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 September 30, 2009
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 Identification No.)
of organization)
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 [X] 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 November 5, 2009, there were 19,412,499 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, 2008
and September 30, 2009 (unaudited) Page 3
Condensed consolidated statements of operations for the three
months and nine months ended September 30, 2008 and
2009 (unaudited) Page 4
Condensed consolidated statements of changes in stockholders'
equity for the year ended December 31, 2008 and nine
months ended September 30, 2009 (unaudited) Page 5
Condensed consolidated statements of cash flows for the
nine months ended September 30, 2008 and 2009 (unaudited) Page 6
Notes to condensed consolidated financial statements (unaudited) Page 7
2
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
Assets December 31, September 30,
2008 2009
------------ ------------
Current assets:
Cash $ 450,968 $ 363,331
Accounts and notes receivable - net 1,046,545 1,352,485
Inventories 223,024 212,397
Assets held for resale 242,690 243,527
Prepaid expenses 222,095 238,814
Current portion of long-term notes receivable 5,810 24,167
Deferred tax asset - current portion 1,050,500 1,050,500
------------ ------------
Total current assets 3,241,632 3,485,221
------------ ------------
Property and equipment:
Equipment 1,206,979 1,230,623
Leasehold improvements 96,512 96,512
------------ ------------
1,303,491 1,327,135
Less accumulated depreciation and amortization 821,422 886,778
------------ ------------
Net property and equipment 482,069 440,357
Deferred tax asset (net of current portion) 11,802,637 10,955,518
Other assets including long-term portion of notes receivable - net 1,752,102 2,225,075
------------ ------------
Total assets $ 17,278,440 $ 17,106,171
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term note payable $ 1,500,000 $ 1,500,000
Accounts payable and accrued expenses 1,191,116 859,456
------------ ------------
Total current liabilities 2,691,116 2,359,456
------------ ------------
Long-term obligations:
Note payable to bank (net of current portion) 5,625,000 4,500,000
------------ ------------
Total long-term liabilities 5,625,000 4,500,000
------------ ------------
Stockholders' equity:
Common stock - no par value (25,000,000 shares authorized,
19,412,499 issued and outstanding as of December 31, 2008
and September 30, 2009) 23,023,250 23,065,476
Preferred stock (5,000,000 shares authorized and 20,625 issued and
outstanding as of December 31, 2008 and September 30, 2009) 800,250 800,250
Accumulated deficit (14,861,176) (13,619,011)
------------ ------------
Total stockholders' equity 8,962,324 10,246,715
------------ ------------
Total liabilities and stockholders' equity $ 17,278,440 $ 17,106,171
============ ============
See accompanying notes to condensed consolidated financial statements.
3
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2009 2008 2009
----------- ----------- ----------- -----------
Royalties and fees $ 1,825,168 $ 1,778,230 $ 5,760,253 $ 5,277,665
Administrative fees and other 10,880 7,818 44,752 45,373
Restaurant revenue 375,907 148,275 1,179,427 405,908
----------- ----------- ----------- -----------
Total revenue 2,211,955 1,934,323 6,984,432 5,728,946
Operating expenses:
Salaries and wages 344,763 252,048 1,074,862 795,778
Trade show expense 121,814 77,032 366,598 229,259
Travel expense 109,940 29,927 332,572 108,060
Sales commissions 12,022 -- 56,135 3,627
Other operating expenses 225,253 172,268 697,784 560,531
Restaurant expenses 363,638 131,706 1,127,858 382,531
Depreciation and amortization 21,060 19,557 70,265 59,456
General and administrative 400,955 375,158 1,243,807 1,097,917
----------- ----------- ----------- -----------
Total expenses 1,599,445 1,057,696 4,969,881 3,237,159
----------- ----------- ----------- -----------
Operating income 612,510 876,627 2,014,551 2,491,787
Interest and other expense 150,678 115,682 466,753 353,138
----------- ----------- ----------- -----------
Income before income taxes 461,832 760,945 1,547,798 2,138,649
Income tax expense 157,023 301,410 526,251 847,120
----------- ----------- ----------- -----------
Net income 304,809 459,535 1,021,547 1,291,529
Cumulative preferred dividends 16,455 16,455 49,545 49,364
----------- ----------- ----------- -----------
Net income available to common
stockholders $ 288,354 $ 443,080 $ 972,002 $ 1,242,165
=========== =========== =========== ===========
Earnings per share - basic:
Net income $ .02 $ .02 $ .05 $ .07
Net income available to common stockholders $ .02 $ .02 $ .05 $ .06
Weighted average number of common shares
outstanding 19,212,499 19,412,499 19,203,647 19,412,499
Diluted earnings per share:
Net income $ .02 $ .02 $ .05 $ .06
Weighted average number of common shares
outstanding 19,937,218 19,922,242 19,928,366 19,922,242
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, 2007 $ 800,250 19,187,499 $ 22,905,618 $(12,393,832) $ 11,312,036
Net loss for the year ended
December 31, 2008 (2,401,163) (2,401,163)
Cumulative preferred
dividends (66,181) (66,181)
Exercise of employee stock options 15,000 12,450 12,450
Amortization of value of employee
stock options 52,682 52,682
Exercise of warrants from
previous debt holders 10,000 12,500 12,500
Issuance of common stock -- 200,000 40,000 -- 40,000
------------ ------------ ------------ ------------ ------------
Balance at December 31, 2008 800,250 19,412,499 23,023,250 (14,861,176) 8,962,324
Net income for nine months ended
September 30, 2009 1,291,529 1,291,529
Cumulative preferred dividends (49,364) (49,364)
Amortization of value of employee
stock options 42,226 42,226
------------ ------------ ------------ ------------ ------------
Balance at September 30, 2009 $ 800,250 19,412,499 $ 23,065,476 $(13,619,011) $ 10,246,715
============ ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
5
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
2008 2009
----------- -----------
OPERATING ACTIVITIES
Net income $ 1,021,547 $ 1,291,529
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 146,410 138,806
Deferred income taxes 526,251 847,120
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts and notes receivable (504,094) (305,940)
Inventories (55,138) 10,627
Prepaid expenses (230,651) (16,719)
Other assets (130,060) (543,566)
Increase (decrease) in:
Accounts payable and accrued expenses (277,764) 238,197
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 496,501 1,660,054
----------- -----------
INVESTING ACTIVITIES
Purchase of property and equipment (123,149) (23,644)
Investment in assets held for resale (1,451,373) (837)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (1,574,522) (24,481)
----------- -----------
FINANCING ACTIVITIES
Payment of obligations from discontinued operations (198,304) (563,159)
Payment of cumulative preferred dividends (49,545) (49,364)
Payment of principal on outstanding debt (1,125,000) (1,125,000)
Payments received on long-term notes receivable 133,735 14,313
Proceeds from additional bank borrowings - net of issuance cost 2,975,024 --
Proceeds from the exercise of stock options and warrants 24,950
----------- -----------
-----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,760,860 (1,723,210)
----------- -----------
Increase (decrease) in cash 682,839 (87,637)
Cash at beginning of period 832,207 450,968
----------- -----------
Cash at end of period $ 1,515,046 $ 363,331
=========== ===========
Supplemental schedule of non-cash investing and financing activities
None
Cash paid for interest $ 430,272 $ 317,750
See accompanying notes to condensed consolidated financial statements.
6
Notes to Condensed Consolidated Financial Statements (Unaudited)
----------------------------------------------------------------
Note 1 - The Company records the cost of franchised locations held by the
Company on a temporary basis until they are sold to a franchisee at the
Company's cost adjusted for impaired value, if any, to the estimated net
realizable value. The Company estimates net realizable value using comparative
replacement costs for other similar franchise locations that are being built at
the time the estimate is made. This policy is in accordance with SFAS No. 144,
paragraph 30 and SFAS No. 121.
The Company records exit or disposal activity for discontinued operations when
management commits to an exit or disposal plan and includes those charges under
results of discontinued operations, as required by SFAS No. 146, Accounting for
Costs Associated with Exit or Disposal Activities.
Note 2 - In conjunction with a Settlement Agreement with SummitBridge National
Investments, LLC and related entities, Noble Roman's obtained a new six-year
term loan in August 2005, in the principal amount of $9,000,000 requiring
principal payments of $125,000 per month plus interest at the rate of LIBOR plus
4% per annum adjusted on a monthly basis. In February 2008, the Company entered
into a First Amendment to Loan Agreement (the "Amendment") with Wells Fargo that
amended the existing Loan Agreement dated August 25, 2005 between the Company
and Wells Fargo (the "Loan Agreement"). The Amendment provided for Wells Fargo
to loan an additional $3,000,000 to the Company. The Amendment also reduced the
interest rate applicable to amounts borrowed under the Loan Agreement to LIBOR
plus 3.75% per annum and extended the maturity date for borrowings under the
loan from August 31, 2011 to August 31, 2013. 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 Loan Agreement, as amended by the
Amendment at an annual interest rate of 8.2%. The amendment to the loan
agreement in February 2008 was not considered substantive under EITF 96-19. The
loan agreement also requires the Company to maintain certain financial ratios
during the term of the loan. At the time of the modification in February 2008,
that loan had a remaining principal balance $5,375,000. The Company entered into
an amendment to provide funds to repurchase some of the Company's common stock
if the Board of Directors should decide that was in the best interest of the
shareholders and for general corporate purposes. The terms of the loan, as
amended, continued the same $125,000 per month principal payments. The amendment
extended the maturity date from August 31, 2011 to August 31, 2013 to reflect
the number of months necessary to maintain the same $125,000 per month principal
amortization and maintain the same covenants with regard to financial ratios.
The Company accounted for the transaction by increasing its cash and note
payable accounts by $3,000,000.
Note 3 - The interim condensed consolidated financial statements, included
herein, are unaudited, but reflect all adjustments which are, in the opinion of
management, necessary for a fair statement of the results of operations 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
nine-month period ended September 30, 2009 are not necessarily indicative of the
results to be expected for the full year ending December 31, 2009.
Note 4 - Approximately $102,050 and $167,650 are included in royalty and fee
income for the three-month and nine-month periods ended September 30, 2009,
respectively, and approximately $58,000 and $296,500 are included in the
three-month and nine-month periods ended September 30, 2008, respectively, for
initial franchise fees. Approximately $7,723 and $84,085, and approximately
$106,610 and $313,685 are included in royalty and fee income for the three-month
and nine-month periods ended September 30, 2009 and 2008, respectively, for
equipment commissions. There were no area development fees in either the
7
three-month or nine-month periods in 2009 and there were no area development
fees in the three-month period ended September 30, 2008, however, there were
$104,825 area development fees in the nine-month period ended September 30,
2008. Royalty and fee income, less initial franchise fees, equipment commissions
and area development fees were $1,668,457 and $5,025,930, and $1,660,558 and
$5,045,426 for the three-month and nine-month periods ended September 30, 2009
and 2008, respectively. The Company's ongoing royalty income is primarily paid
electronically by the Company initiating a draft on the franchisee's account by
electronic withdrawal. As such, the Company has no material amount of past due
royalties.
Note 5 - The following table sets forth the calculation of basic and diluted
earnings per share for the three-month period and nine-month period ended
September 30, 2009:
Three Months Ended September 30, 2009
Income Shares
------ ------ Per-Share
(Numerator) (Denominator) Amount
------
Net income $ 459,535 19,412,499 $ .02
Less preferred stock dividends (16,455)
----------
Earnings per share - basic
Income available to common stockholders 443,080 .02
Effect of dilutive securities
Warrants --
Options 143,077
Convertible preferred stock 16,455 366,666
---------- ----------
Diluted earnings per share
Income available to common stockholders
and assumed conversions $ 459,535 19,922,242 $ .02
Nine Months Ended September 30, 2009
Income Shares
------ ------ Per-Share
(Numerator) (Denominator) Amount
------
Net income $1,291,529 19,412,499 $ .07
Less preferred stock dividends (49,364)
----------
Earnings per share - basic
Income available to common stockholders 1,242,165 .06
Effect of dilutive securities
Warrants --
Options 143,077
Convertible preferred stock 49,364 366,666
---------- ----------
Diluted earnings per share
Income available to common stockholders
and assumed conversions $1,291,529 19,922,242 $ .06
8
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 in June 2008. The Plaintiffs are
former franchisees of the Company's traditional location venue. In addition to
the Company, the Defendants include certain of the Company's officers and
lenders to certain of the Plaintiffs. The Plaintiffs allege that the Defendants
induced them to purchase traditional franchises through fraudulent
representations and omissions of material facts regarding the franchises, and
seek compensatory and punitive damages. Discovery is in progress, but has not
yet been completed. Defendants filed the First Request for Production of
Documents in February 2009 and certain Plaintiffs produced some documents
requested by the Company. However, many of the Plaintiffs produced no documents
and the Company, in July 2009, filed a Motion to Compel the production against
the Plaintiffs. In September 2009 the Judge entered a Stipulated Order on the
Motion to Compel stating that all Plaintiffs in this litigation were ordered to:
(i) fully and completely and without objection or evasion, file written
responses to the Company's Request by September 30, 2009 demonstrating what
documents and things exists which are responsive to the Request and (ii) fully
and completely without objection or evasion, produce all documents and things
that are responsive to the Request by October 15,2009. The Company believes that
the written responses submitted by the Plaintiffs do not comply with the Order.
Further, many of the Plaintiffs have not submitted any documents and most of the
others have not fully complied with the Order to Compel. The Company is in the
process of filing an additional Motion to Require Full Compliance with the Order
to Compel and To Show Cause why they should not be held in contempt and for
sanctions against the Plaintiffs. The Company is unable to estimate the amount
of damages claimed by the Plaintiffs.
The Company filed a Counter-Claim for Damages against all of the Plaintiffs and
moved to obtain Preliminary and Permanent Injunctions against a majority of the
Plaintiffs to remedy the Plaintiffs' continuing breaches of the applicable
franchise agreements. The Company's Motion for Preliminary Injunction was
granted in October 2008. The Company has asserted that none of the preliminarily
enjoined Plaintiffs fully complied with the Court's Order and that several of
them only minimally complied. Accordingly, the Company filed a Motion to Require
Full Compliance and To Show Cause why they should not be held in contempt and
for attorney's fees as sanctions.
The Company filed a Motion to Revoke the Temporary Admission Pro Hac Vice of
David M. Duree, Plaintiff's former counsel, for filing fraudulent affidavits
with the Court. The Court granted this motion in March 2009. In the same ruling
the Court: continued the Motion to Show Cause to allow parties time to conduct
discovery, including depositions on the preliminarily enjoined Plaintiffs, on
that issue; granted preliminary injunctions against Plaintiffs Gomes and
Villasenor; dismissed claims against CIT Small Business Lending Corporation and
PNC Bank with prejudice; and struck the fraudulent affidavits. New counsel for
Plaintiffs entered his appearance in the case on behalf of the Plaintiffs in May
2009.
The Company filed a Motion for Partial Summary Judgment as to several claims in
the Complaint. On September 22, 2009 the Judge granted Defendant's Motion For
Partial Summary Judgment. On October 8, 2009 Plaintiffs filed a Motion To
Correct Error, Reconsider And Vacate Order; Request For Clarification;
Alternatively, Motion For Certification Of Appeal Of Interlocutory Order And For
Stay Of Proceeding Pending Appeal. That Motion has been fully briefed by both
parties and a hearing has been set for January 5, 2010.
Some of the Plaintiffs' depositions were taken during August and September. The
Company has been attempting and continues to attempt to schedule the remaining
Plaintiffs for depositions. On September 29, 2009, Defendants filed a Motion to
9
Reopen Plaintiff Dunn's deposition and require him to come to Indianapolis and
resume his deposition at the Plaintiff's expense claiming that Plaintiffs'
counsel wrongly interrupted a proper line of questioning and prematurely ended
the deposition. A hearing on that motion has been set for January 5, 2010. On
October 16,2009, Defendants filed a motion to require Plaintiff Heyser to travel
to Indianapolis for her deposition as a result of her deposition, which had been
previously agreed to, being canceled at her request and agreeing, through
counsel, to come to Indianapolis at a later date for the deposition. Many days
later Plaintiffs' counsel denied that agreement even though it had been
confirmed by email. A hearing on that motion has been set for January 5, 2010.
Certain Defendants were scheduled for depositions by Plaintiffs' counsel on
November 9, 10, 11 and 12, 2009, however, Plaintiffs' counsel recently canceled
those depositions.
On November 6, 2009, Defendants filed a motion for Summary Judgment as to
Plaintiff Brintle as a result of the testimony at his deposition. The Defendants
are in the process of filing motions for Summary Judgment against all of the
other Plaintiffs whose deposition have been taken.
Although there can be no assurance regarding the outcome of litigation, the
Company believes that it has strong and meritorious legal and factual defenses
to these claims, viable counter claims against the Plaintiffs and will
vigorously defend its interests in this case.
Note 7 - Management has evaluated subsequent events through November 9, 2009,
the date on which the financial statements were issued.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
------------
The Company sells and services franchises for non-traditional and stand-alone
foodservice operations under the trade names "Noble Roman's Pizza," "Tuscano's
Italian Style Subs" and "Noble Roman's Bistro." The Company believes the
attributes of these concepts include high quality products, simple operating
systems, labor minimizing operations, attractive food costs and overall
affordability.
As discussed in the notes to the Company's financial statements, the Company
uses significant estimates in evaluating such items as notes and accounts
receivable to reflect the actual amount expected to be collected for total
receivables. At September 30, 2009, the Company reported net accounts and notes
receivable of $1.352 million, which was net of an allowance to reflect the
amount the Company expects to realize for the receivable at September 30, 2009.
The Company, at September 30, 2009, had a deferred tax asset on its balance
sheet totaling $12.006 million and, after reviewing expected results from the
Company's current business plan, the Company believes it is more likely than not
that the deferred tax assets will be utilized prior to the expiration of those
deferred assets, most of which expire between 2012 and 2028.
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:
10
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.
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. These menu items
are manufactured by third party vendors and distributed by unrelated
distributors who deliver throughout most 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 require
relatively low amounts of labor.
Noble Roman's Take-N-Bake Pizza
-------------------------------
The Company has recently developed a take-n-bake pizza as an addition to its
menu offerings. The take-n-bake pizza is designed as an add-on component for new
and existing convenience store franchisees, and as a stand-alone offering for
grocery store chains. The Company has signed agreements for 44 grocery store
locations, allowing them to operate the take-n-bake pizza program. The Company
is also in discussions with several additional grocery store chains regarding
adding the take-n-bake program to their stores. The Company expects the number
of grocery store locations for take-n-bake to increase significantly over the
next several months. The take-n-bake program has also been integrated into the
operations of 16 existing convenience stores, generating significant add-on
sales, and is now being offered to all convenience store franchisees for a small
training fee. The take-n-bake program in grocery stores is being offered as a
supply agreement rather than a franchise.
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
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.
11
The Company has recently developed a grab-n-go service system for a limited
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 already been integrated into the
operations of seven existing locations, generating significant add-on sales. The
system will be made available to other existing franchisees for a small training
and administrative fee.
The Company is now offering new, non-traditional franchisees the opportunity to
open with both take-n-bake pizza and grab-n-go subs when they acquire a
dual-brand franchise. 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 Subs franchises at a significantly reduced
investment cost. The Company recently has begun promoting these enhancements for
non-traditional locations, and recently demonstrated the dual-brand at the
Foodservice At Retail Expo in Chicago in August and at the National Association
of Convenience Stores in Las Vegas in October.
Noble Roman's Bistro
--------------------
Noble Roman's Bistro, introduced in October 2008, is an additional service
system specifically designed for non-traditional venues such as convenience
stores, entertainment facilities, universities, hospitals, bowling centers and
other high traffic facilities. The Bistro incorporates all of the ingredient
qualities described above for Noble Roman's Pizza, and retains simplicity by
using largely ready-to-use ingredients that require only final assembly and
baking on site. It features the SuperSlice pizza, one-fourth of a large pizza,
along with hot entrees such as chicken parmesan, baked pastas, hot sub
sandwiches, breadsticks and calzones plus fresh salads and snacks. The Bistro is
also available with an optional breakfast expansion menu featuring a variety of
standard breakfast favorites. Customers move along the food display counter and
are served to order as they go. The Bistro was recently demonstrated at a trade
show for parks and attractions in Branson, Missouri in October and the Company
plans to demonstrate the Bistro at the IAAPA Show in Las Vegas in November.
Business Strategy
The Company's business strategy can be summarized as follows:
Intensify Focus on Sales of Non-Traditional Franchises. With a very weak retail
economy, and with the severe dislocations in the lending markets, the Company
believes that it has a unique 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 are often sold into
pre-existing facilities as a service and/or revenue enhancer for the underlying
business. Though focusing on non-traditional franchise expansion, the Company
will still seek to capitalize on other franchising opportunities as they present
themselves.
With the major focus being on non-traditional franchising, the Company's
requirements for overhead and operating cost are reduced. In addition, during
December 2008 the Company discontinued operating restaurants, by selling all but
two of the restaurants it had been temporarily operating pending planned
re-franchising, which also substantially reduced the Company's requirements for
overhead and operating cost for the foreseeable future. This change has allowed
for a more complete focus on selling and servicing franchises to capitalize on
the attractive opportunity the Company believes it has for increased unit growth
in non-traditional franchises.
12
Enhance Product Offerings. To augment the Company's sales opportunities within
non-traditional venues, it introduced the Noble Roman's Bistro service system in
October 2008. As an addition to the other service systems offered in its Noble
Roman's Pizza and Tuscano's Italian Style Subs concepts, the Bistro was designed
to appeal to additional types of businesses and operational objectives with its
fresh food display and serve-to-order serving system. Though presented or
packaged differently, the substantial majority of the menu selections are
comprised of ingredients already utilized in Noble Roman's Pizza and Tuscano's
Italian Style Subs, thereby leveraging the Company's simple systems,
distribution and purchasing power. In addition, the Company has recently
developed 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, and as a stand-alone offering for grocery store
chains. The Company has signed agreements with 44 grocery stores, allowing them
to operate the take-n-bake pizza program pursuant to supply agreements and are
in discussions with several other grocery store chains.
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.
Most of our 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. The Company believes this process results in products
that are great tasting, quality consistent, easy to assemble and relatively low
in food cost and requiring 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
developments, competition, changes in demands 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 and nine-month periods ended September 30, 2008 and 2009,
respectively.
13
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2008 2009 2008 2009
------- ------- ------- -------
Royalties and fees 82.5 % 91.9 % 82.5 % 92.1 %
Administrative fees and other .5 .4 .6 .8
Restaurant revenue 17.0 7.7 16.9 7.1
------- ------- ------- -------
Total revenue 100.0 % 100.0 % 100.0 % 100.0 %
Operating expenses:
Salaries and wages 15.6 13.0 15.4 13.9
Trade show expense 5.5 4.0 5.2 4.0
Travel expense 5.0 1.5 4.8 1.9
Sales commissions .5 -- .8 .1
Other operating expense 10.2 8.9 10.0 9.7
Restaurant expenses 16.4 6.8 16.1 6.7
Depreciation and amortization 1.0 1.0 1.0 1.0
General and administrative 18.1 19.4 17.9 19.2
------- ------- ------- -------
Operating income 27.7 % 45.4 % 28.8 % 43.5 %
Interest and other expense 6.8 6.0 6.7 6.2
------- ------- ------- -------
Income before income taxes 20.9 % 39.4 % 22.1 % 37.3 %
Income tax expense 7.1 15.6 7.5 14.8
------- ------- ------- -------
Net income 13.8 % 23.8 % 14.6 % 22.5 %
======= ======= ======= =======
Results of Operations
---------------------
Results of Operations - Three-Month and Nine-Month Periods Ended September 30,
2008 and 2009
Total revenue decreased from $2,211,955 to $1,934,323 and from $6,984,432 to
$5,728,946 for the three-month and nine-month periods ended September 30, 2009,
respectively, compared to the corresponding periods in 2008. These decreases
were primarily the result of less equipment commissions and operating fewer
restaurants during the three-month period and selling fewer franchises, less
equipment commissions, less area development agreements and operating fewer
restaurants in the nine-month period ended September 30, 2009 compared to the
corresponding periods in 2008. Royalty and fee income, less franchise fees,
equipment commissions and area development fees, were approximately the same in
the 2008 and 2009 periods. The decrease in the sale of area development
agreements was the result of the Company focusing all of its efforts in
non-traditional franchising. The reduction in the sale of franchise agreements
and equipment commissions was primarily the result of the economic environment
resulting in prospects being more reluctant to make capital investments.
Operating fewer restaurants was the result of the Company's decision in December
2008 to sell the restaurants it was operating on a temporary basis to
franchisees and focus all of its efforts on growth of non-traditional locations.
Approximately $102,050 and $167,650 were included in royalty and fee income for
the three-month and nine-month periods ended September 30, 2009, respectively,
and approximately $58,000 and $296,500 were included in the three-month and
nine-month periods ended September 30, 2008, respectively, for initial franchise
fees. Approximately $7,723 and $84,085, and approximately $106,610 and $313,682
were included in royalty and fee income for the three-month and nine-month
periods ended September 30, 2009 and 2008, respectively, for equipment
commissions. There were no area development fees in either the three-month or
14
nine-month periods in 2009 and there were no area development fees in the
three-month period however, there were $104,825 in the nine-month period ended
September 30, 2008. Royalty and fee income, less initial franchise fees,
equipment commissions and area development fees were $1,668,457 and $5,025,930,
and $1,660,558 and $5,045,426 for the three-month and nine-month periods ended
September 30, 2009 and 2008, respectively.
Restaurant revenues decreased from approximately $375,907 to $148,275 and
$1,179,427 to $405,908 for the three-month and nine-month periods ended
September 30, 2009, respectively, compared to the corresponding periods in 2008.
This decrease was a result of the Company discontinuing operating restaurants in
December 2008 to focus all of its efforts on the growth in non-traditional.
Currently, the Company is continuing to operate two restaurants which it uses
for testing and demonstration purposes.
Salaries and wages were 13.0% of total revenue and 13.9% of total revenue for
the three-month and nine-month periods ended September 30, 2009, respectively,
compared to 15.6% and 15.4% for the three-month and nine-month periods ended
September 30, 2008, respectively. The expense decreased from $344,763 to
$252,048 and from $1,074,862 to $795,778 for the three-month and nine-month
periods ended September 30, 2009, respectively, compared to the corresponding
periods in 2008. These decreases were the result of reduction in staff and other
overhead due to the Company's decision to discontinue operating restaurant
pending re-franchising and, as a result, the Company's strategy to grow by
concentrating its efforts on franchising non-traditional locations. The
reduction was partially offset by the decrease in revenue as explained above.
Trade show expenses decreased from 5.5% of total revenue to 4.0% of total
revenue and 5.2% of total revenue to 4.0% of total revenue, respectively, for
the three-month and nine-month periods ended September 30, 2009 compared to the
corresponding periods in 2008. These decreases were the result scheduling fewer
trade shows by eliminating all events focused on franchising for traditional
locations. The reduction was partially offset by the decrease in revenue as
explained above.
Travel expenses decreased from 5.0% of total revenue to 1.5% of total revenue
and from 4.8% of total revenue to 1.9% of total revenue, respectively, for the
three-month and nine-month periods ended September 30, 2009 compared to the
corresponding periods in 2008. The amount of travel expenses decreased from
$109,940 to $29,927 and from $332,572 to $108,060 for the three-month and
nine-month periods ended September 30, 2009, respectively, compared to the
corresponding periods in 2008. These decreases were the result of the Company's
strategy to grow by concentrating its efforts on franchising non-traditional
locations which require less on-site support than franchising in traditional
locations. The reduction was partially offset by the decrease in revenue as
explained above.
There were no sales commissions in the three-month period ended September 30,
2009, however, sales commissions were .5% of total revenue for the comparable
period in 2008. Sales commissions decreased from .8% of total revenue to .1% of
total revenue for the nine-month period ended September 30, 2009 compared to the
corresponding period in 2008. These decreases were the result of fewer franchise
sales and area development agreement sales and reflected the decision the
Company made in December 2008 to focus all of its efforts on non-traditional
franchise sales.
Other operating expenses decreased from 10.2% of total revenue to 8.9% of total
revenue and from 10.0% of total revenue to 9.7% of total revenue, respectively,
for the three-month and nine-month periods ended September 30, 2009 compared to
the corresponding periods in 2008. The expenses decreased from $225,253 to
$172,268 and from $697,784 to $560,531, respectively, for the three-month and
15
nine-month periods ended September 30, 2009 compared to the corresponding
periods in 2008. The reduction in operating expenses was partially offset by the
decrease in revenue. The decreases were due to the Company's decision to
discontinue operating restaurants pending re-franchising and as a result of the
Company's strategy to grow by concentrating its efforts on franchising
non-traditional restaurants.
Restaurant expenses decreased from 16.4% of total revenue to 6.8% of total
revenue and from 16.1% of total revenue to 6.7% of total revenue, respectively,
for the three-month and nine-month periods ended September 30, 2009 compared to
the corresponding periods in 2008. The expenses decreased from $363,638 to
$131,706 and from $1,127,858 to $382,531, respectively for the three-month and
nine-month periods ended September 30, 2009 compared to the corresponding
periods in 2008. These decreases were the result of the Company discontinuing
operating restaurants, except for the two restaurants used for testing and
demonstration purposes.
General and administrative expenses increased as a percentage of total revenue
from 18.1% of total revenue to 19.4% of total revenue and 17.9% of total revenue
to 19.2% of total revenue, respectively, for the three-month and nine-month
periods ended September 30, 2009 compared to the corresponding periods in 2008.
The expenses decreased from $400,955 to $375,158 and from $1,243,807 to
$1,097,917, respectively, for the three-month and nine-month periods ended
September 30, 2009 compared to the corresponding periods in 2008. These
increases, as a percentage of revenue, were the result of the decrease in
revenue as a result of opening fewer new franchises, partially offset by the
reduction in general and administrative expenses.
Total expenses decreased, as a percentage of total revenue, from 72.3% to 54.6%
and 71.2% to 56.5%, respectively, for the three-month and nine-month periods
ended September 30, 2009 compared to the corresponding periods in 2008. The
expenses decreased from $1,599,445 to $1,057,696 and from $4,969,881 to
$3,237,159, respectively, for the three-month and nine-month periods ended
September 30, 2009 compared to the corresponding periods in 2008. This decrease
was due to the Company's decision to discontinue operating restaurants pending
re-franchising and as a result of the Company's strategy to grow by
concentrating its efforts on franchising non-traditional locations.
Operating income increased as a percentage of total revenue from 27.7% of total
revenue to 45.4% of total revenue and 28.8% of total revenue to 43.5% of total
revenue, respectively, for the three-month and nine-month periods ended
September 30, 2009 compared to the corresponding periods in 2008. The primary
reasons for these increases were reductions in overhead as a result of the
Company's decision to discontinue operating restaurants pending re-franchising
and as a result of the Company's strategy to grow by concentrating all of its
efforts on franchising non-traditional locations. The reduction in overhead was
only partially offset by the decrease in revenue as a result of opening fewer
new franchises. Actual operating income increased from $612,510 to $876,627 and
from $2,014,551 to $2,491,787 for the three-month and nine-month periods ended
September 30, 2009 compared to the corresponding periods in 2008.
Interest expense decreased, as a percentage of total revenue, from 6.8% to 6.0%
and from 6.7% to 6.2% of total revenue, respectively, for the three-month and
nine-month periods ended September 30, 2009 compared to the corresponding
periods in 2008. Interest expense decreased from $150,678 to $115,682 and from
$466,753 to $353,138 for the three-month and nine-month periods ended September
30, 2009, respectively, compared to the corresponding periods in 2008. These
decreases were the result of a combination of a decrease in the principal amount
of notes payable outstanding and lower interest rates.
16
Net income, as a percentage of total revenue, increased from 13.8% to 23.8% and
from 14.6% to 22.5%, respectively, for the three-month and nine-month periods
ended September 30, 2009 compared to the corresponding periods in 2008. Net
income increased from $304,809 to $459,535 and from $1,021,547 to $1,291,529,
respectively, for the three-month and nine-month periods ended September 30,
2009 compared to the corresponding periods in 2008. The primary reason for these
increases were the reduction in overhead as a result of the Company's decision
to discontinue operating new restaurants, except for the two units the Company
currently operates for testing and demonstration purposes, and as a result of
the Company's strategy to grow by concentrating its efforts on franchising
non-traditional locations. The reduction in overhead was only partially offset
by the decrease in revenue as a result of opening fewer new franchises.
In order to intensify focus on non-traditional franchising and withdraw from
temporarily operating restaurants, the Company sold the excess restaurants to be
operated as franchises, which reduced the Company's requirement for overhead and
operating cost. For the nine-month period ended September 30, 2009, the Company
is approximately $310,000 behind in income before income taxes from its plan for
2009, as announced in the Form 10-Q for the quarterly period ended September 30,
2008. The Company anticipated more improvement in the economic environment
during the last half of 2009, than has occurred.
Liquidity and Capital Resources
-------------------------------
The Company's current strategy is to grow its business by concentrating largely
on franchising new non-traditional locations and by licensing additional
locations to sell its take-n-bake pizza. The Company increased its focus on
selling additional franchises for non-traditional locations and created the
Noble Roman's Bistro service system as an attempt to broaden the appeal to
additional types of locations and operations, and to accelerate the
non-traditional growth and as a further means to accelerate that growth the
Company developed a take-n-bake pizza as an addition to its menu offerings. 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 store
chains. In addition, the Company has discontinued operating any restaurants
except for the two locations the Company operates for testing and demonstration
purposes. This change has allowed the Company to reduce operating expenses and
overhead. This strategy does not require significant capital investments.
The Company's current ratio increased from 1.2-to-1 to 1.5-to-1 from December
31, 2008 to September 30, 2009 due to profitable operations. The Company does
not expect to report any loss on discontinued operations in 2009.
As a result of the Company's strategy and cash flow expected to be generated
from operations in the future, 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.
On February 4, 2008, the Company and certain of its subsidiaries, entered into a
First Amendment to Loan Agreement (the "Amendment") with Wells Fargo Bank, N.A.
that amended the existing Loan Agreement dated August 25, 2005, between the
Company and Wells Fargo (the "Loan Agreement"). Under the Amendment, Wells Fargo
loaned the Company an additional $3.0 million. The Amendment also reduced the
interest rate applicable to amounts borrowed under the Loan Agreement from LIBOR
plus 4% per annum to LIBOR plus 3.75% per annum and extended the maturity date
for borrowings under the loan from August 31, 2011 to August 31, 2013.
17
On February 6, 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
Loan Agreement, as amended by the Amendment (approximately $3.375 million as of
March 1, 2009), 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, competitive factors and
pricing pressures, the current litigation with certain former traditional
franchisees, shifts in market demand, 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, the
impact of competitors' actions and changes in prices or supplies of food
ingredients and labor as well as the factors discussed under "Risk Factors" in
the Company's Annual Report on Form 10-K for the year ended December 31, 2008.
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 September 30, 2009, the Company had outstanding
interest-bearing debt in the aggregate principal amount of $6.0 million. The
Company's current borrowings are at a monthly variable rate tied to the London
Interbank Offered Rate ("LIBOR") plus 3.75% per annum adjusted on a monthly
basis. To mitigate interest rate risk, the Company traded its previous swap
contract for a new swap contract fixing the rate on 50% of the principal balance
outstanding at 8.2%. Based upon the principal balance outstanding as of November
1, 2009 of $5.75 million, for each 1.0% increase in LIBOR, the Company would
incur increased interest expense of approximately $25,300 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 of 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.
18
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 in June 2008. The Plaintiffs are former
franchisees of the Company's traditional location venue. In addition to the
Company, the Defendants include certain of the Company's officers and lenders to
certain of the Plaintiffs. The Plaintiffs allege that the Defendants induced
them to purchase traditional franchises through fraudulent representations and
omissions of material facts regarding the franchises, and seek compensatory and
punitive damages. Discovery is in progress, but has not yet been completed.
Defendants filed the First Request for Production of Documents in February 2009
and certain Plaintiffs produced some documents requested by the Company.
However, many of the Plaintiffs produced no documents and the Company, in July
2009, filed a Motion to Compel the production against the Plaintiffs. In
September 2009 the Judge entered a Stipulated Order on the Motion to Compel
stating that all Plaintiffs in this litigation were ordered to: (i) fully and
completely and without objection or evasion, file written responses to the
Company's Request by September 30, 2009 demonstrating what documents and things
exists which are responsive to the Request and (ii) fully and completely without
objection or evasion, produce all documents and things that are responsive to
the Request by October 15,2009. The Company believes that the written responses
submitted by the Plaintiffs do not comply with the Order. Further, many of the
Plaintiffs have not submitted any documents and most of the others have not
fully complied with the Order to Compel. The Company is in the process of filing
an additional Motion to Require Full Compliance with the Order to Compel and To
Show Cause why they should not be held in contempt and for sanctions against the
Plaintiffs. The Company is unable to estimate the amount of damages claimed by
the Plaintiffs.
The Company filed a Counter-Claim for Damages against all of the Plaintiffs and
moved to obtain Preliminary and Permanent Injunctions against a majority of the
Plaintiffs to remedy the Plaintiffs' continuing breaches of the applicable
franchise agreements. The Company's Motion for Preliminary Injunction was
granted in October 2008. The Company has asserted that none of the preliminarily
enjoined Plaintiffs fully complied with the Court's Order and that several of
them only minimally complied. Accordingly, the Company filed a Motion to Require
Full Compliance and To Show Cause why they should not be held in contempt and
for attorney's fees as sanctions.
The Company filed a Motion to Revoke the Temporary Admission Pro Hac Vice of
David M. Duree, Plaintiff's former counsel, for filing fraudulent affidavits
with the Court. The Court granted this motion in March 2009. In the same ruling
the Court: continued the Motion to Show Cause to allow parties time to conduct
discovery, including depositions on the preliminarily enjoined Plaintiffs, on
that issue; granted preliminary injunctions against Plaintiffs Gomes and
Villasenor; dismissed claims against CIT Small Business Lending Corporation and
PNC Bank with prejudice; and struck the fraudulent affidavits. New counsel for
Plaintiffs entered his appearance in the case on behalf of the Plaintiffs in May
2009.
The Company filed a Motion for Partial Summary Judgment as to several claims in
the Complaint. On September 22, 2009 the Judge granted Defendant's Motion For
Partial Summary Judgment. On October 8, 2009 Plaintiffs filed a Motion To
Correct Error, Reconsider And Vacate Order; Request For Clarification;
Alternatively, Motion For Certification Of Appeal Of Interlocutory Order And For
Stay Of Proceeding Pending Appeal. That Motion has been fully briefed by both
parties and a hearing has been set for January 5, 2010.
19
Some of the Plaintiffs' depositions were taken during August and September. The
Company has been attempting and continues to attempt to schedule the remaining
Plaintiffs for depositions. On September 29, 2009, Defendants filed a Motion to
Reopen Plaintiff Dunn's deposition and require him to come to Indianapolis and
resume his deposition at the Plaintiff's expense claiming that Plaintiffs'
counsel wrongly interrupted a proper line of questioning and prematurely ended
the deposition. A hearing on that motion has been set for January 5, 2010. On
October 16,2009, Defendants filed a motion to require Plaintiff Heyser to travel
to Indianapolis for her deposition as a result of her deposition, which had been
previously agreed to, being canceled at her request and agreeing, through
counsel, to come to Indianapolis at a later date for the deposition. Many days
later Plaintiffs' counsel denied that agreement even though it had been
confirmed by email. A hearing on that motion has been set for January 5, 2010.
Certain Defendants were scheduled for depositions by Plaintiffs' counsel on
November 9, 10, 11 and 12, 2009, however, Plaintiffs' counsel recently canceled
those depositions.
On November 6, 2009, Defendants filed a motion for Summary Judgment as to
Plaintiff Brintle as a result of the testimony at his deposition. The Defendants
are in the process of filing motions for Summary Judgment against all of the
other Plaintiffs whose deposition have been taken.
Although there can be no assurance regarding the outcome of litigation, the
Company believes that it has strong and meritorious legal and factual defenses
to these claims, viable counter claims against the Plaintiffs and will
vigorously defend its interests in this case.
Other than as disclosed above, the Company is involved in no other litigation
requiring disclosure.
ITEM 6. Exhibits.
(a) Exhibits: See Exhibit Index appearing on page 19.
20
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: November 9, 2009 /s/ Paul W. Mobley
-----------------------------------------
Paul W. Mobley, Chairman of the Board and
Chief Financial Officer
(Authorized Officer and Principal
Financial Officer)
21
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 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.
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 November 15, 1994 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 November 15, 1994
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.
22
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.
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.
23