INDIANAPOLIS, IN / ACCESSWIRE / November 14, 2016 / Noble Roman's, Inc. (OTCQB: NROM), the Indianapolis based franchisor and
licensor of Noble Roman's Pizza and Tuscano's Italian Style Subs, today provided a review of the third quarter operational results
and strategic developments.
Financial Results & Strategic Developments
Operating income increased to $856,000 from $735,000 and to $2.4 million from $2.3 million for the three-month and nine-month
periods ended September 30, 2016 compared to the corresponding periods in 2015. Operating margins improved to 42.4% from 38.3% and
to 41.8% from 40.2% for the three-month and nine-month periods ended September 30, 2016 compared to the corresponding periods in
2015.
The company made significant progress on a key strategy of revenue expansion through franchising/licensing of non-traditional
locations and believes it is well positioned for future growth with its non-traditional franchising/licensing opportunities. Those
opportunities include grocery store delis, convenience stores including Circle K franchise stores, travel plazas, Walmart stores
and entertainment facilities.
As previously announced near the end of the quarter, the company signed an agreement with TMC Franchise Corporation ("TMC") to
become a Preferred Supplier for their system of franchised Circle K®, Kangaroo Express® and On the Run® convenience store brands in
the United States, which today totals nearly 1,000 locations. TMC is part of the Alimentation Couche-Tard, Inc. group, one of the
largest operators and franchisors of convenience stores in North America. Pursuant to the agreement, TMC will communicate Noble
Roman's preferred status for pizza-focused foodservice to its existing franchisees as well as to all new franchise prospects. Since
signing the agreement, the company has signed license agreements for three Circle K units pursuant to the Agreement. However, TMC,
with the company's assistance, recently prepared and distributed a detailed presentation on Noble Roman's to their entire franchise
base. As a result of these developments, the company is currently in discussions with TMC franchisees representing approximately
135 locations.
Also, during the quarter the company continued to make progress with its previously announced expansion into Walmart stores and
has now signed franchise agreements for five locations, with expectations of having four open prior to year-end. Additionally, the
company is currently in discussions regarding several additional potential Walmart locations.
During the last week of September and the first week of October, the company signed and stocked two additional grocery store
distributors with the ingredients for its grocery deli take-n-bake pizza program. So far this year the company has signed license
agreements for 402 additional grocery deli locations.
The company is on track with its other key strategy for revenue expansion, the franchising of traditional locations. The company
has now completed its two-year re-design process for the next generation stand-alone prototype, Noble Roman's Craft Pizza & Pub,
which features two styles of crust. First is the company's popular, traditional hand-tossed style pizza with a thinner crust,
crispy exterior and a flavorful and chewy interior. Second is the company's signature Deep-Dish Sicilian pizza baked in real olive
oil. Both crust styles feature traditional topping selections plus several fun, new toppings and new specialty pizza combinations.
The menu also includes Noble Roman's famous breadsticks with spicy cheese sauce, an assortment of new specialty salads and four new
pasta dishes, all designed to be fast, easy to prepare and delicious to eat. The new prototype utilizes new oven technology which
reduces traditional style pizza oven speeds to two minutes and 30 seconds. The prototype dining room will feature relaxed modern
decor with seating for 140-plus guests. Also showcased is a glass enclosed room where all dough and breadsticks are made fresh
daily in view of customers, highlighting the hand-crafted and fresh nature of the menu as well as providing entertainment for
guests. The company anticipates opening the first two locations as company-owned and -operated locations followed by an aggressive
plan to promote franchising in concentric circles from those locations. The first company-owned location is now under construction
in Westfield, Indiana, a suburb of Indianapolis, and is expected to open in mid January.
Noble Roman's Craft Pizza & Pub is a modernization and re-design of the original Noble Roman's pizzeria concept which originated
in 1972 and was at that time called "Pizza Pub." The original concept was popular with customers then and remains so now with the
legacy units still in operation today. However, operationally, the concept became unsatisfactory as a growth vehicle beginning in
the mid-1990's because pizza bake times were too slow, labor requirements became too specialized and the overall format was too
inefficient and expensive. With the new prototype development, the modernization and re-design uses new technology that was not
available in the 1990's, as well as numerous company directed R&D enhancements to equipment and product formulations. For
example, as previously stated, the oven speed for traditional pizzas in the prototype unit are reduced to only 2 minutes and 30
seconds, and the bake times are reduced by approximately 60% for both styles of pizza versus bake times from the previous
generation technology. These technical enhancements are being combined with an emphasis on hand-crafted freshness, great taste,
speed of service and a fun atmosphere. All factors considered, Noble Roman's Craft Pizza & Pub will be much faster and considerably
more efficient to operate while still featuring the always popular style of Noble Roman's pizza.
In the second quarter ended June 30, 2016, the company recorded a valuation allowance of $750,659. This valuation allowance
reflected the charge off of certain receivables from the operations discontinued in 2008 and represents the remaining receivable
from the various plaintiffs in the Heyser lawsuit which the company won by summary judgment, dismissing the company from any
liability. Through numerous appeals, including an appeal to the Indiana Supreme Court by the Heyser plaintiffs, the summary
judgment was continuously upheld. The company also won summary judgment on its counterclaims against the various plaintiffs and was
awarded a judgment against the plaintiffs in excess of $2 million, which included damages and attorneys' fees. The company has been
pursuing collection since that time. During the second quarter the company made the decision that it was in its best interest to
cease incurring additional legal fees and the diversion of management's focus and time, and to settle its pending claims for
$350,000, which is evidenced by a promissory note secured by a mortgage on two pieces of real estate. This final settlement is in
addition to $550,000 received earlier as partial settlement.
Given the successfully completed development of the company's next generation stand-alone prototype, Noble Roman's Craft Pizza &
Pub, the company made the decision during the quarter ended September 30, 2016 to discontinue expansion of its stand-alone
take-n-bake concept so that management's efforts could be fully focused on the modernized Craft Pizza & Pub. As a result of that
decision, the company charged off all assets related to those discontinued operations, including $504,000 after-tax benefit
invested in three franchised locations which had been used to support research and development by the company. In addition,
$883,000 after-tax benefit reflected the charge-off of various receivables due from other unrelated former franchisees of the
stand-alone take-n-bake concept. That loss also included $39,000, after tax benefit, for settlement of rent on a former location
that was part of the discontinued operations in 2008. This resulted in the total net loss on discontinued operations of $1,426,289,
net of tax benefit of $881,902.
The company is currently engaged in a private placement to secure up to a maximum of $2 million through the issuance of
convertible, subordinated, unsecured promissory notes and warrants exercisable at $1.00 per share up to two million shares. As a
part of this private placement, on November 2, 2016 and November 8, 2016, the company issued notes in the amount of $950,000 and
warrants to purchase 950,000 shares of the company's common stock. The offering is ongoing.
Interest on the notes accrues at the annual rate of 10% and is payable quarterly in arrears. Principal of the notes matures
three years after issuance unless previously converted. Each holder of the notes may convert them at any time into common stock of
the company at a conversion price of $0.50 per share (subject to anti-dilution adjustment). Subject to certain limitations, upon 30
days' notice the company may require the notes to be converted into common stock if the daily average weighted trading price of the
common stock equals or exceeds $1.50 per share for a period of 30 consecutive trading days. The notes provide for customary events
of default.
The warrants expire three years from the date of issuance and provide for an exercise price of $1.00 per share of common stock
(subject to anti-dilution adjustment). Subject to certain limitations, the company may redeem the warrants at a price of $0.001 per
share of common stock subject to the warrant upon 30 days' notice if the daily average weighted trading price of the common stock
equals or exceeds $2.00 per share for a period of 30 consecutive trading days.
In connection with the issuance of the notes and warrants, the company granted the Investors certain registration rights with
respect to the shares of common stock into which the notes are convertible and for which the warrants are exercisable.
Divine Capital Markets LLC is serving as the placement agent for the offering of the notes and warrants. Pursuant to its
arrangement with Divine Capital Markets, LLC, the company may issue notes in an aggregate principal amount of up to an additional
$1,050,000 and warrants to purchase up to an additional 1,050,000 shares of the common stock. The company intends to use the net
proceeds of the notes to fund the opening of a Noble Roman's Craft Pizza & Pub restaurant and for general working capital
needs.
Financial Results for Third Quarter 2016 Compared to Third Quarter 2015
- Total revenue was $2.0 million compared to $1.9
million - Operating income was $856,000, or $.04 per share, compared to $735,000, or $.04 per share - Operating margin was 42.4%
compared to 38.3% - Net income before income taxes from continuing operations was $702,000, or $.03 per share, compared to
$389,000, or $.02 per share. The company will pay no income taxes on approximately the next $22 million in income. - Net income
from continuing operations was $434,000, or $.02 per share, compared to $226,000, or $.01 per share. - Loss from discontinued
operations net of tax benefit, as discussed above, was $1.4 million compared to none. - Net income (loss) was $(1.1 million), or
$(.05) per share, compared to $226,000, or $.01 per share. - Royalties and fees less upfront fees were $1.9 million compared to
$1.7 million - Royalties and fees from non-traditional franchises other than grocery stores were $1.2 compared to $1.1 million -
Royalties and fees from grocery store take-n-bake were $531,00 compared to $486,000 - Royalties and fees from stand-alone
take-n-bake were $65,000 compared to $131,000 - Royalties and fees from traditional locations were $60,000 compared to $67,000
Financial Highlights for the Nine Months Ended September 30, 2016 Compared to the Nine Months Ended September 30, 2015
-
Total revenue was $5.7 million compared to $5.8 million - Operating income was $2.4 million, or $.12 per share, compared to $2.3
million, or $.11 per share - Operating margin was 41.8% compare to 40.2% - Net income before income taxes from continuing
operations was $1.3 million, or $.06 per share, compared to $1.2 million, or $.06 per share. The company will pay no income taxes
on approximately the next $22 million in income. - Net income from continuing operations was $815,000, or $.04 per share, compared
to $708,000, or $.03 per share - Loss from discontinued operations net of tax benefit, as discussed above, was $1.4 million
compared to none. - Net income (loss) was $(611,000), or $(.03) per share compared to $708,000, or $.03 per share - Royalties and
fees less upfront fees were $5.3 million compared to $5.4 million - Royalties and fees from non-traditional franchises other than
grocery stores were $3.3 million compared to $3.3 million. - Royalties and fees from grocery store take-n-bake were $1.5 million
compared to $1.4 million - Royalties and fees from stand-alone take-n-bake were $276,000 compared to $556,000 - Royalties and fees
from traditional locations were $180,000 compared to $201,000
Balance Sheet Summary
Current assets were $5.0 million and current liabilities were $3.7 million as of September 30, 2016 compared to total current
assets of $4.3 million and current liabilities of $1.4 million as of December 31, 2015. The company's outstanding bank loan and the
Kingsway America loan were moved from long-term liabilities at December 31, 2015 to short-term liabilities as of September 30, 2016
as they are due on March 31, 2017 and July 2, 2017, respectively. Total bank debt was $1.5 million as of September 30, 2016
compared to $2.0 million as of December 31, 2015. The Kingsway America loan was $600,000 at both September 30, 2016 and December
31, 2015. Total stockholders' equity as of September 30, 2016 was $14.3 million compared to $14.9 million as of December 31,
2015.
Tactical Approach to the Company's Growth Strategy
The company's overall approach to pursuing its growth strategy can be summarized in the following four points:
- Expand
revenue through franchising and licensing for both non-traditional and traditional locations. - Leveraging the results of and
continuing the process of recent testing, design and development for both the non-traditional and traditional locations. -
Aggressively communicating and marketing the company's advantages to its target markets through a variety of means, including but
not limited to: direct phone solicitation, internet advertising, direct mail, one-on-one product demonstrations and selective trade
shows. - Maintaining an extremely disciplined focus on cost controls while undertaking the effort of expanding revenues.
Significant investment of time and effort has taken place to create competitive advantages through the company's products and
systems. The quality of the company's products created through simple production processes and service systems, offered at a
reasonable price point, is a strategic strength and a key driver of further growth potential. The company strives to design each
ingredient and system to support the company's diverse, modularized menu offerings and to deliver superior results with the minimum
possible labor within those objectives.
With the company's strong product and system development comes communicating those advantages and conveying the high quality of
products to prospective franchisees and licensees through various marketing efforts.
Investor Questions
The company has chosen to substantially increase the scope and detail provided in the quarterly press release, which is also
available on the investor relations section of the company's corporate website, www.nobleromans.com. Additionally, the company's
Executive Chairman and Chief Financial Officer, Paul Mobley, will be accepting teleconference appointments for any interested
shareholder or potential investor to schedule a personal, one-on-one question and answer session. Interested parties wishing to
establish such an appointment may contact Mr. Mobley by e-mail at pmobley@nobleromans.com.
The statements contained in this press release 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, its need to refinance its indebtedness that matures
in March 2017, competitive factors and pricing pressures, non-renewal of franchise agreements, shifts in market demand, the success
of new prototype locations, general economic conditions, changes in purchases of or demand for the company's products, licenses or
franchises, the success or failure of individual franchisees and licensees, changes in prices or supplies of food ingredients and
labor, and dependence on continued involvement of current management. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions or estimates prove incorrect, actual results may differ materially from those
described herein as anticipated, believed, estimated, expected or intended. The company undertakes no obligations to update the
information in this press release for subsequent events.
FOR ADDITIONAL INFORMATION, CONTACT:
For Media Information: Scott Mobley, President & CEO 317/634-3377 For Investor Relations: Paul Mobley, Executive Chairman
317/634-3377
Noble Roman's, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) Assets December 31, 2015
September 30, 2016 Current assets: Cash $ 194,021 $ 175,235 Accounts receivable - net 2,007,751 2,323,301 Inventories 492,222
743,022 Prepaid expenses 634,016 869,853 Deferred tax asset - current portion 925,000 925,000 Total current assets 4,253,010
5,036,411 Property and equipment: Equipment 1,376,190 1,829,736 Leasehold improvements 88,718 88,718 1,464,908 1,918,454 Less
accumulated depreciation and amortization 1,092,785 1,157,927 Net property and equipment 372,123 760,527 Deferred tax asset (net of
current portion) 8,158,523 8,536,518 Other assets including long-term portion of receivables - net 5,681,272 4,545,092 Total assets
$ 18,464,928 $ 18,878,548 Liabilities and Stockholders' Equity Current liabilities: Current portion of term loan payable to bank $
601,081 $ 1,530,385 Current portion of loan payable to Super G Funding, LLC - 1,250,000 Note payable to Kingsway America - 600,000
Accounts payable and accrued expenses 847,418 337,254 Total current liabilities 1,448,499 3,717,639 Long-term obligations: Term
loans payable to bank - net of current portion 1,366,454 - Loan payable to Super G Funding, LLC (net of current portion) - 576,418
Notes payable to officers 175,000 310,000 Note payable to Kingsway America 600,000 - Total long-term liabilities 2,141,454 886,418
Stockholders' equity: Common stock - no par value (25,000,000 shares authorized, 20,775,921 issued and outstanding as of December
31, 2015 and 20,783,032 issued and outstanding as of September 30, 2016) 24,294,002 24,304,841 Accumulated deficit (9,419,027 )
(10,030,350 ) Total stockholders' equity 14,874,975 14,274,491 Total liabilities and stockholders' equity $ 18,464,928 $ 18,878,548
Noble Roman's, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) Three-Months Ended September 30,
Nine-Months Ended September 30, 2015 2016 2015 2016 Revenue: Royalties and fees $ 1,848,207 $ 1,953,843 $ 5,647,290 $ 5,544,389
Administrative fees and other 18,544 12,459 45,178 34,168 Restaurant revenue 51,689 55,691 148,763 162,737 Total revenue 1,918,440
2,021,993 5,841,231 5,741,294 Operating expenses: Salaries and wages 287,972 275,694 859,846 759,603 Trade show expenses 143,016
124,209 405,601 383,086 Travel expenses 57,145 57,010 171,698 152,684 Broker commissions - 10,421 - 32,241 Other operating expenses
202,624 200,367 604,215 575,651 Restaurant expenses 47,539 51,270 148,974 141,175 Depreciation and amortization 26,354 31,675
79,063 92,763 General and administrative 418,784 415,487 1,228,611 1,205,961 Total expenses 1,183,434 1,166,133 3,498,008 3,343,164
Operating income 735,006 855,860 2,343,223 2,398,130 Interest 50,412 153,882 138,641 291,822 Loss on restaurant closed 45,548 -
139,220 36,776 Adjust valuation of receivables 250,000 - 850,000 750,659 Income before income taxes from continuing operations
389,046 701,978 1,215,362 1,318,873 Income tax expense 163,286 268,208 506,932 503,907 Net income from continuing operations
225,760 433,770 708,430 814,966 Loss from discontinued operations net of tax benefit of $881,902 for 2016 - (1,426,289 ) -
(1,426,289 ) Net income (loss) $ 225,760 $ (992,519 ) $ 708,430 $ (611,323 ) Earnings per share - basic: Operating income $ .04 $
.04 $ .11 $ .12 Net income from continuing operations .01 .02 .03 .04 Net loss from discontinued operations net of tax benefit .00
(.07 ) .00 (.07 ) Net income (loss) .01 (.05 ) .03 (.03 ) Weighted average number of common shares outstanding 20,722,497
20,783,032 20,436,846 20,781,501 Diluted earnings per share: Operating income $ .03 $ .04 $ .11 $ .11 Net income from continuing
operations .01 .02 .03 .04 Net loss from discontinued operations net of tax benefit .00 (.07 ) .00 (.07 ) Net income (loss) .01
(.05 ) .03 (.03 ) Weighted average number of common shares outstanding 22,012,769 20,924,077 21,727,118 20,922,546
SOURCE: Noble Roman's, Inc.
