Noble Romans Inc (NROM) SEC Filing 8-K Material Event for the period ending Wednesday, August 9, 2023

EXHIBIT 99.1

 

NEWS BULLETIN

RE: NOBLE ROMAN'S, INC.

6612 E. 75th Street, Suite 450

Indianapolis, IN  46250

FOR ADDITIONAL INFORMATION, CONTACT:

For Media Information: Scott Mobley, President & CEO (smobley@nobleromans.com)

For Investor Relations: Paul Mobley, Executive Chairman (pmobley@nobleromans.com)

  Mike Cole, Investor Relations: 949-444-1341 (mike.cole@armaadvisoryservices.com)

 

Noble Roman’s Announces 2nd Quarter 2023 Financial Results

 

(Indianapolis, Indiana) – August 9, 2022 - Noble Roman's, Inc. (OTCQB: NROM), the Indianapolis based franchisor and licensor of Noble Roman’s Pizza and Noble Roman’s Craft Pizza & Pub (“CPP”), today announced financial results for the second quarter 2023 and growth in franchising in the non-traditional venue. 

 

The company reported a net income of $326,000, or $.02 per share, and $1.2 million, or $.05 per share, for the three-month and six-month periods ended June 30, 2023 compared to a net loss of $50,000 and $187,000 for the comparable periods in 2022.  The net income for the three-month period largely reflected growth in the franchising venue and was unaffected by the Employee Retention Tax Credit refund.  However, since that credit was recorded in the first quarter it is reflected in the results for the six month period.

 

The company generated approximately $539,000 in net cash from operating activities for the three months ended June 30, 2023 compared to approximately $151,000 for the comparable period in 2022.

 

Total revenue for the three-month and six-month periods ended June 30, 2023 was $4.0 million and $7.3 million, respectively, compared to $3.7 million and $7.2 million for the comparable periods in 2022.  Franchising revenue for the three-month and six-month periods ended June 30, 2023 was $1.4 million and $2.4 million, respectively, compared to $1.1 million and $2.1 million in the comparable periods in 2022.  Company-owned Craft Pizza & Pub (CPP) revenue for the three-month and six-month periods ended June 30, 2023 was $2.4 million and $4.5 million, respectively, compared to $2.5 million and $4.8 million for the comparable periods in 2022.  The revenue for the periods in 2022 reflected relatively higher, grand-opening sales from a few locations that opened late in the previous year, which disrupts their comparability.

 

The company-owned CPP locations continued to exhibit very favorable results with margin contribution of 14.7% and 11.8%, respectively, in the three-month and six-month periods ended June 30, 2023 compared to 13.6% and 11.8%, respectively, for the comparable periods in 2022. This is despite considerable inflationary pressure on ingredients and labor over the last year.

 

Results from the company’s franchising venue have seen a significant increase in both revenue and margins.  The company refocused its development plans toward selling more non-traditional franchises as a result of the pandemic and its after effects coming to an end and the determination that owners of non-traditional locations would be more willing to look at expansion options and a willingness to invest in their growth.  With the sales efforts in the first six months of this year the company generated 43 new franchised units available for opening.  During the first six months of 2023, the company opened 22 new locations with the remaining balance of the locations sold and not yet open in various stages of development to be opened.  In addition, the company has a significant pipeline of leads and prospects for future non-traditional franchise sales.  The company believes this growth points to an attractive opportunity for the coming months as the remaining new units already sold become open and given the number of interested prospects for future franchise sales that the company has identified.

 

 

Scott Mobley, the company’s President & CEO, stated, “As we announced earlier in the year, several initiatives were implemented in both the non-traditional and Craft Pizza & Pub venues.  It is rewarding to see that these efforts have paid off throughout the second quarter.  Having negotiated through the extremely difficult operating environment during the COVID and post-COVID periods, the company focused more of its resources on non-traditional franchising efforts as well as continuing to tightly control corporate level overhead expense.”

 

The following table sets forth the revenue, expense and margin contribution of the company's Craft Pizza & Pub venue and the percent relationship to its revenue:

 

		Three months ended June 30,																Six months ended June 30,
Description		2022								2023								2022								2023
Revenue		$	2,503,363				100	%		$	2,373,652				100	%		$	4,786,960				100	%		$	4,463,994				100	%
Cost of sales			523,135				20.9				476,942				20.1				993,408				20.8				928,300				20.8
Salaries and wages			720,537				28.6				652,905				27.5				1,443,494				30.2				1,270,369				28.5
Facility cost including rent, common area and utilities			406,536				16.2				405,768				17.1				800,233				16.7				810,592				18.2
Packaging			85,005				3.4				77,080				3.2				165,743				3.5				149,108				3.3
Delivery fees			39,423				1.6				29,095				1.2				76,347				1.6				60,217				1.3
All other operating expenses			388,253				15.5				383,402				16.1				742,193				15.5				721,428				16.2
Total expenses			2,162,889				86.4				2,025,192				85.3				4,221,418				88.2				3,940,014				88.3
Margin contribution		$	340,474				13.6	%		$	348,460				14.7	%		$	565,542				11.8	%		$	523,980				11.7	%

 

The following table sets forth the revenue, expense and margin contribution of the company's franchising venue and the percent relationship to its revenue:

 

		Three months ended June 30,																Six months ended June 30,
Description		2022								2023								2022								2023
Total royalties and fees revenue		$	1,064,363				100	%		$	1,373,533				100	%		$	2,098,607				100	%		$	2,360,876				100	%
Salaries and wages			216,658				20.4				207,604				15.1				410,254				19.6				430,062				18.2
Trade show expense			45,000				4.2				50,920				3.7				135,000				6.4				141,120				6.0
Insurance			99,431				9.3				78,711				5.7				195,281				9.3				169,886				7.2
Travel and auto			40,002				3.8				26,019				1.9				58,809				2.8				58,149				2.5
All other operating expenses (benefit)			82,149				7.7				70,874				5.2				145,251				6.9				(1,234,035	)(1)			(52.3	)
Total expenses			483,240				45.4				434,128				31.6				944,595				45.0				(434,818	)			(18.4	)
Margin contribution		$	581,123				54.6	%		$	939,405				68.4	%		$	1,154,012				55.0	%		$	2,795,693				118.4	%

 

(1)	See Note 1 to the Company’s condensed consolidated financial statements for a discussion of the ERTC, which substantially reduced operating expenses in the first quarter of 2023 but had no effect on the second quarter.

 

The following table sets forth the revenue, expense and margin contribution of the company-owned non-traditional venue and the percent relationship to its revenue:

 

		Three months ended June 30,																Six months ended June 30,
Description		2022								2023								2022								2023
Revenue(1)		$	177,115				100	%		$	236,585				100	%		$	310,244				100	%		$	459,965				100	%
Total expenses			169,750				95.8				204,150				86.3				302,626				97.5				325,980				70.9
Margin contribution		$	7,365				4.2	%		$	32,434				13.7	%		$	7,618				2.5	%		$	133,985				29.1	%

 

(1)	The significant increase in revenue was primarily the result of the hospital releasing most of its pandemic restrictions by allowing employees and guests to travel throughout the hospital.
(2)	See Note 1 to the Company’s condensed consolidated financial statements for a discussion of the ERTC, which substantially reduced operating expenses in the first quarter of 2023. Total expenses were reduced by $83,177 as a result of recording the ERTC in the first quarter of 2023 but had no effect on the second quarter.

 

 

Other Expenses

 

Depreciation and amortization expense were $95,517 and $191,033 for the three-month and six-month periods ended June 30, 2023 compared to $112,687 and $225,439 for the comparable periods in 2022, respectively.  The decrease in depreciation expense was the result of not opening any new corporate-owned locations to date in 2023.

 

General and administrative expenses were $526,000 and $1,045,000 for the three-month and six-month periods ended June 30, 2023, compared to $540,000 and $1,080,000 for the comparable periods in 2022, respectively.  This reflects the Company’s focus on minimizing costs while growing revenue through franchising.

 

Operating income was $704,361 and $2,230,109 for the three-month and six-month periods ended June 30, 2023 compared to $281,584 and $440,727 for the comparable periods in 2022, respectively.  The increase in the second quarter of 2023 over 2022 was a result of growth in the franchising venue while maintaining Craft Pizza & Pub profitability while and keeping overall expenses under control. The six-month period results also benefited from the recognition of the ERTC of $1.46 million in the first quarter of 2023.

 

Interest expense was $379,000 and $762,000 for the three-month and six-month periods ended June 30, 2023 compared to $348,000 and $690,000 for the comparable periods in 2022, respectively.  The primary reason for the increase in both periods was non-cash PIK interest which adds to the principal amount of the Corbel loan outstanding, however that is now being offset by a principal payment each month of $83,333, plus an application of a portion of the ERTC reimbursement received to the early retirement of a portion of the long-term debt.

 

A significant improvement in net cash provided by operating activities was approximately $539,000 in the three-month period ended June 30, 2023 compared to approximately $151,000 in the comparable period in 2022.

 

The Company’s current ratio was 1.84-to-1 as of June 30, 2023, compared to 1.3-to-1 as of December 31, 2022.   

 

BT Brands, Inc. (“BT Brands”) purported to nominate Gary Copperud for election as a Class III director at the annual meeting in opposition to A. Scott Mobley, President and Chief Executive Officer of Noble Roman’s. Mr. Mobley has been nominated and unanimously endorsed by the Board of Directors.  The Company advised BT Brands that its nominee was disqualified because it was not a shareholders of record at the date it submitted its nomination under the Company’s Bylaws. The shareholders may receive proxy solicitation materials from BT Brands including a proxy statement and proxy card.  The Board of Directors of the Company recommends to the shareholders that they not return the proxy card.  The Company is not responsible for the accuracy of any information provided by or relating to BT Brands contained in any proxy solicitation materials filed or disseminated by, or on behalf of, BT Brands or any other statements that BT Brands or its representatives may have made or otherwise make.  The Board, including all of its independent directors, strongly urges the shareholders NOT to sign or return any proxy card sent to them by or on behalf of BT Brands. On August 3, 2023, BT Brands filed a lawsuit in Federal court in Indianapolis alleging its purported nominee had been wrongfully disqualified and the Company had failed to comply with appliable proxy rules, and seeking various relief against the Company and its Board of Directors. The Company believes the lawsuit is entirely without merit and will defend the claims vigorously.

 

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 indicated by the forward-looking statements due to risks and uncertainties that exist in the Company’s operations and business environment, including, but not limited to the effects of the COVID-19 pandemic and its aftermath, competitive factors and pricing and cost pressures, non-renewal of franchise agreements, shifts in market demand, the success of franchise programs, including the Noble Roman’s Craft Pizza & Pub format, the Company’s ability to successfully operate an increased number of Company-owned restaurants, the outcome of the election of directors at the Company’s 2023 annual meeting of shareholders (as discussed under “Part II-Other Information”), general economic conditions, changes in demand for the Company’s products or franchises, the Company’s ability to service its loans, the acceptance of the amended federal Form 941 returns relating to the ERTC, the impact of franchise regulation, the success or failure of individual franchisees and inflation, other changes in prices or supplies of food ingredients and labor and the resolution of litigation arising out of a dispute with a third party purporting to nominate a candidate for director at the 2023 annual meeting, as well as the factors discussed under “Risk Factors” contained in this Company’s Annual Report on Form 10-K for the year ended December 31, 2022.  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.   If activist stockholder activities ensue, our business could be adversely impacted.

 

-END-

 

 

Noble Roman’s, Inc. and Subsidiaries

 

Condensed Consolidated Balance Sheets

 

(Unaudited)

 

Assets		December 31, 2022				June 30, 2023
Current assets:
Cash		$	785,522			$	685,977
Employee Retention Tax Credit Receivable			-				1,460,444
Accounts receivable - net			824,091				805,924
Inventories			997,868				1,005,265
Prepaid expenses			424,822				410,710
Total current assets			3,032,303				4,368,320
Property and equipment:
Equipment			4,351,558				4,363,377
Leasehold improvements			3,116,030				3,127,880
Construction and equipment in progress			63,097				68,858
			7,530,685				7,560,115
Less accumulated depreciation and amortization			2,817,477				3,008,510
Net property and equipment			4,713,208				4,551,605
Deferred tax asset			3,374,841				3,100,651
Deferred contract cost			934,036				943,109
Goodwill			278,466				278,466
Operating lease right of use assets			5,660,155				5,305,701
Other assets including long-term portion of receivables-net			350,189				389,641
Total assets		$	18,343,198			$	18,937,493
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses		$	650,582			$	572,081
Current portion of operating lease liability			799,164				799,164
Current portion of Corbel loan payable			866,667				1,000,000
Total current liabilities			2,316,413				2,371,245
Long-term obligations:
Term loan payable to Corbel			7,470,900				7,190,510
Corbel warrant value			29,037				29,037
Convertible notes payable			622,864				575,000
Operating lease liabilities - net of short-term portion			5,103,286				4,755,296
Deferred contract income			934,036				943,109
Total long-term liabilities			14,160,123				13,492,952
Stockholders’ equity:
Common stock – no par value (40,000,000 shares authorized, 22,215,512 issued and outstanding as of December 31, 2022 and as of June 30, 2023)			24,819,736				24,832,525
Accumulated deficit			(22,953,074	)			(21,759,227	)
Total stockholders’ equity			1,866,662				3,073,298
Total liabilities and stockholders’ equity		$	18,343,198			$	18,937,495

 

 

Noble Roman’s, Inc. and Subsidiaries

 

Condensed Consolidated Statements of Operations

 

(Unaudited)

 

		Three months ended June 30,								Six months ended June 30,
		2022				2023				2022				2023
Revenue:
Restaurant revenue – company-owned Craft Pizza & Pub		$	2,503,363			$	2,373,652			$	4,786,960			$	4,463,994
Restaurant revenue –company-owned non-traditional			177,115				236,585				310,244				459,965
Franchising revenue			1,064,363				1,373,533				2,098,608				2,360,875
Administrative fees and other			5,051				8,674				19,267				15,413
Total revenue			3,749,892				3,992,444				7,215,079				7,300,247
Operating expenses:
Restaurant expenses – company-owned  Craft Pizza & Pub			2,162,889				2,025,193				4,221,418				3,940,014
Restaurant expenses – company-owned  non-traditional			169,750				204,150				302,626				325,980
Franchising expenses (benefit)			483,240				436,914				944,595				(432,031	)
Total operating expenses			2,815,879				2,666,257				5,468,639				3,833,963
Depreciation and amortization			112,687				95,517				225,439				191,033
General and administrative expenses			539,742				526,309				1,080,274				1,045,140
Total expenses			3,468,308				3,288,083				6,774,352				5,070,136
Operating income			281,584				704,361				440,727				2,230,111
Interest expense			347,717				378,785				689,597				762,074
Income (loss) before income taxes			(66,133	)			325,576				(248,870	)			1,468,037
Income tax (benefit)			(15,872	)			-				(61,913	)			274,190
Net income (loss)		$	(50,261	)		$	325,576			$	(186,957	)		$	1,193,847
Earnings per share – basic:
Net income (loss)		$	.00			$	.02			$	(.01	)		$	.05
Weighted average number of common shares outstanding			22,215,512				22,215,512				22,215,512				22,215,512
Diluted earnings (loss) per share:
Net income (loss)		$	.00			$	.01			$	(.01	)		$	.05
Weighted average number of common shares outstanding			23,579,118				23,498,764				23,579,118				23,498,764