Noble Roman's, Inc. Announces 3rd Quarter Earnings

INDIANAPOLIS, Nov. 10 /PRNewswire-FirstCall/ -- Noble Roman's, Inc. (OTC Bulletin Board: NROM), the Indianapolis based franchisor of Noble Roman's Pizza and Tuscano's Italian Style Subs, today announced earnings for the three-month and the nine-month periods ended September 30, 2008.

For the quarter ended September 30, 2008, the company reported net income of $304,809, or $.02 per share, on 19.2 million weighted average shares outstanding. This compares to net income of $693,655, or $.04 per share, on 18.2 million weighted average shares outstanding for the quarter ended September 30, 2007. Total revenues for the quarter ended September 30, 2008 were $2.2 million compared to $3.0 million for the corresponding quarter in 2007. The company's pre-tax income for the third quarter 2008 was $461,832 compared to $1,035,097 for the corresponding period in 2007. Although the company recognizes income tax expense on its financial statements, it will not pay any income taxes for the next several years, due to its available tax loss carry-forwards.

For the nine-month period ended September 30, 2008, the company reported a net income of $1,021,547, or $.05 per share, on 19.2 million weighted average shares outstanding. This compares to net income of $2,100,166, or $.12 per share, on 17.3 million weighted average shares outstanding for the nine-month period ended September 30, 2007. Total revenues for the nine-month period ended September 30, 2008 were $7.0 million compared to $8.9 million for the corresponding period in 2007. The company's pre-tax income for the nine-month period was $1,547,798 compared to $3,166,172 for the corresponding period in 2007.

The decreases in revenue and net income were largely a result of selling fewer franchises and area development agreements compared to 2007. The decline in franchise sales reflected the general economic environment and the tightening of credit markets whereas the decline in initial fees was the result of refocusing the growth strategy to take a more disciplined approach to area development agreements. Royalty and fee income from existing franchises, apart from new franchise, area development and other related fees, were $1,660,558 and $5,045,426, respectively, for the three-month and nine- month periods ended September 30, 2008. This compares to $1,828,364 and $4,944,645 for the corresponding periods in 2007.

With increasing indications of a very weak retail economy, and with the severe dislocations in the lending markets, the company believes that it has a unique opportunity for increasing unit growth and revenue within its non- traditional venues such as hospitals, military bases, universities, convenience stores, attractions, entertainment facilities, casinos, airports, travel plazas, office complexes and hotels. The company's franchises in non- traditional locations are foodservice providers within a host business, and usually require a minimal investment compared to a stand-alone franchise. Non-traditional franchises are often sold into pre-existing facilities as a service and/or revenue enhancer for the underlying business. Through focusing on non-traditional franchise expansion, the company will still seek to capitalize on other franchising opportunities as they present themselves.

To augment the company's sales opportunities within non-traditional venues, it recently developed the new Noble Roman's Bistro service system. As an addition to the current service systems offered in its Noble Roman's Pizza and Tuscano's Italian Style Subs concepts, the Bistro is designed to appeal to additional types of businesses and operational objectives with a fresh food display and serve-to-order serving system. Though sometimes presented or packaged differently, the vast majority of the menu selections are comprised of ingredients already utilized in Noble Roman's Pizza and Tuscano's Italian Style Subs, thereby leveraging the company's simple systems, distribution and purchasing power.

The Bistro incorporates all of the ingredient qualities which Noble Roman's Pizza has been known for and retains simplicity by using largely ready-to-use ingredients that require only final assembly and baking on site. It features the new SuperSlice pizza, one-fourth of a large pizza, along with hot entrees such as chicken parmesan, baked penne casseroles, breadsticks and calzones plus fresh salads and snacks. The Bistro is also available with an optional breakfast expansion menu featuring hot plate combos with scrambled eggs, bacon, sausage, breakfast potatoes, pancakes, French toast sticks, biscuits and gravy and biscuit sandwiches. Customers move along the food display counter and are served to order as they go.

With the intensified focus on non-traditional franchising, the company's requirements for overhead and operating cost will be substantially less. In addition, the company plans to discontinue operating restaurants, which will also substantially reduce the company's requirements for overhead and operating cost. However, the company does intend to continue operating the two locations that it uses for testing and demonstration purposes and intends to sell the excess restaurants to be operated as franchises. This change will allow for a more complete focus on selling and servicing franchises to take full advantage of the unique opportunity the company believes it has for increased unit growth in non-traditional. After making these changes, according to the company's plan, it is anticipated that the company will generate cash flow of approximately $3.6 million, before principal payments on debt of $1.5 million in 2009, and net income for 2009 of approximately $2.3 million, or $.12 per basic share.

Updating the previously announced lawsuit styled Kari Heyser et al, versus Noble Roman's, Inc., et al, the defendants filed a motion to dismiss the lawsuit in lieu of an answer to the complaint. As a result, the plaintiffs sought leave from the court to file an amended complaint, which the court granted allowing the plaintiffs until October 29, 2008 to complete the filing. Subsequently, the plaintiffs filed a motion for extension of time, which the court granted, to file the amended complaint until November 15, 2008. The company believes that it has strong and meritorious legal and factual defenses to these claims and will vigorously defend its interests in this case.

The company has filed a counter-claim for damages against all ten plaintiffs and a preliminary injunction and a permanent injunction against nine of the plaintiffs. In addition, the company filed a motion for preliminary injunction against nine of the Plaintiffs, all of which are former franchisees. The preliminary injunction was granted by the court on October 7, 2008. Nine plaintiffs were ordered to comply within seven days for the majority of actions required by the injunction, and within 14 days for the remainder. None of the plaintiffs has fully complied with the court's order and the company believes that several have only minimally complied. The company is in the process of filing a motion to require full compliance, to require the plaintiffs to show cause why they should not be held in contempt and for attorney's fees as sanctions.

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 some former franchisees, shifts in market demand, the ability to sell certain franchises which are being operated on a temporary basis, 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, and the impact of competitors' actions. Should one or more of these risks or uncertainties adversely affect the company or should underlying assumptions or estimates prove incorrect, actual results may vary 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.

                       Noble Roman's, Inc. and Subsidiaries
                      Condensed Consolidated Balance Sheets
                                   (Unaudited)

                         Assets                     December 31, September 30,
                                                        2007         2008
    Current assets:
       Cash                                           $832,207   $ 1,515,046
       Accounts and notes receivable (net of
        allowances of $106,712 as of December 31,
        2007 and September 30, 2008)                 1,770,994     2,275,089
       Inventories                                     310,362       365,500
       Assets held for resale                          643,915     2,106,615
       Prepaid expenses                                175,022       405,673
       Current portion of long-term notes receivable   133,736             -
       Deferred tax asset - current portion          1,971,875     1,050,500
             Total current assets                    5,838,111     7,718,423

    Property and equipment:
       Equipment                                     1,289,795     1,410,146
       Leasehold improvements                          107,729       110,527
                                                     1,397,524     1,520,673
       Less accumulated depreciation and
        amortization                                   755,987       835,311
          Net property and equipment                   641,537       685,362
    Deferred tax asset (net of current portion)      9,106,008     9,501,132
    Other assets including long-term portion of
     notes receivable net of valuation allowances
     of $550,000 as of December 31, 2007 and
     September 30, 2008                              1,883,644     2,157,434
             Total assets                         $ 17,469,300  $ 20,062,351

              Liabilities and Stockholders' Equity
    Current liabilities:
       Accounts payable and accrued expenses          $532,263      $216,021
       Current portion of long-term note payable     1,500,000     1,500,000
             Total current liabilities               2,032,263     1,716,021

    Long-term obligations:
       Note payable to bank (net of current
        portion)                                     4,125,000     6,000,000
             Total long-term liabilities             4,125,000     6,000,000

    Stockholders' equity:
       Common stock - no par value (25,000,000
        shares authorized, 19,187,449 issued and
        outstanding as of December 31, 2007 and
        19,212,499 issued and outstanding as of
        September 30, 2008)                         22,905,617    22,967,908
       Preferred stock (5,000,000 shares
        authorized and 20,625 issued
        and outstanding as of December 31, 2007
        and September 30, 2008)                        800,250       800,250
       Accumulated deficit                         (12,393,830)  (11,421,828)
             Total stockholders' equity             11,312,037    12,346,330
                Total liabilities and
                 stockholders' equity             $ 17,469,300  $ 20,062,351



                       Noble Roman's, Inc. and Subsidiaries
                 Condensed Consolidated Statements of Operations
                                   (Unaudited)

                                    Three Months Ended    Nine Months Ended
                                       September 30,         September 30,
                                     2007       2008       2007       2008

    Royalties and fees            $2,679,313 $1,825,168 $8,051,953 $5,760,253
    Administrative fees and other     18,581     10,880     55,567     44,752
    Restaurant revenue               261,428    375,907    787,288  1,179,427
          Total revenue            2,959,322  2,211,955  8,894,808  6,984,432

    Operating expenses:
       Salaries and wages            422,161    344,763  1,221,773  1,074,862
       Trade show expense            138,197    121,814    412,030    366,598
       Travel expense                172,328    109,940    374,089    332,572
       Sales commissions             108,988     12,022    466,567     56,135
       Other operating expenses      253,909    225,253    701,255    697,784
       Restaurant expenses           240,311    363,638    729,743  1,127,858
    Depreciation and amortization     24,359     21,060     70,066     70,265
    General and administrative       400,735    400,955  1,249,151  1,243,807
          Operating income         1,198,334    612,510  3,670,134  2,014,551

    Interest and other expense       163,237    150,678    503,962    466,753
          Income before income
           taxes                   1,035,097    461,832  3,166,172  1,547,798

    Income tax expense               341,442    157,023  1,066,006    526,251
          Net income                 693,655    304,809  2,100,166  1,021,547

          Cumulative preferred
           dividends                  34,864     16,455    110,481     49,545

          Net income available
           to common stockholders   $658,791   $288,354 $1,989,685   $972,002


    Earnings per share - basic:
       Net income                       $.04       $.02       $.12       $.05
       Net income available to
        common stockholders             $.04       $.02       $.12       $.05
    Weighted average number of
     common shares outstanding    18,208,358 19,212,499 17,301,043 19,203,647


    Diluted earnings per share:
       Net income                       $.03       $.02       $.10       $.05
    Weighted average number of
     common shares outstanding    21,100,540 19,937,218 20,193,225 19,928,366

SOURCE Noble Roman's, Inc.