1. Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Note 1 - Summary of Significant Accounting Policies

Organization:  The Company sells and services franchises and/or licenses for non-traditional foodservice operations and stand-alone retail outlets under the trade names “Noble Roman’s Pizza,” “Tuscano’s Italian Style Subs and” “Noble Roman’s Take-N-Pizza”.  Unless the context otherwise indicates, reference to the “Company” are to Noble Roman’s, Inc. and its wholly-owned subsidiaries.

Principles of Consolidation:  The consolidated financial statements include the accounts of Noble Roman’s, Inc. and its wholly-owned subsidiaries, Pizzaco, Inc. and N.R. Realty, 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 market.

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 12 years.  Leasehold improvements are amortized over the shorter of estimated useful life or the term of the lease.

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 (“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.

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.  The Company records a valuation allowance in a sufficient amount to adjust the accounts receivables value, in its best judgment, to reflect the amount that the Company estimates will be collected from its total receivables.  As any accounts are determined to be permanently impaired (bankruptcy, lack of contact, age of account balance, etc.), they are charged off against the valuation allowance.  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.

Intangible Assets:  Debt issue costs are amortized to interest expense ratably over the term of the applicable debt.  The debt issue cost being amortized is $162,833 with accumulated amortization at December 31, 2014 of $93,707.

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.  Initial franchise fees are recognized as income when the services for the franchised restaurant are substantially completed.

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 concluded that no valuation allowance was necessary because it is more likely than not that the Company will earn sufficient income before the expiration of its net operating loss carry-forwards to fully realize the value of the recorded deferred tax asset.  As of December 31, 2014, the net operating loss carry-forward was approximately $22.6 million which expires between the years 2018 and 2033.  Management made the determination that no valuation allowance was necessary after reviewing the Company’s business plans, relevant known facts to date, recent trends, current performance and analysis of the backlog of franchises sold but not yet open.

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, 2012, 2013 and 2014.  The Company’s federal and various state income tax returns for 2011 through 2014 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.

The following table sets forth the calculation of basic and diluted earnings per share for the year ended December 31, 2012:

	Income (Numerator)			Shares (Denominator)		Per Share Amount
Net income	$	624,143
Less preferred stock dividends		(99,271	)
Earnings per share – basic		524,872			19,497,638	$	.03
Income available to common stockholders
Effect of dilutive securities
Options		-			213,606
Convertible preferred stock		99,271			366,666
Diluted earnings per share
Income available to common stockholders and assumed conversions	$	624,143			20,077,910	$	.03

The following table sets forth the calculation of basic and diluted earnings per share for the year ended December 31, 2013:

	Income (Numerator)			Shares (Denominator)		Per Share Amount
Net income	$	91,097
Less preferred stock dividends		(99,000	)
Earnings per share – basic		(7,903	)		19,533,201	$	-
Loss available to common stockholders
Effect of dilutive securities
Options		-			939,707
Convertible preferred stock		99,000			-
Diluted earnings per share
Income available to common stockholders and assumed conversions	$	91,097			20,472,908	$	.01

The following table sets forth the calculation of basic and diluted earnings per share for the year ended December 31, 2014:

	Income (Numerator)		Shares (Denominator)		Per Share Amount
Earnings per share – basic
Net income		1,590,196		19,870,904	$	.08
Effect of dilutive securities
Options		-		1,333,535
Diluted earnings per share
Net income	$	1,590,196		21,204,439	$	.07

Subsequent Events:  The Company evaluated subsequent events through the date the consolidated statements were issued and filed with Form 10-K.  No subsequent event  required recognition or disclosure.