INDIANAPOLIS, Nov. 10, 2010 (GLOBE NEWSWIRE) -- 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 September 30, 2010. Net income from continuing operations was $406,710 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 20.1 million. This compares to net income from continuing operations of $459,535 for the quarterly period ended September 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 September 30, 2010 were $1.9 million compared to total revenues of $1.9 million for the comparable period in 2009. During the quarterly period ended September 30, 2010, the company recorded a loss on discontinued operations in the amount of $935,237 resulting in a net loss for the quarterly period ended September 30, 2010 of $528,527, or $.03 per share basic and diluted.
For the nine-month period ended September 30, 2010, the company reported a net income from continuing operations of $1,133,050, or $.06 per share basic and diluted, on weighted average number of common shares outstanding of 19.4 million and diluted weighted average shares of 20.1 million. This compares to net income from continuing operations of $1,291,529 for the nine-month period ended September 30, 2009, or $.07 per share basic and $.06 per share 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 nine-month period ended September 30, 2010 were $5.4 million compared to $5.7 million for the corresponding period in 2009. During the nine-month period ended September 30, 2010, the company recorded a loss on discontinued operations in the amount of $935,237 resulting in net income for the nine-month period ended September 30, 2010 of $197,813, or $.01 per share basic and diluted.
In 2008 the company accrued for estimated costs to defend the Heyser lawsuit (the status of which is discussed below) in an amount representing the company's best forecast at the time. Reviewing the current status of the lawsuit and forecasting estimated additional costs into the future, it was determined that an additional accrual was now required. Additionally, in reviewing accounts receivable, various receivables initiated in 2007 and 2008 and relating to the operations that were discontinued in 2008 were determined to be doubtful of collection and, therefore, charged to loss from discontinued operations.
Total revenue decreased from $1,934,323 to $1,852,897 and from $5,728,946 to $5,440,343 for the three-month and nine-month periods ended September 30, 2010 compared to the corresponding periods in 2009. One-time fees, franchisee fees and equipment commissions decreased from $109,773 to $60,378 and increased from $251,735 to $267,470 during the three-month and nine-month periods ended September 30, 2010 compared to the corresponding periods in 2009. Ongoing royalties and fees decreased from $1,668,457 to $1,651,697 and from $5,025,930 to $4,759,036 for the three-month and nine-month periods ended September 30, 2010 compared to the corresponding period in 2009. Of this decrease, $71,733 and $266,273 resulted from fewer traditional units being in operation during the three-month and nine-month periods in 2010, and $74,704 and $242,922 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 $129,677 and $242,301 for the three-month and nine-month periods in 2010.
In the third quarter of 2009 the company began offering 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 has completed product research and development on five related products to be sold through the grocery stores and expects to begin distributing those products in late November or early December 2010. The five products are pasta sauce, deep-dish lasagna with Italian sausage, grated aged parmesan cheese, cheesy stix and spicy cheese dip. Unlike the company's take-n-bake pizza which requires on-site assembly by the deli department, these products, except for the spicy cheese dip, arrive at the grocery store fully prepared and ready to display and sell. The products were designed to augment the take-n-bake pizza sales however the company can offer these products to any grocery store and is not limited to only those grocery stores that have signed license agreements since the products do not require any preparation or assembly. Even though the company has no sales experience with these products and the products have no proven market acceptance at this time, the company believes that the revenue generated from these products can potentially be significantly higher than the revenue from the take-n-bake pizza.
As of November 9, 2010, the company had signed agreements for 413 grocery store locations to operate the take-n-bake pizza program, 248 of which were open. The company anticipates opening most of the remaining locations within the next 30 to 60 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 locations. The company expects to sign several additional units with existing chains and is also in discussions with several other grocery store chains.
The company previously announced the signing of 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. To date we have signed agreements with 106 of their customers and are continuing to sign additional units on a regular basis. Recently the company signed a similar agreement with a grocery distribution company in Wisconsin which distributes to approximately 1,000 grocery stores in Wisconsin and surrounding states. The company, along with that distributor, began promoting our propriety products to their customers this week. We are currently in discussions with seven additional grocery distribution companies for similar type agreements. The company's experience thus far indicates that, if successful in obtaining these agreements, it will further accelerate the company's growth in grocery stores.
As previously announced, the company recently redesigned its layout and equipment specifications for convenience stores to lower the initial investment to approximately $15,000 down from the old design of $30,000 without decreasing the revenue potential of the system. This redesign and reduced investment cost has ignited increased interest in this program by convenience stores.
Earlier this year the company began bidding on military base locations through the Army and Air Force Exchange Service and has been awarded five contracts and has outstanding bids on several other Army/Air Force bases. When awarded a contract, the company locates a franchisee and assigns the contract. A franchise was opened on one of these bases on September 1st, one is expected to open within two weeks and the other three are expected to open over the next three months.
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 are former franchisees of the Company's traditional location venue. Originally, the Plaintiffs in this case 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. Since the initiation of this lawsuit, however, Plaintiffs Marikate and Paul Morris and Kapza, Inc. have voluntarily dismissed their claims against the Defendants and the Court has issued an Order finding Plaintiffs Henry and Brenda Villasenor and H&B Villasenor Investments, Inc. in Contempt of Court and has accordingly dismissed with prejudice the claims filed by the Villasenor Plaintiffs in this action. The Defendants in this action originally were the company, certain of the company's officers, and co-Defendants, CIT Small Business Lending Corporation and PNC Bank. The claims against co-Defendants CIT Small Business Lending Corporation and PNC Bank have since been dismissed with prejudice.
The Plaintiffs allege that the Defendants fraudulently induced them to purchase franchises for traditional locations through misrepresentations and omissions of material facts regarding the franchises. As relief, the Plaintiffs seek compensatory and punitive damages. In the Complaint, the Plaintiffs that remain in the case claim damages collectively in the amount of $5.1 million. In addition, some claims include punitive damages, court costs and/or prejudgment interest. Discovery was completed July 19, 2010. To date, all of the Plaintiffs remaining in the case have been deposed except the Soltero Plaintiffs. Plaintiffs' counsel withdrew his representation on behalf of the Soltero Plaintiffs and counsel for Defendants has been unable to locate the Soltero Plaintiffs. Therefore, the Soltero Plaintiffs remain parties to this action and remain unrepresented by counsel.
The company filed a Counter-Claim for Damages against all of the Plaintiffs in the approximate amount of $3.6 million plus attorney's fees, cost of collection and punitive damages in certain instances.
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 February, 2010, counsel for the Plaintiffs filed a Notice of Appeal with the Indiana Court of Appeals as to the Partial Summary Judgment granted by the Court. On August 19, 2010, the Court of Appeals issued a ruling affirming the Judgment of the Trial Court. On September 20, 2010, Plaintiffs filed a Petition for a Rehearing with the Indiana Court of Appeals, which the Court denied on October 25, 2010.
Defendants have filed Motions for Summary Judgment as to all of the Plaintiffs remaining in the case, based primarily on their deposition testimony and the lack of evidence substantiating the Plaintiffs' claims. Plaintiffs filed a consolidated Response to the Motions for Summary Judgment as to ten of the Plaintiff groups. The Soltero Plaintiffs and Heyser Plaintiffs did not file a Response to the Motion for Summary Judgment; therefore, Defendants Motions for Summary Judgment as to those two Plaintiff groups are unopposed. After receiving Plaintiffs' Consolidated Response to the Motions for Summary Judgment, Defendants filed Reply Briefs in support of their Motions for Summary Judgment against each of the ten Plaintiff groups included in the Response. In the Reply Briefs, Defendants asked the Court to: 1) strike the improperly designated and inadmissible materials including affidavits by each of the Plaintiffs which were in conflict with their sworn testimony; 2) strike their statement of fact section as failing to comply with Indiana Trial Rule 56; 3) strike arguments about other states' laws as an improper and belated attempt to amend the Complaint; 4) strike Plaintiffs' choice of law arguments which includes arguments that have already been decided by the trial court and the Indiana Court of Appeals; and 5) enter summary judgment in favor of Defendants. A hearing on Defendants' Motions for Summary Judgment has been set for November 22, 2010.
The Defendants' counterclaims against all of the original Plaintiffs are still pending. While the counterclaims against the individuals Paul and Marikate Morris and Kari and Fred Heyser, were stayed due to their bankruptcy filings in their individual capacities, the counterclaims against their corporate entities, Kapza, Inc., and Meck Enterprises LLC, respectively, remain pending as the corporate entities did not file for bankruptcy. Similarly, the counterclaims against the Villasenor Plaintiffs also remain pending and were not affected by the court's order dismissing that Plaintiff group with prejudice.
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 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, non-renewal of franchise agreements, 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. Since the company has no previous experience selling its products to retail channels, there can be no assurance that grocers will stock them or that customers will buy them. 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.
CONTACT: Noble Roman's, Inc. Paul Mobley, Chairman & CEO 317/634-3377