Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Mar. 20, 2017 | Jun. 30, 2016 | |
Document And Entity Information | |||
Entity Registrant Name | NOBLE ROMANS INC | ||
Entity Central Index Key | 709,005 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | Yes | ||
Is Entity's Reporting Status Current? | No | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 10,000,000 | ||
Entity Common Stock, Shares Outstanding | 20,783,032 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash | $ 477,928 | $ 194,021 |
Accounts receivable - net | 1,828,534 | 2,007,751 |
Inventories | 754,418 | 492,222 |
Prepaid expenses | 568,386 | 634,016 |
Deferred tax asset - current portion | 925,000 | 925,000 |
Total current assets | 4,554,266 | 4,253,010 |
Property and equipment: | ||
Equipment | 1,963,957 | 1,376,190 |
Leasehold improvements | 88,718 | 88,718 |
Construction and equipment in progress | 351,533 | 0 |
Total | 2,404,208 | 1,464,908 |
Less accumulated depreciation and amortization | 1,194,888 | 1,092,785 |
Net property and equipment | 1,209,320 | 372,123 |
Deferred tax asset (net of current portion) | 8,696,870 | 8,158,523 |
Goodwill | 278,466 | 0 |
Other assets including long-term portion of notes receivable - net | 5,159,937 | 5,681,272 |
Total assets | 19,898,859 | 18,464,928 |
Current liabilities: | ||
Current portion of long-term notes payable to bank | 655,725 | 601,081 |
Current portion of loan payable to Super G | 1,130,765 | 0 |
Accounts payable and accrued expenses | 339,125 | 847,418 |
Total current liabilities | 2,125,615 | 1,448,499 |
Long-term obligations: | ||
Notes payable to bank (net of current portion) | 710,729 | 1,366,454 |
Loan payable to Super G (net of current portion) | 718,175 | 0 |
Notes payable to officers | 310,000 | 175,000 |
Note payable to Kingsway America | 600,000 | 600,000 |
Convertible notes payable | 769,835 | 0 |
Derivative warrant liability | 210,404 | 0 |
Derivative conversion liability | 435,671 | 0 |
Total long-term liabilities | 3,754,814 | 2,141,454 |
Stockholders' equity: | ||
Common stock - no par value (25,000,000 shares authorized, 20,775,921 issued and outstanding as of December 31, 2015 and 20,783,032 issued and outstanding as of December 31, 2016) | 24,308,297 | 24,294,002 |
Accumulated deficit | (10,289,867) | (9,419,027) |
Total stockholders' equity | 14,018,430 | 14,874,975 |
Total liabilities and stockholders' equity | $ 19,898,859 | $ 18,464,928 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2016 | Dec. 31, 2015 |
Stockholders' equity: | ||
Common stock, par value | $ 0 | $ 0 |
Common stock, authorized shares | 25,000,000 | 25,000,000 |
Common stock, issued shares | 20,783,032 | 20,775,921 |
Common stock, outstanding shares | 20,783,032 | 20,775,921 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Income Statement [Abstract] | |||
Royalties and fees | $ 7,350,692 | $ 7,464,963 | $ 7,479,334 |
Administrative fees and other | 42,402 | 56,520 | 72,541 |
Restaurant revenue | 443,391 | 207,803 | 363,340 |
Total revenue | 7,836,485 | 7,729,286 | 7,915,215 |
Operating expenses: | |||
Salaries and wages | 996,303 | 1,141,562 | 1,063,076 |
Trade show expense | 520,691 | 543,354 | 541,385 |
Travel expense | 230,091 | 255,125 | 235,127 |
Broker commissions | 32,241 | 0 | 0 |
Other operating expenses | 769,791 | 834,320 | 876,162 |
Restaurant expenses | 443,389 | 248,139 | 402,281 |
Depreciation and amortization | 124,773 | 105,843 | 111,750 |
General and administrative | 1,641,853 | 1,659,966 | 1,646,502 |
Total expenses | 4,759,132 | 4,788,309 | 4,876,283 |
Operating income | 3,077,353 | 2,940,977 | 3,038,932 |
Interest | 615,685 | 186,414 | 190,382 |
Loss on restaurant discontinued | 36,776 | 191,390 | 0 |
Change in fair value of derivatives | 44,464 | 0 | 0 |
Adjust valuation of receivables - including Heyser case | 1,103,521 | 1,230,000 | 0 |
Income before income taxes from continuing operations | 1,276,907 | 1,333,173 | 2,848,550 |
Income tax expense | 487,880 | 512,671 | 1,104,809 |
Net income from continuing operations | 789,027 | 820,502 | 1,743,741 |
Loss from discontinued operations net of tax benefit of $97,284 for 2014, $21,697 for 2015 and $1,026,277 for 2016 | (1,659,867) | (34,724) | (153,545) |
Net income (loss) | $ (870,840) | $ 785,778 | $ 1,590,196 |
Earnings per share - basic: | |||
Net income from continuing operations | $ 0.04 | $ 0.04 | $ 0.09 |
Net loss from discontinued operations net of tax benefit | (.08) | (.00) | (.01) |
Net income (loss) | $ (.04) | $ 0.04 | $ 0.08 |
Weighted average number of common shares outstanding | 20,781,886 | 20,517,846 | 19,870,904 |
Diluted earnings per share: | |||
Net income from continuing operations | $ 0.04 | $ 0.04 | $ 0.08 |
Net loss from discontinued operations net of tax benefit | (.08) | (.00) | (.01) |
Net income (loss) | $ (.04) | $ 0.04 | $ 0.07 |
Weighted average number of common shares outstanding | 21,208,173 | 21,439,242 | 21,204,439 |
Consolidated Statements of Ope5
Consolidated Statements of Operations (Parenthetical) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Income Statement [Abstract] | |||
Tax benefit, discontinued operations | $ 1,026,277 | $ 21,697 | $ 97,284 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Common Stock | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2013 | $ 23,498,401 | $ (11,795,001) | $ 11,703,400 |
Beginning Balance, Shares at Dec. 31, 2013 | 19,585,089 | ||
Net income (loss) | 1,590,196 | 1,590,196 | |
Cashless exercise of employee stock options | 214,998 | ||
Amortization of value of employee stock options | $ 48,815 | 48,815 | |
Stock issued in exchange for payables, Amount | $ 318,208 | 318,208 | |
Stock issued in exchange for payables, Shares | 180,000 | ||
Exercise of employee stock options, Amount | $ 105,230 | 105,230 | |
Exercise of employee stock options, Shares | 115,000 | ||
Ending Balance, Amount at Dec. 31, 2014 | $ 23,970,654 | (10,204,805) | 13,765,849 |
Ending Balance, Shares at Dec. 31, 2014 | 20,095,087 | ||
Net income (loss) | 785,778 | 785,778 | |
Cashless exercise of employee stock options | 360,167 | ||
Amortization of value of employee stock options | $ 26,962 | 26,962 | |
Stock issued in exchange for payables, Amount | $ 95,000 | 95,000 | |
Stock issued in exchange for payables, Shares | 50,000 | ||
Exercise of employee stock options, Amount | $ 201,386 | 201,386 | |
Exercise of employee stock options, Shares | 270,667 | ||
Ending Balance, Amount at Dec. 31, 2015 | $ 24,294,002 | (9,419,027) | 14,874,975 |
Ending Balance, Shares at Dec. 31, 2015 | 20,775,921 | ||
Net income (loss) | (870,840) | (870,840) | |
Cashless exercise of employee stock options | 7,111 | ||
Amortization of value of employee stock options | $ 14,295 | $ 14,295 | |
Exercise of employee stock options, Shares | (20,000) | ||
Ending Balance, Amount at Dec. 31, 2016 | $ 24,308,297 | $ (10,289,867) | $ 14,018,430 |
Ending Balance, Shares at Dec. 31, 2016 | 20,783,032 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
OPERATING ACTIVITIES | |||
Net income (loss) | $ (870,840) | $ 785,778 | $ 1,590,196 |
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: | |||
Depreciation and amortization | 166,681 | 98,826 | 128,265 |
Deferred income taxes | (538,348) | 490,974 | 1,007,526 |
Change in fair value of derivatives | 44,464 | 0 | 0 |
(Increase) decrease in: | |||
Accounts receivable | 131,217 | (319,797) | (419,166) |
Inventories | (244,898) | (110,822) | (43,578) |
Prepaid expenses | 104,802 | (166,295) | 4,344 |
Other assets including long-term portion of accounts receivable | 150,885 | (665,341) | (1,861,460) |
Increase (decrease) in: | |||
Accounts payable and accrued expenses | (473,916) | 322,453 | 263,622 |
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES | (1,529,953) | 435,776 | 669,749 |
INVESTING ACTIVITIES | |||
Purchase of property and equipment | (364,035) | (13,840) | (22,176) |
NET CASH USED BY INVESTING ACTIVITIES | (364,035) | (13,840) | (22,176) |
FINANCING ACTIVITIES | |||
Payment of principal outstanding on bank loans | (601,081) | (1,348,229) | (1,235,694) |
Payment of principal on Super G | (78,976) | 0 | 0 |
Proceeds from new financings net of closing costs | 3,210,509 | 600,000 | 697,704 |
Proceeds from officers loans | 135,000 | 175,000 | 0 |
Proceeds from the exercise of stock options | 0 | 201,386 | 105,230 |
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES | 2,665,452 | (371,843) | (432,760) |
DISCONTINUED OPERATIONS | |||
Payment of obligations from discontinued operations | (487,556) | (56,421) | (172,251) |
Increase (decrease) in cash | 283,907 | (6,328) | 42,562 |
Cash at beginning of year | 194,021 | 200,349 | 157,787 |
Cash at end of year | $ 477,928 | $ 194,021 | $ 200,349 |
1. Summary of Significant Accou
1. Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2016 | |
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 Craft Pizza & Pub.” 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., N.R. Realty, Inc. and RH Roanoke, Inc. Inter-company balances and transactions have been eliminated in consolidation. Inventories: Inventories consist of food, beverage, restaurant supplies, restaurant equipment and marketing materials and are stated at the lower of cost (first-in, first-out) or 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. Construction and equipment in progress are stated at cost for leasehold improvements and equipment for a new restaurant being constructed and was not completed until January 2017. Cash and Cash Equivalents: Includes actual cash balance. The cash is not pledged nor are there any withdrawal restrictions. Advertising Costs: The Company records advertising costs consistent with the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) Other Expense topic and Advertising Costs subtopic. This statement requires the Company to expense advertising production costs the first time the production material is used. Fair Value Measurements and Disclosures: The Fair Value Measurements and Disclosures topic of the FASB’s ASC requires companies to determine fair value based on the price that would be received to sell the assets or paid to transfer to liability to a market participant. The fair value measurements and disclosure topic emphasis that fair value is a market based measurement, not an entity specific measurement. The guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories: Level One: Quoted market prices in active markets for identical assets or liabilities. Level Two: Observable market –based inputs or unobservable inputs that are corroborated by market data. Level Three: Unsobservable inputs that are not corroborated by market data. Use of Estimates: The preparation of the consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. 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. Debt Issuance Costs: Debt issuance cost is presented on the balance sheet as a direct reducton from the carrying amount of the associated liability. The debt issuance cost was reclassified from other assets to long-term debt on its balance sheet but had no effect on its statement of operations. Debt issuance costs are amortized to interest expense ratably over the term of the applicable debt. The debt issuance cost being amortized is $278,408 with an accumulated amortization at December 31, 2016 of $45,727 Intangible Assets: The Company recorded goodwill of $278,000 as a result of the acquisition of RH Roanoke, Inc., in Virginia and a second restaurant in North Carolina, both former franchisees of the Company. The acquisitions were in exchange for $132,000 of equipment, $17,000 of inventory and $427,000 of accounts payable and accrued expenses. Goodwill has an indeterminable life and is assessed for impairment at least annually and more frequently as triggering events may occur. In making this assessment, management relies on a number of factors including operating results, business plans, economic projections, anticipated future cash flows, and transactions and marketplace data. Any impairment losses determined to exist are recorded in the period the determination is made. There are inherent uncertainties related to these factors and management's judgment is involved in performing goodwill and other intangible assets valuation analyses, thus there is risk that the carrying value of goodwill and other intangible assets may be overstated or understated. The Company has elected to perform the annual impairment assessment of recorded goodwill as of the end of the Company’s fiscal year. The results of this annual impairment assessment indicated that the fair value of the reporting unit as of December 31, 2016, exceeded the carrying, or book value, including goodwill, and therefore recorded goodwill was not subject to impairment. Royalties, Administrative and Franchise Fees: Royalties are generally recognized as income monthly based on a percentage of monthly sales of franchised or licensed restaurants and from audits including interest per the franchise agreement 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 location 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, 2016, the net operating loss carry-forward was approximately $23 million which expires between the years 2019 and 2036. 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, 2014, 2015 and 2016. The Company’s federal and various state income tax returns for 2013 through 2016 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, 2014: Income Shares Per Share (Numerator) (Denominator) 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 The following table sets forth the calculation of basic and diluted earnings per share for the year ended December 31, 2015: Income Shares Per Share (Numerator) (Denominator) Amount Earnings per share – basic Net income 785,778 20,517,846 $ 0.04 Effect of dilutive securities Options — 921,296 Diluted earnings per share Net income 785,778 21,439,242 $ 0.04 The following table sets forth the calculation of basic and diluted loss per share for the year ended December 31, 2016: Income Shares Per Share (Numerator) (Denominator) Amount Earnings per share – basic Net loss (870,840 ) 20,781,886 $ (0.04 ) Effect of dilutive securities Options — 32,845 Convertible notes — 393,442 Diluted earnings per share Net loss (870,840 ) 21,208,173 $ (0.04 ) Subsequent Events: The Company evaluated subsequent events through the date the consolidated statements were issued and filed with the annual report. In January 2017, the Company repaid a promissory note to Kingsway America with an interest rate of 8% per annum due July 2017 by borrowing the $600,000 from an officer of the Company at an interest rate of 7% per annum due March 2018. With the initial Kingsway loan, they received a warrant to purchase 300,000 shares of common stock at $2.00 per share containing certain anti-dilutive provisions. In January 2017, as a result of those dilutive provisions, the warrant changed to 1,200,000 shares at $.50 per share. In January 2017, the Company entered into a Fourth Amendment to its Credit Agreement with BMO Harris Bank (the “Bank”) to extend the maturity of that note from March 2017 to March 2018 with all other terms and conditions remaining the same including the monthly principal payments and the interest rate. In January 2017, the Company completed the Offering (as described in Note 3), began in 2016, of Notes and Warrants under which it issued a total of $2.4 million principal amount of the Notes and Warrant to purchase 2.4 million shares of the Company’s common stock. In January 2017, the Company opened its first Noble Roman’s Noble Roman’s Craft Pizza & Pub location. In January 2017, at a special meeting of the shareholders, they approved the authorized shares being increased from 25,000,000 to 40,000,000. No subsequent event required recognition or disclosure except as discussed above. |
2. Accounts Receivable
2. Accounts Receivable | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 2 - Accounts Receivable | At December 31, 2015 and 2016, the carrying value of the Company’s accounts receivable has been reduced to anticipated realizable value. As a result of this reduction of carrying value, the Company anticipates that substantially all of its net receivables reflected on the Consolidated Balance Sheets as of December 31, 2015 and 2016 will be collected. The allowance to reduce the receivables to anticipated net realizable value at December 31, 2015 was $1.2 million and at December 31, 2016 was $2.7 million, including $1.5 million related to discontinued operations. In 2012, the Company dismissed its counterclaims against certain plaintiffs in the lawsuit related to the operations discontinued in 2008 and reduced the net realizable value by $500,000 related to the Company’s counterclaims against the plaintiffs in the lawsuit referenced above. In 2013, based on a judgment that was entered in February 2014 in the lawsuit, the Company reduced the carrying value of the receivables subject to the counterclaims by $1.1 million. Since the right to receive passive income in the form of royalties is not a part of the discontinued operations, the adjustments to reflect these two charges were made to continuing operations. In 2015, the Company made an adjustment for valuation of receivables, including the Heyser case above, of $1.2 million. In 2016, the Company made an adjustment for valuation of receivables, including the Heyser case above, of $1.1 million. |
3. Notes Payable
3. Notes Payable | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Note 3 - Notes Payable | In 2012, the Company entered into a Credit Agreement with the Bank for a term loan in the amount of $5.0 million which was repayable in 48 equal monthly principal installments of approximately $104,000 plus interest with a final payment due in May 2016. In October 2013, the Company entered into a First Amendment to the Credit Agreement (the “First Amendment”). The First Amendment maintained the terms of the term loan except for reducing the monthly principal payments from $104,000 to approximately $80,700 and extending the loan’s maturity to February 2017. All other terms and conditions of the term loan remained the same including interest on the unpaid principal at a rate per annum of LIBOR plus 4%. The First Amendment also provided for a new term loan in the original amount of $825,000 requiring monthly principal payments of approximately $20,600 per month commencing in November 2013 and continuing thereafter until the final payment in February 2017. The term loan provided for interest on the unpaid principal balance to be paid monthly at a rate per annum of LIBOR plus 6.08% per annum. Proceeds from the new term loan were used to redeem the Company’s Series B Preferred Stock which were earning a return to the holders of 12% per annum. In October 2014, the Company entered into a Second Amendment to its Credit Agreement (the “Second Amendment”). Pursuant to the Second Amendment, the Company borrowed $700,000 in the form of a term loan repayable in 36 equal monthly installments of principal in the amount of $19,444 plus interest on the unpaid balance of LIBOR plus 6% per annum. The terms and conditions of the Credit Agreement were otherwise unchanged. The Company used the proceeds from the loan for additional working capital and open air display coolers for grocery stores, as a result of the then recent growth in the grocery store take-n-bake venue. In July 2015, the Company borrowed $600,000 from a third-party lender, evidenced by a promissory note which was to mature in July 2017. Interest on the note was payable at the rate of 8% per annum quarterly in arrears and this loan was subordinate to borrowings under the Company’s bank loan. In connection with the loan, the Company issued, to the holder of the promissory note, a warrant entitling the holder to purchase up to 300,000 shares of the Company’s common stock at an exercise price per share of $2.00. The warrant expires in July 2020. The Kingsway warrant included anti-dilution features similar to those discussed in Note 3. As such, the Kingsway warrant is considered a derivative liability at December 31, 2016 due to the additional borrowing from Super G and the conversion feature of the private placement Notes, the number of shares of common stock underlying the Kingsway warrants increased from 300,000 to 480,000 and the exercise price per warrant decreased from $2.00 per share to $.50 per share. In 2017, the number of shares underlying the warrant increased to 1.2 million and the exercise price remained at $.50 per share. Proceeds were used to increase working capital in anticipation of expected growth due to the Company hiring two new sales people, a Vice President of Supermarket Development, and entering into an agreement with a franchise broker. The Company repaid this loan in January 2017 with the proceeds of a $600,000 loan from Paul W. Mobley at an interest rate of 7% per annum payable quarterly in arrears. The loan matures in March 2018. In December 2015, the Company borrowed $100,000 from Paul W. Mobley and $75,000 from A. Scott Mobley, two officers of the Company, which are evidenced by promissory notes that were originally to mature in January 2017. In January 2016, $25,000 of the previous borrowing from A. Scott Mobley was repaid. In February 2016, A. Scott Mobley loaned the Company another $10,000, evidenced by a promissory note. In April 2016, the Company borrowed an additional $150,000 from Paul W. Mobley, evidenced by a promissory note. Proceeds were used for working capital. In conjunction with the loan from Super G Funding, LLC (“Super G”), as described below, Paul W. Mobley subordinated his $250,000 note and A. Scott Mobley subordinated his $60,000 note to the Super G loan and agreed to extend the maturity of those notes to June 10, 2018. Interest on the notes are payable at the rate of 10% per annum paid quarterly in arrears and the loans are unsecured. In January 2016, the Company entered into a Third Amendment to its Credit Agreement (the “Third Amendment”). Pursuant to the Third Amendment, the Company consolidated its three term loans with the Bank into a new term loan of $1,967,000 repayable in monthly payments of principal in the amount of $54,654 plus interest on the unpaid balance of LIBOR plus 6% per annum. The new term loan was to mature March 31, 2017 when the remaining principal balance would have become due. In addition, the Third Amendment provided for a revolving loan in the maximum amount of $500,000 with a maturity of March 31, 2017. In June 2016, the Company borrowed $2.0 million from Super G and used those funds: (i) to repay the $500,000 revolving Bank loan and (ii) for working capital purposes. This loan is to be repaid in the total amount of $2.7 million in regular semi-monthly payments over a two year period. In the fourth quarter of 2016, the Company issued 32 Units, for a purchase price of $50,000 per Unit, or $1,600,000 in the aggregate. Each $50,000 Unit consists of a convertible, subordinated, unsecured promissory note (a “Note”) in an aggregate principal amount of $50,000 and warrants (the “Warrants”) to purchase up to 50,000 shares of the Company’s common stock, no par value per share (the “Common Stock”). The Company issued Units to investors including the following related parties: Paul W. Mobley, the Company’s Executive Chairman, Chief Financial Officer and a director of the Company ($150,000); and Herbst Capital Management, LLC, the principal of which is Marcel Herbst, a director of the Company ($200,000). Interest on the Notes accrues at the annual rate of 10% and is payable quarterly in arrears. Principal of the Notes matures three years after issuance. Each holder of the Notes may convert them at any time into Common Stock of the Company at a conversion price of $0.50 per share (subject to anti-dilution adjustments). Subject to certain limitations, upon 30 days’ notice the Company may require the Notes to be converted into Common Stock if the daily average weighted trading price of the Common Stock equals or exceeds $2.00 per share for a period of 30 consecutive trading days. The Notes provide for customary events of default. The Notes are unsecured and subordinate to senior debt of the Company. The Warrants expire three years from the date of issuance and provide for an exercise price of $1.00 per share of Common Stock (subject to anti-dilution adjustments). Subject to certain limitations, the Company may redeem the Warrants at a price of $0.001 per share of Common Stock subject to the Warrant upon 30 days’ notice if the daily average weighted trading price of the Common Stock equals or exceeds $1.50 per share for a period of 30 consecutive trading days. In connection with the issuance of the Units, the Company granted the Investors certain registration rights with respect to the shares of Common Stock into which the Notes are convertible and for which the Warrants are exercisable. Divine Capital Markets LLC served as the placement agent for the offering of the Units (the “Placement Agent”). In consideration of the Placement Agent’s services, the Placement Agent earns a cash fee and expense allowance equal to 10% and 3%, respectively, of the gross proceeds of the offering, as well as warrants (the “Placement Agent Warrants”) for 10% of Units sold. Each Placement Agent Warrant allow the Placement Agent to purchase a Unit for $60,000. The Company evaluated the Notes, Warrants and Placement Agent Warrants to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815, Derivatives and Hedging. Due to the anti-dilution features in the contracts, commonly referred to as “down-round protection”, the contracts do not meet the scope exception for treatment as a derivative under ASC 815. As such, the embedded conversion feature in the Notes (the “Conversion Feature”), the Warrants and the Placement Agent warrants are considered derivative financial instruments. The accounting treatment of derivative financial instruments requires that the Company record these instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. The fair value of the derivative instruments, along with the cash Placement Agent fees, are deducted from the carrying value of the Notes, as original issue discount (“OID”). The OID is amortized over the term of the Notes using the effective interest rate method. Activity related to the Units during the fourth quarter of 2016 is as follows: Gross Proceeds $ 1,600,000 Placement Agent Fees 208,000 Fair Value of Warrants 96,380 Fair Value of Conversion Features 458,875 Fair Value of Placement Agent Warrants 46,358 Legal and Other Costs of Issuance 42,918 Net Amount Allocable to Notes $ 747,469 At December 31, 2016, the balance of the Notes is comprised of: Face Value $ 1,600,000 Unamortized OID (830,165 ) Carrying Value $ 769,835 Interest expense related to the Notes, including amortization of OID, amounted to $22,365 for the year ended December 31, 2016. The Company intends to use the net proceeds of the Notes to fund the opening of a Noble Roman’s Noble Roman’s Craft Pizza & Pub restaurants and for general corporate purposes. In January 2017, the Company entered into a Fourth Amendment to its Credit Agreement (the “Fourth Amendment”). Pursuant to the Fourth Amendment, the Bank extended the maturity of the term loan to March 31, 2018. All other terms and conditions of the loan remain the same including the monthly principal payments and the interest rate. Interest paid on the Company’s loans in 2016 was $401,034 and in 2015 was $139,328. |
4. Fair Value Measurement
4. Fair Value Measurement | 12 Months Ended |
Dec. 31, 2016 | |
Fair Value Measurement | |
Note 4 - Fair Value Measurement | To measure the fair value of derivative instruments, the Company utilizes Monte Carlo models that value the Kingsway Warrant, Conversion Feature, Warrants and Placement Agent Warrants. The Monte Carlo models are based on future projections of the various potential outcomes of each instrument, giving consideration to the terms of each instrument. A discounted average cash flow over the various scenarios is completed to determine the value of the instrument. The table below provides a summary of the changes in fair value, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the year ended December 31, 2016: Kingsway Warrant Conversion Feature Warrants Placement Agent Warrants Total Balance January 1, 2016 — — — — — Issuance — 458,875 96,380 46,358 601,613 Change in Fair Value of Derivative Liabilities 68,335 (23,203 ) (2,993 ) 2,326 44,465 Balance – December 31, 2016 68,335 435,672 93,387 48,684 646,078 The fair value of the derivative instruments as of December 31, 2016 were calculated using Monte Carlo models with the following weighted average assumptions: Kingsway Warrant Conversion Feature Warrants Placement Agent Warrants Dividend Yield 0 % 0 % 0 % 0 % Expected Volatility 58 % 58 % 58 % 58 % Risk Free Interest Rate 1.6 % 1.4 % 1.4 % 1.4 % Remaining Contractual Term (Years) 3.5 2.9 2.9 2.9 |
5. Royalties and Fees
5. Royalties and Fees | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Note 5 - Royalties and Fees | Approximately $313,000, $163,000 and $245,000 are included in 2014, 2015 and 2016, respectively, royalties and fees in the Consolidated Statements of Operations for initial franchise fees. Also included in royalties and fees were approximately $80,000, $65,000 and $54,000 in 2014, 2015 and 2016, respectively, for equipment commissions. Most of the cost for the services required to be performed by the Company are incurred prior to the franchise fee income being recorded which is based on contractual liability for the franchisee. A substantial portion of the Company’s ongoing royalty income is paid electronically by the Company initiating a draft on the franchisee’s account by electronic withdrawal. In conjunction with the development of Noble Roman’s Pizza and Tuscano’s Italian Style Subs, the Company has devised its own recipes for many of the ingredients that go into the making of its products (“Proprietary Products”). The Company contracts with various manufacturers to manufacture its Proprietary Products in accordance with the Company’s recipes and formulas and to sell those products to authorized distributors at a contract price which includes an allowance for use of the Company’s recipes. The manufacturing contracts also require the manufacturers to remit those allowances to the Company on a periodic basis, usually monthly. The Company recognizes those allowances in revenue as earned based on sales reports from the distributors. There were 2,562 franchised or licensed outlets in operation on December 31, 2015 and 2,768 on December 31, 2016. During the 12-month period ended December 31, 2016, there were 242 new franchised or licensed outlets opened and 36 franchised or licensed outlets left the system. Grocery stores are accustomed to adding products for a period of time, removing them for a period of time and possibly reoffering them. Therefore, it is unknown of the 2,017 included in the December 31, 2016 count, how many grocery store licenses were actually operating at any given time. |
6. Contingent Liabilities for L
6. Contingent Liabilities for Leased Facilities | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 6 - Contingent Liabilities for Leased Facilities | The Company is no longer contingently liable on any leased facilities. The Company has future obligations of $1,414,526 under current operating leases as follows: due in less than one year $286,426, due in one to three years $431,920 and due in three to five years $696,180. |
7. Income Taxes
7. Income Taxes | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Note 7 - Income Taxes | The Company had a deferred tax asset, as a result of prior operating losses, of $9.1 million at December 31, 2015 and $9.6 million at December 31, 2016, which expires between the years 2019 and 2036. In 2014, 2015 and 2016, the Company used deferred benefits to offset its tax expense of $1.1 million, $513,000 and $488,000, respectively, and tax benefits from loss on discontinued operations of $97,000 in 2014, $22,000 in 2015 and $1.0 million in 2016. As a result of the loss carry-forwards, the Company did not pay any income taxes in 2014, 2015 and 2016. There are no material differences between reported income tax expense or benefit and the income tax expense or benefit that would result from applying the Federal and state statutory tax rates. |
8. Common Stock
8. Common Stock | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Note 8 - Common Stock | On February 28, 2016, a former director exercised a stock option for 20,000 shares of common stock at an exercise price of $.58 per share in a cashless exercise and was issued 7,111 shares of common stock. In connection with a loan in 2015, the Company issued a warrant entitling the holder to purchase up to 300,000 shares of the Company’s common stock at a price per share of $2.00. The warrant expires July 1, 2020, per the anti-dilution provisions of the warrant, the warrant, since January 2017, entitles the holder to purchase 1.2 million shares of the Company’s common stock at a price of $.50 per share. As of December 31, 2016, the Company had issued Notes in the aggregate principal amount of $1.6 million convertible to common stock within three years at the rate of $.50 per share and Warrants to purchase up to 1.6 million shares of the Company’s common stock at $1.00 per share. In January 2017, the Offering as a result of which the Company issued a total of $2.4 million principal amount of Notes and Warrants to purchase up to 2.4 million shares of the Company’s common stock. The Company has an incentive stock option plan for key employees, officers and directors. The options are generally exercisable three years after the date of grant and expire ten years after the date of grant. The option prices are the fair market value of the stock at the date of grant. At December 31, 2016, the Company had the following employee stock options outstanding: # Common Shares Issuable Exercise Price 47,500 $ .58 155,000 .58 1,400,000 .58 31,000 .58 143,667 .58 230,500 1.00 265,000 1.00 325,000 1.00 325,000 .53 35,000 .50 As of December 31, 2016, options for 2,165,999 shares were exercisable The Company adopted the modified prospective method to account for stock option grants, which does not require restatement of prior periods. Under the modified prospective method, the Company is required to record compensation expense for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding at the date of adoption, net of an estimate of expected forfeitures. Compensation expense is based on the estimated fair values of stock options determined on the date of grant and is recognized over the related vesting period, net of an estimate of expected forfeitures. The Company estimates the fair value of its option awards on the date of grant using the Black-Scholes option pricing model. The risk-free interest rate is based on external data while all other assumptions are determined based on the Company’s historical experience with stock options. The following assumptions were used for grants in 2014, 2015 and 2016: Expected volatility 20% to 30% Expected dividend yield None Expected term (in years) 3 Risk-free interest rate 1.4% to 2.64% The following table sets forth the number of options outstanding as of December 31, 2013, 2014, 2015 and 2016 and the number of options granted, exercised or forfeited during the years ended December 31, 2014, December 31, 2015 and December 31, 2016: Balance of employee stock options outstanding as of 12/31/13 3,457,500 Stock options granted during the year ended 12/31/14 370,000 Stock options exercised during the year ended 12/31/14 (390,000 ) Stock options forfeited during the year ended 12/31/14 (2,500 ) Balance of employee stock options outstanding as of 12/31/14 3,435,000 Stock options granted during the year ended 12/31/15 410,000 Stock options exercised during the year ended 12/31/15 (877,333 ) Stock options forfeited during the year ended 12/31/15 (310,000 ) Balance of employee stock options outstanding as of 12/31/15 2,657,667 Stock options granted during the year ended 12/31/16 395,000 Stock options exercised during the year ended 12/31/16 (20,000 ) Stock options forfeited during the year ended 12/31/16 (75,000 ) Balance of employee stock options outstanding as of 12/31/16 2,957,667 The following table sets forth the number of non-vested options outstanding as of December 31, 2013, 2014, 2015 and 2016, and the number of stock options granted, vested and forfeited during the years ended December 31, 2014, 2015 and 2016. Balance of employee non-vested stock options outstanding as of 12/31/13 1,416,500 Stock options granted during the year ended 12/31/14 370,000 Stock options vested during the year ended 12/31/14 (755,000 ) Stock options forfeited during the year ended 12/31/14 — Balance of employee non-vested stock options outstanding as of 12/31/14 1,031,500 Stock options granted during the year ended 12/31/15 410,000 Stock options vested during the year ended 12/31/15 (380,999 ) Stock options forfeited during the year ended 12/31/15 (330,000 ) Balance of employee non-vested stock options outstanding as of 12/31/15 730,501 Stock options granted during the year ended 12/31/16 395,000 Stock options vested during the year ended 12/31/16 (258,833 ) Stock options forfeited during the year ended 12/31/16 (75,000 ) Balance of employee non-vested stock options outstanding as of 12/31/16 791,668 During 2016, employee stock options were granted for 395,000 shares, options for 20,000 shares were exercised and options for 75,000 shares were forfeited. At December 31, 2016, the weighted average grant date fair value of non-vested options was $.79 per share and the weighted average grant date fair value of vested options was $.66 per share. The weighted average grant date fair value of employee stock options granted during 2014 was $1.00, during 2015 was $1.00 and during 2016 was $.53. Total compensation cost recognized for share-based payment arrangements was $48,815 with a tax benefit of $18,935 in 2014, $26,962 with a tax benefit of $10,369 in 2015 and $14,295 with a tax benefit of $5,497 in 2016. As of December 31, 2016, total compensation cost related to non-vested options was $32,297, which will be recognized as compensation cost over the next six to 33 months. No cash was used to settle equity instruments under share-based payment arrangements. |
9. Statements of Financial Acco
9. Statements of Financial Accounting Standards | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 9 - Statements of Financial Accounting Standards | The Company does not believe that the recently issued Statements of Financial Accounting Standards will have any material impact on the Company’s Consolidated Statements of Operations or its Consolidated Balance Sheets except: The FASB recently issued ASU 2015-17 as part of its Simplification Initiative. The amendments eliminate the guidance in Topic 740, Income Taxes, that required an entity to separate deferred tax liabilities and assets between current and noncurrent amounts in a classified balance sheet. Rather, deferred taxes will be presented as noncurrent under the new standard. It takes effect in 2017 for public companies. On February 25, 2016, the FASB issued ASU 2016-02, its leasing standard for both lessees and lessors. Under its core principle, a lessee will recognize lease assets and liabilities on the balance sheet for all arrangements with terms longer than 12 months. The new standard takes effect in 2019 for public business entities. In May 2014, the FASB issused ASU 2014-09 regarding Revenue From Contract With Customers. The new standard to become effective in January 2018. The company does not believe there will be a material impact. |
10. Loss on Restaurant Disconti
10. Loss on Restaurant Discontinued | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 10 - Loss on Restaurant Discontinued | This restaurant was a part of the discontinued operations in 2008 but the decision was made to continue to operate this location until the lease (renewed in 2010) expired. The Company does not expect this expense to recur. |
11. Loss from Discontinued Oper
11. Loss from Discontinued Operations | 12 Months Ended |
Dec. 31, 2016 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Note 11 - Loss from Discontinued Operations | The Company made the decision in late 2008 to discontinue the business of operating traditional quick service restaurants. As a result, the Company charged off or dramatically lowered the carrying value of all receivables related to the traditional restaurants and accrued future estimated expenses related to the estimated cost to prosecute a lawsuit related to those discontinued operations. The ongoing right to receive passive income in the form of royalties is not a part of the discontinued segment. The Company reported a net loss on discontinued operations of $154,000 in 2014. This consisted of $9,600 in legal and settlement costs through the expiration of the lease relating to the restaurant that was closed in conjunction with the business activity discontinued in 1999 discussed above. In addition, the Company incurred $139,600 for legal and other costs related to the operations discontinued in 2008, and wrote off $4,300 in receivables related to the operations discontinued in 2008. The Company reported a net loss on discontinued operations of $35,000 in 2015. This consisted of $4,800 as a final payment on a property that was closed in conjunction with the 1999 discontinued operations. In addition, the Company incurred a loss of $30,000 for rent and legal fees related to the operations discontinued in 2008. The Company report a net loss on discontinued operations of $1.7 million in 2016. During the quarter ended September 30, 2016, the Company made the decision to discontinue the stand-alone take-n-bake concept and devote its efforts to its next generation stand-alone prototype, Noble Roman’s Craft Pizza & Pub. As a result of that decision, the Company is charging off all assets related to those discontinued operations, including $505,000 after-tax benefit invested in three franchised locations, partially owned by certain officers of the Company which were not involved in the management of the operations, which had been used primarily to support research and development by the Company in those three franchised locations. The Company was using those franchised locations for testing and development in an attempt to improve the stand-alone take-n-bake concept for future franchising before the Company made the decision in the third quarter to discontinue that concept. In addition, $1.07 million of the after-tax benefit reflected the charge-off of various receivables due from unrelated former franchisees of the stand-alone take-n-bake concept. In addition, $48,000 of the after-tax benefit reflected the charge-off of various other expenses related to the discontinuation of the stand-alone take-n-bake concept. This resulted in the net loss after-tax benefit resulting from the discontinuation of the stand-alone take-n-bake concept in the aggregate amount of $1.7 million. The loss on discontinued operations also included a loss of $39,000, after the tax benefit, for settlement of rent on a former location that was part of the discontinued operations in 2008. |
12. Contingencies
12. Contingencies | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Note 12 - Contingencies | The Company, from time to time, is or may become involved in various litigation or regulatory proceedings arising out of its normal business operations. Currently, there are no such pending proceedings which the Company considers to be material. |
13. Certain Relationships and R
13. Certain Relationships and Related Transactions | 12 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
Note 13 - Certain Relationships and Related Transactions | The following is a summary of transactions to which the Company and certain officers and directors of the Company are a party or have a financial interest. The Board of Directors of the Company has adopted a policy that all transactions between the Company and its officers, directors, principal shareholders and other affiliates must be approved by a majority of the Company’s disinterested directors, and be conducted on terms no less favorable to the Company than could be obtained from unaffiliated third parties. In December 2015, the Company borrowed $100,000 from Paul W. Mobley and $75,000 from A. Scott Mobley, two officers of the Company, which are evidenced by promissory notes that were originally to mature in January 2017. In January 2016, $25,000 of the previous borrowing from A. Scott Mobley was repaid. In February 2016, A. Scott Mobley loaned the Company another $10,000, evidenced by a promissory note. In April 2016, the Company borrowed an additional $150,000 from Paul W. Mobley, evidenced by a promissory note. Proceeds were used for working capital. In conjunction with the loan from Super G, as described below, Paul W. Mobley subordinated his $250,000 note and A. Scott Mobley subordinated his $60,000 note to the Super G loan and agreed to extend the maturity of those notes to June 10, 2018. Interest on the notes are payable at the rate of 10% per annum paid quarterly in arrears and the loans are unsecured. In January 2017, the Company borrowed $600,000 from Paul W. Mobley at an interest rate of 7% per annum payable quarterly in arrears. The loan matures in March 2018. Of the 32 units sold in the private placement which began in October 2016, three units were purchased by Paul W. Mobley, Executive Chairman, and four units were purchased by Marcel Herbst, Director. Each unit consists of a Note in the principal amount of $50,000 and a Warrant to purchase 50,000 shares of the Company’s common stock. These transactions were all done on the same terms and conditions as all of the independent investors who purchased the other 25 units. The Company executed a franchise agreement for three stand-alone take-n-bake retail outlets during 2012 in which the franchisee was partially owned by certain officers of the Company, however, these individuals were not involved in the management of the franchisee’s operations, which had been used primarily to support research and development by the Company in those three franchised locations. The Company was supporting that franchise because it was using those franchised locations for testing and development in an attempt to improve the stand-alone take-n-bake concept for future franchising before the Company made the decision in the third quarter to discontinue that concept, resulting in a loss after-tax benefit related to that entity of $505,000. The Company has no exposure to loss related to this entity in the future. Neither the Company, nor any officers of the Company, have guaranteed any obligations of the franchisee. While the franchisee was determined to be a variable interest entity, as defined by accounting principles generally accepted in the United States, management determined that the Company had a significant variable interest but did not have the power to direct the activities of the variable interest entity that most significantly impact its economic performance. Therefore, the Company was not the primary beneficiary of the franchisee, and as such, was not required to present consolidated financial statements with the franchisee. |
14. Unaudited Quarterly Financi
14. Unaudited Quarterly Financial Information | 12 Months Ended |
Dec. 31, 2016 | |
Quarterly Financial Information Disclosure [Abstract] | |
Note 14 - Unaudited Quarterly Financial Information | Quarter Ended 2016 December 31 September 30 June 30 March 31 (in thousands, except per share data) Total revenue $ 2,095 $ 2,022 $ 1,940 $ 1,779 Operating income 679 856 881 662 Loss on restaurant discontinued — — — 37 Valuation allowance for receivables - including Heyser case (353 ) — (751 ) — Change in fair value of derivatives (44 ) — — — Net income (loss) before income taxes from continuing operations (42 ) 702 47 570 Net income (loss) from continuing operations (26 ) 434 31 350 Loss from discontinued operations (234 ) (1,426 ) — — Net income (loss) (260 ) (993 ) 31 350 Net income from continuing operations per common share Basic .00 .02 .00 .02 Diluted .00 .02 .00 .02 Net income (loss) per common share Basic (.01 ) (.05 ) .00 .02 Diluted (.01 ) (.05 ) .00 .02 Quarter Ended 2015 December 31 September 30 June 30 March 31 (in thousands, except per share data) Total revenue $ 1,888 $ 1,918 $ 2,096 $ 1,827 Operating income 634 725 918 664 Loss on restaurant discontinued 191 — — — Valuation allowance for receivables - including Heyser case 380 250 600 — Net income before income taxes from continuing operations 15 425 276 618 Net income from continuing operations 10 261 170 380 Loss from discontinued operations (35 ) — — — Net income (loss) (25 ) 261 170 380 Net income from continuing operations per common share Basic — .01 .01 .02 Diluted — .01 .01 .02 Net income per common share Basic — .01 .01 .02 Diluted — .01 .01 .02 |
1. Summary of Significant Acc22
1. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Summary Of Significant Accounting Policies Policies | |
Organization | 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 Craft Pizza & Pub.” Unless the context otherwise indicates, reference to the “Company” are to Noble Roman’s, Inc. and its wholly-owned subsidiaries. |
Principles of Consolidation | Principles of Consolidation: The consolidated financial statements include the accounts of Noble Roman’s, Inc. and its wholly-owned subsidiaries, Pizzaco, Inc., N.R. Realty, Inc. and RH Roanoke, Inc. Inter-company balances and transactions have been eliminated in consolidation. |
Inventories | Inventories: Inventories consist of food, beverage, restaurant supplies, restaurant equipment and marketing materials and are stated at the lower of cost (first-in, first-out) or market. |
Property and Equipment | Property and Equipment: Equipment and leasehold improvements are stated at cost. Depreciation and amortization are computed on the straight-line method over the estimated useful lives ranging from five years to 12 years. Leasehold improvements are amortized over the shorter of estimated useful life or the term of the lease. Construction and equipment in progress are stated at cost for leasehold improvements and equipment for a new restaurant being constructed and was not completed until January 2017. |
Cash and Cash Equivalents | Cash and Cash Equivalents: Includes actual cash balance. The cash is not pledged nor are there any withdrawal restrictions. |
Advertising Costs | Advertising Costs: The Company records advertising costs consistent with the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) Other Expense topic and Advertising Costs subtopic. This statement requires the Company to expense advertising production costs the first time the production material is used. |
Fair Value Measurements and Disclosures | Fair Value Measurements and Disclosures: The Fair Value Measurements and Disclosures topic of the FASB’s ASC requires companies to determine fair value based on the price that would be received to sell the assets or paid to transfer to liability to a market participant. The fair value measurements and disclosure topic emphasis that fair value is a market based measurement, not an entity specific measurement. The guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories: Level One: Quoted market prices in active markets for identical assets or liabilities. Level Two: Observable market –based inputs or unobservable inputs that are corroborated by market data. Level Three: Unsobservable inputs that are not corroborated by market data. |
Use of Estimates | Use of Estimates: The preparation of the consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. 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. |
Debt Issuance Costs | Debt Issuance Costs: Debt issuance cost is presented on the balance sheet as a direct reducton from the carrying amount of the associated liability. The debt issuance cost was reclassified from other assets to long-term debt on its balance sheet but had no effect on its statement of operations. Debt issuance costs are amortized to interest expense ratably over the term of the applicable debt. The debt issuance cost being amortized is $278,408 with an accumulated amortization at December 31, 2016 of $45,727 |
Intangible Assets | Intangible Assets: The Company recorded goodwill of $278,000 as a result of the acquisition of RH Roanoke, Inc., in Virginia and a second restaurant in North Carolina, both former franchisees of the Company. The acquisitions were in exchange for $132,000 of equipment, $17,000 of inventory and $427,000 of accounts payable and accrued expenses. Goodwill has an indeterminable life and is assessed for impairment at least annually and more frequently as triggering events may occur. In making this assessment, management relies on a number of factors including operating results, business plans, economic projections, anticipated future cash flows, and transactions and marketplace data. Any impairment losses determined to exist are recorded in the period the determination is made. There are inherent uncertainties related to these factors and management's judgment is involved in performing goodwill and other intangible assets valuation analyses, thus there is risk that the carrying value of goodwill and other intangible assets may be overstated or understated. The Company has elected to perform the annual impairment assessment of recorded goodwill as of the end of the Company’s fiscal year. The results of this annual impairment assessment indicated that the fair value of the reporting unit as of December 31, 2016, exceeded the carrying, or book value, including goodwill, and therefore recorded goodwill was not subject to impairment. |
Royalties, Administrative and Franchise Fees | Royalties, Administrative and Franchise Fees: Royalties are generally recognized as income monthly based on a percentage of monthly sales of franchised or licensed restaurants and from audits including interest per the franchise agreement 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 location are substantially completed. |
Exit or Disposal Activities Related to Discontinued Operations | Exit or Disposal Activities Related to Discontinued Operations: The Company records exit or disposal activity for discontinued operations when management commits to an exit or disposal plan and includes those charges under results of discontinued operations, as required by the ASC “Exit or Disposal Cost Obligations” topic. |
Income Taxes | Income Taxes: The Company provides for current and deferred income tax liabilities and assets utilizing an asset and liability approach along with a valuation allowance as appropriate. The Company 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, 2016, the net operating loss carry-forward was approximately $23 million which expires between the years 2019 and 2036. 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, 2014, 2015 and 2016. The Company’s federal and various state income tax returns for 2013 through 2016 are subject to examination by the applicable tax authorities, generally for three years after the later of the original or extended due date. |
Basic and Diluted Net Income Per Share | Basic and Diluted Net Income Per Share: Net income per share is based on the weighted average number of common shares outstanding during the respective year. When dilutive, stock options and warrants are included as share equivalents using the treasury stock method. The following table sets forth the calculation of basic and diluted earnings per share for the year ended December 31, 2014: Income Shares Per Share (Numerator) (Denominator) 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 The following table sets forth the calculation of basic and diluted earnings per share for the year ended December 31, 2015: Income Shares Per Share (Numerator) (Denominator) Amount Earnings per share – basic Net income 785,778 20,517,846 $ 0.04 Effect of dilutive securities Options — 921,296 Diluted earnings per share Net income 785,778 21,439,242 $ 0.04 The following table sets forth the calculation of basic and diluted loss per share for the year ended December 31, 2016: Income Shares Per Share (Numerator) (Denominator) Amount Earnings per share – basic Net loss (870,840 ) 20,781,886 $ (0.04 ) Effect of dilutive securities Options — 32,845 Convertible notes — 393,442 Diluted earnings per share Net loss (870,840 ) 21,208,173 $ (0.04 ) |
Subsequent Events | Subsequent Events: The Company evaluated subsequent events through the date the consolidated statements were issued and filed with the annual report. In January 2017, the Company repaid a promissory note to Kingsway America with an interest rate of 8% per annum due July 2017 by borrowing the $600,000 from an officer of the Company at an interest rate of 7% per annum due March 2018. With the initial Kingsway loan, they received a warrant to purchase 300,000 shares of common stock at $2.00 per share containing certain anti-dilutive provisions. In January 2017, as a result of those dilutive provisions, the warrant changed to 1,200,000 shares at $.50 per share. In January 2017, the Company entered into a Fourth Amendment to its Credit Agreement with BMO Harris Bank (the “Bank”) to extend the maturity of that note from March 2017 to March 2018 with all other terms and conditions remaining the same including the monthly principal payments and the interest rate. In January 2017, the Company completed the Offering (as described in Note 3), began in 2016, of Notes and Warrants under which it issued a total of $2.4 million principal amount of the Notes and Warrant to purchase 2.4 million shares of the Company’s common stock. In January 2017, the Company opened its first Noble Roman’s Noble Roman’s Craft Pizza & Pub location. In January 2017, at a special meeting of the shareholders, they approved the authorized shares being increased from 25,000,000 to 40,000,000. No subsequent event required recognition or disclosure except as discussed above. |
1. Summary of Significant Acc23
1. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Summary Of Significant Accounting Policies Tables | |
Basic and diluted earnings per share | The following table sets forth the calculation of basic and diluted earnings per share for the year ended December 31, 2014: Income Shares Per Share (Numerator) (Denominator) 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 The following table sets forth the calculation of basic and diluted earnings per share for the year ended December 31, 2015: Income Shares Per Share (Numerator) (Denominator) Amount Earnings per share – basic Net income 785,778 20,517,846 $ 0.04 Effect of dilutive securities Options — 921,296 Diluted earnings per share Net income 785,778 21,439,242 $ 0.04 The following table sets forth the calculation of basic and diluted loss per share for the year ended December 31, 2016: Income Shares Per Share (Numerator) (Denominator) Amount Earnings per share – basic Net loss (870,840 ) 20,781,886 $ (0.04 ) Effect of dilutive securities Options — 32,845 Convertible notes — 393,442 Diluted earnings per share Net loss (870,840 ) 21,208,173 $ (0.04 ) |
3. Notes Payable (Tables)
3. Notes Payable (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Notes Payable Tables | |
Activity related to the Units | Gross Proceeds $ 1,600,000 Placement Agent Fees 208,000 Fair Value of Warrants 96,380 Fair Value of Conversion Features 458,875 Fair Value of Placement Agent Warrants 46,358 Legal and Other Costs of Issuance 42,918 Net Amount Allocable to Notes $ 747,469 |
Notes payable | Face Value $ 1,600,000 Unamortized OID (830,165 ) Carrying Value $ 769,835 |
4. Fair Value Measurement (Tabl
4. Fair Value Measurement (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Fair Value Measurement Tables | |
Changes in fair value of all financial assets and liabilities | Kingsway Warrant Conversion Feature Warrants Placement Agent Warrants Total Balance January 1, 2016 — — — — — Issuance — 458,875 96,380 46,358 601,613 Change in Fair Value of Derivative Liabilities 68,335 (23,203 ) (2,993 ) 2,326 44,465 Balance – December 31, 2016 68,335 435,672 93,387 48,684 646,078 |
Weighted average assumptions | Kingsway Warrant Conversion Feature Warrants Placement Agent Warrants Dividend Yield 0 % 0 % 0 % 0 % Expected Volatility 58 % 58 % 58 % 58 % Risk Free Interest Rate 1.6 % 1.4 % 1.4 % 1.4 % Remaining Contractual Term (Years) 3.5 2.9 2.9 2.9 |
8. Common Stock (Tables)
8. Common Stock (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Common Stock Tables | |
Employee stock options outstanding | # Common Shares Issuable Exercise Price 47,500 $ .58 155,000 .58 1,400,000 .58 31,000 .58 143,667 .58 230,500 1.00 265,000 1.00 325,000 1.00 325,000 .53 35,000 .50 |
Assumptions for grants | Expected volatility 20% to 30% Expected dividend yield None Expected term (in years) 3 Risk-free interest rate 1.4% to 2.64% |
Options outstanding | Balance of employee stock options outstanding as of 12/31/13 3,457,500 Stock options granted during the year ended 12/31/14 370,000 Stock options exercised during the year ended 12/31/14 (390,000 ) Stock options forfeited during the year ended 12/31/14 (2,500 ) Balance of employee stock options outstanding as of 12/31/14 3,435,000 Stock options granted during the year ended 12/31/15 410,000 Stock options exercised during the year ended 12/31/15 (877,333 ) Stock options forfeited during the year ended 12/31/15 (310,000 ) Balance of employee stock options outstanding as of 12/31/15 2,657,667 Stock options granted during the year ended 12/31/16 395,000 Stock options exercised during the year ended 12/31/16 (20,000 ) Stock options forfeited during the year ended 12/31/16 (75,000 ) Balance of employee stock options outstanding as of 12/31/16 2,957,667 |
Number of non-vested options outstanding | Balance of employee non-vested stock options outstanding as of 12/31/13 1,416,500 Stock options granted during the year ended 12/31/14 370,000 Stock options vested during the year ended 12/31/14 (755,000 ) Stock options forfeited during the year ended 12/31/14 — Balance of employee non-vested stock options outstanding as of 12/31/14 1,031,500 Stock options granted during the year ended 12/31/15 410,000 Stock options vested during the year ended 12/31/15 (380,999 ) Stock options forfeited during the year ended 12/31/15 (330,000 ) Balance of employee non-vested stock options outstanding as of 12/31/15 730,501 Stock options granted during the year ended 12/31/16 395,000 Stock options vested during the year ended 12/31/16 (258,833 ) Stock options forfeited during the year ended 12/31/16 (75,000 ) Balance of employee non-vested stock options outstanding as of 12/31/16 791,668 |
14. Unaudited Quarterly Finan27
14. Unaudited Quarterly Financial Information (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Unaudited Quarterly Financial Information Tables | |
Unaudited Quarterly Financial Information | Quarter Ended 2016 December 31 September 30 June 30 March 31 (in thousands, except per share data) Total revenue $ 2,095 $ 2,022 $ 1,940 $ 1,779 Operating income 679 856 881 662 Loss on restaurant discontinued — — — 37 Valuation allowance for receivables - including Heyser case (353 ) — (751 ) — Change in fair value of derivatives (44 ) — — — Net income (loss) before income taxes from continuing operations (42 ) 702 47 570 Net income (loss) from continuing operations (26 ) 434 31 350 Loss from discontinued operations (234 ) (1,426 ) — — Net income (loss) (260 ) (993 ) 31 350 Net income from continuing operations per common share Basic .00 .02 .00 .02 Diluted .00 .02 .00 .02 Net income (loss) per common share Basic (.01 ) (.05 ) .00 .02 Diluted (.01 ) (.05 ) .00 .02 Quarter Ended 2015 December 31 September 30 June 30 March 31 (in thousands, except per share data) Total revenue $ 1,888 $ 1,918 $ 2,096 $ 1,827 Operating income 634 725 918 664 Loss on restaurant discontinued 191 — — — Valuation allowance for receivables - including Heyser case 380 250 600 — Net income before income taxes from continuing operations 15 425 276 618 Net income from continuing operations 10 261 170 380 Loss from discontinued operations (35 ) — — — Net income (loss) (25 ) 261 170 380 Net income from continuing operations per common share Basic — .01 .01 .02 Diluted — .01 .01 .02 Net income per common share Basic — .01 .01 .02 Diluted — .01 .01 .02 |
1. Summary of Significant Acc28
1. Summary of Significant Accounting Policies (Details) (USD $) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Income (Numerator) | |||||||||||
Net income (loss) | $ (260,000) | $ (993,000) | $ 31,000 | $ 350,000 | $ (25,000) | $ 261,000 | $ 170,000 | $ 380,000 | $ (870,840) | $ 785,778 | $ 1,590,196 |
Shares (Denominator) | |||||||||||
Weighted average number of common shares outstanding, basic | 20,781,886 | 20,517,846 | 19,870,904 | ||||||||
Effect of dilutive securities: options | 32,845 | 921,396 | 1,333,535 | ||||||||
Effect of dilutive securities: convertible notes | 393,442 | ||||||||||
Weighted average number of common shares outstanding, diluted | 21,208,173 | 21,439,242 | 21,204,439 | ||||||||
Per Share Amount | |||||||||||
Earnings per share - basic | $ (.01) | $ (.05) | $ 0 | $ 0.02 | $ 0 | $ 0.01 | $ 0.01 | $ 0.02 | $ (.04) | $ 0.04 | $ 0.08 |
Diluted earnings per share | $ (.04) | $ 0.04 | $ 0.07 |
1. Summary of Significant Acc29
1. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Debt issue cost | $ 278,408 | |
Accumulated amortization | 45,727 | |
Goodwill | 278,466 | $ 0 |
Net operating loss carry-forward | $ 23,000,000 | |
Minimum | ||
Estimated useful life | 5 years | |
Maximum | ||
Estimated useful life | 12 years |
3. Notes Payable (Details)
3. Notes Payable (Details) | Dec. 31, 2016USD ($) |
Notes Payable Details | |
Gross Proceeds | $ 1,600,000 |
Placement Agent Fees | 208,000 |
Fair Value of Warrants | 96,380 |
Fair Value of Conversion Features | 458,875 |
Fair Value of Placement Agent Warrants | 46,358 |
Legal and Other Costs of Issuance | 42,918 |
Net Amount Allocable to Notes | $ 747,469 |
3. Notes Payable (Details 1)
3. Notes Payable (Details 1) | Dec. 31, 2016USD ($) |
Notes Payable Details 1 | |
Face Value | $ 1,600,000 |
Unamortized OID | (830,165) |
Carrying Value | $ 769,835 |
3. Notes Payable (Details Narra
3. Notes Payable (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Notes Payable Details Narrative | ||
Interest expense related to Notes | $ 22,365 | |
Interest paid on loans | $ 401,034 | $ 139,328 |
4. Fair Value Measurement (Deta
4. Fair Value Measurement (Details) | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Beginning Balance | $ 0 |
Issuance | 601,613 |
Change in Fair Value of Derivative Liabilities | 44,465 |
Ending Balance | 646,078 |
Kingsway Warrant | |
Beginning Balance | 0 |
Issuance | 0 |
Change in Fair Value of Derivative Liabilities | 68,335 |
Ending Balance | 68,335 |
Conversion Feature | |
Beginning Balance | 0 |
Issuance | 245,875 |
Change in Fair Value of Derivative Liabilities | (23,203) |
Ending Balance | 435,672 |
Warrants | |
Beginning Balance | 0 |
Issuance | 96,380 |
Change in Fair Value of Derivative Liabilities | (2,993) |
Ending Balance | 93,387 |
Placement Agent Warrants | |
Beginning Balance | 0 |
Issuance | 46,358 |
Change in Fair Value of Derivative Liabilities | 2,326 |
Ending Balance | $ 48,684 |
4. Fair Value Measurement (De34
4. Fair Value Measurement (Details 1) | 12 Months Ended |
Dec. 31, 2016 | |
Kingsway Warrant | |
Dividend Yield | 0.00% |
Expected Volatility | 58.00% |
Risk Free Interest Rate | 1.60% |
Remaining Contractual Term (Years) | 3 years 6 months |
Conversion Feature | |
Dividend Yield | 0.00% |
Expected Volatility | 58.00% |
Risk Free Interest Rate | 1.40% |
Remaining Contractual Term (Years) | 2 years 10 months 24 days |
Warrants | |
Dividend Yield | 0.00% |
Expected Volatility | 58.00% |
Risk Free Interest Rate | 1.40% |
Remaining Contractual Term (Years) | 2 years 10 months 24 days |
Placement Agent Warrants | |
Dividend Yield | 0.00% |
Expected Volatility | 58.00% |
Risk Free Interest Rate | 1.40% |
Remaining Contractual Term (Years) | 2 years 10 months 24 days |
5. Royalties and Fees (Details
5. Royalties and Fees (Details Narrative) | 12 Months Ended | ||
Dec. 31, 2016USD ($)Integer | Dec. 31, 2015USD ($)Integer | Dec. 31, 2014USD ($) | |
Number of Franchisee | 2,768 | 2,562 | |
Outlets opened | 242 | ||
Outlets closed | 36 | ||
Initial Franchisee Fees | |||
Royalties and Fees | $ | $ 245,000 | $ 163,000 | $ 313,000 |
Equipment Commission | |||
Royalties and Fees | $ | $ 54,000 | $ 65,000 | $ 80,000 |
6. Contingent Liabilities for36
6. Contingent Liabilities for Leased Facilities (Details Narrative) | Dec. 31, 2016USD ($) |
Notes to Financial Statements | |
Future obligations operating leases | $ 1,414,526 |
Due in less than one year | 286,426 |
Due in one to three years | 431,920 |
Due in three to five years | $ 696,180 |
7. Income Taxes (Details Narrat
7. Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | |||
Deferred tax asset | $ 9,600,000 | $ 9,100,000 | |
Deferred benefits | 488,000 | 513,000 | $ 1,100,000 |
Tax benefits from loss on discontinued operations | $ 1,000,000 | $ 22,000 | $ 97,000 |
8. Common Stock (Details)
8. Common Stock (Details) | Dec. 31, 2016$ / sharesshares |
Employee Stock Option 1 [Member] | |
Common Shares Represented | shares | 47,500 |
Exercise Price | $ / shares | $ 0.58 |
Employee Stock Option 2 [Member] | |
Common Shares Represented | shares | 155,000 |
Exercise Price | $ / shares | $ 0.58 |
Employee Stock Option 3 [Member] | |
Common Shares Represented | shares | 1,400,000 |
Exercise Price | $ / shares | $ 0.58 |
Employee Stock Option 4 [Member] | |
Common Shares Represented | shares | 31,000 |
Exercise Price | $ / shares | $ 0.58 |
Employee Stock Option 5 [Member] | |
Common Shares Represented | shares | 143,667 |
Exercise Price | $ / shares | $ 0.58 |
Employee Stock Option 6 [Member] | |
Common Shares Represented | shares | 230,500 |
Exercise Price | $ / shares | $ 1 |
Employee Stock Option 7 [Member] | |
Common Shares Represented | shares | 265,000 |
Exercise Price | $ / shares | $ 1 |
Employee Stock Option 8 [Member] | |
Common Shares Represented | shares | 325,000 |
Exercise Price | $ / shares | $ 1 |
Employee Stock Option 9 [Member] | |
Common Shares Represented | shares | 325,000 |
Exercise Price | $ / shares | $ 0.53 |
Employee Stock Option 10 [Member] | |
Common Shares Represented | shares | 35,000 |
Exercise Price | $ / shares | $ 0.5 |
8. Common Stock (Details 1)
8. Common Stock (Details 1) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Equity [Abstract] | |||
Expected volatility, Minimum | 20.00% | 20.00% | 20.00% |
Expected volatility, Maximum | 30.00% | 30.00% | 30.00% |
Expected dividend yield | $ 0 | $ 0 | $ 0 |
Expected term (in years) | 3 years | 3 years | 3 years |
Risk-free interest rate, Minimum | 1.40% | 1.40% | 1.40% |
Risk-free interest rate, Maximum | 2.64% | 2.64% | 2.64% |
8. Common Stock (Details 2)
8. Common Stock (Details 2) - shares | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Stock options granted | 395,000 | ||
Stock options exercised | (20,000) | ||
Employee Stock Option [Member] | |||
Balance of employee stock options outstanding | 2,657,667 | 3,435,000 | 3,457,500 |
Stock options granted | 395,000 | 410,000 | 370,000 |
Stock options exercised | (20,000) | (877,333) | (390,000) |
Stock options forfeited | (75,000) | (310,000) | (2,500) |
Balance of employee stock options outstanding | 2,957,667 | 2,657,667 | 3,435,000 |
8. Common Stock (Details 3)
8. Common Stock (Details 3) - shares | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Equity [Abstract] | |||
Balance of employee non-vested stock options outstanding | 730,501 | 1,031,500 | 1,416,500 |
Stock options granted | 395,000 | 410,000 | 370,000 |
Stock options vested | (258,833) | (380,999) | (755,000) |
Stock options forfeited | (75,000) | (330,000) | 0 |
Balance of employee non-vested stock options outstanding | 791,668 | 730,501 | 1,031,500 |
8. Common Stock (Details Narrat
8. Common Stock (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Common Stock Details Narrative | |||
Stock options granted | 395,000 | ||
Stock options exercised | (20,000) | ||
Weighted average grant date fair value of non-vested options | $ .79 | ||
Weighted average grant date fair value of vested options | .66 | ||
Weighted average grant date fair value of employee stock options granted | $ .53 | $ 1 | $ 1 |
Share based compensation | $ 48,815 | $ 26,962 | $ 14,295 |
Tax benefit | $ 18,935 | $ 10,369 | $ 14,295 |
11. Loss from Discontinued Op43
11. Loss from Discontinued Operations (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Discontinued Operations and Disposal Groups [Abstract] | |||
Loss on discontinued operations | $ 1,700,000 | $ 35,000 | $ 154,000 |
14. Unaudited Quarterly Finan44
14. Unaudited Quarterly Financial Information (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Quarterly Financial Information Disclosure [Abstract] | |||||||||||
Total revenue | $ 2,095,000 | $ 2,022,000 | $ 1,940,000 | $ 1,779,000 | $ 1,888,000 | $ 1,918,000 | $ 2,096,000 | $ 1,827,000 | $ 7,836,485 | $ 7,729,286 | $ 7,915,215 |
Operating income | 679,000 | 856,000 | 881,000 | 662,000 | 634,000 | 725,000 | 918,000 | 664,000 | 3,077,353 | 2,940,977 | 3,038,932 |
Loss on restaurant discontinued | 0 | 0 | 0 | 37,000 | 191,000 | 0 | 0 | 0 | 36,776 | 191,390 | 0 |
Valuation allowance for receivables - including Heyser case | (353,000) | 0 | (751,000) | 0 | 380,000 | 250,000 | 600,000 | 0 | 1,103,521 | 1,230,000 | 0 |
Change in fair value of derivatives | (44,000) | 0 | 0 | 0 | (44,464) | 0 | 0 | ||||
Net income (loss) before income taxes from continuing operations | (42,000) | 702,000 | 47,000 | 570,000 | 15,000 | 425,000 | 276,000 | 618,000 | 1,276,907 | 1,333,173 | 2,848,550 |
Net income (loss) from continuing operations | (26,000) | 434,000 | 31,000 | 350,000 | 10,000 | 261,000 | 170,000 | 380,000 | 789,027 | 820,502 | 1,743,741 |
Loss from discontinued operations | (234,000) | (1,426,000) | 0 | 0 | (35,000) | 0 | 0 | 0 | (1,659,867) | (34,724) | (153,545) |
Net income (loss) | $ (260,000) | $ (993,000) | $ 31,000 | $ 350,000 | $ (25,000) | $ 261,000 | $ 170,000 | $ 380,000 | $ (870,840) | $ 785,778 | $ 1,590,196 |
Basic | $ 0 | $ 0.02 | $ 0 | $ 0.02 | $ 0 | $ 0.01 | $ 0.01 | $ 0.02 | $ 0.04 | $ 0.04 | $ 0.09 |
Diluted | 0 | 0.02 | 0 | 0.02 | 0 | 0.01 | 0.01 | 0.02 | 0.04 | 0.04 | 0.08 |
Net income per common share | |||||||||||
Basic | (.01) | (.05) | 0 | 0.02 | 0 | 0.01 | 0.01 | 0.02 | $ (.04) | $ 0.04 | $ 0.08 |
Diluted | $ (.01) | $ (.05) | $ 0 | $ 0.02 | $ 0 | $ 0.01 | $ 0.01 | $ 0.02 |