United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended June 30, 2012
Commission file number: 0-11104
NOBLE ROMAN'S, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1281154
(State or other jurisdiction (I.R.S. Employer
of organization) Identification No.)
One Virginia Avenue, Suite 300
Indianapolis, Indiana 46204
(Address of principal executive offices) (Zip Code)
(317) 634-3377
(Registrant's telephone number, including area code)
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 and
posted on its corporate web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section
232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes X No
--- ---
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer Accelerated Filer
--- ---
Non-Accelerated Filer Smaller Reporting Company X
(do not check if --- ---
smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes No X
--- ---
As of August 9, 2012, there were 19,516,589 shares of Common Stock, no par
value, outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
The following unaudited condensed consolidated financial statements are
included herein:
Condensed consolidated balance sheets as of December 31, 2011
and June 30, 2012 (unaudited) Page 3
Condensed consolidated statements of operations for the
six months ended June 30, 2011 and 2012 (unaudited) Page 4
Condensed consolidated statements of changes in stockholders'
equity for the three and six months ended June 30, 2012
(unaudited) Page 5
Condensed consolidated statements of cash flows for the
six months ended June 30, 2011 and 2012 (unaudited) Page 6
Notes to condensed consolidated financial statements (unaudited) Page 7
2
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
December 31, June 30,
2011 2012
------------ ------------
Assets
Current assets:
Cash $ 233,296 $ 240,763
Accounts and notes receivable - net 884,811 1,125,052
Inventories 338,447 411,649
Assets held for resale 252,552 252,552
Prepaid expenses 278,718 401,951
Deferred tax asset - current portion 1,400,000 1,400,000
------------ ------------
Total current assets 3,387,824 3,831,967
------------ ------------
Property and equipment:
Equipment 1,147,109 1,155,906
Leasehold improvements 12,283 12,283
------------ ------------
1,159,392 1,168,189
Less accumulated depreciation and amortization 851,007 879,249
------------ ------------
Net property and equipment 308,385 288,940
Deferred tax asset (net of current portion) 9,613,399 9,184,058
Other assets 3,914,523 4,283,492
------------ ------------
Total assets $ 17,224,131 $ 17,588,457
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term note payable to bank $ 3,575,000 $ 1,250,000
Accounts payable and accrued expenses 665,054 248,209
------------ ------------
Total current liabilities 4,240,054 1,498,209
------------ ------------
Long-term obligations:
Note payable to bank (net of current portion) -- 3,645,833
Note payable to officer 1,255,821 --
------------ ------------
Total long-term liabilities 1,255,821 3,645,833
------------ ------------
Stockholders' equity:
Common stock - no par value (25,000,000 shares authorized, 19,469,317 issued
and outstanding as of December 31, 2011 and 19,489,317 as of
June 30, 2012) 23,239,976 23,298,570
Preferred stock (5,000,000 shares authorized and 20,625 issued and
outstanding as of December 31, 2011 and June 30, 2012) 800,250 800,250
Accumulated deficit (12,311,970) (11,654,405)
------------ ------------
Total stockholders' equity 11,728,256 12,444,415
------------ ------------
Total liabilities and stockholders' equity $ 17,224,131 $ 17,588,457
============ ============
See accompanying notes to condensed consolidated financial statements.
3
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2011 2012 2011 2012
----------- ----------- ----------- -----------
Royalties and fees $ 1,731,802 $ 1,767,414 $ 3,406,589 $ 3,470,980
Administrative fees and other 11,018 5,496 19,395 12,743
Restaurant revenue 137,670 120,680 256,522 247,529
----------- ----------- ----------- -----------
Total revenue 1,880,490 1,893,590 3,682,506 3,731,252
Operating expenses:
Salaries and wages 247,497 253,524 485,140 496,983
Trade show expense 93,247 123,127 183,247 244,124
Travel expense 52,589 45,459 99,474 94,374
Other operating expenses 176,290 172,008 355,230 350,209
Restaurant expenses 129,903 113,029 248,467 232,272
Depreciation and amortization 36,311 28,561 49,860 59,225
General and administrative 403,430 392,670 811,818 788,387
----------- ----------- ----------- -----------
Total expenses 1,139,267 1,128,378 2,233,236 2,265,574
----------- ----------- ----------- -----------
Operating income 741,223 765,212 1,449,270 1,465,678
Interest and other expense 97,207 198,692 195,859 294,621
----------- ----------- ----------- -----------
Income before income taxes 644,016 566,520 1,253,411 1,171,057
Income tax expense 255,097 224,398 496,478 463,856
----------- ----------- ----------- -----------
Net income 388,919 342,122 756,933 707,201
Cumulative preferred dividends 24,411 24,683 49,364 49,636
----------- ----------- ----------- -----------
Net income available to common
stockholders $ 364,508 $ 317,439 $ 707,569 $ 657,565
=========== =========== =========== ===========
Earnings per share - basic:
Net income $ .02 $ .02 $ .04 $ .04
Net income available to common stockholders $ .02 $ .02 $ .04 $ .03
Weighted average number of common shares
outstanding 19,469,317 19,489,317 19,446,113 19,483,383
Diluted earnings per share:
Net income $ .02 $ .02 $ .04 $ .04
Net income available to common
stockholders $ .02 $ .02 $ .04 $ .03
Weighted average number of common shares
outstanding 20,183,876 20,041,048 20,160,672 20,035,114
See accompanying notes to condensed consolidated financial statements.
4
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in
Stockholders' Equity
(Unaudited)
Preferred Common Stock Accumulated
Stock Shares Amount Deficit Total
---------- ---------- ------------ ------------ -----------
Balance at December 31, 2011 $ 800,250 19,469,317 $ 23,239,976 $(12,311,970) $11,728,256
Net income for six months ended
June 30, 2012 707,201 707,201
Cumulative preferred dividends (49,636) (49,636)
Exercise of employee stock options 20,000 7,200 7,200
Amortization of value of stock
options 51,394 51,394
---------- ---------- ------------ ------------ -----------
Balance at June 30, 2012 $ 800,250 19,489,317 $ 23,298,570 $(11,654,405) $12,444,415
========== ========== ============ ============ ===========
See accompanying notes to condensed consolidated financial statements.
5
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
2011 2012
----------- -----------
OPERATING ACTIVITIES
Net income $ 756,933 $ 707,201
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 106,112 109,396
Deferred income taxes 496,478 463,856
Changes in operating assets and liabilities:
Increase in:
Accounts and notes receivable (242,926) (240,242)
Inventories (1,216) (73,203)
Prepaid expenses (97,290) (123,233)
Other assets (454,990) (211,186)
Decrease in:
Accounts payable and accrued expenses (28,551) (79,066)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 534,550 553,523
----------- -----------
INVESTING ACTIVITIES
Purchase of property and equipment (4,196) (8,797)
Investment in assets held for sale (3,393) --
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (7,589) (8,797)
----------- -----------
FINANCING ACTIVITIES
Payment of obligations from discontinued operations (379,642) (337,777)
Payment of cumulative preferred dividends (49,364) (49,636)
Payment of principal outstanding under prior bank loan (305,801) (3,575,000)
Payment of principal outstanding due officer -- (1,255,821)
Net proceeds from new bank loan -- 4,812,457
Payment of principal outstanding under new bank loan -- (104,167)
Payment of alternative minimum tax -- (34,515)
Proceeds from the exercise of employee stock options 18,000 7,200
Principal payment received on notes receivable 29,947 --
Proceeds from officer loan 50,000 --
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (636,860) (537,259)
----------- -----------
Increase (decrease) in cash (109,899) 7,467
Cash at beginning of period 337,044 233,296
----------- -----------
Cash at end of period $ 227,145 $ 240,763
=========== ===========
Supplemental schedule of non-cash investing and financing
activities
None.
Cash paid for interest $ 173,456 $ 155,184
See accompanying notes to condensed consolidated financial statements.
6
Notes to Condensed Consolidated Financial Statements (Unaudited)
----------------------------------------------------------------
Note 1 - The accompanying unaudited interim condensed consolidated financial
statements, included herein, have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC"). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. These condensed
consolidated statements have been prepared in accordance with the Company's
accounting policies described in the Annual Report on Form 10-K for the year
ended December 31, 2011 and should be read in conjunction with the audited
consolidated financial statements and the notes thereto included in that report.
Unless the context indicates otherwise, references to the "Company" mean Noble
Roman's, Inc. and its subsidiaries.
In the opinion of the management of the Company, the information contained
herein reflects all adjustments necessary for a fair presentation of the results
of operations and cash flows for the interim periods presented and the financial
condition as of the dates indicated, which adjustments are of a normal recurring
nature. The results for the six-month period ended June 30, 2012 are not
necessarily indicative of the results to be expected for the full year ending
December 31, 2012.
Note 2 - On May 15, 2012, the Company entered into a Credit Agreement with BMO
Harris Bank, N.A. for a term loan in the amount of $5.0 million which is
repayable in 48 equal monthly principal installments of $104,000 plus interest
commencing on June 15, 2012 with a final payment due on May 15, 2016. Interest
on the unpaid principal balance is payable at a rate per annum of LIBOR plus 4%.
The proceeds from the term loan, net of certain fees and expenses associated
with obtaining the term loan, were used to repay existing indebtedness to Wells
Fargo Bank, N.A. and to an officer of the Company. The Company's obligations
under the term loan are secured by the grant of a security interest in
essentially all assets of the Company and a personal guaranty of an officer of
up to $1.2 million of the term loan and certain restrictions apply such as a
prohibition on the payment of dividends, as defined in the Credit Agreement.
Note 3 - Royalties and fees include $50,000 and $125,000 for the three-month and
six-month periods ended June 30, 2012, and $75,000 and $127,000 for the
three-month and six-month periods ended June 30, 2011, respectively, of initial
franchise fees. Royalties and fees included $13,000 and $23,000 for the
three-month and six-month periods ended June 30, 2012, and $8,000 and $18,000
for the three-month and six-month periods ended June 30, 2011, respectively, of
equipment commissions. Royalties and fees, less initial franchise fees and
equipment commissions were $1.7 million and $3.3 million for the three-month and
six-month periods ended June 30, 2012 and $1.6 million and $3.3 million for the
three-month and six-month periods ended June 30, 2011, respectively. The
breakdown of royalties and fees, less upfront fees, are royalties and fees from
non-traditional franchises other than grocery stores were $1.2 million and $2.2
million for the three-month and six-month periods ended June 30, 2012, and $1.1
million and $2.2 million for the three-month and six-month periods ended June
30, 2011, respectively; royalties and fees from the grocery store take-n-bake
were $371,000 and $695,000 for the three-month and six-month periods ended June
30, 2012, and $265,000 and $548,000 for the three-month and six-month periods
ended June 30, 2011, respectively; and royalties and fees from traditional
locations were $180,000 and $461,000 for the three-month and six-month periods
ended June 30, 2012, and $272,000 and $551,000 for the three-month and six-month
periods ended June 30, 2011, respectively. The Company has no material amount of
past due royalties.
There were 1,331 franchises/licenses in operation on June 30, 2011 and 1,710
franchises/licenses in operation on June 30, 2012. During the twelve-month
period ended June 30, 2012 there was 394 new outlets opened and 15 outlets
7
closed. The breakdown of the 1,710 franchises at June 30, 2012 was 756
non-traditional franchises other than grocery stores, 912 grocery stores and 42
traditional franchises. In the ordinary course, grocery stores from time to time
add products, remove and subsequently re-offer them. Therefore, it is unknown if
any grocery store licenses have left the system.
Note 4 - The following table sets forth the calculation of basic and diluted
earnings per share for the three-month and six-month periods ended June 30,
2012:
Three Months Ended June 30, 2012
--------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Net income $ 342,122 19,489,317 $ .02
Less preferred stock dividends 24,683
----------
Earnings per share - basic
Income available to common stockholders 317,439 .02
Effect of dilutive securities
Options 185,065
Convertible preferred stock 24,683 366,666
---------- ----------
Diluted earnings per share
Income available to common stockholders
and assumed conversions $ 342,122 20,041,048 $ .02
========== ========== =======
Six Months Ended June 30, 2012
------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Net income $ 707,201 19,483,383 $ .04
Less preferred stock dividends 49,636
----------
Earnings per share - basic
Income available to common stockholders 657,565 .03
Effect of dilutive securities
Options 185,065
Convertible preferred stock 49,636 366,666
---------- ----------
Diluted earnings per share
Income available to common stockholders
and assumed conversions $ 707,201 20,035,114 $ .03
========== ========== =======
8
The following table sets forth the calculation of basic and diluted earnings per
share for the three-month and six-month periods ended June 30, 2011:
Three Months Ended June 30, 2011
--------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Net income $ 388,919 19,469,317 $ .02
Less preferred stock dividends (24,411)
----------
Earnings per share - basic
Income available to common stockholders 364,508 .02
Effect of dilutive securities
Options 347,893
Convertible preferred stock 24,411 366,666
---------- ----------
Diluted earnings per share
Income available to common stockholders
and assumed conversions $ 388,919 20,183,876 $ .02
========== ========== =======
Six Months Ended June 30, 2011
------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Net income $ 756,933 19,446,113 $ .04
Less preferred stock dividends (49,364)
----------
Earnings per share - basic
Income available to common stockholders 707,569 .04
Effect of dilutive securities
Options 347,893
Convertible preferred stock 49,364 366,666
---------- ----------
Diluted earnings per share
Income available to common stockholders
and assumed conversions $ 756,933 20,160,672 $ .04
========== ========== =======
Note 5 - The Company is a Defendant in a lawsuit styled Kari Heyser, Fred Eric
Heyser and Meck Enterprises, LLC, et al v. Noble Roman's, Inc. et al, filed in
Superior Court in Hamilton County, Indiana in June 2008. The Court issued an
Order dated December 23, 2010 granting summary judgment in favor of the Company
against all of the Plaintiffs. As a result, the Plaintiffs' allegations of fraud
against the Company and certain of its officers were determined to be without
merit. Plaintiffs filed numerous motions and an appeal to the Indiana Court of
Appeals, in an attempt to reverse the December 23, 2010 summary judgment. All of
the motions were denied and the Indiana Court of Appeals dismissed the appeal
with prejudice. Plaintiffs' last attempt to vacate the summary judgment award
was their attempt to vacate the Order on the grounds of misconduct of third
parties. On December 1, 2011, the Judge denied their motion and specifically
found "that there was absolutely no evidence of misconduct" and the Court
admonished Plaintiffs and Plaintiffs' counsel for making such unfounded
allegations. The fraud charges against the Company and certain of its officers
are dismissed entirely and Plaintiffs have no appeal rights remaining. The
Company then filed a motion for sanctions against the Plaintiffs and their
attorney for the frivolous filings. On February 28, 2012, the Court granted the
Company's request for sanctions and ordered the Plaintiffs and their attorney to
pay the Company $8,326 by April 23, 2012. The Plaintiffs filed a motion to
9
reconsider and the hearing was held on May 23, 2012. The Judge denied their
motion and ordered Plaintiffs and Plaintiffs' counsel to pay those sanctions
within 14 days, which made the payment due on June 7, 2012. Sanctions were not
paid and the Company filed a motion for contempt of court or to show cause. The
Judge gave the Plaintiffs until July 5, 2012 to respond to that motion. The
Plaintiffs filed a response but the Plaintiffs' counsel did not respond. The
Company does not believe that the Plaintiffs' response was responsive to the
contempt charge and, therefore, the Company filed a reply asking the Court to
rule on the contempt charge against Plaintiffs' counsel and to point out that
the Plaintiffs' response was not responsive to the Company's contempt motion and
moved the Court to impose additional sanctions. The Company's counterclaims
against the Plaintiffs for breach of contract remain pending as to amount of
damages, however the Company has been granted summary judgment as to liability.
The Complaint was originally against the Company and certain officers and
institutional lenders. The Plaintiffs are former franchisees of the Company's
traditional location venue. The Plaintiffs alleged that the Defendants
fraudulently induced them to purchase franchises for traditional locations
through misrepresentations and omissions of material facts regarding the
franchises. In addition to the above claims, one group of franchisee-Plaintiffs
in the same case had asserted a separate claim under the Indiana Franchise Act
as to which the Court's Order denied the Company's motion for summary judgment
as the Court determined that there is a genuine issue of material facts but did
not render any opinion on the merits of the claim. The Company denies any
liability on the Indiana Franchise Act claim and will continue to vigorously
defend against this claim.
The Company filed counterclaims for damages for breach of contract against all
of the Plaintiffs in the approximate amount of $3.6 million plus attorneys'
fees, interest and other costs of collection, or a total of over $5 million. On
September 21, 2011, the Company filed motions for partial summary judgment as to
liability against the Plaintiffs on the Company's counterclaims. As a result,
the Company was granted partial summary judgment as to liability against the
Plaintiffs/Counterclaim-Defendants on the Company's counterclaims against the
Plaintiffs. In this partial summary judgment, the Court determined that the
Plaintiffs were liable to the Company for direct damages and consequential
damages, including future royalties, for breach of their franchise agreements.
In addition, the Court determined that, as a matter of law, Noble Roman's was
entitled to recover attorneys' fees associated with obtaining preliminary
injunctions, fees resulting from the prosecution of Noble Roman's counterclaims
and fees for defending against fraud claims against the Company and certain of
its officers. The amount of the award is to be determined at trial. The Company
moved the Court to order mandatory mediation as to the Indiana Franchise Act
claim and the Company's counterclaim for damages. The Court ordered mediation,
which is set for September 14, 2012 with all Plaintiffs required to appear.
Note 6: The Company evaluated subsequent events through the date the financial
statements were issued and filed with the SEC. There were no subsequent events
that required recognition or disclosure beyond what is disclosed in this report.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General Information
-------------------
Noble Roman's, Inc., an Indiana corporation incorporated in 1972 with two
wholly-owned subsidiaries, Pizzaco, Inc. and N.R. Realty, Inc., sells and
services franchises and licenses for non-traditional foodservice operations
10
under the trade names "Noble Roman's Pizza", "Noble Roman's Take-N-Bake",
"Tuscano's Italian Style Subs" and "Tuscano's Grab-N-Go Subs". The concepts'
hallmarks include high quality pizza and sub sandwiches, along with other
related menu items, simple operating systems, fast service times,
labor-minimizing operations, attractive food costs and overall affordability.
Since 1997, the Company has focused its efforts and resources primarily on
franchising and licensing for non-traditional locations and now has awarded
franchise and/or license agreements in 49 states plus Washington, D.C., Puerto
Rico, the Bahamas, Italy and Canada. Although from 2005 to 2007 the Company sold
some franchises for its concepts in traditional restaurant locations, the
Company is currently focusing its sales efforts primarily on (1) selling
franchises for non-traditional locations primarily in convenience stores and
entertainment facilities and (2) license agreements for grocery stores to sell
the Noble Roman's Take-n-Bake Pizza. The Company has recently developed a
stand-alone take-n-bake pizza prototype and has entered into agreements with two
separate existing independent franchisees to open a total of four such units in
the upcoming months. Pizzaco, Inc. is the owner and operator of the two Company
locations used for testing and demonstration purposes. The Company has no plans
to operate any other locations.
Products & Systems
------------------
The Company's non-traditional franchises provide high-quality products, simple
operating systems, labor minimizing operations and attractive food costs.
Noble Roman's Pizza
The hallmark of Noble Roman's Pizza is "Superior quality that our customers can
taste." Every ingredient and process has been designed with a view to produce
superior results.
o Crust made with only specially milled flour with above average protein and
yeast.
o Fresh packed, uncondensed sauce made with secret spices, parmesan cheese
and vine-ripened tomatoes.
o 100% real cheese blended from mozzarella and Muenster, with no soy
additives or extenders.
o 100% real meat toppings, again with no additives or extenders - a
distinction compared to many pizza concepts.
o Vegetable and mushroom toppings that are sliced and delivered fresh, never
canned.
o An extended product line that includes breadsticks and cheesy stix with
dip, pasta, baked sandwiches, salads, wings and a line of breakfast
products.
o A fully-prepared pizza crust that captures the made-from-scratch pizzeria
flavor which gets delivered to the franchise location shelf-stable so that
dough handling is no longer an impediment to a consistent product.
Noble Roman's Take-N-Bake
The Company developed a take-n-bake version of its pizza as an addition to its
menu offerings. The take-n-bake pizza is designed as an add-on component for new
and existing convenience stores and as a stand-alone offering for grocery
stores. The take-n-bake program in grocery stores is being offered as a license
agreement rather than a franchise agreement. In convenience stores, take-n-bake
is an available menu offering under the existing franchise agreement. The
Company has recently developed a stand-alone take-n-bake pizza prototype and has
entered into agreements with two separate existing independent franchisees to
open a total of four such units in the upcoming months. The Company uses the
same high quality pizza ingredients for its take-n-bake pizza as with its
standard pizza, with slight modifications to portioning for increased home
baking performance.
11
Tuscano's Italian Style Subs
Tuscano's Italian Style Subs is a separate restaurant concept that focuses on
sub sandwich menu items. Tuscano's was designed to be comfortably familiar from
a customer's perspective but with many distinctive features that include an
Italian-themed menu. The franchise fee and ongoing royalty for a Tuscano's is
identical to that charged for a Noble Roman's Pizza franchise. For the most
part, the Company awards Tuscano's franchises for some of the same facilities as
Noble Roman's Pizza franchises, although Tuscano's franchises are also available
for locations that do not have a Noble Roman's Pizza franchise.
Tuscano's Grab-N-Go Subs
Noble Roman's has developed a grab-n-go service system for a selected portion of
the Tuscano's menu. The grab-n-go system is designed to add sales opportunities
at existing non-traditional Noble Roman's Pizza and/or Tuscano's Subs locations.
Franchisees that opened prior to the development of the grab-n-go service system
may add it as an option. The grab-n-go system has already been integrated into
the operations of several existing locations and is now available to all
franchisees. New, non-traditional franchisees have the opportunity to open with
both take-n-bake pizza and grab-n-go subs when they acquire a Noble Roman's
franchise or license.
Business Strategy
-----------------
The Company's business strategy includes in the following four elements:
1. Focus on revenue expansion through two primary growth vehicles:
Sales of Non-Traditional Franchises and Licenses. The Company believes that in
today's macroeconomic circumstances, it has an opportunity for increasing unit
growth and revenue within its non-traditional venues, particularly with
convenience stores, travel plazas and entertainment facilities. The Company's
franchises in non-traditional locations are foodservice providers within a host
business, and usually require a substantially less investment compared to a
stand-alone traditional location. Non-traditional franchises and licenses are
most often sold into pre-existing facilities as a service and/or revenue
enhancer for the underlying business. Although the Company's current focus is on
non-traditional franchise or license expansion, the Company will still seek to
capitalize on other franchising opportunities as they present themselves.
As a result of the Company's major focus being on non-traditional franchising
and licensing, its requirements for overhead and operating costs are
significantly less than if it were focusing on traditional franchising. In
addition, the Company does not operate restaurants except for two restaurants it
uses for product testing, demonstration and training purposes. This allows for a
more complete focus on selling and servicing franchises and licenses to pursue
increased unit growth.
Licensing and Franchising the Company's Take-N-Bake Program. In September 2009,
the Company introduced a take-n-bake pizza as an addition to its menu offering.
The take-n-bake pizza is designed as a stand-alone offering for grocery stores,
an add-on component for new and existing convenience store franchisees or
licensees and or stand-alone franchise locations. Since September 2009, when the
Company started offering take-n-bake pizza to grocery store chains, through
August 9, 2012, the Company has signed agreements for 1,206 grocery store
locations to operate the take-n-bake pizza program and has opened take-n-bake
pizza in approximately 945 of those locations. The Company is currently in
12
discussions with numerous grocery store operators for additional take-n-bake
locations. Beginning in August 2011, the Company introduced six new "Signature
Specialty Take-N-Bake Pizza" combinations to its current standard offerings.
These pizzas feature unique, fun combinations of ingredients with proven
customer appeal in other Company venues, and include Hawaiian pizza, Four Cheese
pizza, BBQ Pork pizza, BBQ Chicken pizza, Hoppin' Jalapeno pizza and Parmesan
Tomato pizza. The Company's strategy with these new combinations is to secure
more shelf space in existing locations, to add to the appeal of the program in
order to attract new locations, and to generally increase sales of the Company's
products.
To further accelerate the growth of take-n-bake pizza in grocery stores, the
Company has focused on signing agreements with various grocery store
distributors to market the take-n-bake pizza program to the distributors'
current customer base. As of August 9, 2012, the Company had signed 12 grocery
distributors to the program, and continues to pursue others as well.
2. Leverage the results of extensive research and development advances.
The Company has invested a great deal in the time and effort to create what it
considers to be competitive advantages in its product and systems for
non-traditional and grocery take-n-bake locations. The Company will continue to
make these investments the focal point in its marketing process. The Company
believes that the quality of its products, the cost-effectiveness of those
products, its relatively simple production and service systems, and its diverse,
modularized menu offerings all contribute to the Company's strategic advantages
and growth potential. Every ingredient and process was designed with a view to
producing superior results. The menu items were developed to be delivered in a
ready-to-use form requiring only on-site assembly and baking except for
take-n-bake pizza, which is sold to bake at home, and the new carton-to-shelf
retail items which require no assembly. The Company believes this process
results in products that are great tasting, quality consistent, easy to
assemble, and relatively low in food cost, and which require very low amounts of
labor, and allow for a significant competitive advantage due to the speed at
which its products can be prepared, baked and served to customers.
For example, in convenience stores and travel plazas, at competitive retail
prices, the margins on selling Noble Roman's products, after cost of product and
royalty, provides franchisees with a gross margin on the sales of approximately
65% to 70%. The Company believes it maintains a competitive advantage in product
cost by using carefully selected independent third-party manufacturers and
independent third-party distributors. This allows the Company to contract for
proprietary products and services with highly efficient suppliers that have the
potential of keeping costs extremely low when compared to typical, competing
systems whereby the franchisor attempts to own and operate production and
distribution systems of their own much less efficiently.
3. Expand the Company's overall capacity to generate new franchises and
licenses.
The Company's Chairman and CEO has assumed the lead position at all of the
Company's trade shows across the country, which is the primary means for
demonstrating its product and system advantages to thousands of prospective
non-traditional and grocery operators. This focus by the Company's CEO has
underscored the Company's current, overriding orientation towards new revenue
generation.
13
4. Aggressively communicate the Company's competitive advantages to its target
market of potential franchisees and licensees.
The Company utilizes four basic methods of reaching potential franchisees and
licensees and to communicate its product and system advantages. These methods
include: 1) calling from both acquired and in-house prospect lists; 2) frequent
direct mail campaigns to targeted prospects; 3) web-based lead capturing; and 4)
live demonstrations at trade and food shows. In particular, the Company has
found that conducting live demonstrations of its systems and products at
carefully selected trade and food shows across the country allows it to
demonstrate advantages that can otherwise be difficult for a potential prospect
to visualize. There is no substitute for actually tasting the difference in a
product's quality to demonstrate the advantages of the Company's product
quality. The Company carefully selects the national and regional trade and food
shows where it either has an existing relationship or considerable previous
experience to expect that they offer opportunities for fruitful lead generation.
Business Operations
-------------------
Distribution
------------
Primarily all of the Company's products are manufactured pursuant to the
Company's recipes and formulas by third-party manufacturers pursuant to
contracts between the Company and the various manufacturers. The contracts
require the manufacturers to produce various ingredients and sell them to
Company-approved distributors at a price negotiated between the Company and the
manufacturer.
At present, the Company has distribution agreements with 11 primary distributors
strategically located throughout the United States. The distribution agreements
require the primary distributors to maintain adequate inventories of all
ingredients to meet the needs of the Company's franchisees and licensees for
weekly deliveries to the franchisee/licensee locations plus the grocery store
distributors in their respective territories. The primary distributors purchase
the ingredients from the manufacturer, under payment terms agreed upon by the
manufacturer and the distributor, and distribute the ingredients to the
franchisee/licensee at a price fixed by the distribution agreement, which is
their landed cost plus a contracted mark-up for distribution. Payment terms to
the distributor are agreed upon between each franchisee/licensee and the
respective distributor. In addition, the Company has agreements with 12 grocery
store distributors located in various parts of the country which are required to
buy their products from one of the primary distributors to distribute
take-n-bake products to their grocery store customers.
Franchising
-----------
The Company sells franchises into various non-traditional and traditional
venues.
The initial franchise fee is as follows:
------------------------------------------------------------------------------------------------
Non-Traditional, Traditional
Franchise except Hospitals Hospitals Stand-Alone
------------------------------------------------------------------------------------------------
Noble Roman's Pizza $ 6,000 $10,000 $15,000
------------------------------------------------------------------------------------------------
Tuscano's Subs $ 6,000 $10,000 $15,000
------------------------------------------------------------------------------------------------
Noble Roman's & Tuscano's $10,000 $18,000 $18,000
------------------------------------------------------------------------------------------------
Noble Roman's Stand-Alone Take-N-Bake $15,000
------------------------------------------------------------------------------------------------
14
The franchise fees are paid upon signing the franchise agreement and, when paid,
are deemed fully earned and 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.
Licensing
---------
Noble Roman's Take-n-Bake Pizza licenses for grocery stores are goverened by a
supply agreement. The supply agreement generally requires the licensee to:
purchase proprietary ingredients from a Noble Roman's-approved distributor;
assemble the products using only Noble Roman's approved ingredients and recipes;
package the products using shrink wrap; place the products in Noble Roman's
Pizza boxes; and display products in a manner approved by Noble Roman's using
Noble Roman's point-of-sale marketing materials. Pursuant to the distribution
agreements, the distributors place an additional mark-up, as determined by the
Company, above their normal selling price, on the key ingredients for a fee to
the Company in lieu of royalty. The distributors are to segregate this
additional mark-up upon invoicing the licensee and hold the amount in trust for
the Company and remit such fees to the Company within ten days after the end of
each month.
Financial Summary
-----------------
The preparation of the consolidated financial statements in conformity with
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 periodically evaluates the carrying values of its assets,
including property, equipment and related costs, accounts receivable and
deferred tax asset, 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 value. If
any impairment of an individual asset is evident, a charge will be provided to
reduce the carrying value to its estimated fair value.
15
The following table sets forth the percentage relationship to total revenue of
the listed items included in Noble Roman's consolidated statements of operations
for the three-month and six-month periods ended June 30, 2011 and 2012,
respectively.
Three Months Ended Six Months Ended
June 30, June 30,
------- -------
2011 2012 2011 2012
---- ---- ---- ----
Royalties and fees 92.1 % 93.3 % 92.5 % 93.1 %
Administrative fees and other .6 .3 .5 .3
Restaurant revenue 7.3 6.4 7.0 6.6
----- ----- ----- -----
Total revenue 100.0 100.0 100.0 100.0
----- ----- ----- -----
Operating expenses:
Salaries and wages 13.2 13.4 13.2 13.3
Trade show expense 5.0 6.5 5.0 6.5
Travel expense 2.8 2.4 2.7 2.5
Other operating expense 9.4 9.1 9.6 9.4
Restaurant expenses 6.9 6.0 6.7 6.2
Depreciation and amortization 1.8 1.5 1.4 1.6
General and administrative 21.5 20.7 22.0 21.1
----- ----- ----- -----
Total expenses 60.6 59.6 60.6 60.6
----- ----- ----- -----
Operating income 39.4 40.4 39.4 39.4
Interest and other expense 5.2 10.5 5.4 7.9
----- ----- ----- -----
Income before income taxes 34.2 29.9 34.0 31.5
Income tax expense 13.5 11.9 13.4 12.4
----- ----- ----- -----
Net income 20.7 % 18.0 % 20.6 % 19.1 %
===== ===== ===== =====
Results of Operations
---------------------
Total revenue increased from $1.88 million to $1.89 million and from $3.68
million to $3.73 million for the three-month and six-month periods ended June
30, 2012 compared to the corresponding periods in 2011. Franchisee fees and
equipment commissions ("upfront fees") decreased from $83,000 to $63,000 and
increased from $146,000 to $148,000 during the three-month and six-month periods
ended June 30, 2012 compared to the corresponding periods in 2011. Royalties and
fees, less upfront fees, increased from $1.65 million to $1.70 million and from
$3.26 million to $3.32 million for the three-month and six-month periods ended
June 30, 2012 compared to the corresponding periods in 2011. The breakdown of
royalties and fees less upfront fees, royalties and fees from non-traditional
franchises other than grocery stores were $1.15 million and $2.17 million for
the three-month and six-month periods ended June 30, 2012 and $1.11 million and
$2.16 million for the three-month and six-month periods ended June 30, 2011,
respectively; royalties and fees from the grocery store take-n-bake were
$371,000 and $695,000 for the three-month and six-month periods ended June 30,
2012 and $265,000 and $548,000 for the three-month and six-month periods ended
June 30, 2011, respectively; and royalties and fees from non-traditional
locations were $180,000 and $461,000 for the three-month and six-month periods
ended June 30, 2012 and $272,000 and $551,000 for the three-month and six-month
periods ended June 30, 2011, respectively. Included in royalties and fees from
traditional locations were $100,000 and $300,000 for the three-month and
six-month periods ended June 30, 2012 and $200,000 and $400,000 for the
three-month and six-month periods ended June 30, 2011, respectively, for
royalties and fees recognized as collectible from traditional locations which
are no longer operating.
Restaurant revenue decreased from $138,000 to $121,000 and from $257,000 to
$248,000 for the three-month and six-month periods ended June 30, 2012 compared
to the corresponding periods in 2011. The decreases were the result of same
16
store sales decreases. The Company only operates two locations used primarily
for testing and demonstration purposes.
As a percentage of total revenue, salaries and wages increased from 13.2% to
13.4% and from 13.2% to 13.3% for the three-month and six-month periods ended
June 30, 2012 compared to the corresponding periods in 2011. Salaries and wages
increased from $247,000 to $254,000 and from $485,000 to $497,000 for the
three-month and six-month periods ended June 30, 2012 compared to the
corresponding periods in 2011.
Trade show expenses increased from 5.0% to 6.5% of total revenue for both the
three-month and six-month periods ended June 30, 2012, respectively, compared to
the corresponding periods in 2011. These increases were the result of scheduling
more trade shows for grocery stores. Trade show expenses were $123,000 and
$244,000 in the three-month and six-month periods ended June 30, 2012 compared
to $93,000 and $183,000 in the corresponding periods in 2011.
As a percentage of revenue, travel expenses decreased from 2.8% to 2.4% and from
2.7% to 2.5% for the three-month and six-month periods ended June 30, 2012,
respectively, compared to the corresponding periods in 2011. Travel expense
decreased from $53,000 to $45,000 and from $99,000 and $94,000 for the
three-month and six-month periods ended June 30, 2012 compared to the
corresponding periods in 2011. These decreases were the result of carefully
scheduling take-n-bake openings in grocery stores throughout the country to
minimize travel expenses.
As a percentage of total revenue, other operating expenses decreased from 9.4%
to 9.1% and from 9.6% to 9.4% for the three-month and six-month periods ended
June 30, 2012, respectively, compared to the corresponding periods in 2011.
Operating expenses decreased slightly for both periods in 2012 compared to the
corresponding periods in 2011. These decreases were the result of tightly
controlling operating costs.
As a percentage of total revenue, restaurant expenses decreased from 6.9% to
6.0% and from 6.7% to 6.2% for the three-month and six-month periods ended June
30, 2012, respectively, compared to the corresponding periods in 2011. These
percentage decreases were partially the result of a decrease in restaurant
revenue and partially the result of more tightly controlling restaurant
expenses. The Company only operates two restaurants which it uses for
demonstration, training and testing purposes.
As a percentage of total revenue general and administrative expenses decreased
from 21.5% to 20.7% and from 22.0% to 21.1% for the three-month and six-month
periods ended June 30, 2012, respectively, compared to the corresponding periods
in 2011. General and administrative expense decreased from $403,000 to $393,000
and from $812,000 to $788,000 for the three-month and six-month periods ended
June 30, 2012, respectively, compared to the corresponding periods in 2011. The
decrease in general and administrative expenses was the result of tightly
controlling those expenses.
As a percentage of total revenue, total expenses decreased from 60.6% to 59.6%
for the three-month period ended June 30, 2012 compared to the corresponding
period in 2011and remained the same at 60.6% for the six-month period ended June
30, 2012 and 2011. Expenses decreased from $1.14 million to $1.13 million for
the three-month periods and increased from $2.23 million to $2.27 million for
six-month periods ended June 30, 2012 compared to the corresponding periods in
2011. These increases were primarily the result of the increase in trade show
expense and a slight increase in salaries and wages offset by decreases in all
other expenses.
17
As a percentage of total revenue, operating income increased from 39.4% to 40.4%
for the three-month period and remained the same at 39.4% for the six-month
period ended June 30, 2012 compared to the corresponding periods in 2011.
Operating income increased from $741,000 to $765,000 and from $1.45 million to
$1.47 million for the three-month and six-month periods ending June 30, 2012,
respectively, compared to the corresponding periods in 2011.
Interest expense increased from $97,000 to $199,000 and from $196,000 to
$295,000 for the three-month and six-month periods ended June 30, 2012 compared
to the corresponding periods in 2011. The primary reason for the increase in
interest expense was refinancing of the Company's bank debt and borrowing from
an officer of the Company with a new bank loan. The Company expensed $93,000 in
unamortized loan closing costs from the origination of the former bank loan at
the time the loan was repaid and recorded expense of $30,000 to terminate the
existing interest rate swap agreement related to the loan which was repaid. In
the future, interest expense should be approximately $61,000 per quarter or less
as the new loan continues to amortize. For details of the new loan agreement,
see Note 2 in the Notes to Condensed Consolidated Financial Statements herein.
Net income decreased from $389,000 to $342,000 and from $757,000 to $707,000 for
the three-month and six-month periods ended June 30, 2012 compared to the
corresponding periods in 2011. The increased interest expense, as explained
above, more than offset the increased operating income resulting in lower net
income.
Liquidity and Capital Resources
-------------------------------
The Company's current strategy is to grow its business by concentrating on
franchising/licensing new non-traditional locations and licensing grocery stores
to sell take-n-bake pizza and other retail products. This strategy is intended
to not require any significant increase in expenses. In addition, the Company
has previously announced that it has taken the take-n-bake concept, which it has
been doing through grocery stores, and created a stand-alone take-n-bake concept
for an additional avenue to increase revenue. The strategy will be to franchise
that concept which the Company thinks can be done within its existing overhead
structure. Additionally, the Company does not operate any restaurants except for
two locations for testing and demonstration purposes. This strategy requires
limited overhead and operating expense and does not require significant capital
investment.
The Company's current ratio was 2.6-to-1 on June 30, 2012 compared to 0.8-to-1
on December 31, 2011. This significant improvement was achieved by refinancing
all of its debt into one 48-month term loan and the continued net operating
income.
On May 15, 2012, the Company entered into a Credit Agreement with a bank for a
term loan in the amount of $5.0 million which is repayable in 48 equal monthly
principal installments of $104,000 plus interest commencing on June 15, 2012
with a final payment due on May 15, 2016. Interest on the unpaid principal
balance is payable at a rate per annum of LIBOR plus 4%. The proceeds from the
term loan, net of certain fees and expenses associated with obtaining the term
loan, were used to repay existing bank indebtedness and borrowing from an
officer of the Company.
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 for the foreseeable
future. The Company's cash flow projections are based on the Company's strategy
of focusing entirely on growth in non-traditional venues and the growth in the
number of grocery store locations licensed to sell the take-n-bake pizza.
18
The Company does not anticipate that any of the recently issued Statement of
Financial Accounting Standards will have a material impact on its Statement of
Operations or its Balance Sheet.
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 projected in the forward-looking
statements due to risks and uncertainties that exist in the Company's operations
and business environment, including, but not limited to competitive factors and
pricing pressures, non-renewal of franchise agreements, shifts in market demand,
general economic conditions, changes in demand for the Company's products or
franchises, the success or failure of individual franchisees and changes in
prices or supplies of food ingredients and labor, the success of its recently
developed stand-alone take-n-bake concept, and the factors discussed under "Risk
Factors" as contained in the Company's annual report on Form 10-K. 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 3. Quantitative and Qualitative Disclosures about Market Risk
The Company's exposure to interest rate risk relates primarily to its
variable-rate debt. As of June 30, 2012, the Company had outstanding variable
interest-bearing debt in the aggregate principal amount of $4.9 million. The
Company's current borrowings are at a variable rate tied to the London Interbank
Offered Rate ("LIBOR") plus 4% 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 $42,800 over the succeeding
twelve-month period.
ITEM 4. Controls and Procedures
Based on his evaluation as of the end of the period covered by this report, Paul
W. Mobley, the Company's Chief Executive Officer and Chief Financial Officer,
has concluded that the Company's disclosure controls and procedures and internal
controls over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended) 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.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
The Company is a Defendant in a lawsuit styled Kari Heyser, Fred Eric Heyser and
Meck Enterprises, LLC, et al v. Noble Roman's, Inc. et al, filed in Superior
Court in Hamilton County, Indiana in June 2008. The Court issued an Order dated
December 23, 2010 granting summary judgment in favor of the Company against all
of the Plaintiffs. As a result, the Plaintiffs' allegations of fraud against the
Company and certain of its officers were determined to be without merit.
Plaintiffs filed numerous motions and an appeal to the Indiana Court of Appeals,
in an attempt to reverse the December 23, 2010 summary judgment. All of the
19
motions were denied and the Indiana Court of Appeals dismissed the appeal with
prejudice. Plaintiffs' last attempt to vacate the summary judgment award was
their attempt to vacate the Order on the grounds of misconduct of third parties.
On December 1, 2011, the Judge denied their motion and specifically found "that
there was absolutely no evidence of misconduct" and the Court admonished
Plaintiffs and Plaintiffs' counsel for making such unfounded allegations. The
fraud charges against the Company and certain of its officers are dismissed
entirely and Plaintiffs have no appeal rights remaining. The Company then filed
a motion for sanctions against the Plaintiffs and their attorney for the
frivolous filings. On February 28, 2012, the Court granted the Company's request
for sanctions and ordered the Plaintiffs and their attorney to pay the Company
$8,326 by April 23, 2012. The Plaintiffs filed a motion to reconsider and the
hearing was held on May 23, 2012. The Judge denied their motion and ordered
Plaintiffs and Plaintiffs' counsel to pay those sanctions within 14 days, which
made the payment due on June 7, 2012. Sanctions were not paid and the Company
filed a motion for contempt of court or to show cause. The Judge gave the
Plaintiffs until July 5, 2012 to respond to that motion. The Plaintiffs filed a
response but the Plaintiffs' counsel did not respond. The Company does not
believe that the Plaintiffs' response was responsive to the contempt charge and,
therefore, the Company filed a reply asking the Court to rule on the contempt
charge against Plaintiffs' counsel and to point out that the Plaintiffs'
response was not responsive to the Company's contempt motion and moved the Court
to impose additional sanctions. The Company's counterclaims against the
Plaintiffs for breach of contract remain pending as to amount of damages,
however the Company has been granted summary judgment as to liability.
The Complaint was originally against the Company and certain officers and
institutional lenders. The Plaintiffs are former franchisees of the Company's
traditional location venue. The Plaintiffs alleged that the Defendants
fraudulently induced them to purchase franchises for traditional locations
through misrepresentations and omissions of material facts regarding the
franchises. In addition to the above claims, one group of franchisee-Plaintiffs
in the same case had asserted a separate claim under the Indiana Franchise Act
as to which the Court's Order denied the Company's motion for summary judgment
as the Court determined that there is a genuine issue of material facts but did
not render any opinion on the merits of the claim. The Company denies any
liability on the Indiana Franchise Act claim and will continue to vigorously
defend against this claim.
The Company filed counterclaims for damages for breach of contract against all
of the Plaintiffs in the approximate amount of $3.6 million plus attorneys'
fees, interest and other costs of collection, or a total of over $5 million. On
September 21, 2011, the Company filed motions for partial summary judgment as to
liability against the Plaintiffs on the Company's counterclaims. As a result,
the Company was granted partial summary judgment as to liability against the
Plaintiffs/Counterclaim-Defendants on the Company's counterclaims against the
Plaintiffs. In this partial summary judgment, the Court determined that the
Plaintiffs were liable to the Company for direct damages and consequential
damages, including future royalties, for breach of their franchise agreements.
In addition, the Court determined that, as a matter of law, Noble Roman's was
entitled to recover attorneys' fees associated with obtaining preliminary
injunctions, fees resulting from the prosecution of Noble Roman's counterclaims
and fees for defending against fraud claims against the Company and certain of
its officers. The amount of the award is to be determined at trial. The Company
moved the Court to order mandatory mediation as to the Indiana Franchise Act
claim and the Company's counterclaim for damages. The Court ordered mediation,
which is set for September 14, 2012 with all Plaintiffs required to appear.
ITEM 6. Exhibits.
(a) Exhibits: See Exhibit Index appearing on page 22.
20
SIGNATURES
Pursuant to the requirements 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.
NOBLE ROMAN'S, INC.
Date: August 13, 2012 By: /s/ Paul W. Mobley
----------------------------------
Paul W. Mobley, Chairman,
Chief Executive Officer,
Chief Financial Officer
and Principal Accounting Officer
(Authorized Officer and Principal
Financial Officer)
21
Index to Exhibits
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.
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 Form of Warrant Agreement filed as Exhibit 4.1 to the
Registrant's current report on Form 8-K filed August 29, 2005, is
incorporated herein by reference.
10.1 Employment Agreement with Paul W. Mobley dated January 2, 1999
filed 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.
22
10.3 1984 Stock Option Plan filed with the Registrant's Form S-8 filed
November 29, 1994 (SEC File No. 33-86804), is incorporated herein
by reference.
10.4 Noble Roman's, Inc. Form of Stock Option Agreement filed with the
Registrant's Form S-8 filed November 29, 1994 (SEC File No.
33-86804), is incorporated herein by reference.
10.5 Settlement Agreement with SummitBridge dated August 1, 2005,
filed as Exhibit 99.2 to the Registrant's current report on Form
8-K filed August 5, 2005, is incorporated herein by reference.
10.6 Loan Agreement with Wells Fargo Bank, N.A. dated August 25, 2005
filed as Exhibit 10.1 to the Registrant's current report on Form
8-K filed August 29, 2005, is incorporated herein by reference.
10.7 First Amendment to Loan Agreement with Wells Fargo Bank, N.A.
dated February 4, 2008, filed as Exhibit 10.1 to the Registrant's
current report on Form 8-K filed February 8, 2008, is
incorporated herein by reference.
10.8 Registration Rights Agreement dated August 1, 2005 between the
Company and SummitBridge National Investments filed as an Exhibit
to the Registrant's Form S-1 filed on April 19, 2006, is
incorporated herein by reference.
10.9 Second Amendment to Loan Agreement with Wells Fargo Bank, N.A.
dated November 10, 2010 filed as Exhibit 10.7 to the Registrant's
current report on Form 10-Q filed on November 10, 2010, is
incorporated herein by reference.
10.10 Third Amendment to Loan Agreement with Wells Fargo Bank, N.A.
dated March 10, 2011, filed as Exhibit 10.10 to the Registrant's
current report on Form 10-K filed on March 13, 2012, is
incorporated herein by reference.
10.11 Promissory Note payable to Paul Mobley dated November 1, 2010
filed as Exhibit 10.8 to the Registrant's current report on Form
10-Q filed November 10, 2010, is incorporated herein by
reference.
10.12 Fourth Amendment to Loan Agreement with Wells Fargo Bank, N.A.
dated July 19, 2011, filed as Exhibit 10.12 to the Registrant's
current report on Form 10-K filed on March 13, 2012, is
incorporated herein by reference.
10.13 Fifth Amendment to Loan Agreement with Wells Fargo Bank, N.A.
dated October 28, 2011, filed as Exhibit 10.13 to the
Registrant's current report on Form 10-K filed on March 13, 2012,
is incorporated herein by reference.
10.14 Sixth Amendment to Loan Agreement with Wells Fargo Bank, N.A.
dated December 1, 2011, filed as Exhibit 10.14 to the
Registrant's current report on Form 10-K filed on March 13, 2012,
is incorporated herein by reference.
23
10.15 Seventh Amendment to Loan Agreement with Wells Fargo Bank, N.A.
dated January 30, 2012, filed as Exhibit 10.15 to the
Registrant's current report on Form 10-K filed on March 13, 2012,
is incorporated herein by reference.
10.16 Amended Promissory Note to Paul Mobley dated December 21, 2011,
filed as Exhibit 10.16 to the Registrant's current report on Form
10-K filed on March 13, 2012, is incorporated herein by
reference.
10.17 Credit Agreement with BMO Harris Bank, N.A. dated May 15, 2012
filed herewith.
10.18 Promissory Note to BMO Harris Bank, N.A. dated May 15, 2012 filed
herewith.
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.
31.1 C.E.O. and C.F.O. Certification under Rule 13a-14(a)/15d-14(a)
32.1 C.E.O. and C.F.O. Certification under Section 1350
101 Interactive Financial Data
24