuant to the cashless exercise of the options
.
See accompanying notes to consolidated financial
statements.
23
Notes to Consolidated Financial
Statements
Noble Roman’s, Inc. and Subsidiaries
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 foodservice
locations for one non-traditional location and five traditional
restaurants called Craft Pizza & Pub under the trade names
“Noble Roman’s Pizza”, “Noble Roman’s
Craft Pizza & Pub” and “Tuscano’s Italian
Style Subs”. Unless the context otherwise indicates,
reference to the “Company” are to Noble Roman’s,
Inc. and its two wholly-owned subsidiaries.
Principles
of Consolidation: The consolidated financial statements include the
accounts of Noble Roman’s, Inc. and its wholly-owned
subsidiaries, Pizzaco, Inc. and RH Roanoke, Inc. Inter-company
balances and transactions have been eliminated in
consolidation.
Inventories:
Inventories consist of food, beverage, restaurant supplies,
restaurant equipment and marketing materials and are stated at the
lower of cost (first-in, first-out) or net realizable
value.
Property
and Equipment: Equipment and leasehold improvements are stated at
cost. Depreciation and amortization are computed on the
straight-line method over the estimated useful lives ranging from
five years to 20 years. Leasehold improvements are amortized over
the shorter of estimated useful life or the term of the lease
including likely renewals. Construction and equipment in progress
are stated at cost for leasehold improvements, equipment for a new
restaurant being constructed and for pre-opening costs of any
restaurant not yet open as of the date of the
statements.
Significant Accounting Policies: There have been no significant
changes in the Company's accounting policies from those disclosed
in its Annual Report on Form 10-K for the year ended December 31,
2019.
The Company determines if an arrangement is a lease at inception.
Operating leases are included in right-of-use assets ("ROU"), and
lease liability obligations are included in the Company's balance
sheets. ROU assets represent the Company's right to use an
underlying asset for the lease term and lease liability obligations
represent its obligation to make lease payments arising from the
lease. Operating lease ROU assets and liabilities are recognized at
the commencement date based on the present value of lease payments
over the lease term. As the Company's leases typically do not
provide an implicit rate, the Company estimates its incremental
borrowing rate based on the information available at the
commencement date in determining the present value of lease
payments. The Company uses the implicit rate when readily
determinable. The ROU asset also includes in the lease payments
made and excludes lease incentives and lease direct costs. The
Company's lease term may include options to extend or terminate the
lease when it is reasonably certain that the Company will exercise
that option. Lease expense is recognized on a straight-line basis
over the lease term.
The Company adopted the new standard to all material leases
existing on January 1, 2019 and recognized a cumulative effect
adjustment to the opening balance of accumulated deficit on that
date.
Cash
and Cash Equivalents: Includes actual cash balance. The cash is not
pledged nor are there any withdrawal restrictions.
Advertising
Costs: The Company records advertising costs consistent with the
Financial Accounting Standards Board’s (the
“FASB”) Accounting Standards Codification
(“ASC”)“Other Expense” topic and
“Advertising Costs” subtopic. This statement requires
the Company to expense advertising production costs the first time
the production material is used.
Fair
Value Measurements and Disclosures: The Fair Value Measurements and
Disclosures topic of the FASB’s ASC requires companies to
determine fair value based on the price that would be received to
sell the assets or paid to transfer to liability to a market
participant. The fair value measurements and disclosure topic
emphasis that fair value is a market based measurement, not an
entity specific measurement. The guidance requires that assets and
liabilities carried at fair value be classified and disclosed in
one of the following categories:
Level
One: Quoted market prices in active markets for identical assets or
liabilities.
Level
Two: Observable market –based inputs or unobservable inputs
that are corroborated by
market
data.
Level
Three: Unobservable inputs that are not corroborated by market
data.
24
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, 2020 was
$780,000.
Intangible
Assets: The Company recorded goodwill of $278,000 as a result of
the acquisition of RH Roanoke, Inc. of certain assets of a former
franchisee of the Company. Goodwill has an indeterminable life and
is assessed for impairment at least annually and more frequently as
triggering events may occur. In making this assessment, management
relies on a number of factors including operating results, business
plans, economic projections, anticipated future cash flows, and
transactions and marketplace data. Any impairment losses determined
to exist are recorded in the period the determination is made.
There are inherent uncertainties related to these factors and
management’s judgment is involved in performing goodwill and
other intangible assets valuation 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, 2020, exceeded the carrying or
book value, including goodwill, and therefore recorded goodwill was
not subject to impairment.
Royalties,
Administrative and Franchise Fees: Royalties are generally
recognized as income monthly based on a percentage of monthly sales
of franchised or licensed restaurants and from audits and other
inspections as they come due and payable by the franchisee. Fees
from the retail products in grocery stores are recognized monthly
based on the distributors’ sale of those retail products to
the grocery stores or grocery store distributors. Administrative
fees are recognized as income monthly as earned. The Company
adopted 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. As of December 31, 2020, the net operating loss
carry-forward was approximately $7.4 million which expires between
the years 2021 and 2036.
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, 2018, 2019 and 2020. The Company’s
federal and various state income tax returns for 2017 through 2019
are subject to examination by the applicable tax authorities,
generally for three years after the later of the original or
extended due date.
Basic
and Diluted Net Income Per Share: Net income per share is based on
the weighted average number of common shares outstanding during the
respective year. When dilutive, stock options and warrants are
included as share equivalents using the treasury stock
method.
25
The
following table sets forth the calculation of basic and diluted
loss per share for the year ended December 31, 2018:
|
|
Income
(Numerator)
|
Shares
(Denominator)
|
Per
Share
Amount
|
|
Net
loss per share - basic
|
|
|
|
|
Net
loss
|
$(3,062,209)
|
21,249,607
|
$(.14)
|
|
Effect
of dilutive securities
|
|
|
|
|
Options
|
-
|
511,260
|
|
|
Convertible
Notes
|
213,125
|
4,333,425
|
|
|
Diluted
net loss per share
|
|
|
|
|
Net loss
(1)
|
$(2,849,084)
|
26,094,292
|
$(.14)
|
(1)
Net loss per share is shown the same as basic loss per share
because the underlying dilutive
securities
have an anti-dilutive effect.
The
following table sets forth the calculation of basic and diluted
loss per share for the year ended December 31, 2019:
|
|
Income
(Numerator)
|
Shares
(Denominator)
|
Per
Share
Amount
|
|
Net
loss per share - basic
|
|
|
|
|
Net
loss
|
$(378,605)
|
22,052,859
|
$(.02)
|
|
Effect
of dilutive securities
|
|
|
|
|
Options
|
-
|
12,836
|
|
|
Convertible
Notes
|
62,500
|
1,250,000
|
|
|
Diluted
net loss per share
|
|
|
|
|
Net loss
(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.
Subsequent
Events: The Company evaluated subsequent events through the date
the consolidated statements were issued and filed with the Annual
Report on Form 10-K.
On
February 5, 2021, the Company received an additional loan of
$940,734 under the PPP. The Company intends to use the proceeds of
this loan for qualifying expenses under the CARES ACT. The Company
anticipates this loan will be forgiven and, therefore will account
for it as a grant.
No
subsequent event required recognition or disclosure except as
discussed above.
26
Note 2: Accounts Receivable
At
December 31, 2019 and 2020, 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, 2019 and 2020 will be collected.
Other
assets, as of December 31, 2020, includes security deposit and cash
value of life insurance.
Long-term
receivables from franchisees in the past represented receivables
from approximately 80 different non-traditional franchisees (Noble
Roman’s franchises located within a host facility). These
receivables originated from a variety of circumstances, including
where audits of a number of the non-traditional franchises’
reporting of sales found them to be underreporting their sales and,
therefore, underpaying their royalty obligations. In other
instances, some franchisees were selling non-Noble Roman’s
products under Noble Roman’s trademark. In addition, some
receivables arose from the Company incurring legal fees to enforce
the franchise agreements and other collection cost which adds to
the receivables in accordance with the agreements. Some of the
receivables were generated by early termination of the franchise
agreements. 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.
Note 3: Notes Payable
In September 2017, the Company entered into a loan agreement (the
“Bank Agreement”) with First Financial Bank (the
“Bank”). The Bank Agreement provided for a senior
credit facility (the “Credit Facility”) to be provided
by the Bank consisting of: (i) a term loan in the amount of $4.5
million (the “Term Loan”); and (ii) a development line
of credit of up to $1.6 million (the “Development Line of
Credit”). Borrowings under the Credit Facility bore interest
at a variable annual rate equal to the London Interbank Offer Rate
(“LIBOR”) plus 7.25%. The Term Loan and the Development
Line of Credit were to be repaid monthly based on a seven-year
term. All outstanding amounts owed under the Bank Agreement were to
mature on September 13, 2022. In conjunction with a new credit
facility entered into on February 7, 2020, all money still owed to
the Bank was repaid in full.
On
February 7, 2020, the Company entered into a Senior Secured
Promissory Note and Warrant Purchase Agreement (the
“Agreement”) with Corbel Capital Partners SBIC, L.P.
(the “Purchaser”). Pursuant to the Agreement, the
Company issued to the Purchaser a senior secured promissory note
(the “Senior Note”) in the initial principal amount of
$8.0 million. The Company has used or will use the net proceeds of
the Agreement as follows: (i) $4.2 million was used to repay the
Company’s then-existing bank debt which was in the original
amount of $6.1 million; (ii) $1,275,000 was used to repay the
portion of the Company’s existing subordinated convertible
debt the maturity date of which most had not previously been
extended; (iii) debt issuance costs; and (iv) the remaining net
proceeds will be used for working capital or other general
corporate purposes, including development of new Company-owned
Craft Pizza & Pub locations.
The
Senior Note bears cash interest of LIBOR, as defined in the
Agreement, plus 7.75%. In addition, the Senior Note requires
payment-in-kind interest (“PIK Interest”) of 3% per
annum, which will be added to the principal amount of the Senior
Note. Interest is payable in arrears on the last calendar day of
each month. The Senior Note matures on February 7, 2025. The Senior
Note does not require any fixed principal payments until February
28, 2023, at which time required monthly payments of principal in
the amount of $33,333 begin and continue until maturity. The Senior
Note requires the Company to make additional payments on the
principal balance of the Senior Note based on its consolidated
excess cash flow, as defined in the Agreement.
In
conjunction with the borrowing under the Senior Note, the Company
issued to the Purchaser a warrant (the “Corbel
Warrant”) to purchase up to 2,250,000 shares of Common Stock.
The Corbel Warrant entitles the Purchaser to purchase from the
Company, at any time or from time to time: (i) 1,200,000 shares of
Common Stock at an exercise price of $0.57 per share
(“Tranche 1”), (ii) 900,000 shares of Common Stock at
an exercise price of $0.72 per share (“Tranche 2”), and
(iii) 150,000 shares of Common Stock at an exercise price of $0.97
per share (“Tranche 3”). The Purchaser is required to
exercise the Corbel Warrant with respect to Tranche 1 if the Common
Stock is trading at $1.40 per share or higher for a specified
period, and is further required to exercise the Corbel Warrant with
respect to Tranche 2 if the Common Stock is trading at $1.50 per
share or higher for a specified period. Cashless exercise of the
Corbel Warrant is only permitted with respect to Tranche 3. The
Purchaser has the right, within six months after the issuance of
any shares under the Corbel Warrant, to require the Company to
repurchase such shares for cash or for Put Notes, at the Company's
discretion. The Corbel Warrant expires on the sixth anniversary of
the date of its issuance.
At December 31, 2020, the balance of the Senior Note was comprised
of:
|
Principal
Due
|
$8,192,365
|
|
Unamortized
Loan Closing Cost
|
(723,656)
|
|
Carrying
Value
|
$7,468,709
|
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).
27
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, 2020, the balance of the Notes is comprised
of:
|
Face
Value
|
$625,000
|
|
Unamortized
OID
|
(50,521)
|
|
Carrying
Value
|
$574,479
|
Total cash and non-cash interest accrued on the Company’s
indebtedness in 2020 was $1.9 million and in 2019 was
$775,000.
Note 4: Royalties and Fees
Approximately
$305,000, $307,000 and $198,000 are included in 2018, 2019 and
2020, respectively, royalties and fees in the Consolidated
Statements of Operations for amortized initial franchise fees. Also
included in royalties and fees were approximately $74,000, $70,000
and $45,000 in 2018, 2019 and 2020, respectively, for equipment
commissions. Most of the cost for the services required to be
performed by the Company are incurred prior to the franchise fee
income being recorded which is based on contractual liability for
the franchisee. Such incremental costs, include training, design
and related travel cost to new franchisees. The deferred contract
income and costs both approximated $818,000 on December 31, 2019
and $834,000 on December 31, 2020.
In
conjunction with the development of Noble Roman’s Pizza and
Tuscano’s Italian Style Subs, the Company has devised its own
recipes for many of the ingredients that go into the making of its
products (“Proprietary Products”). The Company
contracts with various manufacturers to manufacture its Proprietary
Products in accordance with the Company’s recipes and
formulas and to sell those products to authorized distributors at a
contract price which includes an allowance for use of the
Company’s recipes. The manufacturing contracts also require
the manufacturers to hold those allowances in trust and to remit
those allowances to the Company on a periodic basis, usually
monthly. The Company recognizes those allowances in revenue as
earned based on sales reports from the distributors.
There were 3,064 franchised/licensed or Company-owned outlets in
operation on December 31, 2020 and 3,064 on December 31, 2019.
During 2019, 22 new franchised/licensed were opened and 22
franchised outlets left the system. Grocery stores are accustomed
to adding products for a period of time, removing them for a period
of time and possibly re-offering them. Therefore, it is unknown how
many grocery store licenses, out of the total count of 2,402, have
left the system.
Note 5: Liabilities for Leased Facilities
The
Company has future obligations of $8.2 million under current
operating leases as follows: due in less than one year $967,000,
due in one to three years $3.0 million, due in three to five years
$2.1 million and due in more than five years $2.2
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 $34,986 more in lease
expense than cash actually paid in 2020 for the
leases.
28
Note 6: Income Taxes
The
Company had deferred tax assets, as a result of prior operating
losses, of $3.9 million at December 31, 2019 and $3.1 million at
December 31, 2020, which expires between the years 2021 and 2036.
The net operating loss carry-forward is approximately $7.4 million
so the Company will have no obligation to pay income tax on the
amount of that operating loss carry-forward, however the carrying
value of that deferred tax asset was significantly reduced by the
2017 Tax Act which lowered the highest corporate income tax rate
from 34% to 21%. In 2017, 2018 and 2019, the Company used deferred
benefits to offset its tax expense of $442,000, recorded a tax
benefit of $503,000, and recorded a tax benefit of $468,000
respectively, and tax benefits from loss on discontinued operations
of $57,000 in 2017 and $12,000 in 2018, however, the Company
recorded a tax expense of $4.1 million in 2017 to lower the
carrying value of the deferred tax credit as a result of the
corporate tax rate being reduced from 34% to 21%, as explained
above. The Company also recorded $1.4 million in additional tax in
2018 after evaluating its deferred tax assets and determined that
$1.4 million of the deferred tax credits may expire in 2019 and
2020 before they are fully utilized. The Company also reviewed its
operating loss carry-forward in 2019 and determined that $1.7
million of that loss may expire before it is used and, as a result,
recorded an additional $400,000 in tax expense for 2019. In 2020,
the Company again reviewed the deferred tax asset and determined
that 2020 taxable income used up $267,528 of the deferred tax
credits and $572,400 of the deferred tax credits were expiring. As
a result of the loss carry-forwards, the Company did not pay any
income taxes in 2018, 2019 and 2020. There are no other material
differences between reported income tax expense or benefit and the
income tax expense or benefit that would result from applying the
Federal and state statutory tax rates.
Note 7: Common Stock
During 2016 and 2017, the Company issued Notes in the aggregate
principal amount of $2.4 million convertible to common stock within
three years at the rate of $0.50 per share and Warrants to purchase
up to 2.4 million shares of the Company’s common stock at
$1.00 per share. During 2018, holders of $400,000 in principal
amount of Notes converted into 800,000 shares of common stock. In
2019, holders of $100,000 in principal amount of Notes converted
into 200,000 shares of common stock. In February 2020, in
conjunction with the Company’s refinancing, $1,275,000 in
principal amount of Notes were repaid terminating the
holders’ right to convert and canceling their warrants. Now
outstanding are $625,000 principal amount of Notes convertible to
stock at $0.50 per share and warrants to purchase 775,000 shares of
stock at $0.57 per share.
The
Company has an incentive stock option plan for key employees,
officers and directors. The options are generally exercisable three
years after the date of grant and expire ten years after the date
of grant. The option prices are the fair market value of the stock
at the date of grant. At December 31, 2020, the Company had the
following employee stock options outstanding:
|
# Common
Shares
Issuable
|
Exercise
Price
|
|
46,500
|
$0.58
|
|
155,000
|
0.58
|
|
1,400,000
|
0.58
|
|
31,000
|
0.58
|
|
123,667
|
0.58
|
|
207,500
|
1.00
|
|
232,500
|
1.00
|
|
287,500
|
1.00
|
|
280,000
|
0.53
|
|
35,000
|
0.50
|
|
372,500
|
0.51
|
|
332,500
|
0.623
|
|
474,500
|
0.60
|
|
443,500
|
0.40
|
As of
December 31, 2020, options for 3,409,501 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 2018, 2019 and 2020:
|
Expected
volatility
|
20%
|
|
Expected dividend
yield
|
None
|
|
Expected term (in
years)
|
3
|
|
Risk-free interest
rate
|
1.68 to
2.82%
|
29
The
following table sets forth the number of options outstanding as of
December 31, 2017, 2018, 2019 and 2020 and the number of options
granted, exercised or forfeited during the years ended December 31,
2018, 2019 and 2020:
|
Balance of employee
stock options outstanding as of 12/31/17
|
3,334,167
|
|
Stock
options granted during the year ended 12/31/18
|
415,000
|
|
Stock
options exercised during the year ended 12/31/18
|
0
|
|
Stock
options forfeited during the year ended 12/31/18
|
(105,500)
|
|
Balance of employee
stock options outstanding as of 12/31/18
|
3,643,667
|
|
Stock
options granted during the year ended 12/31/19
|
529,500
|
|
Stock
options exercised during the year ended 12/31/19
|
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
|
The
following table sets forth the number of non-vested options
outstanding as of December 31, 2017, 2018, 2019 and 2020, and the
number of stock options granted, vested and forfeited during the
years ended December 31, 2018, 2019 and 2020.
|
Balance of employee
non-vested stock options outstanding as of 12/31/17
|
749,835
|
|
Stock
options granted during the year ended 12/31/18
|
415,000
|
|
Stock
options vested during the year ended 12/31/18
|
(337,499)
|
|
Stock
options forfeited during the year ended 12/31/18
|
(105,500)
|
|
Balance of employee
non-vested stock options outstanding as of 12/31/18
|
721,836
|
|
Stock
options granted during the year ended 12/31/19
|
529,500
|
|
Stock
options vested during the year ended 12/31/19
|
(325,000)
|
|
Stock
options forfeited during the year ended 12/31/19
|
(195,000)
|
|
Balance of employee
non-vested stock options outstanding as of 12/31/19
|
731,336
|
|
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
|
During
2020, employee stock options were granted for 443,500 shares and
options for 0 shares were forfeited. At December 31, 2020, the
weighted average grant date fair value of non-vested options was
$0.51 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 2018 was $0.623, during 2019 was $0.66 and during
2020 was $0.40. Total compensation cost recognized for share-based
payment arrangements was $16,597 with a tax benefit of $3,983 in
2018, $18,829 in 2019 with a tax benefit of $4,995 in 2019 and
$21,536 in 2020 with a tax benefit of $5,168. As of December 31,
2020, total unamortized compensation cost related to options was
$20,075, 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.
30
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 ASU 2016-02, its leasing standard for
both lessees and lessors. Under its core principle, a lessee will
recognize lease assets and liabilities on the balance sheet for all
arrangements with terms longer than 12 months. The new standard
took effect in 2019 for public business entities and, therefore, is
included in the current financial statements. This had the effect
of increasing the value of the assets and liabilities of the
Company and incurred an additional expense for rent on the
Consolidated Statement of Operations by $34,986 in
2020.
Note 9: Loss from Discontinued Operations
The
Company made the decision in late 2008 to discontinue the business
of operating traditional quick service restaurants. As a result,
the Company charged off or dramatically lowered the carrying value
of all receivables related to the traditional restaurants and
accrued future estimated expenses related to the estimated cost to
prosecute a lawsuit related to those discontinued operations. The
ongoing right to receive passive income in the form of royalties is
not a part of the discontinued segment.
The
Company reported a net loss on discontinued operations of $37,800
in 2018. This consisted of rent related to a location that was a
part of the operations discontinued in 2008. The obligation of rent
on this location has been satisfied and no further loss is
expected. There are no known contingencies with regard to the
operations discontinued in 2008 that are expected to result in any
loss.
Note 10: 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.
Note 11: 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 41 Units. The Notes, at the time of issue, were to mature
three years after issue date. In late 2018, the Company sent an
offer to each remaining Note holder offering to extend the maturity
of the Notes to January 31, 2023. Holders of $775,000 in principal
amount of the Notes accepted that offer of extension including the
Notes held by Paul W. Mobley and Herbst Capital Management, LLC. In
conjunction with the refinancing of the Company in February 2020,
Notes held by Paul Mobley were included in the $1,275,000 in
principal amount of Notes that were repaid out of the proceeds of
the new financing.
31
Note 12: Unaudited Quarterly Financial Information
|
|
Quarter
Ended
|
|||
|
|
December
31
|
September
30
|
June
30
|
March
31
|
|
2020
|
(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)
|
|
|
Quarter Ended
|
|||
|
|
December 31
|
September 30
|
June 30
|
March 31
|
|
2019
|
(in thousands, except
per share data)
|
|||
|
Total
revenue
|
$2,582
|
$3,079
|
$3,121
|
$2,923
|
|
Operating
income
|
224
|
835
|
801
|
754
|
|
Net income
(loss)before income taxes
|
(1,283)
|
615
|
580
|
627
|
|
Net income
(loss)
|
(1,763)
|
467
|
441
|
476
|
|
Net income (loss)
per common share
|
|
|
|
|
|
Basic
|
(.08)
|
.02
|
.02
|
.02
|
|
Diluted
|
(.08)
|
.02
|
.02
|
.02
|
32
Report of Independent Registered
Public Accounting Firm
To the Board of Directors and Stockholders of
NOBLE ROMAN’S, INC.
Indianapolis, Indiana
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of
NOBLE ROMAN’S, INC. and subsidiaries (the
“Company”) as of December 31, 2020 and 2019, the
related consolidated statements of operations, changes in
stockholders’ equity and cash flows for each of the three
years in the period ended December 31, 2020, and the related notes
(collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial
position of the Company at December 31, 2020 and 2019, and the
results of its operations and its cash flows for each of the three
years in the period ended December 31, 2020, in conformity with
accounting principles generally accepted in the United States of
America.
Basis for Opinion
These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements
based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States)
(“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. As part of our
audits, we are required to obtain an understanding of internal
control over financial reporting, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express
no such opinion.
Our audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation
of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising
from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to
the audit committee and that: (1) relate to accounts or disclosures
that are material to the consolidated financial statements and (2)
involved our especially challenging, subjective or complex
judgments. The communication of critical audit matters does not
alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the
critical audit matters below, providing separate opinions on the
critical audit matters or on the accounts or disclosures to which
they relate.
Valuation of Long-term Accounts Receivable
As described in Notes 1 and 2 to the consolidated financial
statements, the Company’s long-term accounts receivable
balance was fully reserved, resulting in a valuation adjustment of
$4.9 million for the year ended December 31, 2020, as presented in
the Consolidated Statements of Operations.
We
identified the valuation of long-term accounts
receivable as a
critical audit matter. Specifically, management is required to make
significant judgments and assumptions to estimate cash flows and
evaluate collection performance. Auditing these elements involved
especially challenging and subjective auditor judgment due to the
nature and extent of audit effort required to address these
matters.
The
primary procedures we performed to address this critical audit
matter included:
●
Understanding the
design of controls relating to management’s assessment of
estimated cash flows and collection performance.
●
Testing the
completeness and accuracy of collection data.
●
Evaluating the
assessment of estimated cash flows through consideration of recent
performance trends and changes to the estimated cash
flows.
33
Valuation of Deferred Tax Assets
As described in Notes 1 and 6 to the consolidated financial
statements, the Company’s deferred tax asset was $3.1 million
at December 31, 2020.
We
identified the valuation of deferred tax assets as a critical audit matter.
Specifically, management is required to make significant judgments
and assumptions to estimate forecasted taxable income. Auditing
these elements involved especially challenging and subjective
auditor judgment due to the nature and extent of audit effort
required to address these matters.
The
primary procedures we performed to address this critical audit
matter included:
●
Understanding the
design of controls relating to management’s assessment of
forecasted taxable income.
●
Testing the
completeness and accuracy of historical taxable
income.
●
Evaluating the
assessment of forecasted taxable income through consideration of
recent performance trends.
We have served as the Company's auditor since 2007.
/s/
Somerset CPA's, P.C
Indianapolis, Indiana
March 22, 2021
34
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND
PROCEDURES
Management’s Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as defined in
Exchange Act Rule 13a-15(f) under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”).
Internal
control over financial reporting is a process designed by, or under
the supervision of, the Company’s principal executive and
principal financial officers, or persons performing similar
functions, and effected by the Company’s Board of Directors,
management, and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with United States generally accepted accounting
principles (“GAAP”) and includes those policies and
procedures that:
(1)
Pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of
the assets of the Company;
(2)
Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with GAAP, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of
management and directors of the Company; and
(3)
Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on the
financial statements.
Because of applicable limitations, there is a risk that material
misstatements may not be prevented or detected on a timely basis by
internal control over financial reporting. Also, projections of any
evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
The
Public Company Accounting Oversight Board’s Auditing Standard
No. 5 defines a material weakness as a deficiency, or a
combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a
material misstatement of the Company’s annual or interim
financial statements will not be prevented or detected on a timely
basis. A deficiency in internal control over reporting exists when
the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned
functions, to prevent or detect misstatements on a timely
basis.
Our
management, including Paul W. Mobley, the Company’s Executive
Chairman of the Board and Chief Financial Officer, and A. Scott
Mobley, the Company’s President and Chief Executive Officer,
conducted an evaluation of the effectiveness of our internal
control over financial reporting as of December 31, 2020 based on
the framework in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Our management has concluded that the Company’s
internal controls over financial reporting are
effective.
There
have been no changes in internal controls over financial reporting
during the period covered by this report that have materially
affected, or are reasonably likely to materially affect, the
Company’s internal control over financial
reporting.
This
annual report does not include an attestation report of the
Company’s registered public accounting firm regarding
internal control over financial reporting. Management’s
report was not subject to attestation by the Company’s
registered public accounting firm pursuant to rules of the
Securities and Exchange Commission that permit the Company to
provide only management’s report in this annual
report.
Management’s Evaluation of Disclosure Controls and
Procedures
Based
on their evaluation, as of the end of the period covered by this
report, Paul W. Mobley, the Company’s Executive Chairman of
the Board and Chief Financial Officer, and A. Scott Mobley, the
Company’s President and Chief Executive Officer, have
concluded that the Company’s disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) are effective.
ITEM 9B. OTHER INFORMATION
None.
35
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS
OF THE REGISTRANT AND CORPORATE
GOVERNANCE
Set forth
below is certain information regarding the executive officers and
the directors of the Company:
|
Name
|
Age
|
Positions
with the Company
|
|
Paul W.
Mobley
|
80
|
Executive
Chairman of the Board, Chief Financial Officer and Class II
Director
|
|
A.
Scott Mobley
|
57
|
Chief
Executive Officer, President, Secretary and Class III
Director
|
|
Douglas
H. Coape-Arnold
|
75
|
Class I
Director
|
|
Marcel
Herbst
|
50
|
Class I
Director
|
|
William
Wildman
|
72
|
Class
II Director
|
|
Troy
Branson
|
57
|
Executive
Vice President of Franchising
|
The
officers of the Company serve at the discretion of the board of
directors and are elected at the annual meeting of the board of
directors. The board of directors has a classified structure in
which the directors are divided into three classes with
approximately one-third of the directors standing for election each
year. Under this structure, directors serve staggered three-year
terms or until their successors are duly elected and
qualified.
The
following is a brief description of the previous business
background of our executive officers and directors:
Paul W.
Mobley has been Executive Chairman of the Board and Chief
Financial Officer since November 2014. Prior to November 2014, Mr.
Mobley was Chairman of the Board, Chief Executive Officer and Chief
Financial Officer since December 1991, and a director since 1974.
Mr. Mobley was President of the Company from 1981 to 1997. From
1975 to 1987, Mr. Mobley was a significant shareholder and
president of a company which owned and operated 17 Arby’s
franchise restaurants. From 1974 to 1978, he also served as Vice
President and Chief Operating Officer of the Company and from 1978
to 1981 as its Senior Vice President. Mr. Mobley has a B.S. in
Business Administration from Indiana University. He is the father
of A. Scott Mobley.
A. Scott
Mobley has been President and Chief Executive Officer since
November 2014. Prior to November 2014, Mr. Mobley was President and
Chief Operating Officer since 1997. He has served as a director
since 1992, and Secretary since 1993. Mr. Mobley was Vice President
from 1988 to 1997, and from 1987 until 1988 he also served as
Director of Marketing for the Company. Prior to joining the Company
Mr. Mobley was a strategic planning analyst with a division of
Lithonia Lighting Company. Mr. Mobley has a B.S. in Business
Administration from Georgetown University, and an MBA from Indiana
University. He is the son of Paul W. Mobley.
Douglas H.
Coape-Arnold has been a director of the Company since 1999.
Mr. Coape-Arnold has been Managing General Partner of Geovest
Capital Partners, L.P. since 1997, and was Managing Director of
TradeCo Global Securities, Inc. from 1994 to 2002. Mr. Coape-Arnold
is a Chartered Financial Analyst.
Marcel
Herbst has been a director of the Company since July 2016.
Mr. Herbst is the co-founder and portfolio manager of Herbst
Capital Management, LLC and has over 15 years of investment
experience in equities, fixed income and commodities. Mr. Herbst
started his professional career in 1991 in Germany with a
commercial diploma in banking. Prior to founding Herbst Capital
Management, LLC, Mr. Herbst had more than 10 years’
experience in the management of hospitality services for large,
upscale, branded properties in the US and Europe. Most recently he
served as the Director of Food and Beverage at the 1544 room Hilton
Chicago, overseeing $40 million in annual food and beverage
revenue. Mr. Herbst has a Bachelor degree of Business
Administration from Schiller International University in
Heidelberg, Germany and a Master’s degree of Management in
Hospitality concentrating in food and beverage from Cornell
University.
William
Wildman has been a director of the Company since June 2019.
Mr. Wildman is the President and Chief
Executive Officer of Pinnacle Commercial Capital
(“Pinnacle”), a provider of growth funding to
multi-unit franchisees and franchisors. Mr. Wildman has extensive
working knowledge of restaurant concepts, their franchisors and
their franchise groups, including both multi-unit and single-unit
operators. Before founding Pinnacle, Mr. Wildman served as a Vice
President with each of Provident Bank, a regional commercial bank,
Atherton Capital, a San Francisco based capital markets lender, and
Meridian Financial Corporation, an equipment leasing company in
Indianapolis. Mr. Wildman studied business and law at the
University of Evansville, and undertook additional financial
management studies at the Indiana Banking School at
Purdue.
Troy Branson
has been Executive Vice President of Franchising for the Company
since 1997, and from 1992 to 1997, he was Director of Business
Development. Before joining the Company, Mr. Branson was an owner
of Branson-Yoder Marketing Group from 1987 to 1992. Mr. Branson
received a B.S. in Business from Indiana University.
36
CODE OF ETHICS
The
Company has adopted a code of ethics for its senior executive and
financial officers. The code of ethics can be obtained without
charge by contacting the Company’s executive office at 6612
E. 75th
Street, Suite 450, Indianapolis, Indiana 46250 and requesting a
copy of the code of ethics.
ITEM 11. EXECUTIVE
COMPENSATION
Summary Compensation Table for 2019 and 2020
The
following table sets forth the cash and non-cash compensation
awarded to or earned by the Executive Chairman of the Board and
Chief Financial Officer, the Chief Executive Officer, President and
Secretary and the one other highest paid executive officer of the
Company.
|
Name and Principal
Position(s)
|
Year
|
Salary
|
Non-Equity Incentive
Compensation
|
Option
Awards(1)
|
Total
Compensation
|
|
Paul W.
Mobley
|
2020
|
$300,000
|
$-
|
$3,500
|
$303,500
|
|
Executive Chairman
of the Board and Chief Financial Officer
|
2019
|
$300,000
|
$-
|
$4,000
|
$304,000
|
|
|
|
|
|
|
|
|
A. Scott
Mobley
|
2020
|
$444,568
|
$-
|
$4,000
|
$448,568
|
|
Chief Executive
Officer, President and Secretary
|
2019
|
$444,568
|
$-
|
$5,000
|
$449,568
|
|
|
|
|
|
|
|
|
Troy
Branson
|
2020
|
$120,000
|
$77,110
|
$1,500
|
$198,610
|
|
Executive
Vice President
|
2019
|
$110,000
|
$85,967
|
$2,125
|
$198,092
|
(1)
These amounts represent the grant date fair value of the option
awards. See “—Equity Incentive Awards” for
information regarding valuation of stock option
grants.
Equity Incentive Awards
The
Company maintains an employee stock option plan for our employees,
officers and directors that is designed to motivate them to
increase shareholder value. Any employee, officer or director of
the Company is eligible to be awarded options under the plan. The
employee stock option plan provides that any options issued
pursuant to the plan for non-director employees will have a
three-year vesting period and for director employees will vest
one-third each year and both will expire ten years after the date
of grant. The vesting period is intended to provide incentive for
longevity with the Company. Awards under the plan are periodically
made at the recommendation of the Executive Chairman/Chief
Financial Officer and President/Chief Executive Officer, and then
approved by the board of directors. The employee stock option plan
does not have a limit on the number of shares that may be issued
under the plan.
The
Summary Compensation Table includes the grant date fair value for
stock options granted in 2019 and 2020 to the named executive
officers under the Company’s employee stock option plan. The
Company determines the grant date fair value of stock options
calculated in accordance with Financial Accounting Standards Board
Accounting Standards Codification Topic 718. See Note 7 to the
Notes to the Company’s Consolidated Financial Statements in
the Company’s Annual Report on Form 10-K for the year ended
December 31, 2020 for a discussion of the Company’s
determination of the grant date fair value of stock
options.
In
2020, the Company granted options to purchase 443,500 shares on
September 30, 2020 at an exercise price equal to the then-current
market price of $0.40 per share. There were no employee stock
options exercised in 2020 and no stock options were
forfeited.
Employment Agreements
Paul W.
Mobley has an employment agreement with the Company which: (A)
fixes his base compensation at $650,000 per year for 2020 (although
Mr. Mobley voluntarily reduced his base compensation to $300,000
for 2019 and 2020 and pursuant to an agreement entered into in
conjunction with the Corbel financing in 2020 Mr. Mobley agreed to
limit his salary in future years to a 5% per annum increase); (B)
provides for reimbursement of travel and other expenses incurred in
connection with his employment, including the furnishing of an
automobile and health and accident insurance similar to that
provided other employees; and (C) provides life insurance in an
amount related to his base salary. The initial term of the
agreement is seven years and the term automatically renews each
year for a seven-year period unless the board of directors takes
specific action to not renew. The agreement is terminable by the
Company for cause as defined in the agreement. The agreement does
not provide for any benefits payable as a result of a change of
control of the Company.
37
A.
Scott Mobley has an employment agreement with the Company which:
(A) fixes his base compensation at $551,000 per year for 2020
(although Mr. Mobley voluntarily reduced his base compensation to
$444,568 for 2019 and 2020 and pursuant to an agreement entered
into in conjunction with the Corbel financing in 2020 Mr. Mobley
agreed to limit his salary in future years to a 5% per annum
increase); (B) provides for reimbursement of travel and other
expenses incurred in connection with his employment, including the
furnishing of an automobile and health and accident insurance
similar to that provided other employees; and (C) provides life
insurance in an amount related to his base salary. The initial term
of the agreement is five years and the term automatically renews
each year for a five-year period unless the board of directors
takes specific action to not renew. The agreement is terminable by
the Company for cause as defined in the agreement. The agreement
does not provide for any benefits payable as a result of a change
of control of the Company.
Non-Equity Incentive Arrangements
The
Company currently has a non-equity incentive arrangement with our
Executive Vice President under which he may earn additional
compensation. For 2020 and 2019, his compensation was based on 2.5%
of the Company’s adjusted earnings before interest, taxes,
depreciation and amortization (“Adjusted
EBITDA”)1 for the first $2.5 million and 3.0% of
EBITDA above $2.5 million. Under these plans, the Executive Vice
President was paid incentive compensation of $85,967 and $77,110 in
2019 and 2020, respectively.
Outstanding Equity Awards at Fiscal Year-End
The
following table sets forth information concerning the number of
outstanding equity awards of the executive officers named in the
Summary Compensation Table as of December 31, 2020.
|
|
Option
Awards
|
|||
|
Name
|
Number of
Securities Underlying Unexercised Options (#)
Exercisable
|
Number of
Securities Underlying Unexercised Options (#)
Unexercisable
|
Option Exercise
Price ($)
|
Option
Expiration Date
|
|
Paul W.
Mobley
|
100,000
|
|
0.58
|
9/30/23
|
|
|
900,000
|
|
0.58
|
9/30/23
|
|
|
33,333
|
|
0.58
|
6/27/22
|
|
|
50,000
|
|
1.00
|
7/2/23
|
|
|
60,000
|
|
1.00
|
7/2/24
|
|
|
70,000
|
|
1.00
|
6/23/25
|
|
|
60,000
|
|
0.53
|
7/7/26
|
|
|
70,000
|
|
0.51
|
7/7/27
|
|
|
46,667
|
23,333
|
0.623
|
7/6/28
|
|
|
26,667
|
53.333
|
0.60
|
7/2/29
|
|
|
0
|
70,000
|
0.40
|
9/30/30
|
|
A.
Scott Mobley
|
25,000
|
|
0.58
|
9/30/23
|
|
|
300,000
|
|
0.58
|
9/30/23
|
|
|
33,334
|
|
0.58
|
6/27/22
|
|
|
50,000
|
|
1.00
|
7/2/23
|
|
|
60,000
|
|
1.00
|
7/2/24
|
|
|
70,000
|
|
1.00
|
6/23/25
|
|
|
70,000
|
|
0.53
|
7/7/26
|
|
|
90,000
|
0
|
0.51
|
7/7/27
|
|
|
53,333
|
26,667
|
0.623
|
7/6/28
|
|
|
33,333
|
66,667
|
.60
|
7/2/29
|
|
|
0
|
80,000
|
0.40
|
9/30/30
|
|
Troy
Branson
|
10,000
|
|
0.58
|
9/30/23
|
|
|
40,000
|
|
1.00
|
7/2/23
|
|
|
30,000
|
|
1.00
|
7/2/24
|
|
|
40,000
|
|
1.00
|
6/23/25
|
|
|
35,000
|
|
0.53
|
7/7/26
|
|
|
42,500
|
|
0.51
|
7/7/27
|
|
|
|
42,500
|
0.623
|
7/6/28
|
|
|
|
42,500
|
0.60
|
7/2/29
|
|
|
|
30,000
|
0.40
|
9/30/30
|
The
employee stock option plan provides that any options issued
pursuant to the plan for non-director employees will have a
three-year vesting period and for director employees will vest
one-third each year, so long as the optionee continues to be
employed by the Company, and both will expire ten years after the
date of grant.
38
DIRECTOR COMPENSATION
|
Name
|
Fees Earned or
Paid in Cash ($)
|
Option Awards
($)
|
All Other
Compensation ($)
|
Total
($)
|
|
Douglas
H. Coape-Arnold
|
19,000
|
2,000
|
-
|
21,000
|
|
Marcel
Herbst
|
19,000
|
2,000
|
-
|
21,000
|
|
William
Wildman
|
19,000
|
2,000
|
-
|
21,000
|
Each
non-employee director is compensated: $18,000 as an annual retainer
fee paid quarterly; a $500 fee for each board of directors meeting
attended. The directors are all eligible for stock option grants
and are reimbursed for out-of-pocket expenses incurred in
connection with their board service. The board of directors
currently does not have any standing committees.
The
Company does not pay any separate compensation for directors that
are also employees of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
As of
March 5, 2021, there were 22,215,512 shares of the Company’s
common stock outstanding. The following table sets forth the amount
and percentage of the Company’s common stock beneficially
owned on March 5, 2021, including shares that may be acquired by
the exercise of options, by: (A) each director and named executive
officer individually; (B) each beneficial owner of more than 5% of
the Company’s outstanding common stock known to the Company;
and (C) all executive officers and directors as a
group.
|
Name of Beneficial
Owner
|
Number of
Shares
Beneficially Owned
(1)
|
Percent
of
Common
Stock(2)
|
|
Corbel Capital
Partners SBIC, L.P.
|
2,250,000(3)
|
9.2%
|
|
Paul W.
Mobley
|
3,659,368(4)
|
15.3
|
|
A. Scott
Mobley
|
1,951,245(5)
|
8.4
|
|
Douglas H.
Coape-Arnold
|
530,000(6)
|
2.3
|
|
Marcel
Herbst
|
1,110,491(7)
|
4.8
|
|
|
|
|
|
Troy
Branson
|
607,500(8)
|
2.7
|
|
William
Wildman
|
165,000(9)
|
0.7
|
|
Robert P.
Stiller
|
3,067,085(10)
|
13.8
|
|
All executive
officers and directors as a
group (6) persons)
|
8,023,604
|
30.1%
|
(1)
All shares owned
directly with sole investment and voting power, unless otherwise
noted.
(2)
The percentage
calculations are based upon 22,215,512 shares of the
Company’s common stock issued and outstanding as of the most
recent practicable date and, for each officer or director of the
group, the number of shares subject to options, warrants or
conversion rights exercisable within 60 days of April 15,
2020.
(3)
According to the
information provided to the Company in a Schedule 13-G, filed with
the SEC on February 14, 2020, the total includes 2,250,000 warrants
to purchase up to 2,250,000 shares. The Schedule 13-G states that
the filer has sole voting power and sole dispositive power for all
such shares. Corbel’s address is 11777 San Vicente Blvd.,
Suite 777, Los Angeles, California 90049.
(4)
The total includes
1,563,333 shares of common stock subject to options granted under a
stock option plan and warrants to purchase 150,000 shares . Mr.
Mobley’s address is 6612 E. 75th Street, Suite 450,
Indianapolis, Indiana 46250.
(5)
The total includes
958,334 shares of common stock subject to options granted under a
stock option plan. Mr. Mobley’s address is 6612 E. 75th
Street, Suite 450, Indianapolis, Indiana 46250.
(6)
The total includes
530,000 shares of common stock subject to options granted under a
stock option plan. Mr. Coape-Arnold’s address is 6612 E.
75th
Street, Suite 450, Indianapolis, Indiana 46250.
39
(7)
The total includes
195,000 shares of common stock subject to options granted under a
stock option plan, 400,000 shares issuable upon conversion of
convertible notes and 200,000 shares issuable upon exercise of
warrants. Mr. Herbst’s address is 6612 E. 75th Street, Suite 450,
Indianapolis, Indiana 46250.
(8)
The total includes
312,500 shares of common stock subject to options granted under a
stock option plan. Mr. Branson’s address is 6612 E.
75th
Street, Suite 450, Indianapolis, Indiana 46250.
(9)
The total includes
115,000 shares of common stock subject to options granted under a
stock option plan. Mr. Wildman’s address is 6612 E.
75th
Street, Suite 450, Indianapolis, Indiana 46250.
(10)
According to
information provided to the Company in an amendment to Schedule
13-G, filed with SEC on February 11, 2021. The amendment states
that the filer has sole voting power and sole dispositive power for
all such shares. The filer’s address is c/o Sunrise
Management Services, LLC, 515 N. Flagler Drive, Suite 1702, West
Palm Beach, Florida 33401.
The
following table provides information as of December 31, 2020 with
respect to the shares of the Company’s common stock that may
be issued under its existing equity compensation plan.
|
Plan
Category
|
Number of
Securities to be issued upon exercise of outstanding options,
warrants and rights
(a)
|
Weighted-average
exercise price of outstanding options, warrants and
rights
(b)
|
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(c)
|
|
Equity compensation
plans approved by stockholders
|
-
|
$-
|
-
|
|
Equity compensation
plans not approved by stockholders
|
4,421,667
|
$.63
|
(1)
|
|
Total
|
4,421,667
|
$.63
|
(1)
|
(1) The
Company may grant additional options under the employee stock
option plan. There is no maximum number of shares
available
for
issuance under the employee stock option plan.
The
Company maintains an employee stock option plan for its employees,
officers and directors. Any employee, officer and director of the
Company is eligible to be awarded options under the plan. The
employee stock option plan provides that any options issued
pursuant to the plan will generally have a three-year vesting
period and will expire ten years after the date of grant. Awards
under the plan are periodically made at the recommendation of the
Executive Chairman and the Chief Executive Officer and authorized
by the Board of Directors. The employee stock option plan does not
limit the number of shares that may be issued under the
plan.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The
Company has reviewed all transactions to which the Company and
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 on the same terms and conditions as all
of the independent investors who purchased the other 41 Units. The
Notes, at the time of issue, were to mature three years after issue
date. In late 2018, the Company sent an offer to each remaining
Note holder offering to extend the maturity of the Notes to January
31, 2023. Holders of $775,000 in principal amount of the Notes
accepted that offer of extension including the Notes held by Paul
W. Mobley and Herbst Capital Management, LLC. In conjunction with
the refinancing of the Company in February 2020, Notes held by Paul
Mobley were included in the $1,275,000 in principal amount of Notes
that were repaid out of the proceeds of the new
financing.
The
Company’s board of directors is currently comprised of: Paul
W. Mobley, our Executive Chairman and Chief Financial Officer; A.
Scott Mobley, our President and Chief Executive Officer; Douglas H.
Coape-Arnold; Marcel Herbst; and William Wildman. For the purpose
of determining director independence, the Company has adopted the
New York Stock Exchange definition of independence. The board of
directors has determined that Messrs. Coape-Arnold, Herbst and
Wildman are independent directors under that
definition.
40
ITEM 14. PRINCIPAL ACCOUNTING FEES AND
SERVICES
The
following table presents fees for professional audit services
rendered by Somerset CPAs for the audit of our annual financial
statements and review of our quarterly financial statements, and
fees billed for other services rendered by Somerset during 2020 and
2019.
|
|
2020
|
2019
|
|
Audit fees and
review fees (1)
|
$110,000
|
$110,000
|
(1)
Audit fees consist
of fees rendered for professional services rendered by Somerset for
the audit of our financial statements included in our annual
reports on Form 10-K for the years ended December 31, 2020 and
2019, and the review of the unaudited financial statements included
in our quarterly reports on Form 10-Q during 2020 and
2019.
The
engagement of Somerset, for conducting the audit of the
Company’s financial statements for the years ended December
31, 2020 and 2019, and for the review of its financial statements
included in its Form 10-Q’s during 2020 and 2019, was
pre-approved by the Company’s board of directors. Somerset
has not been engaged by the Company to perform any services other
than audits of the financial statements included in its Form 10-Ks
and review of the financial statements in its Form 10-Qs. The board
of directors does not have a pre-approval policy with respect to
work performed by the Company’s independent
auditor.
41
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES
|
The following
consolidated financial statements of Noble
|
|
| Roman’s, Inc. and Subsidiaries are included in Item 8: |
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Page
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|
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20
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|
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21
|
|
|
22
|
|
|
23
|
|
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24
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|
|
33
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|
|
43
|
42
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Exhibit Number
|
Description
|
|
3.1
|
Amended
Articles of Incorporation of the Registrant, filed as an exhibit to
the Registrant’s Amendment No. 1 to the Post-Effective
Amendment No. 2 to Registration Statement on Form S-1 filed July 1,
1985 (SEC File No.2-84150), is incorporated herein by
reference.
|
|
3.2
|
Amended
and Restated By-Laws of the Registrant, as currently in effect,
filed as an exhibit to the Registrant’s Form 8-K filed
December 23, 2009, is incorporated herein by
reference.
|
|
3.3
|
Articles
of Amendment of the Articles of Incorporation of the Registrant
effective February 18, 1992 filed as an exhibit to the
Registrant’s Registration Statement on Form SB-2 (SEC File
No. 33-66850), ordered effective on October 26, 1993, is
incorporated herein by reference.
|
|
3.4
|
Articles
of Amendment of the Articles of Incorporation of the Registrant
effective May 11, 2000, filed as Annex A and Annex B to the
Registrant’s Proxy Statement on Schedule 14A filed March 28,
2000, is incorporated herein by reference.
|
|
3.5
|
Articles
of Amendment of the Articles of Incorporation of the Registrant
effective April 16, 2001 filed as Exhibit 3.4 to Registrant’s
annual report on Form 10-K for the year ended December 31, 2005, is
incorporated herein by reference.
|
|
3.6
|
Articles
of Amendment of the Articles of Incorporation of the Registrant
effective August 23, 2005, filed as Exhibit 3.1 to the
Registrant’s current report on Form 8-K filed August 29,
2005, is incorporated herein by reference.
|
|
3.7
|
Articles
of Amendment of the Articles of Incorporation of the Registrant
effective February 7, 2017, filed as Exhibit 3.7 to the
Registrant’s Registration on Form S-1 (SEC File
No.332-217442) filed April 25, 2017, is incorporated herein by
reference.
|
|
4.1
|
Specimen
Common Stock Certificates filed as an exhibit to the
Registrant’s Registration Statement on Form S-18 filed
October 22, 1982 and ordered effective on December 14, 1982 (SEC
File No. 2-79963C), is incorporated herein by
reference.
|
|
4.2
|
Warrant
to purchase common stock, dated July 1, 2015, filed as Exhibit
10.11 to the Registrant’s Form 10-Q filed on August 11, 2015,
is incorporated herein by reference.
|
|
4.3
|
Form
of Senior Secured Promissory Note issued by Registrant to Corbel
Capital Partners SBIC, L.P. dated February 7, 2020 and filed as
Exhibit 4.3 to Registrant’s annual report on Form 10-K for
the year ended December 31, 2019 is incorporated herein by
reference.
|
|
4.4
|
Form of
Warrant issued to Corbel Capital Partners SBIC, L.P. dated February
7, 2020 and filed as Exhibit 4.4 to Registrant’s annual
report on Form 10-K for the year ended December 31, 2019 is
incorporated herein by reference.
|
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4.5
|
Form of
Promissory Note under the Paycheck Protection Plan issued by
Registrant to Huntington National Bank dated April 17, 2020 filed
as Exhibit 4.5 to Registrant’s quarterly report on Form 10-Q
for the period ended March 31, 2020 is incorporated herein by
reference.
|
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4.6
|
Promissaory
Note under the Paycheck Protection Program loan issued by Noble
Roman's, Inc. to Huntington National Bank dated February 5, 2021
filed as Exhibit 10.1 to Registrant's current report on Form 8-K
filed February 8, 2021 is incorporated herein by
reference.
|
|
10.1*
|
Employment
Agreement with Paul W. Mobley dated January 2, 1999filed as Exhibit
10.1 to Registrant’s annual report on Form 10-K for the year
ended December 31, 2005, is incorporated herein by
reference.
|
|
10.2*
|
Employment
Agreement with A. Scott Mobley dated January 2, 1999 filed as
Exhibit 10.2 to Registrant’s annual report on Form 10-K for
the year ended December 31, 2005, is incorporated herein by
reference.
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10.3
|
Loan
Agreement dated as of September 13, 2017 by and between Noble
Roman’s, Inc. and First Financial, filed as Exhibit 10.1 to
the Registrant’s Form 8-K filed September 19, 2017, is
incorporated herein by reference.
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|
10.4
|
Term
note dated September 13, 2017 to First Financial Bank filed as
Exhibit 10.4 to the Registrant’s Form 10-Q filed November 14,
2017, is incorporated herein by reference.
|
|
10.5
|
Development
line note dated September 13, 2017 to First Financial Bank filed as
Exhibit 10.5 to the Registrant’s Form 10-Q filed November 14,
2017, is incorporated herein by reference.
|
|
10.6
|
Agreement
dated April 8, 2015, by and among Noble Roman’s, Inc. and the
shareholder parties, filed as Exhibit 10.1 to Registrant’s
Form 8-K filed on April 8, 2015, is incorporated herein by
reference.
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|
10.7
|
Form of
10% Convertible Subordinated Unsecured note filed as Exhibit 10.16
to the Registrant’s Form 10-K filed on March 27, 2017, is
incorporated herein by reference.
|
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10.8
|
Form of
Redeemable Common Stock Purchase Class A Warrant filed as Exhibit
10.21 to the Registrant’s Registration Statement on Form S-1
(SEC File No. 33-217442) on April 25, 2017, is incorporated herein
by reference.
|
|
10.9
|
Registration
Rights Agreement dated October 13, 2016 by and between the
Registrant and the investors signatory thereto, filed as Exhibit
10.22 to the Registrant’s Registration Statement on Form S-1
(SEC File No. 33-217442) on April 25, 2017, is incorporated herein
by reference.
|
|
10.10
|
First
Amendment to the Registration Rights Agreement dated February 13,
2017 by and between the Registrant and the investors signatory
thereto, filed as Exhibit 10.23 to the Registrant’s
Registration Statement on Form S-1 (SEC File No. 33-217442) on
April 25, 2017, is incorporated herein by reference.
|
|
10.11
|
Senior
Secured Note and Warrant Purchase Agreement dated February 7, 2020
by and between the Registrant and Corbel Capital Partners SBIC,
L.P. filed as Exhibit 10.11 to Registrant’s annual report on
Form 10-K for the year ended December 31, 2019 is incorporated
herein by reference
|
|
21.1
|
Subsidiaries
of the Registrant filed in the Registrant’s Registration
Statement on Form SB-2 (SEC File No 33-66850) ordered effective on
October 26, 1993, is incorporated herein by reference.
|
|
C.E.O.
Certification under Rule 13a-14(a)/15d-14(a)
|
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C.F.O.
Certification under Rule 13a-14(a)/15d-14(a)
|
|
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C.E.O.
Certification under Section 1350
|
|
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C.F.O.
Certification under Section 1350
|
|
|
101
|
Interactive
Financial Data
|
*
Management contract for compensation plan..
ITEM 16. FORM 10-K SUMMARY
None.
43
SIGNATURES
In
accordance with of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
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NOBLE
ROMAN’S, INC.
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Date: March 22,
2021
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By:
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/s/ A. Scott
Mobley
|
|
|
|
|
A. Scott
Mobley
|
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|
|
|
President and Chief
Executive
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||
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|
Date:
March
22, 2021
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By:
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/s/ Paul W.
Mobley
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|
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Paul W. Mobley |
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|
|
|
Executive Chairman,
Chief
Financial Officer
and Principal Accounting Officer |
|
In
accordance with the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates
indicated.
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||
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|
|
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|
Date:
March
22, 2021
|
By:
|
/s/ Paul W.
Mobley
|
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|
|
|
Paul W. Mobley |
|
|
|
|
Executive Chairman,
Chief
Financial Officer
and Principal Accounting Officer |
|
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|
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|
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|
|
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|
Date: March 22,
2021
|
By:
|
/s/ A. Scott
Mobley
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|
A. Scott
Mobley
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|
President and Chief
Executive
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|
Date: March 22,
2021
|
By:
|
/s/ Douglas H.
Coape-Arnold
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|
|
Douglas H.
Coape-Arnold
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Director
|
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Date: March 22,
2021
|
By:
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/s/
Marcel
Herbst
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|
Marcel
Herbst
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Director
|
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|
|
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|
|
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|
Date: March 22,
2021
|
By:
|
/s/ William
Wildman
|
|
|
|
|
William Wildman |
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|
|
Director |
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44