INDIANAPOLIS  (RestaurantNewsRelease.com)  Noble Roman’s, Inc. (OTCBB:NROM), the Indianapolis based franchisor of Noble Roman’s Pizza and Tuscano’s Italian Style Subs, today announced results for the quarterly period ended June 30, 2010. Net income was $374,673 or $.02 per share basic and diluted, on weighted average number of common shares outstanding of 19.4 million and diluted weighted average shares of 20.0 million. This compares to net income of $415,234 for the quarterly period ended June 30, 2009, or $.02 per share basic and diluted, on weighted average number of common shares outstanding of 19.4 million, and diluted weighted average shares of 19.9 million. Total revenues for the quarterly period ended June 30, 2010 were $1.8 million compared to total revenues of $1.9 million for the comparable period in 2009.

For the six-month period ended June 30, 2010, the company reported a net income of $726,339, or $.04 per share basic and diluted, on weighted average number of common shares outstanding of 19.4 million and diluted weighted average shares of 20.0 million. This compares to net income of $831,995 for the six-month period ended June 30, 2009, or $.04 per share basic and diluted weighted average number of common shares outstanding of 19.4 million and diluted weighted average shares of 19.9 million. Total revenues for the six-month period ended June 30, 2010 were $3.6 million compared to $3.8 million for the corresponding period in 2009. The company’s pre-tax income for the six-month period was $1,202,748 compared to $1,377,704 for the corresponding period in 2009.

Total revenue decreased from $1.9 million to $1.8 million and from $3.8 million to $3.6 million for the three-month and six-month periods ended June 30, 2010 compared to the corresponding periods in 2009. One-time fees, franchisee fees and equipment commissions increased from $57,338 to $83,408 and from $141,961 to $207,092 for the three-month and six-month periods ended June 30, 2010 compared to the corresponding periods in 2009. Ongoing royalties and fees decreased from $1,682,483 to $1,595,367 and from $3,357,473 to $3,107,339 for the quarterly and six-month periods in 2010 compared to 2009. Of this decrease, $92,156 and $194,539 resulted from fewer traditional units being in operation during the three-month and six-month periods in 2010, and $63,334 and $168,619 resulted from a decrease in ongoing royalties and fees from non-traditional units other than grocery stores. These were partially offset by an increase in ongoing royalties and fees from the grocery store take-n-bake additions in the amount of $68,384 and $113,024 for the three-month and six-month periods in 2010. 

The company recently developed a take-n-bake version of its 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 started offering take-n-bake pizza to grocery store chains in September 2009.

As of June 30, 2010, the company had signed agreements for 190 grocery store locations to operate the take-n-bake pizza program, 166 of which were open at that time. As of August 6, 2010, the company had signed agreements for 234 grocery store locations to operate the take-n-bake pizza program, 180 of which were open at that time. The company anticipates opening almost all of the remaining 54 locations within the next 30 days. Many of the grocery store chains that have signed agreements for certain of their grocery store locations to operate the take-n-bake pizza program have indicated their intent to enter into agreements for the remainder of their grocery stores. The company expects to sign several additional units with existing chains and is also in discussions with several other grocery store chains. 

The company also recently signed an agreement with a grocery distribution company which services approximately 1,700 grocery stores in the western United States. This agreement provides for the grocery distributor to stock the company’s proprietary products for distribution to their customers and promote the company’s take-n-bake program to all of their 1,700 customers. The take-n-bake program has been integrated into the operations of many of the company’s existing convenience store franchises, which has generated significant add-on sales, and is now being offered to all franchise prospects for convenience stores. The company uses the same high quality pizza ingredients for its take-n-bake product as with its standard pizza, with slight modification to portioning for increased home baking performance.

Lack of access to capital in today’s economic environment by many small to medium sized businesses, which make up the larger base of the company’s pool of franchise prospects for its non-traditional franchise program, has slowed the company’s rate of growth in these venues. To address these conditions, the company recently redesigned its layout and equipment specifications for convenience stores to lower their investment to approximately $15,000 down from the old design of $30,000 without decreasing the revenue potential of the concept. The company believes that this lower investment cost, in today’s environment, will substantially increase the growth rate in convenience stores resulting in additional royalty and fee income.

The company also recently began bidding on military base locations through the Army and Air Force Exchange Service and has been awarded four contracts and has outstanding bids on several Army/Air Force bases. When awarded a contract, the company locates a franchisee and assigns the contract. The company has already signed franchise agreements for the Keesler Air Force Base and the Tinker Air Force Base and those units are under construction and expected to open in September.

The company is a Defendant in a lawsuit styled Kari Heyser, Fred Eric Heyser and Meck Enterprises, LLC, et al v. Noble Roman’s, Inc. et al, filed in Superior Court in Hamilton County, Indiana on June 19, 2008 (Cause No. 29D01 0806 PL 739). The Plaintiffs in the case originally were Kari and Fred Heyser and Meck Enterprises, LLC, Shawn and Jamie White and Casual Concepts of Texas, LLC, Afifa Abdelmalek and St. Markorios Corporation, Robert and Kathleen Hopkins and Withmere Restaurants, LLC, John and Mariann Dunn and D & G Restaurant, LLC, Jason Clark and Nican Enterprises, LLC, Thomas A. Brintle and Noble Roman’s Mt. Airy 100, LLC, Marikate and Paul Morris and Kapza, Inc., Kim Neal and Mopan Commerce, Inc., and Collett Eugene Harrington and Sazzip, LLC. Plaintiffs Marikate and Paul Morris and Kapza, Inc. have withdrawn their claims against the company. The Judge found the Villasenor Plaintiffs in a Contempt of Court Order and dismissed with prejudice the claims filed by Plaintiffs Henry and Brenda Villasenor and H&B Villasenor Investments, Inc. against the company and the company’s officers that were named in this action. The Defendants originally were the company, Paul W. Mobley, A. Scott Mobley, Troy Branson, Mitch Grunat, CIT Small Business Lending Corporation and PNC Bank. The Court has dismissed the claims against CIT Small Business Lending Corporation and PNC Bank. 

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. 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. In the Complaint, the Plaintiffs claimed damages in the aggregate in the amount of $6.8 million and in some cases requested punitive damages, court costs and/or prejudgment interest. Discovery was completed July 19, 2010 and the Judge has denied Plaintiffs’ request for an extension of the discovery deadlines. To date, all of the remaining Plaintiffs have been deposed except Soltero Plaintiffs. Plaintiffs’ counsel withdrew representation of Soltero Plaintiffs and counsel for Defendants has been unable to locate the Soltero 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 Court granted the company’s Motion ordering Plaintiffs to fully comply with the preliminary injunction order.

The company filed a Motion to Revoke the Temporary Admission Pro Hac Vice of David M. Duree, Plaintiffs’ 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 also filed a Motion for Partial Summary Judgment as to several claims in the Complaint, which the Court granted in September, 2009. In October, 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. In January, 2010, the Court denied Plaintiffs’ Motion and in the same Order the Court denied Plaintiffs’ Motion for Certification of Appeal of Interlocutory Order and for Stay of Proceedings Pending Appeal. The Court also denied Plaintiffs’ request to amend their Complaint. In February, 2010, counsel for the Plaintiffs filed a Notice of Appeal with the Indiana Court of Appeals and subsequently filed their Brief of Appellants. Defendants’ Counsel filed a Brief of Appellees in opposition to the appeal, both for lack of jurisdiction and also on the merits. The Plaintiffs did not file a Reply Brief. Briefing is completed and the parties are now awaiting a decision from the Indiana Court of Appeals. The Court of Appeals has not scheduled an oral argument for this appeal.   

Defendants have all been deposed by Plaintiffs’ counsel. Defendants have filed Motions for Summary Judgment as to all of the Plaintiffs as a result of their deposition testimony. Through various extensions, the Court has now set a deadline of August 12, 2010 for Plaintiffs to file their responses to Defendants’ Motions for Summary Judgment against all remaining Plaintiffs and has ruled that Plaintiffs cannot request any further extensions of time in this respect. Pursuant to the Court’s mandate, Defendants will have 14 days after Plaintiffs file their response briefs to file any Reply Briefs in support of Defendants’ summary judgment motions. Once summary judgment briefing has concluded, the Court will set a hearing on the Motions for Summary Judgment upon the parties’ request, or issue a ruling on the briefs.

The Defendants’ counterclaims against all of the original Plaintiffs are still pending. The counterclaims are not affected by the withdrawal of Plaintiffs Marikate Morris, Paul Morris and Kapza, Inc., or by the dismissal of the claims by Henry Villasenor, Brenda Villasenor and H&B Villasenor Investments, Inc. and thus remain viable. 

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.

The statements contained above 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, 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, 2009. 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.

Noble Roman’s, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
 
     
 Assets December 31,
 2009
 June 30,
 2010
Current assets:    
 Cash $ 333,204 $ 241,735
 Accounts and notes receivable – net 1,343,500 1,601,098
 Inventories 239,006 225,016
 Assets held for resale 243,527 243,582
 Prepaid expenses 241,852 454,699
 Deferred tax asset – current portion 1,050,500 1,050,500
 Total current assets 3,451,589 3,816,630
     
Property and equipment:    
 Equipment 1,133,312 1,135,849
 Leasehold improvements  96,512  96,512
  1,229,824 1,232,361
 Less accumulated depreciation and amortization  790,134  824,253
 Net property and equipment 439,690 408,108
Deferred tax asset (net of current portion) 10,703,594 10,227,185
Other assets including long-term portion of notes receivable 2,087,644 2,619,905
 Total assets  $ 16,682,517 $ 17,071,828
     
Liabilities and Stockholders’ Equity    
Current liabilities:    
 Current portion of long-term note payable $ 1,500,000 $ 1,500,000
 Accounts payable and accrued expenses  434,665  871,317
 Total current liabilities 1,934,666 2,371,317
     
Long-term obligations:    
 Note payable to bank (net of current portion) 4,125,000 3,375,000
 Total long-term liabilities 4,125,000 3,375,000
     
Stockholders’ equity:    
 Common stock – no par value (25,000,000 shares authorized, 19,412,499
 issued and outstanding as of December 31, 2009 and June 30, 2010)
 
23,074,160
 
23,091,527
 Preferred stock (5,000,000 shares authorized and 20,625 issued and
 outstanding as of December 31, 2009 and June 30, 2010)
 
800,250
 
800,250
 Accumulated deficit (13,251,559) (12,566,266)
 Total stockholders’ equity  10,622,851  11,325,511
 Total liabilities and stockholders’ equity $ 16,682,517 $ 17,071,828
 
 
Noble Roman’s, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
         
  Three Months Ended Six Months Ended
  June 30, June 30,
  2009 2010 2009 2010
Royalties and fees $ 1,739,821 $ 1,678,775 $ 3,499,434 $ 3,314,431
Administrative fees and other 24,993 14,458 37,555 20,708
Restaurant revenue 138,742  139,081 257,635  252,307
 Total revenue 1,903,556 1,832,314 3,794,624 3,587,446
         
Operating expenses:        
 Salaries and wages 269,581 245,129 543,730 485,516
 Trade show expense 76,611 75,703 152,228 150,841
 Travel expense 33,601 36,764 78,133 73,003
 Sales commissions 3,627
 Other operating expenses 196,314 176,043 388,263 366,558
 Restaurant expenses 132,802 135,495 250,825 247,244
Depreciation and amortization 20,561 13,645 39,899 28,219
General and administrative  369,357  414,973  722,759  809,776
 Total expenses 1,098,827 1,097,751 2,179,464 2,161,157
 Operating income 804,729 734,563 1,615,160 1,426,289
         
Interest and other expense  117,141  114,141  237,456  223,541
 Income before income taxes 687,588 620,422 1,377,704 1,202,748
         
Income tax expense  272,354  245,749  545,709  476,409
 Net income 415,234 374,673 831,995 726,339
         
 Cumulative preferred dividends  16,274  24,411  32,910  41,046
         
 Net income available to common
 stockholders
 
$ 398,960
 
$ 350,262
 
$ 799,085
 
$ 685,293
         
         
Earnings per share – basic:        
 Net income  $ .02 $ .02 $ .04  $ .04 
 Net income available to common stockholders $ .02 $ .02 $ .04  $ .04 
Weighted average number of common shares
 outstanding
 
19,412,499
 
19,412,499
 
19,412,499
 
19,412,499
         
         
Diluted earnings per share:        
 Net income $ .02 $ .02 $ .04  $ .04
Weighted average number of common shares
 outstanding
 
19,909,365
 
20,065,298
 
19,909,365
 
20,065,298