SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securites Act of 1934
Date of Report February 8, 2000
NOBLE ROMAN'S, INC.
(Exact name of registrant as specified in its charter)
Indiana 0-11104 35-1281154
(State or other (Commission (IRS Employer
jurisdiction File Number) Identification No.)
One Virginia Avenue, Suite 800
Indianapolis, Indiana 46204
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code (317) 634-3377
<PAGE>
Item 5. Other Events
On February 8, 2000, Noble Roman's, Inc. (the "Company") entered into a
series of transactions resulting in the Company obtaining approximately $8.5
million in additional capital and closing 16 and franchising two of its
previously owned traditional full-service restaurant locations.
The additional capital came from investors associated with the Geometry
Group, Inc. in New York, certain local investors in Indianapolis and The
Provident Bank in Cincinnati. Investors purchased common stock of the Company
for approximately $2.0 million in a private placement. The Provident Bank
exchanged $6.5 million senior secured debt for $1.6 million in common stock and
$4.9 million in no-yield preferred stock which may later be converted to common
stock at $3.00 per share at its option.
The Company closed 16 and franchised two of its previously owned
traditional full-service restauarant locations. This action was taken by the
Company to limit its direct operational involvement in the traditional
restaurants to a core group of locations in the Indianapolis, Columbus,
Bloomingtion and Evansville area markets in Indiana. The Company began
franchising non-traditional locations in 1997 and co-branding with Subway(R) and
TCBY(R) in 1999. To date the Company has awarded over 500 franchised locations
in 35 states. The Company made the decision to limit its involvement in
full-service operations in order to devote more of its management resources and
capital to the growth and development of its franchised non-traditional and
co-brand locations.
Over the past two years the Company has developed a system for
franchisees to establish a miniaturized version of a Noble Roman's pizzeria in
universities, recreational facilities, convenience stores, travel plazas and
other high traffic facilities. These "non-traditional" locations offer many of
the same quality menu items that the Company has sold in its full-service
restaurants for over 28 years. In addition, the Company has been franchising
locations in other restaurant facilities pursuant to co-brand agreements.
<PAGE>
Item 7. Financial Statements and Exhibits
(b) Pro forma financial information
(c) Exhibits
10.1 Press Release, dated February 9, 2000
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Date: February 21, 2000 ` NOBLE ROMAN'S, INC.
By: /s/ Paul W. Mobley
---------------------------
Paul W. Mobley, Chairman
By: /s/ Dan Hutchison
---------------------------
Dan Hutchison, Chief
Financial Officer
<PAGE>
NOBLE ROMAN'S, INC.
CONDENSED CONSOLIDATED PROFORMA FINANCIAL STATEMENTS
(UNAUDITED)
The following condensed consolidated proforma balance sheet as of September 30,
1999 and the condensed consolidated proforma statements of operations for the
nine-month period ended September 30, 1999 and the twelve-month period ending
December 31, 1998 have been derived, respectively, from the unaudited and
audited consolidated financial statements of Noble Roman's, Inc. These condensed
consolidated proforma financial statements give effect to the $2 million in
additional capital from the private placement, the exchange of $6.5 million in
senior secured debt for $1.6 million in common stock and $4.9 million in
no-yield preferred stock and the closing of 16 and franchising two of its
previously owned traditional full-service restaurants (more thoroughly described
in Item 5 "Other Events").
The condensed consolidated proforma balance sheets are shown assuming the
transactions had been completed as of September 30, 1999. The condensed
consolidated proforma statements of operations are shown assuming the
transactions had been completed as of January 1, 1998. Accordingly, the
historical information has been adjusted by the proforma adjustments to reflect
the changes directly attributable to the above transactions which is expected to
have a continuing impact on the Company and the corresponding tax effects of
such adjustments.
The condensed consolidated proforma financial statements are not necessarily
indicative of the results of operations had the transactions been consummated on
January 1, 1998, or of the results of future operations. The condensed
consolidated pro forma financial statements should be read in conjunction with
the historical financial statements and notes thereto of the Company.
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
(In Thousands)
<TABLE>
<CAPTION>
Adjustments
ASSETS -----------
- ------ Actual Debit Credit Pro Forma
--------------------------- ------------------------
<S> <C> <C> <C> <C>
Total current assets $ 2,870 270 (2) $ 3,970
276 (5)
198 (7)
355 (7)
Property and equipment, less accumulated 6,172 2,068 (1) 4,104
depreciation and amortization
Deferred tax asset 5,196 703 (1) 92 (2) 7,175
1,079 (4)
289 (6)
Cost in excess of assets acquired, net 5,757 3,173 (4) 2,584
Other assets 751 50 (7) 801
---------- -------
Total assets $ 20,746 $18,635
=========
LIABILITIES
Accounts payable $ 2,523 923 (7) $ 1,601
Other current liabilities 1,477 58 (7) 850 (6) 2,139
130 (7)
---------
Total current liabilities $ 4,000 $ 3,740
--------- -------
Total long-term liabilities 16,728 6,323 (3) 137 (7) 10,542
--------- -------
Total liabilities $ 20,728 $14,281
---------
Total stockholders equity $ 17 1,365 (1) 1,643 (3) $ 4,353
2,094 (4) 1,578 (7)
561 (6) 4,929 (3)
249 (3) 178 (2)
276 (5)
Total liabilities and stockholders
equity $ 20,746 $18,635
========= =======
</TABLE>
(1) To record the reduction of the carrying value of assets by the book
value of the restaurants closed or franchised.
(2) Record the estimated liquidation value of the assets from closed and
franchised restaurants.
(3) To record the conversion of $6,572,366 of senior secured debt less
warrant valuation of $249,117 to $4,929,274 no-yield preferred stock
and $1,643,092 common stock at $1.00 per share.
(4) To reduce the carrying value of goodwill by the goodwill associated
with the closed and franchised restaurants.
(5) To record the private placement of common stock to local investor
($300,000 less commissions of 8%).
(6) To accrue for future expenses associated with the closed and franchised
restaurants.
(7) To record the additional capital of $1,715,000 less 8% commissions
payable in a participating note and the use of proceeds, therefrom, for
the payment of interest to Provident Bank through May 1, 2000, the
payment of certain accounts payable and accrued expenses and the
estimated legal and other closing costs associated with this
transaction.
<PAGE>
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(In thousands except earnings per share)
<TABLE>
<CAPTION>
Adjustments
-----------
Actual Debit Credit Pro Forma
--------------------------- ------------------------
<S> <C> <C> <C> <C>
Restaurant revenue $ 16,538 5,772 (1) $ 10,765
Restaurant royalties 62 48 (4) 110
Express royalties and fees 2,459 2,459
Administrative fees and other 130 130
--------- --------
Total Revenue 19,190 13,465
Restaurant operating expenses:
Cost of revenue 3,369 1,216 (1) 2,154
Salaries and wages 6,316 2,519 (1) 3,798
Rent 1,679 721 (1) 958
Advertising 828 289 (1) 539
Other 3,935 1,572 (1) 2,363
Depreciation and amortization 802 246 (1) 453
103 (3)
Express operating expenses 1,186 1,186
General and administrative 1,946 422 (1) 1,523
--------- --------
Operating income(loss) ( 871) 491
Interest 1,345 481 (2) 864
--------- --------
Net loss before income taxes ( 2,216) ( 373)
Income taxes (benefit) ( 754) 627 (5) ( 126)
--------- --------
Net loss ($ 1,463) ($ 246)
========= ========
Weighted average number of shares 5,679 9,372
outstanding
Net loss per share ($ .26) ($ .03)
</TABLE>
(1) To remove the income and expense relating to the closed and franchised
restaurants from historical results.
(2) To reduce interest expense for the interest on the senior secured debt
which was converted to equity.
(3) To remove the current year amortization of goodwill related to the
closed and franchised restaurants.
(4) To record royalty revenue for the two restaurants franchised.
(5) To reflect income tax effect for above entries.
<PAGE>
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(In thousands except earnings per share)
<TABLE>
<CAPTION>
Adjustments
-----------
Actual Debit Credit Pro Forma
--------------------------- ------------------------
<S> <C> <C> <C> <C>
Restaurant revenue $ 23,307 8,734 (1) $ 14,572
Restaurant royalties 125 74 (5) 198
Express royalties and fees 2,161 2,161
Administrative fees and other 189 189
--------- --------
Total Revenue 25,782 17,121
Restaurant operating expenses:
Cost of revenue 4,686 1,933 (1) 2,753
Salaries and wages 8,515 3,487 (1) 5,027
Rent 2,223 966 (1) 1,257
Advertising 1,667 437 (1) 1,230
Other 5,690 2,228 (1) 3,462
Depreciation and amortization 1,059 301 (1) 620
137 (4)
Express operating expenses 839 839
General and administrative 3,002 774 (1) 2,228
Restructuring costs 571 571
--------- --------
Operating income(loss) ( 2,469) ( 866)
Interest 1,387 600 (3) 787
--------- --------
Net loss before income taxes ( 3,856) ( 1,653)
Income taxes (benefit) ( 1,311) 736 (6) ( 562)
--------- --------
Net loss before extraordinary gain ( 2,545) ( 1,091)
Extraordinary gain on forgiveness of debt,
net of tax expense of $203,876 396 396
--------- --------
Net loss ($ 2,150) ($ 695)
========= ========
Weighted average number of shares 4,131 7,789
outstanding
Net loss per share ($ .52) ($ .09)
</TABLE>
(1) To remove the income and expense relating to the closed and franchised
restaurants from historical results.
(2) To reduce interest expense for the interest on the senior secured debt
which was converted to equity.
(3) To remove the current year amortization of goodwill related to the
closed and franchised restaurants.
(4) To record royalty revenue for the two restaurants franchised.
(5) To reflect income tax effect for above entries.
Exhibit 10.1
NEWS BULLETIN RE: NOBLE ROMAN'S, INC.
1 Virginia Avenue, Suite 800
Indianapolis, IN 46204
FOR ADDITIONAL INFORMATION, CONTACT:
Paul W. Mobley, Chairman
317/634-3377
Michael Lauren, Investor Relations
415/564-5677
Indianapolis, Indiana - Noble Roman's, Inc. announced today that in a series of
transactions which closed on February 8, 2000, it has obtained approximately
$8.5 million in additional capital. These events are part of its strategic plan
to position Noble Roman's for accelerated growth in the franchising of
non-traditional locations and co-branding with other traditional foodservice
companies such as Subway(R) and TCBY(R).
Noble Roman's, Inc. began franchising non-traditional locations in 1997, and
co-branding with Subway and TCBY in 1999. To date the company has awarded over
500 franchised locations in 35 states with many more on the way. Though
non-traditional locations were developed first, officials at Noble Roman's
anticipate co-branding will offer at least as much if not more opportunity for
growth in the future.
Over the past two years the company has developed a method for franchisees to
establish a miniaturized version of a Noble Roman's pizzeria in universities,
recreational facilities, convenience stores, travel plazas and other
high-traffic facilities. These "non-traditional" locations, as they are called,
offer many of the same quality menu items that Noble Roman's has sold for 28
years at its traditional locations, including fresh made pizzas and breadsticks
among other items, plus a line of breakfast products. In discussing the
company's non-traditional franchise concept, Paul Mobley, Chairman of Noble
Roman's, stated, "We believe our concept is second to none. The food quality is
superior, the operations are simple, staffing requirements are minimal, and the
franchisee gets the benefit of a low initial investment and great on-going unit
economics. So far we have received an amazing reception in 35 states, and the
growth possibilities are enormous".
In addition to the non-traditional locations, the company has franchised
locations under co-branding agreements such as the recent opening of Noble
Roman's franchises in the TCBY at 49th Street and Pennsylvania Avenue and in the
Subway at West 71st Street and I-465, both in Indianapolis. Scott Mobley,
President of Noble Roman's, stated that, "Both non-traditional and co-branded
franchising are the wave of the future in the restaurant industry, and we're on
the cutting edge of that trend. We developed what we think is a better concept,
and this fact has been proven in the rapid sale of more than 500 franchises in
just over 2 years. We are devoting as much of our human resources as possible to
capitalize on this early success."
<PAGE>
Accordingly, the company will now limit its direct operational involvement in
traditional locations to a core group of locations in the Indianapolis,
Columbus, Bloomington and Evansville area markets in Indiana. Scott Mobley said,
"We have closed 16 traditional locations at least temporarily while we complete
on-going discussions on the possibility of re-opening them as franchises or
co-brand locations. In the meantime, we have reassigned several supervisors and
others formerly involved in those operations to help facilitate the growth of
our non-traditional and co-branded facilities. But the traditional locations are
extremely important to us - our product innovations and operating experience all
come from that side of the business, and we expect they will continue to do so
in the future."
The additional capital came from investors associated with Geometry Group, Inc.
in New York, certain local investors in Indianapolis and The Provident Bank in
Cincinnati. The Geometry Group and other local investors purchased common stock
of the company for approximately $2.0 million in a private placement. The
Provident Bank exchanged $6.5 million senior secured debt for $1.6 million in
common stock and $4.9 million in no-yield preferred stock which may later be
converted to common stock at $3.00 per share at its option.
Paul Mobley stated that, "Having already begun to reap the rewards of a
repositioned business strategy, and now with the significant increase in capital
and the management infrastructure which has been established in the past two
years, Noble Roman's is positioned for the expansion of several thousand
franchised co-branded and non-traditional units over the next few years." Mobley
further stated, "I am extremely pleased with the way Noble Roman's is now
positioned for the future. We have aligned our company with several of the
largest and well known retail food establishments in the country including
Subway(R) and TCBY(R). As experts in the field of food retailing both of these
companies recognize the significance of co-branding and have chosen Noble
Roman's over hundreds of other concepts. There is no doubt that co-branding and
non-traditional fast food retailing are sweeping the nation as more and more of
us eat where it is convenient. Given this need for consumer convenience, we
believe our business strategy has positioned Noble Roman's to take advantage of
these opportunities."
Given the significance of the current transactions, the company will be filing a
Form 8-k with the SEC showing restated proforma income statement information as
if the transactions had occurred on January 1, 1998, and proforma balance sheet
information as if the transactions had occurred on September 30, 1999. The
proforma income statement shows operations at approximately a break-even level
for both the twelve months ended December 31, 1998 and the nine months ended
September 30, 1999. The proforma balance sheet as of September 30, 1999 shows
current assets of $4.0 million (actual September 30, 1999 were $2.9 million),
current liabilities of $3.3 million (actual current liabilities for September
30, 1999 were $4.0 million), long-term obligations of $10.6 million (actual
September 30, 1999 were $16.7 million) and stockholder's equity of $4.6 million
(actual September 30, 1999 were $17 thousand).
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
<PAGE>
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: the operations and results of
operations of the Company as well as its customers and suppliers, including as a
result of competitive factors and pricing pressures, 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 impact of
competitors' actions, and changes in prices or supplies of food ingredients.
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.
- END -
