-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E3tdCAd+DeFLw1LZ+WE3qZCfMQEiOLVHnVHSKgHqf1E2ZVw5DMKgvLzqc38XFeOr nr/czgwrSSVNxBrwGNvcfQ== 0000926274-01-500016.txt : 20010514 0000926274-01-500016.hdr.sgml : 20010514 ACCESSION NUMBER: 0000926274-01-500016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOBLE ROMANS INC CENTRAL INDEX KEY: 0000709005 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 351281154 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11104 FILM NUMBER: 1630636 BUSINESS ADDRESS: STREET 1: ONE VIRGINIA AVE STREET 2: STE 800 CITY: INDIANAPOLIS STATE: IN ZIP: 46204 BUSINESS PHONE: 3176343377 MAIL ADDRESS: STREET 1: ONE VIRGINIA AVENUE STREET 2: SUITE 800 CITY: INDIANAPOLIS STATE: IN ZIP: 46204 10-Q 1 nr-q.txt United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 For the quarterly period ended March 31, 2001 Or 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) Indiana 35-1281154 (State or other jurisdiction (I.R.S. Employer Identification No.) of organization) One Virginia Avenue, Suite 800 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 --- --- As of April 20, 2001, there were 13,709,701 shares of Common Stock, no par value, outstanding. PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements The following condensed consolidated financial statements are included herein: Note to condensed consolidated financial statements Page 2 Condensed consolidated balance sheets as of December 31, 2000 and March 31, 2001 Page 3 Condensed consolidated statements of operations for the three months ended March 31, 2000 and 2001 Page 4 Condensed consolidated statements of cash flows for the three months ended March 31, 2000 and 2001 Page 5 The interim condensed consolidated financial statements included herein reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim periods presented and the balance sheets for the dates indicated, which adjustments are of a normal recurring nature. Notes - ----- Based on the Company's 1999 and 2000 operating results, its business plan, the number of franchise units now open, the backlog of units sold to be opened, the backlog of franchise prospects now in ongoing discussions and negotiations, the Company's trends and the results of its operations thus far in 2001, management has determined that it is more likely than not that the Company's deferred tax credits will be fully utilized before the tax credits expire. Therefore, no valuation allowance was established for its deferred tax asset. However, there can be no assurance that the franchising growth will continue in the future. If unanticipated events should occur in the future, the realization of all or some portion of the Company's deferred tax asset could be jeopardized. The Company will continue to evaluate the need for a valuation allowance on a quarterly basis in the future. The statements contained 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, shifts in market demand, general economic conditions and other factors, including (but not limited to) changes in demand for the Company's products or franchises, the impact of competitors' actions, and changes in prices or supplies of food ingredients and labor. 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. 2 Noble Roman's, Inc. and Subsidiaries Condensed Consolidated Balance Sheets
(Unaudited) December 31, March 31, Assets 2000 2001 ------ ------------ ------------- Current assets: Cash $ 9,406 $ 2,149 Accounts receivable 856,492 763,310 Note receivable 290,000 175,000 Inventories 74,587 180,923 Prepaid expenses 203,460 238,125 Deferred tax assets - current portion 1,122,551 1,122,551 ------------ ------------ Total current assets 2,556,496 2,482,058 ------------ ------------ Property and equipment: Equipment 822,046 857,046 Leasehold improvements 84,229 84,229 ------------ ------------ 906,275 941,275 Less accumulated depreciation and amortization 377,865 387,667 ------------ ------------ Net property and equipment 528,410 553,608 ------------ ------------ Deferred tax asset 8,502,555 8,393,458 Other assets 1,407,307 1,390,557 ------------ ------------ Total assets $ 12,994,768 $ 12,819,681 ============ ============ Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Accounts payable $ 485,093 $ 582,092 Note payable officer 65,840 65,840 Deferred franchise fees 228,500 117,500 Other current liabilities 528,249 87,109 ------------ ------------ Total current liabilities 1,307,682 852,541 ------------ ------------ Long-term obligations: Notes payable to Provident Bank net of warrant value of $213,266 at December 31, 2000 and $195,029 at March 31, 2001 7,786,734 7,804,971 Notes payable to various funds affiliated with Geometry Group net of warrant valuation of $159,618 at December 31, 2000 and $142,430 at March 31, 2001 2,212,383 2,229,571 ------------ ------------ Total long-term liabilities 9,999,117 10,034,542 ------------ ------------ Stockholders' equity Common stock (25,000,000 shares authorized, 13,593,701 outstanding at December 31, 2000 and 13,709,701 as of March 31, 2001) 17,734,495 17,770,445 Preferred Stock (5,000,000 shares authorized) 4,929,274 4,929,274 Accumulated deficit (20,975,800) (20,767,121) ------------ ------------ Total stockholder's equity 1,687,969 1,932,598 ------------ ------------ Total liabilities and stockholder's equity $ 12,994,768 $ 12,819,681 ============ ============
See accompanying note to condensed consolidated financial statements. 3 Noble Roman's, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, ------------------------- 2000 2001 ----------- ----------- Royalties and fees $ 964,333 $ 1,244,062 Administrative fees and other 272,115 201,540 ----------- ----------- Total revenue 1,236,448 1,445,602 Operating expenses: Salaries and wages 238,890 261,310 Trade show expense 60,000 71,716 Travel expense 68,413 58,098 Other operating expenses 99,136 147,317 Depreciation 9,802 9,802 General and administrative 325,006 272,703 ----------- ----------- Operating income 435,201 624,656 Interest and other expense 307,221 306,880 ----------- ----------- Income before income taxes 127,980 317,776 Income tax 43,513 109,097 ----------- ----------- Net income $ 84,467 $ 208,679 =========== =========== Earnings per share: Net income $ .01 $ .02 =========== =========== Weighted average number of common shares outstanding 9,238,621 13,674,545 Fully diluted earnings per share: Net income $ .01 $ .01 =========== =========== Weighted number of common shares outstanding assuming full dilution 13,553,945 16,527,808
See accompanying notes to condensed consolidated financial statements. 4 Noble Roman's, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, -------------------------- OPERATING ACTIVITIES 2000 2001 - -------------------- ----------- ----------- Net income $ 84,467 $ 208,679 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 9,802 9,802 Non-cash interest 64,269 35,426 Deferred federal income taxes 29,838 109,097 Changes in operating assets and liabilities (increase) decrease in: Accounts receivable (60,628) 93,182 Inventory 56,508 (106,336) Prepaid expenses (279,226) (34,665) Other assets -- 131,750 Increase (decrease) in: Accounts payable (933,717) 96,999 Other current liabilities (1,234,436) (441,141) Deferred franchise fee 49,500 (111,000) ----------- ----------- NET CASH USED IN OPERATING ACTIVITIES (2,213,624) (8,207) INVESTING ACTIVITIES - -------------------- Purchase of property and equipment (4,016) (35,000) Issuance of capital stock net of issuance cost 2,208,000 35,950 ----------- ----------- NET CASH PROVIDED BY INVESTING ACTIVITIES 2,203,984 950 FINANCING ACTIVITIES - -------------------- Proceeds from long-term debt -- -- Principal payments on long-term debt and capital lease obligations -- -- ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES -- -- ----------- ----------- INCREASE (DECREASE) IN CASH (9,640) (7,257) Cash at beginning of period 29,913 9,406 ----------- ----------- Cash at end of period $ 20,273 $ 2,149 ----------- -----------
Supplemental Schedule of non-cash investing and financing activities None. See accompanying note to condensed consolidated financial statements. 5 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Noble Roman's, Inc. and Subsidiaries Results of Operations - Three-month periods ended March 31, 2000 and 2001 Introduction - ------------ Over the last several years, the Company made the strategic decision to refocus its business on its non-traditional and co-branding opportunities and away from operating full-service, traditional restaurant operations. Given the potential size of the opportunities in the non-traditional and co-branding segments, and the actual rapid pace of their growth within the Company, during 1999 management determined that all financial and human resources at the Company's disposal would need to be focused on franchise services to maximize the potential for stakeholders. During 2000, the Company completed that transition and all of its full-service, traditional restaurants are now franchised. The Company will continue to offer franchise services to the full-service franchises which were formerly company operated in much the same fashion as it has been doing with its non-traditional and co-branded franchises. The franchising concept is designed to capitalize on the rapid growth of non-traditional locations for quick service restaurants and is simple to operate, requires a modest investment, with minimal staffing requirements while serving great tasting pizza and related products. The concept is also convenient and quick for its customers. Based on experience to date, the Company believes that franchising offers opportunities for rapid growth for the foreseeable future. Based on the Company's 2000 operating results, its business plan, the number of franchise units now open, the backlog of units sold to be opened, the backlog of franchise prospects now in ongoing discussions and negotiations, the Company's trends and the results of its operations thus far in 2001, management has determined that it is more likely than not that the Company's deferred tax credits will be fully utilized before the tax credits expire. Therefore, no valuation allowance was established for its deferred tax asset. However, there can be no assurance that the franchising growth will continue in the future. If unanticipated events should occur in the future, the realization of all or some portion of the Company's deferred tax asset could be jeopardized. The Company will continue to evaluate the need for a valuation allowance on a quarterly basis in the future. The following table sets forth the percentage relationship to total revenue of the listed items included in Noble Roman's condensed consolidated statements of operations for the three month periods ended March 31, 2000 and for March 31, 2001, respectively. 6
Three Months Ended March 31, ------------------- 2000 2001 -------- -------- Royalties and fees 78.0 % 86.1 % Administrative fees and other 22.0 13.9 -------- -------- Total revenue 100.0 % 100.0 % Operating expenses: Salaries and wages 19.3 % 18.1 % Trade show expenses 4.9 5.0 Travel expense 5.5 4.0 Other operating expenses 8.0 10.2 Depreciation .8 .7 General and administrative 26.3 18.9 -------- -------- Operating income 35.2 % 43.2 % Interest 24.8 21.2 -------- -------- Net income before income tax and extraordinary item 10.4 % 22.0 %
2001 Compared with 2000 - ----------------------- Total revenue increased from $1.24 million to $1.45 million, or 16.9%, for the three month period ended March 31, 2001 compared to the same period in 2000. This increase was primarily the result of the growth in the number of franchise locations open. Royalties and fees were approximately $1.24 million for the three-month period ended March 31, 2001 compared to $.96 million during the same period in 2000. This increase was the result of rapid growth in the number of franchises. Salaries and wages decreased from 19.3% of revenue for the three month period ended March 31, 2000 compared to 18.1% of revenue for the same period in 2001. The primary reason for this decrease was the increased number of franchise units open based on the Company's infrastructure which was previously established for the anticipated rapid growth. Trade show expense increased from 4.9% of revenue for the three month period ended March 31, 2000 compared to 5.0% of revenue for the same period in 2001. The primary reason for this increase was that the number of trade shows increased to reach additional venues for future growth. Travel decreased from 5.5% for the three month period ended March 31, 2000 to 4.0% for the same period in 2001. This decrease was the result of the growth in number of franchises and scheduling efficiencies which allows multiple assignments to be accomplished with one trip. Other operating expenses increased from 8.0% of revenue for the three month period ended March 31, 2000 to 10.2% of revenue for the same period in 2001. This increase resulted from the Company's efforts to increase its ability for additional growth in the future partially offset by the increased revenue from the growth in the number of franchised units. General and administrative expense decreased from 26.3% for the three month period ended March 31, 2000 to 18.9% of the same period in 2001. This decrease was the result of the growth in the number of franchise units with the same administrative structure put in place earlier in anticipation of the growth. 7 Operating income grew from 35.2%, or $435 thousand, for the three month period ended March 31, 2000 to 43.2%, or $625 thousand, for the same period in 2001. This increase of $190 thousand, or 44.7%, was the result of the continued growth in the number of franchise units while maintaining approximately the same operating structure. Interest expense decreased from 24.8% for the three month period ended March 31, 2000 to 21.2% for the same period in 2001. This was the result of the growth in the number of franchised units with no additional borrowing. Net income before income taxes grew from 10.4%, or $84 thousand, for the three month period ended March 31, 2000 to 22.0%, or $209 thousand, for the same period in 2001. This 148.8% increase was the result of the growth in franchising with approximately the same infrastructure. Liquidity and Capital Resources - ------------------------------- Over the last several years, the Company made the strategic decision to refocus its business on its non-traditional and co-branding opportunities and away from operating full-service, traditional restaurant operations. Given the potential size of the opportunities in the non-traditional and co-branding segments, and the actual rapid pace of their growth within the Company, during 1999 management determined that all financial and human resources at the Company's disposal would need to be focused on franchise services to maximize the potential for stakeholders. During 2000, the Company completed that transition and all of its full-service, traditional restaurants are now franchised. The Company will continue to offer franchise services to the full-service franchises which were formerly company operated in much the same fashion as it has been doing with its non-traditional and co-branded franchises. During 2000, the Company entered into a series of transactions resulting in its obtaining approximately $10.4 million in additional capital. The additional capital came from investors associated with The Geometry Group in New York and certain other investors purchasing approximately $3.2 million of common stock in exchange for cash, The Provident Bank exchanging $6.5 million senior secured debt and $740 thousand PIK notes for $2.4 million of common stock and $4.9 million in no-yield preferred stock which may later be converted to common stock at $3.00 per share at the Bank's option and an officer converted $312 thousand of notes for common stock. Most of these transactions were at $1.00 per share. On April 30, 1999, the Company obtained $2.2 million in additional funding from various investors associated with The Geometry Group based in New York City, who purchased participating income notes of the Company (the "Participating Notes") and warrants to purchase at any time prior to December 31, 2001 an aggregate of 275 thousand shares of the Company's common stock at a price of $.01 per share. The Participating Notes mature on April 15, 2003 and are payable at that time, at the option of each investor, in cash, in shares of the Company's common stock based on a conversion price of $1.00 per share or in a combination thereof. Interest on the Participating Notes accrues at a rate per annum equal to each investor's pro rata share of the Company's revenues associated with the Company's Pizza Express. Such interest is payable in cash monthly, provided, however, that to the extent that the interest otherwise payable to an investor would exceed such investor's pro rata share of the sum of $33,534, all interest in excess of such amount shall be paid in the form of a PIK Note of the Company. Each PIK Note matures on April 15, 2003 and, similar to the Participating Notes, is payable at that time, at the option of each investor, in cash, in shares of the Company's common stock based on a conversion 8 price of $1.00 per share or in a combination thereof. As a result of the capital raised by the Company, cash flow generated from operations, its focus on growth by franchising and the current rate of growth plus the anticipated growth, the Company believes it will have sufficient cash flow to meet its obligations and to carry out its current business plan. The statements contained 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, shifts in market demand, general economic conditions and other factors, including (but not limited to) changes in demand for the Company's products or franchises, the impact of competitors' actions, and changes in prices or supplies of food ingredients and labor. 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. PART II - OTHER INFORMATION ITEM 1. Legal Proceedings. The Company is involved in various litigation relating to claims arising out of its normal business operations and relating to restaurant facilities closed in 1997 and 2000. The Company believes that none of its current proceedings, individually or in the aggregate, will have a material adverse effect upon the Company beyond the amount reserved in its financial statements. ITEM 2. Changes in Securities. None. ITEM 3. Defaults Upon Senior Securities. None. ITEM 4. Submission of Matters to a Vote of Security Holders. None. ITEM 5. Other Information. None. ITEM 6. Exhibits and Reports on Form 8-K. Exhibit 27. Financial Data Schedule 9 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: May 11, 2001 /s/ Paul W. Mobley ------------ ------------------------------------- Paul W. Mobley, Chairman of the Board 10 -----END PRIVACY-ENHANCED MESSAGE-----