Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 08, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | NOBLE ROMANS INC | |
Entity Central Index Key | 0000709005 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 22,015,413 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2019 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash | $ 231,824 | $ 76,194 |
Accounts receivable - net | 1,784,207 | 1,573,600 |
Inventories | 909,173 | 962,783 |
Prepaid expenses | 680,409 | 688,259 |
Total current assets | 3,605,613 | 3,300,836 |
Property and equipment: | ||
Equipment | 2,884,824 | 2,872,494 |
Leasehold improvements | 1,180,637 | 1,180,050 |
Construction and equipment in progress | 150,564 | 119,340 |
Total | 4,216,025 | 4,171,884 |
Less accumulated depreciation and amortization | 1,540,817 | 1,399,435 |
Net property and equipment | 2,675,208 | 2,772,449 |
Deferred tax asset | 4,527,604 | 4,817,309 |
Deferred contract cost | 698,936 | 698,935 |
Goodwill | 278,466 | 278,466 |
Operating lease right of use assets | 4,384,022 | 0 |
Other assets including long-term portion of receivables-net | 4,130,173 | 3,808,957 |
Total assets | 20,300,022 | 15,676,952 |
Current liabilities: | ||
Current portion of term loan payable to bank | 871,429 | 871,429 |
Accounts payable and accrued expenses | 108,824 | 523,315 |
Current portion of operating lease liability | 333,763 | 0 |
Total current liabilities | 1,314,016 | 1,394,744 |
Long-term obligations: | ||
Term loans payable to bank (net of current portion) | 3,512,425 | 3,898,733 |
Convertible notes payable | 1,529,270 | 1,539,204 |
Operating lease liabilities - net of short-term portion | 4,176,871 | 0 |
Deferred contract income | 698,936 | 698,935 |
Total long-term liabilities | 9,917,502 | 6,136,872 |
Stockholders' equity: | ||
Common stock - no par value (40,000,000 shares authorized, 21,583,032 issued and outstanding as of December 31, 2018 and 21,915,413 as of June 30, 2019) | 24,797,569 | 24,739,482 |
Accumulated deficit | (15,729,065) | (16,594,146) |
Total stockholders' equity | 9,068,504 | 8,145,336 |
Total liabilities and stockholders' equity | $ 20,300,022 | $ 15,676,952 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Jun. 30, 2019 | Dec. 31, 2018 |
Stockholders' equity: | ||
Common stock, par value | $ .00 | $ .00 |
Common stock, authorized shares | 40,000,000 | 40,000,000 |
Common stock, issued shares | 21,915,413 | 21,583,032 |
Common stock, outstanding shares | 21,915,413 | 21,583,032 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Revenue: | ||||
Total revenue | $ 3,120,805 | $ 3,177,204 | $ 6,043,554 | $ 6,129,867 |
Operating expenses: | ||||
Total operating expenses | 1,818,857 | 1,937,865 | 3,478,197 | 3,736,316 |
Depreciation and amortization | 76,446 | 100,253 | 170,045 | 172,756 |
General and administrative expenses | 424,793 | 436,044 | 841,042 | 818,324 |
Total expenses | 2,320,096 | 2,474,162 | 4,489,284 | 4,727,396 |
Operating income | 800,709 | 703,042 | 1,554,270 | 1,402,471 |
Interest expense | 220,268 | 153,365 | 347,171 | 313,653 |
Income before income taxes | 580,441 | 549,677 | 1,207,099 | 1,088,818 |
Income tax expense | 139,305 | 137,529 | 289,703 | 274,121 |
Net income | $ 441,136 | $ 412,148 | $ 917,396 | $ 814,697 |
Earnings per share - basic: | ||||
Net income before income tax - basic | $ 0.03 | $ 0.03 | $ 0.06 | $ 0.05 |
Net income | $ 0.02 | $ 0.02 | $ 0.04 | $ 0.04 |
Weighted average number of common shares outstanding | 21,742,291 | 21,156,658 | 21,707,300 | 21,013,971 |
Diluted earnings per share: | ||||
Net income before income tax - diluted | $ 0.02 | $ 0.02 | $ 0.05 | $ 0.04 |
Net income | $ 0.02 | $ 0.02 | $ 0.04 | $ 0.03 |
Weighted average number of common shares outstanding | 25,663,140 | 26,377,773 | 25,633,674 | 26,377,773 |
Company-Owned Craft Pizza & Pub | ||||
Revenue: | ||||
Total revenue | $ 1,329,465 | $ 1,245,942 | $ 2,472,079 | $ 2,354,365 |
Operating expenses: | ||||
Total operating expenses | 1,120,934 | 963,892 | 2,131,853 | 1,829,391 |
Company-Owned Non-traditional | ||||
Revenue: | ||||
Total revenue | 160,020 | 291,526 | 330,522 | 579,642 |
Operating expenses: | ||||
Total operating expenses | 153,109 | 288,831 | 306,818 | 572,687 |
Franchising Revenue Non-traditional | ||||
Revenue: | ||||
Total revenue | 1,620,208 | 1,633,352 | 3,213,222 | 3,175,231 |
Operating expenses: | ||||
Total operating expenses | 544,814 | 685,142 | 1,039,526 | 1,334,238 |
Administrative Fees and Other | ||||
Revenue: | ||||
Total revenue | $ 11,112 | $ 6,384 | $ 27,731 | $ 20,629 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) | Common Stock | Accumulated Deficit | Total |
Beginning balance, shares at Dec. 31, 2017 | 20,783,032 | ||
Beginning balance, amount at Dec. 31, 2017 | $ 24,322,885 | $ (13,674,794) | $ 10,648,091 |
Effects of new accounting standards | 142,857 | 142,857 | |
Net income | 814,697 | 814,697 | |
Amortization of value of employee stock options | $ 14,158 | 14,158 | |
Conversion of convertible note to common stock, shares | 400,000 | ||
Conversion of convertible note to common stock, amount | $ 200,000 | 200,000 | |
Ending balance, shares at Jun. 30, 2018 | 21,183,032 | ||
Ending balance, amount at Jun. 30, 2018 | $ 24,537,043 | (12,717,240) | 11,819,803 |
Beginning balance, shares at Mar. 31, 2018 | 20,983,032 | ||
Beginning balance, amount at Mar. 31, 2018 | $ 24,726,636 | (13,433,138) | 11,293,498 |
Effects of new accounting standards | (303,751) | 303,751 | |
Net income | 412,147 | 412,148 | |
Amortization of value of employee stock options | $ 14,158 | 14,158 | |
Conversion of convertible note to common stock, shares | 200,000 | ||
Conversion of convertible note to common stock, amount | $ 100,000 | 100,000 | |
Ending balance, shares at Jun. 30, 2018 | 21,183,032 | ||
Ending balance, amount at Jun. 30, 2018 | $ 24,537,043 | (12,717,240) | 11,819,803 |
Beginning balance, shares at Dec. 31, 2018 | 21,583,032 | ||
Beginning balance, amount at Dec. 31, 2018 | $ 24,739,482 | (16,594,146) | 8,145,336 |
Effects of new accounting standards | (52,315) | (52,315) | |
Net income | 917,396 | 917,396 | |
Amortization of value of employee stock options | $ 8,087 | 8,087 | |
Cashless exercise of warrants, shares | 232,381 | ||
Conversion of convertible note to common stock, shares | 100,000 | ||
Conversion of convertible note to common stock, amount | $ 50,000 | 50,000 | |
Ending balance, shares at Jun. 30, 2019 | 21,915,313 | ||
Ending balance, amount at Jun. 30, 2019 | $ 24,797,569 | (15,729,065) | 9,068,504 |
Beginning balance, shares at Mar. 31, 2019 | 21,683,032 | ||
Beginning balance, amount at Mar. 31, 2019 | $ 24,789,482 | (16,170,201) | 8,619,281 |
Net income | 441,136 | 441,136 | |
Amortization of value of employee stock options | $ 8,087 | 8,087 | |
Cashless exercise of warrants, shares | 232,281 | ||
Ending balance, shares at Jun. 30, 2019 | 21,915,313 | ||
Ending balance, amount at Jun. 30, 2019 | $ 24,797,569 | $ (15,729,065) | $ 9,068,504 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
OPERATING ACTIVITIES | ||
Net income | $ 917,396 | $ 814,697 |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 238,942 | 234,817 |
Amortization of lease cost in excess of cash paid in accordance with ASU 2016-02 | 21,228 | 0 |
Deferred income taxes | 289,703 | 274,121 |
(Increase) decrease in: | ||
Accounts receivable | (210,607) | (64,571) |
Inventories | 53,610 | (50,127) |
Prepaid expenses | 7,850 | (100,220) |
Other assets including long-term portion of receivables | (235,698) | (66,359) |
Increase (decrease) in: | ||
Accounts payable and accrued expenses | (394,490) | (166,532) |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 687,934 | 875,826 |
INVESTING ACTIVITIES | ||
Purchase of property and equipment | (85,409) | (1,288,393) |
NET CASH USED IN INVESTING ACTIVITIES | (85,409) | (1,288,393) |
FINANCING ACTIVITIES | ||
Payment of principal on bank term loans | (446,895) | (360,119) |
Proceeds from development loan | 0 | 500,000 |
Payment of additional closing costs | 0 | (13,717) |
NET CASH USED BY FINANCING ACTIVITIES | (446,895) | 126,164 |
DISCONTINUED OPERATIONS | ||
Payment of obligations from discontinued operations | 0 | (30,000) |
Increase (decrease) in cash | 155,630 | (316,403) |
Cash at beginning of period | 76,194 | 461,068 |
Cash at end of period | 231,824 | 144,665 |
Supplemental schedule of investing and financing activities | ||
Cash paid for interest | $ 298,324 | $ 223,504 |
1. Basis of Presentation
1. Basis of Presentation | 6 Months Ended |
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
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, 2018 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. Significant Accounting Policies There have been no significant changes in the Company's accounting policies from those disclosed in its Annual Report on Form 10-K except for those policies described below in relation to the adoption of Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842). The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use assets ("ROU"), and lease liability obligations are included in the Company's balance sheets. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liability obligations represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company's leases typically do not provide an implicit rate, the Company estimates its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The ROU asset also includes in the lease payments made and excludes lease incentives and lease direct costs. The Company's lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. In the opinion of the management of the Company, the information contained herein reflects all adjustments necessary for a fair presentation of the results of operations and cash flows for the interim periods presented and the financial condition as of the dates indicated, which adjustments are of a normal recurring nature. The results for the six-month period ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year ending December 31, 2019. |
2. Royalties and Fees
2. Royalties and Fees | 6 Months Ended |
Jun. 30, 2019 | |
Revenue Recognition [Abstract] | |
2. Royalties and Fees | Franchising revenue included initial franchise fee amortization of $116,000 for the three-month period ended June 30, 2019 and $210,500 for the six-month period ended June 30, 2019 compared to $50,000 and $119,500 for the respective three-month and six-month periods ended June 30, 2018. Franchising revenue included equipment commissions of $8,000 and $28,000 for the respective three-month and six-month periods ended June 30, 2019, and $16,000 and $40,000 for the respective three-month and six-month periods ended June 30, 2018. Franchising revenue, less amortized initial franchise fees and equipment commissions, were $1.5 million and $3.0 million for the respective three-month and six-month periods ended June 30, 2019, and $1.6 million and $3.0 for the respective three-month and six-month periods ended June 30, 2018. 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 of 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 $699,000 on June 30, 2019. At December 31, 2018 and June 30, 2019, the Company reported net accounts receivable from former franchisees of $4.4 million and $4.9 million, respectively, which were both net of allowances of $4.3 million. There were 2,894 franchises/licenses in operation on December 31, 2018 and 2,904 franchises/licenses in operation on June 30, 2019. During the six-month period ended June 30, 2019, there were 17 new outlets opened and seven outlets closed. In the ordinary course, grocery stores from time to time add the Company's licensed products, remove them and may subsequently re-offer them. Therefore, it is unknown how many of the 2,263 licensed grocery store units included in the counts above have left the system. |
3. Earnings per Share
3. Earnings per Share | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share [Abstract] | |
3. Earnings per Share | The following table sets forth the calculation of basic and diluted earnings per share for the three-month and six-month periods ended June 30, 2018: Three Months Ended June 30, 2018 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 412,148 21,156,658 $ .02 Effect of dilutive securities Options and warrants 794,740 Convertible notes 55,000 4,426,374 Diluted earnings per share Net income $ 467,148 26,377,772 $ .02 Six Months Ended June 30, 2018 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 814,697 21,013,972 $ .04 Effect of dilutive securities Options and warrants 794,740 Convertible notes 112,500 4,569,061 Diluted earnings per share Net income $ 927,197 26,377,773 $ .04 The following table sets forth the calculation of basic and diluted earnings per share for the three-month and six-month periods ended June 30, 2019: Three Months Ended June 30, 2019 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 441,136 21,742,291 $ .02 Effect of dilutive securities Options and warrants 20,849 Convertible notes 48,750 3,900,000 Diluted earnings per share Net income $ 489,886 25,663,140 $ .02 Six Months Ended June 30, 2019 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 917,396 21,707,300 $ .04 Effect of dilutive securities Options and warrants 20,849 Convertible notes 97,500 3,905,525 Diluted earnings per share Net income $ 1,014,896 25,633,674 $ .04 |
4. Other Assets
4. Other Assets | 6 Months Ended |
Jun. 30, 2019 | |
Other Assets [Abstract] | |
4. Other Assets | Other assets as of June 30, 2019, include security deposits of $11,000, cash surrender value of life insurance in the amount of $199,000 and long-term franchisee receivables in the amount of $3.9 million which is net of a $4.3 million valuation allowance. Long-term receivable from franchisees represent receivables from approximately 80 different non-traditional franchisees (Noble Roman’s franchises located within a host facility). These receivables originated from a variety of circumstances, including where audits of a number of the non-traditional franchises’ reporting of sales found them to be underreporting their sales and, therefore, underpaying their royalty obligations. In other instances, some franchisees were selling non-Noble Roman’s products under the Noble Roman’s trademark. In addition, some receivables arose from the Company incurring legal fees to enforce the franchise agreements and other collection costs totaling approximately $1.9 million which adds to the receivables in accordance with the agreements. Some of the receivables were generated by early termination of the franchise agreements. These receivables have been classified as long-term since collections are expected to extend over more than a one-year cycle. |
5. Subsequent Events
5. Subsequent Events | 6 Months Ended |
Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
5. 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 that an additional $50,000 convertible note was converted to 100,000 shares of commons stock on August 6, 2019. |
3. Earnings per Share (Tables)
3. Earnings per Share (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share [Abstract] | |
Earnings per share | The following table sets forth the calculation of basic and diluted earnings per share for the three-month and six-month periods ended June 30, 2018: Three Months Ended June 30, 2018 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 412,148 21,156,658 $ .02 Effect of dilutive securities Options and warrants 794,740 Convertible notes 55,000 4,426,374 Diluted earnings per share Net income $ 467,148 26,377,772 $ .02 Six Months Ended June 30, 2018 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 814,697 21,013,972 $ .04 Effect of dilutive securities Options and warrants 794,740 Convertible notes 112,500 4,569,061 Diluted earnings per share Net income $ 927,197 26,377,773 $ .04 The following table sets forth the calculation of basic and diluted earnings per share for the three-month and six-month periods ended June 30, 2019: Three Months Ended June 30, 2019 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 441,136 21,742,291 $ .02 Effect of dilutive securities Options and warrants 20,849 Convertible notes 48,750 3,900,000 Diluted earnings per share Net income $ 489,886 25,663,140 $ .02 Six Months Ended June 30, 2019 Income (Numerator) Shares (Denominator) Per-Share Amount Net income $ 917,396 21,707,300 $ .04 Effect of dilutive securities Options and warrants 20,849 Convertible notes 97,500 3,905,525 Diluted earnings per share Net income $ 1,014,896 25,633,674 $ .04 |
2. Royalties and Fees (Details
2. Royalties and Fees (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Initial Franchisee Fees | ||||
Royalties and Fees | $ 116,000 | $ 50,000 | $ 210,500 | $ 119,500 |
Equipment Commission | ||||
Royalties and Fees | $ 16,000 | $ 8,000 | $ 40,000 | $ 28,000 |
3. Earnings Per Share (Details)
3. Earnings Per Share (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Net income | $ 441,136 | $ 412,148 | $ 917,396 | $ 814,697 |
Effect of dilutive securities | 48,750 | 55,000 | 97,500 | 112,500 |
Net income per share with assumed conversions | $ 489,886 | $ 467,148 | $ 1,014,896 | $ 927,197 |
Weighted average number of common shares outstanding, basic | 21,742,291 | 21,156,658 | 21,707,300 | 21,013,971 |
Weighted average number of common shares outstanding, diluted | 25,663,140 | 26,377,773 | 25,633,674 | 26,377,773 |
Earnings per share, basic | $ 0.02 | $ 0.02 | $ 0.04 | $ 0.04 |
Earnings per share, diluted | $ 0.02 | $ 0.02 | $ 0.04 | $ 0.03 |
Options and Warrants | ||||
Effect of dilutive securities | 20,849 | 794,740 | 20,849 | 794,740 |
Convertible Notes | ||||
Effect of dilutive securities | $ 48,750 | $ 55,000 | $ 97,500 | $ 112,500 |
Effect of dilutive securities | 3,900,000 | 4,426,374 | 3,905,525 | 4,569,061 |