United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended June 30, 2011
Commission file number: 0-11104
NOBLE ROMAN'S, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1281154
(State or other jurisdiction (I.R.S. Employer
of organization) Identification No.)
One Virginia Avenue, Suite 300
Indianapolis, Indiana 46204
(Address of principal executive offices) (Zip Code)
(317) 634-3377
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section
232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer [ ] Accelerated Filer [ ]
Non-Accelerated Filer [ ] Smaller Reporting Company [X]
(do not check if smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of August 5, 2011, there were 19,469,317 shares of Common Stock, no par
value, outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
The following unaudited condensed consolidated financial statements are
included herein:
Condensed consolidated balance sheets as of December 31, 2010
and June 30, 2011 (unaudited) Page 3
Condensed consolidated statements of operations for the
three and six months ended June 30, 2010 and 2011 (unaudited) Page 4
Condensed consolidated statements of changes in stockholders'
equity for the six months ended June 30, 2011 (unaudited) Page 5
Condensed consolidated statements of cash flows for the
six months ended June 30, 2010 and 2011 (unaudited) Page 6
Notes to condensed consolidated financial statements (unaudited) Page 7
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
Assets December 31, June 30,
2010 2011
------------ ------------
Current assets:
Cash $ 337,044 $ 227,145
Accounts and notes receivable - net 920,304 1,150,917
Inventories 316,913 318,129
Assets held for resale 246,278 249,671
Prepaid expenses 235,778 333,068
Deferred tax asset - current portion 1,400,000 1,400,000
------------ ------------
Total current assets 3,456,317 3,678,930
------------ ------------
Property and equipment:
Equipment 1,139,050 1,143,246
Leasehold improvements 12,283 12,283
------------ ------------
1,151,333 1,155,529
Less accumulated depreciation and amortization 784,282 816,740
------------ ------------
Net property and equipment 367,051 338,789
Deferred tax asset (net of current portion) 10,150,558 9,654,081
Other assets 2,920,853 3,339,260
------------ ------------
Total assets $ 16,894,779 $ 17,011,060
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term note payable to bank $ 1,875,000 $ 1,925,000
Accounts payable and accrued expenses 654,319 240,766
------------ ------------
Total current liabilities 2,529,319 2,165,766
------------ ------------
Long-term obligations:
Note payable to bank (net of current portion) 2,625,000 2,275,000
Note payable to officer 855,821 905,821
------------ ------------
Total long-term liabilities 3,480,821 3,180,821
------------ ------------
Stockholders' equity:
Common stock - no par value (25,000,000 shares authorized,
19,419,317 issued and outstanding as of December 31, 2010 and
19,469,317 as of June 30, 2011) 23,116,317 23,188,582
Preferred stock (5,000,000 shares authorized and 20,625 issued and
outstanding as of December 31, 2010 and June 30, 2011) 800,250 800,250
Accumulated deficit (13,031,928) (12,324,359)
------------ ------------
Total stockholders' equity 10,884,639 11,664,473
------------ ------------
Total liabilities and stockholders' equity $ 16,894,779 $ 17,011,060
============ ============
See accompanying notes to condensed consolidated financial statements.
3
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2010 2011 2010 2011
----------- ----------- ----------- -----------
Royalties and fees $ 1,678,775 $ 1,731,802 $ 3,314,431 $ 3,406,589
Administrative fees and other 14,458 11,018 20,708 19,395
Restaurant revenue 139,081 137,670 252,307 256,522
----------- ----------- ----------- -----------
Total revenue 1,832,314 1,880,490 3,587,446 3,682,506
Operating expenses:
Salaries and wages 245,129 247,497 485,516 485,140
Trade show expense 75,703 93,247 150,841 183,247
Travel expense 36,764 52,589 73,003 99,474
Other operating expenses 176,043 176,290 366,558 355,230
Restaurant expenses 135,495 129,903 247,244 248,467
Depreciation and amortization 13,645 36,311 28,219 49,860
General and administrative 414,973 403,430 809,776 811,818
----------- ----------- ----------- -----------
Total expenses 1,097,751 1,139,267 2,161,157 2,233,236
----------- ----------- ----------- -----------
Operating income 734,563 741,223 1,426,289 1,449,270
Interest and other expense 114,141 97,207 223,541 195,859
----------- ----------- ----------- -----------
Income before income taxes 620,422 644,016 1,202,748 1,253,411
Income tax expense 245,749 255,097 476,409 496,478
----------- ----------- ----------- -----------
Net income 374,673 388,919 726,339 756,933
Cumulative preferred dividends 24,411 24,411 41,046 49,364
----------- ----------- ----------- -----------
Net income available to common
stockholders $ 350,262 $ 364,508 $ 685,293 $ 707,569
=========== =========== =========== ===========
Earnings per share - basic:
Net income $ .02 $ .02 $ .04 $ .04
Net income available to common stockholders $ .02 $ .02 $ .04 $ .04
Weighted average number of common shares
outstanding 19,412,499 19,469,317 19,412,499 19,446,113
Diluted earnings per share:
Net income $ .02 $ .02 $ .04 $ .04
Net income available to common
stockholders $ .02 $ .02 $ .03 $ .04
Weighted average number of common shares
outstanding 20,065,298 20,183,876 20,065,298 20,160,672
See accompanying notes to condensed consolidated financial statements.
4
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in
Stockholders' Equity
(Unaudited)
Preferred Common Stock Accumulated
Stock Shares Amount Deficit Total
------------ ---------- ------------ ------------ ------------
Balance at December 31, 2010 $ 800,250 19,419,317 $ 23,116,317 $(13,031,928) $ 10,884,639
Net income for six months ended
June 30, 2011 756,933 756,933
Cumulative preferred dividends (49,364) (49,364)
Exercise of employee stock options 50,000 18,000 18,000
Amortization of value of stock
options 54,265 54,265
------------ ---------- ------------ ------------ ------------
Balance at June 30, 2011 $ 800,250 19,469,317 $ 23,188,582 $(12,324,359) $ 11,664,473
============ ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
5
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
2010 2011
--------- ---------
OPERATING ACTIVITIES
Net income $ 726,339 $ 756,933
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 70,336 106,112
Deferred income taxes 476,409 496,478
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts and notes receivable (234,701) (242,926)
Inventories 13,989 (1,216)
Prepaid expenses (212,847) (97,290)
Other assets (579,908) (454,990)
Decrease in:
Accounts payable and accrued expenses (29,128) (28,551)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 230,489 534,550
--------- ---------
INVESTING ACTIVITIES
Purchase of property and equipment (2,591) (4,196)
Investment in assets held for sale -- (3,393)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (2,591) (7,589)
--------- ---------
FINANCING ACTIVITIES
Payment of obligations from discontinued operations (138,321) (379,642)
Payment of cumulative preferred dividends (41,046) (49,364)
Payment of principal on outstanding debt (750,000) (305,801)
Proceeds from the exercise of stock options -- 18,000
Principal payment received on notes receivable -- 29,947
Proceeds from officer loan 610,000 50,000
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES (319,367) (636,860)
--------- ---------
Decrease in cash (91,469) (109,899)
Cash at beginning of period 333,204 337,044
--------- ---------
Cash at end of period $ 241,735 $ 227,145
========= =========
Supplemental schedule of non-cash investing and financing activities
None.
Cash paid for interest $ 184,262 $ 173,456
See accompanying notes to condensed consolidated financial statements.
6
Notes to Condensed Consolidated Financial Statements (Unaudited)
----------------------------------------------------------------
Note 1 - 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 Annual Report on Form 10-K for the year
ended December 31, 2010 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 six-month period ended June 30, 2011 are not
necessarily indicative of the results to be expected for the full year ending
December 31, 2011.
Note 2 - On July 19, 2011, the Company entered into a Fourth Amendment to Loan
Agreement (the "Amendment") with Wells Fargo Bank, National Association ("Wells
Fargo") that amended the existing Loan Agreement dated August 25, 2005, between
the Company and Wells Fargo, as previously amended by a certain First Amendment
to Loan Agreement dated February 4, 2008, a certain Second Amendment to Loan
Agreement dated November 10, 2010, and a certain Third Amendment to Loan
Agreement dated March 10, 2011 (as so amended, the "Loan Agreement").
The Amendment reduces monthly principal payments and shortens the maturity date
for borrowings under the Loan from August 13, 2013 to October 1, 2012 at which
date the principal balance payable will be $1,675,000. The Amendment maintains
the current interest rate applicable to amounts borrowed under the Loan
Agreement of LIBOR plus 4.25% per annum, but increases the interest rate
applicable to amounts borrowed under the Loan Agreement after June 1, 2012 to
LIBOR plus 7.25% per annum.
Note 3 - At various times, Paul W. Mobley, the Company's Chairman of the Board
and Chief Executive Officer, made advances to the Company to help fund principal
payments due under its bank loan and payments related to discontinued
operations. The payments related to the discontinued operations were largely for
legal fees related to the Heyser lawsuit, which is described in Note 6 to the
accompanying unaudited condensed consolidated financial statements in this
report and in Note 10 of the Company's consolidated financial statements
included in its Form 10-K for the year ended December 31, 2010. The Company
issued an amended note in July 2011 in the principal amount of $1,055,821 to
reflect the advances. The note provides for interest at the rate of 8% per annum
to be paid monthly on the unpaid principal balance of the note and continuing on
the first day of each calendar month thereafter until the note is paid in full.
The Company is current on the required interest payments. In addition, the note
requires principal payments commencing on November 1, 2012 and on the first day
of each calendar month thereafter up to and including March 1, 2013 in the
amount of $200,000 per month with a final payment of any remaining principal
balance to be paid on April 1, 2013.
Note 4 - Royalties and fees include $74,985 and $127,485 for the three-month and
six-month periods ended June 30, 2011, respectively, and $55,500 and $119,500
for the three-month and six-month periods ended June 30, 2010, respectively, of
initial franchise fees. Royalties and fees included $8,354 and $18,478 for the
7
three-month and six-month periods ended June 30, 2011 and $27,908 and $87,592
for the three-month and six-month periods ended June 30, 2010, respectively, of
equipment commissions. Royalties and fees, less initial franchise fees and
equipment commissions were $1,648,462 and $3,260,626 for the three-month and
six-month periods ended June 30, 2011 and $1,595,367 and $3,107,339 for the
three-month and six-month periods ended June 30, 2010, respectively. The
breakdown of royalties and fees, less upfront fees, are royalties and fees from
non-traditional franchises other than grocery stores were $1,111,428 and
$2,162,306 for the three-month and six-month periods ended June 30, 2011,
respectively, and $1,060,879 and $2,056,528 for the three-month and six-month
periods ended June 30, 2010, respectively; royalties and fees from the grocery
store take-n-bake were $264,739 and $547,600 for the three-month and six-month
periods ended June 30, 2011, respectively, and $68,385 and $113,025 for the
three-month and six-month periods ended June 30, 2010, respectively; and
royalties and fees from traditional locations were $272,296 and $550,720 for the
three-month and six-month periods ended June 30, 2011, respectively, and
$466,103 and $937,786 for the three-month and six-month periods ended June 30,
2010, respectively. The Company has no material amount of past due royalties.
There were 1,112 franchises in operation on December 31, 2010 and 1,331
franchises in operation on June 30, 2011. During the six-month period ended June
30, 2011 there were 227 new outlets opened and 8 outlets closed. The breakdown
of the 1,331 franchises at June 30, 2011 was 752 non-traditional franchises
other than grocery stores, 537 grocery stores and 42 traditional franchises.
Note 5 - 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,
2011:
Three Months Ended June 30, 2011
--------------------------------
Income Shares Per-Share
------ ------ Amount
(Numerator) (Denominator) ---------
Net income $ 388,919 19,469,317 $ .02
Less preferred stock dividends (24,411)
---------
Earnings per share - basic
Income available to common stockholders 364,508 .02
Effect of dilutive securities
Options 347,893
Convertible preferred stock 24,411 366,666
--------- ----------
Diluted earnings per share
Income available to common stockholders
and assumed conversions $ 388,919 20,183,876 $ .02
8
Six Months Ended June 30, 2011
------------------------------
Income Shares Per-Share
------ ------ Amount
(Numerator) (Denominator) ---------
Net income $ 756,933 19,446,113 $ .04
Less preferred stock dividends (49,364)
---------
Earnings per share - basic
Income available to common stockholders 707,569 .04
Effect of dilutive securities
Options 347,893
Convertible preferred stock 49,364 366,666
--------- ----------
Diluted earnings per share
Income available to common stockholders
and assumed conversions $ 756,933 20,160,672 $ .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, 2010:
Three Months Ended June 30, 2010
--------------------------------
Income Shares Per-Share
------ ------ Amount
(Numerator) (Denominator) ---------
Net income $ 374,673 19,412,499 $ .02
Less preferred stock dividends (24,411)
---------
Earnings per share - basic
Income available to common stockholders 350,262 .02
Effect of dilutive securities
Options 286,133
Convertible preferred stock 24,411 366,666
--------- ----------
Diluted earnings per share
Income available to common stockholders
and assumed conversions $ 374,673 20,065,298 $ .02
Six Months Ended June 30, 2010
------------------------------
Income Shares Per-Share
------ ------ Amount
(Numerator) (Denominator) ---------
Net income $ 726,339 19,412,499 $ .04
Less preferred stock dividends (41,046)
---------
Earnings per share - basic
Income available to common stockholders 685,293 .04
Effect of dilutive securities
Options 286,133
Convertible preferred stock 41,046 366,666
--------- ----------
Diluted earnings per share
Income available to common stockholders
and assumed conversions $ 726,339 20,065,298 $ .04
9
Note 6 - The Company is a Defendant in a lawsuit styled Kari Heyser, Fred Eric
Heyser and Meck Enterprises, LLC, et al v. Noble Roman's, Inc. et al, filed in
Superior Court in Hamilton County, Indiana on June 19, 2008 (Cause No. 29D01
0806 PL 739). The Court issued an Order dated December 23, 2010 granting summary
judgment in favor of the Company against all of the Plaintiffs on their fraud
claims. As a result, the Plaintiffs' allegations of fraud against the Company
and certain of its officers were determined to be without merit. The Company's
counterclaims against the Plaintiffs for breach of contract and other related
claims remain pending.
The Complaint was originally filed against the Company and certain of its
officers and certain institutional lenders. The Plaintiffs are former
franchisees of the Company's traditional location venue. Initially there were
approximately 14 groups of franchisee-Plaintiffs. Since the inception of the
lawsuit, the Court has dismissed the claims against the institutional lenders.
In addition, one group of franchisee-Plaintiffs voluntarily dismissed its claims
against the Company and the Court held another group of franchisee-Plaintiffs in
contempt and dismissed its claims with prejudice.
The Plaintiffs allege that the Defendants fraudulently induced them to purchase
franchises for traditional locations through misrepresentations and omissions of
material facts regarding the franchises. As relief, the Plaintiffs sought
compensatory and punitive damages in addition to court costs and/or prejudgment
interest. The Plaintiffs that remained in the case, following the voluntary and
involuntary dismissals described above, claimed actual damages in the amount of
$5.1 million, which has been discharged as a result of the summary judgment
Order in favor of the Company issued December 23, 2010.
The Company filed counterclaims for damages for breach of contract against all
of the Plaintiffs in the aggregate approximate amount of $3.6 million plus
attorney's fees, cost of collection and punitive damages in certain instances.
The Company intends to prosecute the counterclaims and obtain and execute on any
judgments against all counterclaim Defendants.
In addition to the above actual fraud claims, one group of franchisee-Plaintiffs
asserted a separate claim under the Indiana Franchise Act. The Court's December
23, 2010 Order denied the Company's motion for summary judgment as to the
Indiana Franchise Act claim finding the existence of a genuine issue of material
fact and did not render any opinion on the merits of that claim. The Company
denies liability on this claim and will continue to vigorously prosecute its
defenses against this claim.
The Plaintiffs filed a motion with the Court asking it to correct errors and to
reconsider the Order for summary judgment. The Company opposed that motion and a
hearing on the motion was held on March 24, 2011. In accordance with trial rule
53.3, if the Judge does not rule on the motion to reconsider within 30 days, the
motion is deemed denied. Therefore the motion was deemed denied on April 25,
2011. In accordance with the same trial rule, the 30 days within which a notice
of appeal can be filed starts running the day it was deemed denied. Therefore,
the deadline passed on May 25, 2011 for a notice of appeal to be filed and none
was filed.
On June 28, 2011 Plaintiffs filed a motion with the Court asking the Judge to
reconsider his Order of December 23, 2010 making it an "Interlocutory" order
instead of a "Final" order. The Company filed its response opposing that motion.
The Judge set a hearing on that motion for September 26, 2011. However, on June
8, 2011 Plaintiffs filed an appeal with the Indiana Court of Appeals. On July 6,
2011 the Clerk of the trial court issued a notice of completion of the Clerk's
record. On July 11, 2011 the Company filed a motion with the trial court to
vacate the Order setting the hearing for September 26, 2011 on Plaintiff's
10
motion to reconsider the Order of December 23, 2010 on the grounds that the
trial court no longer had jurisdiction over this issue since it completed the
Clerk's record to the Indiana Court of Appeals. On July 14, 2011 the Company
filed a motion with the Indiana Court of Appeals to dismiss the appeal on the
grounds that the appeal was filed after the deadline of May 25, 2011 for filing
of an appeal. On July 25, 2011 the Court granted the Company's motion to vacate
the order setting the hearing for September 26, 2011. On July 29, 2011,
Plaintiffs filed a motion with the Indiana Court of Appeals to voluntarily
dismiss the appeal. Also, on July 29, 2011, Plaintiffs filed a motion with the
trial court to reset the hearing on the motion to reconsider the Order of
December 23, 2010. The Company intends to oppose the motion for voluntary
withdrawal of appeal in the Indiana Court of Appeals asking the Court to rule on
the Company's motion to dismiss the appeal with prejudice. If the Indiana Court
of Appeal grants the Company's motion to dismiss the appeal with prejudice the
motion to reset the hearing to reconsider the Order of December 23, 2010 will
become moot.
On June 10, 2011 the Court granted permission for the Company to file summary
judgment motions on the Company's counterclaims against the Plaintiffs as
opposed to jury trial. The Company will be filing summary judgment motions. The
judge has set a hearing on the summary judgment motions for December 6, 2011.
Note 7: The Company evaluated subsequent events through the date the financial
statements were issued and filed with the Securities and Exchange Commission.
There were no subsequent events that required recognition or disclosure beyond
what is disclosed in this report.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
------------
The Company sells and services franchises and licenses for non-traditional and
stand-alone foodservice operations under the trade names "Noble Roman's Pizza",
"Tuscano's Italian Style Subs", "Noble Roman's Bistro", "Noble Roman's
Take-N-Bake" and "Tuscano's Grab-N-Go Subs". The Company believes the attributes
of these concepts include high quality products, simple operating systems, labor
minimizing operations, attractive food costs and overall affordability.
Noble Roman's Pizza
-------------------
"Superior quality that our customers can taste" - that is the hallmark of Noble
Roman's Pizza. Every ingredient and process has been designed with a view to
producing superior results. We believe the following make our products unique:
o Crust made with only specially milled flour with above average protein
and yeast.
o Fresh packed, uncondensed sauce made with secret spices, parmesan
cheese and vine-ripened tomatoes.
o 100% real cheese blended from mozzarella and Muenster, with no soy
additives or extenders.
o 100% real meat toppings, again with no additives or extenders - a real
departure from many pizza concepts.
o Vegetable and mushroom toppings that are sliced and delivered fresh,
never canned.
11
o An extended product line that includes breadsticks with dip, pasta,
baked sandwiches, salads, wings and a line of breakfast products.
o A fully-prepared pizza crust that captures the made-from-scratch
pizzeria flavor which gets delivered to the franchise location
shelf-stable so that dough handling is no longer an impediment to a
consistent product.
The Company carefully developed nearly all of its menu items to be delivered in
a ready-to-use form requiring only on-site assembly and baking. The ingredients
for these menu items are manufactured by third-party vendors and distributed by
unrelated distributors who deliver throughout much of the continental United
States. We believe this process results in products that are great tasting,
quality consistent, easy to assemble and relatively low in food cost and that
require relatively low amounts of labor.
Noble Roman's Take-N-Bake Pizza
-------------------------------
In September 2009, the Company introduced a take-n-bake version of its pizza as
an addition to its menu offerings. The Company uses the same high-quality pizza
ingredients for its take-n-bake product as with its standard pizza, with slight
modifications to portioning for increased home baking performance. The
take-n-bake pizza is designed as an add-on component for new and existing
convenience store franchises, and as a stand-alone offering for grocery stores.
Since adding this component in September 2009, the Company has signed agreements
for 778 grocery store locations to operate the take-n-bake pizza program. The
Company is also in discussions with several other grocery store owners. The
Company expects the number of grocery store locations operating the take-n-take
program to increase substantially over the remainder of the year. The
take-n-bake program has also been integrated into the operations of several
existing convenience store franchises, generating add-on sales, and is now being
offered to all convenience store franchisees. The take-n-bake program in grocery
stores is being offered as a supply agreement rather than a franchise agreement.
To supplement the take-n-bake pizza offering, at the beginning of 2011, the
Company introduced five carton-to-shelf retail items that require no assembly at
the grocery store and as a complement to the take-n-bake program. These five
items are Noble Roman's Pasta Sauce, Noble Roman's Flavor-Aged Parmesan Cheese,
Noble Roman's Deep-Dish Lasagna with Italian Sausage, Noble Roman's Spicy Cheese
Sauce and Noble Roman's Cheesy Stix. In addition to being a complement to the
take-n-bake program, these five products are being offered to all grocery stores
and require no agreement, unlike the take-n-bake program which requires a supply
agreement to help control quality and to protect the Company's proprietary
products, because the pizzas are assembled in the grocery store deli
departments.
Tuscano's Italian Style Subs
----------------------------
Tuscano's Italian Style Subs is a separate restaurant concept that focuses on
sub sandwich menu items. Tuscano's was designed to be comfortably familiar from
a customer's perspective but with many distinctive features that include an
Italian-themed menu. The franchise fee and ongoing royalty for a Tuscano's is
identical to that charged for a Noble Roman's Pizza franchise. For the most
part, the Company awards Tuscano's franchises for the same facilities as Noble
Roman's Pizza franchises, although Tuscano's franchises are also available for
locations that do not have a Noble Roman's Pizza franchise.
With its Italian theme, Tuscano's offers a distinctive yet recognizable format.
Like most other brand name sub concepts, customers select menu items at the
start of the counter line then choose toppings and sauces according to their
12
preference until they reach the check out point. Tuscano's, however, has many
unique competitive features, including its Tuscan theme, the extra rich yeast
content of its fresh baked bread, thematic menu selections and serving options,
high quality meats, and generous yet cost-effective quality sauces and spreads.
Tuscano's was designed to be premium quality, simple to operate and
cost-effective.
The Company also has a grab-n-go service system for a selected portion of the
Tuscano's menu. The grab-n-go system is designed to add sales opportunities at
existing non-traditional Noble Roman's Pizza and/or Tuscano's Subs locations.
The grab-n-go system has been integrated into the operations of several existing
locations to generate add-on sales.
The Company offers new, non-traditional franchisees the opportunity to open with
both take-n-bake pizza and grab-n-go subs when they acquire a dual-branded
franchise or license. Additionally, through changes in the menu, operating
systems and equipment structure, the Company is now able to offer dual Noble
Roman's Pizza and Tuscano's Grab-N-Go Subs franchises at a much reduced
investment cost compared to the previous offering.
Business Strategy
-----------------
The Company's business strategy can be summarized as follows:
Sales of Non-Traditional Franchises and Licenses. The Company believes that it
has an opportunity for increasing unit growth and revenue within its
non-traditional venues such as hospitals, military bases, universities,
convenience stores, grocery stores, attractions, entertainment facilities,
casinos, airports, travel plazas, office complexes and hotels. The Company's
franchises in non-traditional locations are foodservice providers within a host
business, and usually require a minimal investment compared to a stand-alone
franchise. Non-traditional franchises or licenses are most often sold into
pre-existing facilities as a service and/or revenue enhancer for the underlying
business. Although the Company's current focus is on non-traditional franchise
or license expansion, the Company will still seek to capitalize on other
franchising opportunities as they present themselves.
As a result of the Company's major focus being on non-traditional franchising
and licensing, its requirements for overhead and operating cost are
significantly less than if it were focusing on traditional franchising. In
addition, the Company does not operate restaurants except for two restaurants it
uses for product testing, demonstration and training purposes. This allows for a
more complete focus on selling and servicing franchises and licenses to pursue
increased unit growth.
Licensing the Company's Take-N-Bake Program. In September 2009, the Company
introduced a take-n-bake pizza as an addition to its menu offering. The
take-n-bake pizza is designed as an add-on component for new and existing
convenience store franchisees or licensees and as a stand-alone offering for
grocery stores. Since September 2009 when the Company started offering
take-n-bake pizza to grocery store chains through August 5, 2011, the Company
has signed agreements with 778 grocery store locations to operate the
take-n-bake pizza program and has opened take-n-bake pizza in 586 locations. The
Company is currently in discussions with numerous additional grocery store
owners. Following the hot, picnic season of middle summer when deli departments
are otherwise occupied, the rate of openings are expected to accelerate in
August and into fall and winter, which are prime seasons for pizza sales.
At the start of 2011, to supplement the take-n-bake pizza offering and expand
merchandising space, the Company introduced five carton-to-shelf retail items
that require no assembly at the grocery store and help expand the merchandising
13
visibility of the Noble Roman's brand. These five items are Noble Roman's Pasta
Sauce, Noble Roman's Flavor-Aged Parmesan Cheese, Noble Roman's Deep-Dish
Lasagna with Italian Sausage, Noble Roman's Spicy Cheese Sauce and Noble Roman's
Cheesy Stix. Beginning in August 2011, the Company introduced six new "Signature
Specialty Take-N-Bake Pizza" combinations to its current standard offerings.
These pizzas feature unique, fun combination of ingredients with proven customer
appeal in other Company venues, and include Hawaiian pizza, Four Cheese pizza,
BBQ Pork pizza, BBQ Chicken pizza, Hoppin' Jalapeno pizza and Parmesan Tomato
pizza. The Company's strategy with these new combinations is to secure more
shelf space in existing locations and appeal to the program to attract new
locations and to generally increase sales of the Company's products. Interest in
the Company's new pizza combinations has been very high in recent trade shows
where they have been presented.
In an attempt to accelerate the growth of take-n-bake pizza in grocery stores,
the Company has been focusing on signing agreements with various grocery store
distributors to market the take-n-bake pizza program to the distributor's
current customer base. On July 19, 2010, the Company signed an agreement with a
grocery store distributor headquartered in California and the Company now has
196 take-n-bake agreements with their customers. On October 13, 2010, the
Company signed an agreement with a grocery store distributor in Wisconsin,
however, they did not stock their warehouse until February 1, 2011. The Company
now has 25 take-n-bake agreements with their customers. On January 13, 2011, the
Company signed an agreement with a grocery store distributor headquartered in
Connecticut. The Company now has 63 take-n-bake agreements with their customers.
On March 28, 2011, the Company signed an agreement with a grocery store
distributor in Oklahoma. The Company now has 82 take-n-bake agreements with
their customers. On March 30, 2011, the Company signed an agreement with a
grocery store distributor in Utah. The Company now has 68 take-n-bake agreements
with their customers. On April 12, 2011, the Company signed an agreement with a
grocery store distributor in Pennsylvania. The Company now has 25 take-n-bake
agreements with their customers. On May 20, 2011, the Company signed an
agreement with a grocery store distributor in New Hampshire. The Company now has
two take-n-bake agreements with their customers. On August 2, 2011, the Company
signed an agreement with a grocery store distributor in Indiana. The Company now
has 10 take-n-bake agreements with their customers. The Company is currently in
discussion with a number of other grocery store distributors.
Maintain Superior Product Quality. The Company believes that the quality of its
products will contribute to the growth of its non-traditional locations. Every
ingredient and process was designed with a view to producing superior results.
The menu items were developed to be delivered in a ready-to-use form requiring
only on-site assembly and baking except for take-n-bake pizza which is sold to
bake at home, and the new carton-to-shelf retail items which require no
assembly. The Company believes this process results in products that are great
tasting, quality consistent, easy to assemble, and relatively low in food cost
and that require very low amounts of labor, which allows for a significant
competitive advantage due to the speed at which its products can be prepared,
baked and served to customers.
Financial Summary
-----------------
The preparation of the consolidated financial statements in conformity with
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 may differ from those
estimates. The Company periodically evaluates the carrying values of its assets,
including property, equipment and related costs, accounts receivable and
deferred tax asset, to assess whether any impairment indications are present due
to (among other factors) recurring operating losses, significant adverse legal
14
developments, competition, changes in demand for the Company's products or
changes in the business climate that affect the recovery of recorded value. If
any impairment of an individual asset is evident, a charge will be provided to
reduce the carrying value to its estimated fair value.
The following table sets forth the percentage relationship to total revenue of
the listed items included in Noble Roman's consolidated statements of operations
for the three-month periods ended June 30, 2010 and 2011, respectively.
Three Months Ended Six Months Ended
June 30, June 30,
------- -------
2010 2011 2010 2011
---- ---- ---- ----
Royalties and fees 91.6 % 92.1 % 92.4 % 92.5 %
Administrative fees and other .8 .6 .6 .5
Restaurant revenue 7.6 7.3 7.0 7.0
----- ----- ----- -----
Total revenue 100.0 100.0 100.0 100.0
----- ----- ----- -----
Operating expenses:
Salaries and wages 13.4 13.2 13.5 13.2
Trade show expense 4.1 5.0 4.2 5.0
Travel expense 2.0 2.8 2.0 2.7
Other operating expense 9.7 9.4 10.2 9.6
Restaurant expenses 7.4 6.9 6.9 6.7
Depreciation and amortization .8 1.8 .9 1.4
General and administrative 22.6 21.5 22.6 22.0
----- ----- ----- -----
Total expenses 60.0 60.6 60.3 60.6
----- ----- ----- -----
Operating income 40.0 39.4 39.7 39.4
Interest and other expense 6.2 5.2 6.2 5.4
----- ----- ----- -----
Income before income taxes 33.8 34.2 33.5 34.0
Income tax expense 13.3 13.5 13.3 13.4
----- ----- ----- -----
Net income 20.5 % 20.7 % 20.2 % 20.6 %
===== ===== ===== =====
Results of Operations
---------------------
Total revenue increased from $1,832,314 to $1,880,490 and from $3,587,446 to
$3,682,506 for the three-month and six-month periods ended June 30, 2011
compared to the corresponding periods in 2010. One-time fees, franchisee fees
and equipment commissions increased from $83,408 to $83,339 and decreased from
$207,092 to $145,963 during the three-month and six-month periods ended June 30,
2011 compared to the corresponding periods in 2010. Ongoing royalties and fees
increased from $1,595,367 to $1,648,463 and from $3,107,339 to $3,260,626 for
the three-month and six-month periods ended June 30, 2011 compared to the
corresponding periods in 2010. Of these increases, $196,354 and $434,575
resulted from increases in ongoing royalties and fees from grocery store
take-n-bake additions and $50,549 and $105,777 from increases in ongoing
royalties and fees from non-traditional franchises other than grocery stores for
the three-month and six-month periods ended June 30, 2011 compared to the
corresponding periods in 2010. These increases were partially offset by
decreases in ongoing royalties and fees from traditional locations of $193,807
and $387,066 for the three-month and six-month periods ended June 2011 compared
to the corresponding periods in 2010.
Restaurant revenue decreased from $139,081 to $137,670 and increased from
$252,307 to $256,522 for the three-month and six-month periods ended June 30,
2011 compared to the corresponding periods in 2010. The decrease in the second
quarter and increase in the six-month period were a result of a same store sales
15
decrease during the second quarter and an increase during the six-month period.
The Company only operates two locations primarily for testing and demonstration
purposes.
Salaries and wages decreased, as a percentage of total revenue, from 13.4% from
to 13.2% from 13.5% and 13.2% for the three-month and six-month periods ended
June 30, 2011 compared to the corresponding periods in 2010. The decreases were
the result of the Company's strategy to grow by concentrating its efforts on
franchising and licensing non-traditional locations plus the increase in total
revenue.
Trade show expenses increased from 4.1% to 5.0% of total revenue and from 4.2%
to 5.0% of total revenue for the three-month and six-month periods ended June
30, 2011, respectively, compared to the corresponding periods in 2010. These
increases were the result of scheduling more trade shows for grocery stores.
Trade show expenses were $93,247 and $183,247 in the three-month and six-month
periods ended June 30, 2011 compared to $75,703 and $150,841 in the
corresponding periods in 2010.
Travel expenses increased from 2.0% to 2.8% of total revenue and from 2.0% to
2.7% of total revenue for the three-month and six-month periods ended June 30,
2011, respectively, compared to the corresponding periods in 2010. Actual travel
expense increased from $36,764 and $73,003 to $52,589 and $99,474 for the
three-month and six-month periods ended June 30, 2011 compared to the
corresponding periods in 2010. These increases were the result of opening 211
take-n-bake locations in grocery stores throughout the country during the first
six months of 2011 compared to opening 120 locations in the corresponding period
of 2010.
Other operating expenses decreased, as a percentage of total revenue, from 9.7%
to 9.4% and from 10.2% to 9.6% for the three-month and six-month periods ended
June 30, 2011, respectively, compared to the corresponding periods in 2010.
Actual operating expenses remained approximately the same for the second quarter
of 2011 compared to the corresponding quarter in 2010 and decreased from
$366,558 to $355,230 for the six-month period ended June 30, 2011.
Restaurant expenses decreased as a percentage of total revenue from 7.4% to 6.9%
and from 6.9% to 6.7% for the three-month and six-month periods ended June 30,
2011, respectively, compared to the corresponding periods in 2010. The decreases
in percentage were a result of the increase in total revenue. The Company only
operates two restaurants which it uses for demonstration, training and testing
purposes.
General and administrative expenses decreased as a percentage of total revenue
from 22.6% to 21.5% and from 22.6% to 22.0% for the three-month and six-month
periods ended June 30, 2011, respectively, compared to the corresponding periods
in 2010. Actual general and administrative expense decreased from $414,973 to
$403,430 and increased from $809,776 to $811,818 for the three-month and
six-month periods ended June 30, 2011, respectively, compared to the
corresponding periods in 2010.
Total expenses increased as a percentage of total revenue from 60.0% to 60.6%
and from 60.3% to 60.6% for the three-month and six-month periods period ended
June 30, 2011, respectively, compared to the corresponding periods in 2010.
Actual expenses increased from $1,097,751 to $1,139,267 and from $2,161,157 to
$2,233,236 for the three-month and six-month periods ended June 30, 2011,
respectively, compared to the corresponding periods in 2010. These increases
were primarily the result of the increase in trade show expense and travel
expenses due to more openings. The Company opened a total of 211 locations in
the six-month period of 2011 compared to a total of 120 locations in the
corresponding period in 2010.
16
Operating income decreased as a percentage of total revenue from 40.0% to 39.4%
and from 39.7% to 39.4% for the three-month and six-month periods ended June 30,
2011, respectively, compared to the corresponding periods in 2010. Actual
operating income increased from $734,563 to $741,223 and from $1,426,289 to
$1,449,270 for the three-month and six-month periods ending June 30, 2011,
respectively, compared to the corresponding periods in 2010.
Interest expense decreased as a percentage of total revenue from 6.2% to 5.2%
and from 6.2% to 5.4% for the three-month and six-month periods ended June 30,
2011, respectively, compared to the corresponding periods in 2010. These
decreases were primarily the result of a decrease in notes payable outstanding
and in increase in total revenue.
Net income increased from $374,673 to $388,919 and from $726,339 to $756,933 for
the three-month and six-month periods ended June 30, 2011 compared to the
corresponding periods in 2010.
Liquidity and Capital Resources
-------------------------------
The Company's current strategy is to grow its business by concentrating on
franchising non-traditional locations, licensing grocery stores to sell
take-n-bake pizza and to sell retail products through grocery stores. The
Company has chosen that strategy as a means to accelerate non-traditional unit
growth by increasing revenue without any significant increase in expenses.
Additionally, the Company does not operate any restaurants except for two
locations for testing and demonstration purposes. This strategy requires limited
overhead and operating expense and does not require significant capital
investment.
The Company's current ratio was 1.7-to-1 on June 30, 2011 compared to 1.4-to-1
on December 31, 2010.
At various times, Paul W. Mobley, the Company's Chairman of the Board and Chief
Executive Officer, made advances to the Company to help fund principal payments
due under its bank loan and payments related to discontinued operations. The
payments related to the discontinued operations were largely for legal fees
related to the Heyser lawsuit, which is described in Note 6 to the accompanying
unaudited condensed consolidated financial statements in this report and in Note
10 of the Company's consolidated financial statements included in its Form 10-K
for the year ended December 31, 2010. The Company issued an amended note in July
2011 in the principal amount of $1,055,821 to reflect the advances. The note
provides for interest at the rate of 8% per annum to be paid monthly on the
unpaid principal balance of the note and continuing on the first day of each
calendar month thereafter until the note is paid in full. The Company is current
on the required interest payments. In addition, the note requires principal
payments commencing on November 1, 2012 and on the first day of each calendar
month thereafter up to and including March 1, 2013 in the amount of $200,000 per
month with a final payment of any remaining principal balance to be paid on
April 1, 2013.
On July 19, 2011, the Company entered into a Fourth Amendment to Loan Agreement
(the "Amendment") with Wells Fargo Bank, National Association ("Wells Fargo")
that amended the existing Loan Agreement dated August 25, 2005, between the
Company and Wells Fargo, as previously amended by a certain First Amendment to
Loan Agreement dated February 4, 2008, a certain Second Amendment to Loan
Agreement dated November 10, 2010, and a certain Third Amendment to Loan
Agreement dated March 10, 2011 (as so amended, the "Loan Agreement").
17
The Amendment reduces monthly principal payments and shortens the maturity date
for borrowings under the Loan from August 13, 2013 to October 1, 2012. The
Amendment maintains the current interest rate applicable to amounts borrowed
under the Loan Agreement of LIBOR plus 4.25% per annum, but increases the
interest rate applicable to amounts borrowed under the Loan Agreement after June
1, 2012 to LIBOR plus 7.25% per annum.
Below are the monthly required principal amortization amounts under the Loan
Agreement:
Date Amount
---- ------
August 1, 2011 $100,000
September 1, 2011 $100,000
October 1, 2011 $125,000
November 1, 2011 $125,000
December 1, 2011 $125,000
January 1, 2012 $125,000
February 1, 2012 $200,000
March 1, 2012 $200,000
April 1, 2012 $200,000
May 1, 2012 $200,000
June 1, 2012 $200,000
July 1, 2012 $200,000
August 1, 2012 $200,000
September 1, 2012 $200,000
October 1, 2012 $1,675,000
As a result of the financial arrangements described above and the Company's cash
flow projections, the Company believes it will have sufficient cash flow to meet
its obligations and to carry out its current business plan for the foreseeable
future. The Company's cash flow projections are based on the Company's strategy
of focusing entirely on growth in non-traditional venues, the growth in the
number of grocery store locations licensed to sell the take-n-bake pizza and the
recent introduction of the additional retail products for grocery stores
including pasta sauce, deep-dish lasagna with Italian sausage, grated parmesan
cheese, cheesy stix and spicy cheese dip.
In February 2008, the Company elected to trade its previous swap contract for a
new swap contract fixing the rate on 50% of the principal balance under the
Company's loan agreement, as amended (approximately $1,562,500 as of August 5,
2011), at an annual interest rate of 8.2%.
The Company does not anticipate that any of the recently issued Statement of
Financial Accounting Standards will have a material impact on its Statement of
Operations or its Balance Sheet.
Forward Looking Statements
--------------------------
The statements contained above in Management's Discussion and Analysis
concerning the Company's future revenues, profitability, financial resources,
market demand and product development are forward-looking statements (as such
term is defined in the Private Securities Litigation Reform Act of 1995)
relating to the Company that are based on the beliefs of the management of the
Company, as well as assumptions and estimates made by and information currently
available to the Company's management. The Company's actual results in the
future may differ materially from those projected in the forward-looking
statements due to risks and uncertainties that exist in the Company's operations
and business environment, including, but not limited to market acceptance of
18
recently introduced products, competitive factors and pricing pressures, the
current litigation with certain former traditional franchisees, non-renewal of
franchise agreements, shifts in market demand, compliance with the terms of the
Company's bank credit agreement, general economic conditions and other factors
including, but not limited to, changes in demand for the Company's products or
franchises, the success or failure of individual franchisees and changes in
prices or supplies of food ingredients and labor as well as the factors
discussed under "Risk Factors" as contained in this annual report. In addition,
the Company has no previous experience selling its products to retail channels
and there can be no assurance that grocers will stock them or that customers
will buy them. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions or estimates prove incorrect, actual results
may vary materially from those described herein as anticipated, believed,
estimated, expected or intended.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to interest rate risk relates primarily to its
variable-rate debt. As of June 30, 2011, the Company had outstanding variable
rate interest-bearing debt in the aggregate principal amount of $4.2 million.
The Company's current borrowings are at a variable rate tied to the London
Interbank Offered Rate ("LIBOR") plus 4.25% per annum through May 2012 and plus
7.25% per annum beginning June 1, 2012 adjusted on a monthly basis. To mitigate
interest rate risk, the Company purchased a swap contract fixing the rate on 50%
of the principal balance outstanding at 8.2% per annum. Based upon the principal
balance outstanding as of August 5, 2011 of $3.875 million for each 1.0%
increase in LIBOR, the Company would incur increased interest expense of
approximately $18,800 over the succeeding twelve-month period.
ITEM 4. Controls and Procedures
Based on his evaluation as of the end of the period covered by this report, Paul
W. Mobley, the Company's Chief Executive Officer and Chief Financial Officer,
has concluded that the Company's disclosure controls and procedures and internal
controls over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended) are effective. There have
been no changes in internal controls over financial reporting during the period
covered by this report that have materially affected, or are reasonably likely
to materially affect, the Company's internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
The Company is a Defendant in a lawsuit styled Kari Heyser, Fred Eric Heyser and
Meck Enterprises, LLC, et al v. Noble Roman's, Inc. et al, filed in Superior
Court in Hamilton County, Indiana on June 19, 2008 (Cause No. 29D01 0806 PL
739). The Court issued an Order dated December 23, 2010 granting summary
judgment in favor of the Company against all of the Plaintiffs on their fraud
claims. As a result, the Plaintiffs' allegations of fraud against the Company
and certain of its officers were determined to be without merit. The Company's
counterclaims against the Plaintiffs for breach of contract and other related
claims remain pending.
The Complaint was originally filed against the Company and certain of its
officers and certain institutional lenders. The Plaintiffs are former
franchisees of the Company's traditional location venue. Initially there were
19
approximately 14 groups of franchisee-Plaintiffs. Since the inception of the
lawsuit, the Court has dismissed the claims against the institutional lenders.
In addition, one group of franchisee-Plaintiffs voluntarily dismissed its claims
against the Company and the Court held another group of franchisee-Plaintiffs in
contempt and dismissed its claims with prejudice.
The Plaintiffs allege that the Defendants fraudulently induced them to purchase
franchises for traditional locations through misrepresentations and omissions of
material facts regarding the franchises. As relief, the Plaintiffs sought
compensatory and punitive damages in addition to court costs and/or prejudgment
interest. The Plaintiffs that remained in the case, following the voluntary and
involuntary dismissals described above, claimed actual damages in the amount of
$5.1 million, which has been discharged as a result of the summary judgment
Order in favor of the Company issued December 23, 2010.
The Company filed counterclaims for damages for breach of contract against all
of the Plaintiffs in the aggregate approximate amount of $3.6 million plus
attorney's fees, cost of collection and punitive damages in certain instances.
The Company intends to prosecute the counterclaims and obtain and execute on any
judgments against all counterclaim Defendants.
In addition to the above actual fraud claims, one group of franchisee-Plaintiffs
asserted a separate claim under the Indiana Franchise Act. The Court's December
23, 2010 Order denied the Company's motion for summary judgment as to the
Indiana Franchise Act claim finding the existence of a genuine issue of material
fact and did not render any opinion on the merits of that claim. The Company
denies liability on this claim and will continue to vigorously prosecute its
defenses against this claim.
The Plaintiffs filed a motion with the Court asking it to correct errors and to
reconsider the Order for summary judgment. The Company opposed that motion and a
hearing on the motion was held on March 24, 2011. In accordance with trial rule
53.3, if the Judge does not rule on the motion to reconsider within 30 days, the
motion is deemed denied. Therefore the motion was deemed denied on April 25,
2011. In accordance with the same trial rule, the 30 days within which a notice
of appeal can be filed starts running the day it was deemed denied. Therefore,
the deadline passed on May 25, 2011 for a notice of appeal to be filed and none
was filed.
On June 28, 2011 Plaintiffs filed a motion with the Court asking the Judge to
reconsider his Order of December 23, 2010 making it an "Interlocutory" order
instead of a "Final" order. The Company filed its response opposing that motion.
The Judge set a hearing on that motion for September 26, 2011. However, on June
8, 2011 Plaintiffs filed an appeal with the Indiana Court of Appeals. On July 6,
2011 the Clerk of the trial court issued a notice of completion of the Clerk's
record. On July 11, 2011 the Company filed a motion with the trial court to
vacate the Order setting the hearing for September 26, 2011 on Plaintiff's
motion to reconsider the Order of December 23, 2010 on the grounds that the
trial court no longer had jurisdiction over this issue since it completed the
Clerk's record to the Indiana Court of Appeals. On July 14, 2011 the Company
filed a motion with the Indiana Court of Appeals to dismiss the appeal on the
grounds that the appeal was filed after the deadline of May 25, 2011 for filing
of an appeal. On July 25, 2011 the Court granted the Company's motion to vacate
the order setting the hearing for September 26, 2011. On July 29, 2011,
Plaintiffs filed a motion with the Indiana Court of Appeals to voluntarily
dismiss the appeal. Also, on July 29, 2011, Plaintiffs filed a motion with the
trial court to reset the hearing on the motion to reconsider the Order of
December 23, 2010. The Company intends to oppose the motion for voluntarily
withdrawal of appeal in the Indiana Court of Appeals asking the Court to rule on
the Company's motion to dismiss the appeal with prejudice. If the Indiana Court
of Appeal grants the Company's motion to dismiss the appeal with prejudice the
motion to reset the hearing to reconsider the Order of December 23, 2010 will
20
become moot.
On June 10, 2011 the Court granted permission for the Company to file summary
judgment motions on the Company's counterclaims against the Plaintiffs as
opposed to jury trial. The Company will be filing summary judgment motions. The
judge has set a hearing on the summary judgment motions for December 6, 2011.
ITEM 6. Exhibits.
(a) Exhibits: See Exhibit Index appearing on page 23.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NOBLE ROMAN'S, INC.
Date: August 10, 2011 By: /s/ Paul W. Mobley
---------------------------------
Paul W. Mobley, Chairman of the Board and
Chief Financial Officer
(Authorized Officer and Principal
Financial Officer)
22
Index to Exhibits
Exhibit
-------
3.1 Amended Articles of Incorporation of the Registrant, filed
as an exhibit to the Registrant's Amendment No. 1 to the
Post Effective Amendment No. 2 to Registration Statement on
Form S-1 filed July 1, 1985 (SEC File No.2-84150), is
incorporated herein by reference.
3.2 Amended and Restated By-Laws of the Registrant, as currently
in effect, filed as an exhibit to the Registrant's Form 8-K
filed December 24, 2009, is incorporated herein by
reference.
3.3 Articles of Amendment of the Articles of Incorporation of
the Registrant effective February 18, 1992 filed as an
exhibit to the Registrant's Registration Statement on Form
SB-2 (SEC File No. 33-66850), ordered effective on October
26, 1993, is incorporated herein by reference.
3.4 Articles of Amendment of the Articles of Incorporation of
the Registrant effective May 11, 2000, filed as Annex A and
Annex B to the Registrant's Proxy Statement on Schedule 14A
filed March 28, 2000, is incorporated herein by reference.
3.5 Articles of Amendment of the Articles of Incorporation of
the Registrant effective April 16, 2001 filed as Exhibit 3.4
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 2005, is incorporated herein by
reference.
3.6 Articles of Amendment of the Articles of Incorporation of
the Registrant effective August 23, 2005, filed as Exhibit
3.1 to the Registrant's current report on Form 8-K filed
August 29, 2005, is incorporated herein by reference.
4.1 Specimen Common Stock Certificates filed as an exhibit to
the Registrant's Registration Statement on Form S-18 filed
October 22, 1982 and ordered effective on December 14, 1982
(SEC File No. 2-79963C), is incorporated herein by
reference.
4.2 Form of Warrant Agreement filed as Exhibit 4.1 to the
Registrant's current report on Form 8-K filed August 29,
2005, is incorporated herein by reference.
10.1 Employment Agreement with Paul W. Mobley dated January 2,
1999 filed as Exhibit 10.1 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 2005, is
incorporated herein by reference.
10.2 Employment Agreement with A. Scott Mobley dated January 2,
1999 filed as Exhibit 10.2 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 2005, is
incorporated herein by reference.
10.3 1984 Stock Option Plan filed with the Registrant's Form S-8
filed November 29, 1994 (SEC File No. 33-86804), is
incorporated herein by reference.
23
10.4 Noble Roman's, Inc. Form of Stock Option Agreement filed
with the Registrant's Form S-8 filed November 29, 1994 (SEC
File No. 33-86804), is incorporated herein by reference.
10.5 Loan Agreement with Wells Fargo Bank, N.A. dated August 25,
2005 filed as Exhibit 10.1 to the Registrant's current
report on Form 8-K filed August 29, 2005, is incorporated
herein by reference.
10.6 First Amendment to Loan Agreement with Wells Fargo Bank,
N.A. dated February 4, 2008, filed as Exhibit 10.1 to the
Registrant's report on Form 8-K filed February 8, 2008, is
incorporated herein by reference.
10.7 Second Amendment to Loan Agreement with Wells Fargo Bank,
N.A. dated November 10, 2010, filed as Exhibit 10.7 to the
Registrant's current report on Form 10-Q filed on November
10, 2010, is incorporated herein by reference.
10.8 Third Amendment to Loan Agreement with Wells Fargo Bank,
N.A. dated March 10, 2011, filed as Exhibit 10.10 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 2010, is incorporated herein by reference.
10.9 Promissory Note payable to Paul Mobley dated November 1,
2010, filed as Exhibit 10.8 to the Registrant's current
report on Form 10-Q filed on November 10, 2010, is
incorporated herein by reference.
10.10 Fourth Amendment to Loan Agreement with Wells Fargo Bank,
N.A. dated July 19, 2011, is filed herewith.
21.1 Subsidiaries of the Registrant filed in the Registrant's
Registration Statement on Form SB-2 (SEC File No. 33-66850)
ordered effective on October 26, 1993, is incorporated
herein by reference.
31.1 C.E.O. and C.F.O. Certification under Rule 13a-14(a)/15d-15(e).
32.1 C.E.O. and C.F.O. Certification under Section 1350.
101 Interactive Financial Data
24