Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 10, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | NOBLE ROMANS INC | |
Entity Central Index Key | 709,005 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 21,183,032 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,018 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash | $ 200,194 | $ 461,068 |
Accounts receivable - net | 1,802,824 | 1,796,757 |
Inventories | 793,164 | 779,989 |
Prepaid expenses | 687,575 | 680,326 |
Total current assets | 3,483,757 | 3,718,140 |
Property and equipment: | ||
Equipment | 2,804,169 | 2,533,848 |
Leasehold improvements | 873,323 | 541,197 |
Construction and equipment in progress | 359,002 | 558,602 |
Total | 4,036,494 | 3,673,647 |
Less accumulated depreciation and amortization | 1,407,281 | 1,372,821 |
Net property and equipment | 2,629,213 | 2,300,826 |
Deferred tax asset (net of current portion) | 5,598,912 | 5,735,504 |
Deferred contract cost | 592,160 | 0 |
Goodwill | 278,466 | 278,466 |
Other assets including long-term portion of receivables-net | 6,816,942 | 6,851,697 |
Total assets | 19,399,450 | 18,884,633 |
Current liabilities: | ||
Current portion of term loan payable to bank | 793,452 | 754,173 |
Accounts payable and accrued expenses | 539,675 | 674,600 |
Total current liabilities | 1,333,127 | 1,428,773 |
Long-term obligations: | ||
Term loans payable to bank – net of current portion | 4,048,915 | 4,246,375 |
Convertible notes payable | 2,131,750 | 1,131,982 |
Deferred contract income | 592,160 | 0 |
Derivative warrant liability | 0 | 503,851 |
Derivative conversion liability | 0 | 925,561 |
Total long-term liabilities | 6,772,825 | 6,807,769 |
Stockholders' equity: | ||
Common stock – no par value (40,000,000 shares authorized, 20,783,032 issued and outstanding as of December 31, 2017 and 20,983,032 as of March 31, 2018) | 24,726,636 | 24,322,885 |
Accumulated deficit | (13,433,138) | (13,674,794) |
Total stockholders' equity | 11,293,498 | 10,648,091 |
Total liabilities and stockholders' equity | $ 19,399,450 | $ 18,884,633 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2018 | Dec. 31, 2017 |
Stockholders' equity: | ||
Common stock, par value | $ 0 | $ 0 |
Common stock, authorized shares | 40,000,000 | 40,000,000 |
Common stock, issued shares | 20,983,032 | 20,783,032 |
Common stock, outstanding shares | 20,983,032 | 20,783,032 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||
Royalties and fees | $ 1,541,879 | $ 1,612,920 |
Administrative fees and other | 14,245 | 12,069 |
Restaurant revenue – Craft Pizza & Pub | 1,108,423 | 306,311 |
Restaurant revenue – non-traditional | 288,116 | 281,318 |
Total revenue | 2,952,663 | 2,212,618 |
Operating expenses: | ||
Salaries and wages | 267,968 | 239,707 |
Trade show expense | 120,772 | 121,656 |
Travel expense | 21,939 | 60,295 |
Other operating expenses | 238,417 | 198,690 |
Restaurant expenses - Craft Pizza & Pub | 865,499 | 213,146 |
Restaurant expenses – non-traditional | 283,856 | 273,373 |
Depreciation and amortization | 72,503 | 51,893 |
General and administrative | 382,280 | 404,472 |
Total expenses | 2,253,234 | 1,563,232 |
Operating income | 699,429 | 649,386 |
Interest | 160,288 | 320,994 |
Change in fair value of derivatives | 0 | 17,627 |
Income before income taxes | 539,141 | 310,765 |
Income tax expense (benefit) | 136,592 | 118,222 |
Net loss | $ 402,549 | $ 192,543 |
Earnings per share - basic: | ||
Net income | $ 0.02 | $ 0.01 |
Weighted average number of common shares outstanding | 20,869,689 | 20,783,032 |
Diluted earnings per share: | ||
Net income | $ 0.02 | $ 0.01 |
Weighted average number of common shares outstanding | 26,389,740 | 25,419,967 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - 3 months ended Mar. 31, 2018 - USD ($) | Common Stock | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2017 | $ 24,322,885 | $ (13,674,794) | $ 10,648,091 |
Beginning Balance, Shares at Dec. 31, 2017 | 20,783,032 | ||
Remove derivatives in accordance with ASU 2017-11 | $ 303,751 | (160,893) | 142,858 |
Net income | 402,549 | 402,549 | |
Conversion of convertible note to common stock, Amount | $ 100,000 | 100,000 | |
Conversion of convertible note to common stock, Shares | 200,000 | ||
Ending Balance, Amount at Mar. 31, 2018 | $ 24,726,636 | $ (13,433,138) | $ 11,293,498 |
Ending Balance, Shares at Mar. 31, 2018 | 20,983,032 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
OPERATING ACTIVITIES | ||
Net income | $ 402,549 | $ 192,543 |
Adjustments to reconcile net income to net cash provided (used) by operating activities: | ||
Depreciation and amortization | 106,781 | 124,880 |
Deferred income taxes | 136,592 | 118,222 |
Change in fair value of derivatives | 0 | 17,627 |
Other non-cash expense | 0 | 24,526 |
(Increase) decrease in: | ||
Accounts receivable | (6,067) | (196,605) |
Inventories | (13,173) | (92,452) |
Prepaid expenses | (7,249) | (72,285) |
Other assets | 34,755 | (111,295) |
Decrease in: | ||
Accounts payable and accrued expenses | (119,926) | (68,417) |
NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES | 534,262 | (63,256) |
INVESTING ACTIVITIES | ||
Purchase of property and equipment | (605,705) | (213,555) |
NET CASH USED IN INVESTING ACTIVITIES | (605,705) | (213,555) |
FINANCING ACTIVITIES | ||
Payment of principal on bank term loans | (160,714) | (163,931) |
Payment of additional closing cost | (13,717) | 0 |
Payment of principal on Super G Funding, LLC loan | 0 | (176,775) |
Payment of Kingsway America loan | 0 | (600,000) |
Net proceeds from (repayment of) officer notes | 0 | 424,166 |
Net proceeds from convertible notes notes | 0 | 674,832 |
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES | (174,431) | 158,292 |
DISCONTINUED OPERATIONS | ||
Payment of obligations from discontinued operations | (15,000) | (72,308) |
Decrease in cash | (260,874) | (190,827) |
Cash at beginning of period | 461,068 | 477,928 |
Cash at end of period | 200,194 | 287,101 |
Supplemental schedule of investing and financing activities | ||
Cash paid for interest | $ 136,420 | $ 197,138 |
1. Basis of Presentation
1. Basis of Presentation | 3 Months Ended |
Mar. 31, 2018 | |
Notes to Financial Statements | |
1. Basis of Presentation | The accompanying unaudited interim condensed consolidated financial statements, included herein, have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated statements have been prepared in accordance with the Company’s accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and should be read in conjunction with the audited consolidated financial statements and the notes thereto included in that report. Unless the context indicates otherwise, references to the “Company” mean Noble Roman’s, Inc. and its subsidiaries. In the opinion of the management of the Company, the information contained herein reflects all adjustments necessary for a fair presentation of the results of operations and cash flows for the interim periods presented and the financial condition as of the dates indicated, which adjustments are of a normal recurring nature. The results for the three-month period ended March 31, 2018 are not necessarily indicative of the results to be expected for the full year ending December 31, 2018. |
2. Royalties and Fees
2. Royalties and Fees | 3 Months Ended |
Mar. 31, 2018 | |
Notes to Financial Statements | |
2. Royalties and Fees | Royalties and fees included $55,500 and $60,500 for the three-month periods ended March 31, 2017 and 2018, respectively, of amortized initial franchise fees. Royalties and fees included $8,382 and $18,561 for the three-month periods ended March 31, 2017 and 2018, respectively, of equipment commissions. Royalties and fees, less initial amortized franchise fees and equipment commissions were $1,549,038 and $1,462,818 for the three-month periods ended March 31, 2017 and 2018, respectively. 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 a contractual liability for the franchisee. In accordance with ASU 2014-09, the Company adopted revenue and expense recognition as described in ASU 2014-09 effective January 2018. Initial franchise fees and related contract costs are deferred and amortized on a straight-line basis over the term of the franchise agreement, generally five to 10 years. The effect to comparable periods within the financial statements is not material as the initial franchise fee for the non-traditional franchise is intended to defray the initial contract costs, and the franchisee fees and contract costs initially incurred and paid approximate the relative amortized franchise fees and contract costs for those same periods. The deferred contract income and costs both approximated $592,000 on December 31, 2017. At December 31, 2017 and March 31, 2018, the Company reported net accounts receivable from franchisees of $7.6 million at both dates which were both net of allowances of $1.5 million. There were 2,854 franchises/licenses in operation on December 31, 2017 and 2,871 franchises/licenses in operation on March 31, 2018. During the three-month period ended March 31, 2018, there were 19 new outlets opened and two outlets closed. In the ordinary course, grocery stores from time to time add our licensed products, remove them and may subsequently re-offer them. Therefore, it is unknown how many of the 2,098 licensed grocery store units included in the counts above have left the system. |
3. Earnings per Share
3. Earnings per Share | 3 Months Ended |
Mar. 31, 2018 | |
Notes to Financial Statements | |
3. Earnings per Share | The following table sets forth the calculation of basic and diluted earnings per share for the three-month period ended March 31, 2017: Three Months Ended March 31, 2017 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 192,543 20,783,032 $ .01 Effect of dilutive securities Options and warrants - 248,046 - Convertible notes - 4,388,889 - Diluted earnings per share Net income per share with assumed conversions $ 192,543 25,419,967 $ .01 The following table sets forth the calculation of basic and diluted earnings per share for the three-month period ended March 31, 2018: Three Months Ended March 31, 2018 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 402,549 20,869,689 $ .02 Effect of dilutive securities Options and warrants - 920,051 Convertible notes 65,168 4,600,000 ____ Diluted earnings per share Net income per share with assumed conversions $ 467,717 26,389,740 $ .02 |
4. Notes Payable
4. Notes Payable | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
4. Notes Payable | In 2016 and 2017, the Company conducted a private placement (the "Offering") of convertible notes ("Notes") and warrants ("Warrants") in the amount 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 accounting treatment of derivative financial instruments formerly required 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 was recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassessed the classification of its derivative instruments at each balance sheet date. If the classification changed as a result of events during the period, the contract was reclassified as of the date of the event that caused the reclassification. In July 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Updates ("ASU") 2017-11, which simplifies the accounting for certain accounting instruments with down round features. This update changes the classification analysis of certain equity-linked financial instruments such as warrants and embedded conversion features such that a down round feature is disregarded when assessing whether the instrument is indexed to an entity's own stock. As a result of this change in the quarter ended March 31, 2018, the Company removed all of the derivative accounting from its financial statements resulting in a gain of $142,858 recognized as a cumulative adjustment to retained earnings on January 1, 2018. Placement agent fees and other origination cost of the Notes are deducted from the carrying value of the Notes, as original issue discount (“OID”). The OID is amortized over the term of the Notes. |
5. Subsequent Events
5. Subsequent Events | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
6. Subsequent Events | The Company evaluated subsequent events through the date the financial statements were issued and filed with SEC. There were no subsequent events that required recognition or disclosure beyond what is disclosed in this report except: 1) on April 13, 2018 a holder of a $100,000 Note converted that Note into 200,000 share of the Company's common stock in accordance with its term, 2) the Company signed a 10 year lease for a fourth Company operated Craft Pizza & Pub location in Carmel, Indiana which is expected to open in late May 2018 and extended the lease on the corporate office from March 31, 2018 until June 30, 2018 while looking for a new corporate office space. |
3. Earnings per Share (Tables)
3. Earnings per Share (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share Tables | |
Earnings Per Share | Three Months Ended March 31, 2017 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 192,543 20,783,032 $ .01 Effect of dilutive securities Options and warrants - 248,046 - Convertible notes - 4,388,889 - Diluted earnings per share Net income per share with assumed conversions $ 192,543 25,419,967 $ .01 Three Months Ended March 31, 2018 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 402,549 20,869,689 $ .02 Effect of dilutive securities Options and warrants - 920,051 Convertible notes 65,168 4,600,000 ____ Diluted earnings per share Net income per share with assumed conversions $ 467,717 26,389,740 $ .02 |
2. Royalties and Fees (Details
2. Royalties and Fees (Details Narrative) | 3 Months Ended | ||
Mar. 31, 2018USD ($)Integer | Mar. 31, 2017USD ($) | Dec. 31, 2017Integer | |
Royalties and Fees | $ | $ 1,462,818 | $ 1,549,038 | |
Number of Franchisee | Integer | 2,871 | 2,854 | |
Outlets opened | Integer | 19 | ||
Outlets closed | Integer | 2 | ||
Initial Franchisee Fees | |||
Royalties and Fees | $ | $ 60,500 | 55,500 | |
Equipment Commission | |||
Royalties and Fees | $ | $ 18,561 | $ 8,382 |
3. Earnings Per Share (Details)
3. Earnings Per Share (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income (Numerator) | ||
Net income | $ 402,549 | $ 192,543 |
Dilutive earnings per share: Net income per share with assumed conversions | $ 192,543 | |
Shares (Denominator) | ||
Shares, basic | 20,869,689 | 20,783,032 |
Dilutive earnings per share: Income available to common stockholders and assumed conversions | 26,389,740 | 25,419,967 |
Per-Share (Amount) | ||
Earnings per share | $ 0.02 | $ 0.01 |
Diluted earnings per share Income available to common stockholders and assumed conversions | $ 0.02 | $ 0.01 |
Options | ||
Income (Numerator) | ||
Dilutive earnings per share: Net income per share with assumed conversions | $ 467,717 | |
Shares (Denominator) | ||
Effect of dilutive securities | 920,051 | 248,046 |
Convertible Preferred Stock | ||
Income (Numerator) | ||
Effect of dilutive securities | $ 65,168 | |
Shares (Denominator) | ||
Effect of dilutive securities | 4,600,000 | 4,388,889 |