United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended March 31, 2012
Commission file number: 0-11104
NOBLE ROMAN'S, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1281154
(State or other jurisdiction (I.R.S. Employer
of organization) Identification No.)
One Virginia Avenue, Suite 300
Indianapolis, Indiana 46204
(Address of principal executive offices) (Zip Code)
(317) 634-3377
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section
232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes X No
--- ---
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer Accelerated Filer
--- ---
Non-Accelerated Filer Smaller Reporting Company X
(do not check if --- ---
smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes No X
--- ---
As of May 6, 2012, there were 19,489,317 shares of Common Stock, no par value,
outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
The following unaudited condensed consolidated financial statements are
included herein:
Condensed consolidated balance sheets as of December 31, 2011
and March 31, 2012 (unaudited) Page 3
Condensed consolidated statements of operations for the
three months ended March 31, 2011 and 2012 (unaudited) Page 4
Condensed consolidated statements of changes in stockholders'
equity for the three months ended March 31, 2012 (unaudited) Page 5
Condensed consolidated statements of cash flows for the
three months ended March 31, 2011 and 2012 (unaudited) Page 6
Notes to condensed consolidated financial statements (unaudited) Page 7
2
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
December 31, March 31,
2011 2012
------------ ------------
Assets
Current assets:
Cash $ 233,296 $ 179,775
Accounts and note receivable - net 884,811 1,023,487
Inventories 338,447 357,476
Assets held for resale 252,552 252,552
Prepaid expenses 278,718 336,913
Deferred tax asset - current portion 1,400,000 1,400,000
------------ ------------
Total current assets 3,387,824 3,550,203
------------ ------------
Property and equipment:
Equipment 1,147,109 1,150,733
Leasehold improvements 12,283 12,283
------------ ------------
1,159,392 1,163,016
Less accumulated depreciation and amortization 851,007 866,155
------------ ------------
Net property and equipment 308,385 296,861
Deferred tax asset (net of current portion) 9,613,399 9,408,457
Other assets including long-term portion of notes receivable 3,914,523 4,058,368
------------ ------------
Total assets $ 17,224,131 $ 17,313,889
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Note payable to bank $ 3,575,000 $ 3,375,000
Accounts payable and accrued expenses 665,054 581,789
------------ ------------
Total current liabilities 4,240,054 3,956,789
------------ ------------
Long-term obligations:
Note payable to officer 1,255,821 1,255,821
------------ ------------
Total long-term liabilities 1,255,821 1,255,821
------------ ------------
Stockholders' equity:
Common stock - no par value (25,000,000 shares authorized, 19,469,317 issued
and outstanding as of December 31, 2011 and 19,489,317 as of
March 31, 2012) 23,239,976 23,272,873
Preferred stock (5,000,000 shares authorized and 20,625 issued and
outstanding as of December 31, 2011 and March 31, 2012) 800,250 800,250
Accumulated deficit (12,311,970) (11,971,844)
------------ ------------
Total stockholders' equity 11,728,256 12,101,279
------------ ------------
Total liabilities and stockholders' equity $ 17,224,131 $ 17,313,889
============ ============
See accompanying notes to condensed consolidated financial statements.
3
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
March 31,
-------------------------
2011 2012
----------- -----------
Royalties and fees $ 1,674,788 $ 1,703,566
Administrative fees and other 8,377 7,247
Restaurant revenue 118,852 126,849
----------- -----------
Total revenue 1,802,017 1,837,662
Operating expenses:
Salaries and wages 237,644 243,459
Trade show expense 90,000 120,997
Travel expense 46,885 48,915
Other operating expenses 178,942 178,201
Restaurant expenses 118,564 119,243
Depreciation and amortization 13,549 30,664
General and administrative 408,388 395,717
----------- -----------
Total expenses 1,093,972 1,137,196
----------- -----------
Operating income 708,045 700,466
Interest and other expense 98,652 95,929
----------- -----------
Income before income taxes 609,393 604,537
Income tax expense 241,381 239,458
----------- -----------
Net income 368,012 365,079
Cumulative preferred dividends 24,953 24,953
----------- -----------
Net income available to common
stockholders $ 343,059 $ 340,126
=========== ===========
Earnings per share - basic:
Net income $ .02 $ .02
Net income available to common stockholders .02 .02
Weighted average number of common shares
outstanding 19,422,650 19,477,449
Diluted earnings per share:
Net income $ .02 $ .02
Weighted average number of common shares
outstanding 20,118,211 20,005,889
See accompanying notes to condensed consolidated financial statements.
4
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in
Stockholders' Equity
(Unaudited)
Preferred Common Stock Accumulated
Stock Shares Amount Deficit Total
----- ------ ------ ------- -----
Balance at December 31, 2011 $ 800,250 19,469,317 $ 23,239,976 $(12,311,970) $11,728,256
Net income for three months ended
March 31, 2012 365,079 365,079
Cumulative preferred
dividends (24,953) (24,953)
Exercise of employee stock options 20,000 7,200 7,200
Amortization of value of employee
stock options 25,697 25,697
--------- ---------- ----------- ------------ -----------
Balance at March 31, 2012 $ 800,250 19,489,317 $23,272,873 $(11,971,844) $12,101,279
========= ========== =========== ============= ===========
See accompanying notes to condensed consolidated financial statements.
5
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31,
----------------------------
2011 2012
--------- ---------
OPERATING ACTIVITIES
Net income $ 368,012 $ 365,079
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 64,925 40,846
Deferred income taxes 241,381 239,458
Changes in operating assets and liabilities:
(Increase) in:
Accounts and notes receivable (27,081) (138,677)
Inventories (14,454) (19,029)
Prepaid expenses (80,169) (58,195)
Other assets (293,988) (143,845)
(Decrease) increase in:
Accounts payable and accrued expenses 21,578 (12,090)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 280,204 273,547
--------- ---------
INVESTING ACTIVITIES
Purchase of property and equipment (3,375) (3,624)
Investment in assets held for sale (1,403) --
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (4,778) (3,624)
--------- ---------
FINANCING ACTIVITIES
Payment of obligations from discontinued operations (142,158) (71,176)
Payment of cumulative preferred dividends (24,953) (24,953)
Payment of principal on outstanding debt (275,000) (200,000)
Payment of alternative minimum tax -- (34,515)
Proceeds from the exercise of employee stock options 18,000 7,200
Principal payment received on notes receivable 3,807 --
Proceeds from officer loan 50,000 --
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES (370,304) (323,444)
--------- ---------
Decrease in cash (94,878) (53,521)
Cash at beginning of period 337,044 233,296
--------- ---------
Cash at end of period $ 242,166 $ 179,775
========= =========
Supplemental schedule of non-cash investing and financing activities
None
Cash paid for interest $ 86,773 $ 77,108
See accompanying notes to condensed consolidated financial statements.
6
Notes to Condensed Consolidated Financial Statements (Unaudited)
----------------------------------------------------------------
Note 1 - The accompanying unaudited interim condensed consolidated financial
statements, included herein, have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC"). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. These condensed
consolidated statements have been prepared in accordance with the Company's
accounting policies described in the Annual Report on Form 10-K for the year
ended December 31, 2011 and should be read in conjunction with the audited
consolidated financial statements and the notes thereto included in that report.
Unless the context indicates otherwise, references to the "Company" mean Noble
Roman's, Inc. and its subsidiaries.
In the opinion of the management of the Company, the information contained
herein reflects all adjustments necessary for a fair presentation of the results
of operations and cash flows for the interim periods presented and the financial
condition as of the dates indicated, which adjustments are of a normal recurring
nature. The results for the three-month period ended March 31, 2012 are not
necessarily indicative of the results to be expected for the full year ending
December 31, 2012.
Note 2 - Royalties and fees include $52,500 and $74,833 for the three-month
periods ended March 31, 2011 and 2012, respectively, of initial franchise fees.
Royalties and fees included $10,125 and $9,345 for the three-month periods ended
March 31, 2011 and 2012, respectively, of equipment commissions. Royalties and
fees, less initial franchise fees and equipment commissions were $1,612,163 and
$1,619,388 for the three-month periods ended March 31, 2011 and 2012,
respectively. This increase resulted from an increase in royalties and fees from
grocery stores of $41,294, and an increase of $2,055 in royalties and fees from
traditional locations partially offset by a decrease of $36,124 in royalties and
fees from non-traditional locations other than grocery stores. The $41,294
increase from royalties and fees from grocery stores reflected an increase of
$74,853 in royalties and fees from take-n-bake sales partially offset by a
decrease of $33,559 in fees from retail products. The Company has no material
amount of past due royalties.
There were 1,583 outlets in operation on December 31, 2011 and 1,653 outlets in
operation on March 31, 2012. During the three-month period ended March 31, 2012,
there were 77 new outlets opened and seven outlets closed. In the ordinary
course, grocery stores from time to time add products, remove and subsequently
re-offer them. Therefore, it is unknown if any grocery store licenses have left
the system.
7
Note 3 - The following table sets forth the calculation of basic and diluted
earnings per share for the three-month period ended March 31, 2011:
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Net income $ 368,012 19,422,650 $ .02
Less preferred stock dividends (24,953)
-----------
Earnings per share - basic
Income available to common stockholders 343,059 .02
Effect of dilutive securities
Options 328,895
Convertible preferred stock 24,953 366,666
----------- ----------
Diluted earnings per share
Income available to common stockholders
and assumed conversions $ 368,012 20,118,211 $ .02
The following table sets forth the calculation of basic and diluted earnings per
share for the three-month period ended March 31, 2012:
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Net income $ 365,079 19,477,449 $ .02
Less preferred stock dividends (24,953)
-----------
Earnings per share - basic
Income available to common stockholders 340,126 .02
Effect of dilutive securities
Options 161,774
Convertible preferred stock 24,953 366,666
----------- ----------
Diluted earnings per share
Income available to common stockholders
and assumed conversions $ 365,079 20,005,889 $ .02
Note 4 - 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 in June 2008 (Cause No. 29D01 0806 PL
739). The Court issued an Order dated December 23, 2010 granting summary
judgment in favor of the Company against all of the Plaintiffs. As a result, the
Plaintiffs' allegations of fraud against the Company and certain of its officers
were determined to be without merit. Plaintiffs filed numerous motions and an
appeal to the Indiana Court of Appeals, in an attempt to reverse the December
23, 2010 summary judgment. All of the motions failed and the Indiana Court of
Appeals dismissed the appeal with prejudice. Plaintiffs' last attempt to vacate
the summary judgment award was their attempt to vacate the Order on the grounds
of misconduct of third parties. On December 1, 2011, the Judge denied their
motion and specifically found "that there was absolutely no evidence of
misconduct" and the Court admonished Plaintiffs and Plaintiffs' counsel for
making such unfounded allegations. The fraud charges against the Company and
certain of its officers are dismissed entirely and Plaintiffs have no appeal
rights remaining. The Company then filed a motion for sanctions against the
8
Plaintiffs and their attorney for the frivolous filings. On February 28, 2012,
the Court granted the Company's request for sanctions and ordered the Plaintiffs
and their attorney to pay the Company $8,326 by April 23, 2012. Plaintiffs and
their attorney have asked the Court to reconsider the grant of sanctions and
requested a hearing. The Judge has set a hearing for May 23, 2012. The Company
obtained summary judgment on its counterclaims against the Plaintiffs; however,
the amounts of damages have not yet been determined by the Court.
The Complaint was originally against the Company and certain officers and
institutional lenders. The Plaintiffs are former franchisees of the Company's
traditional location venue. The Plaintiffs alleged that the Defendants
fraudulently induced them to purchase franchises for traditional locations
through misrepresentations and omissions of material facts regarding the
franchises. In addition to the above claims, one group of franchisee-Plaintiffs
in the same case had asserted a separate claim under the Indiana Franchise Act
on which the Court's Order denied the Company's motion for summary judgment as
the Court determined that there is a genuine issue of material fact but did not
render any opinion on the merits of the claim. The Company denies any liability
on the Indiana Franchise Act claim and will continue to vigorously defend
against this claim.
The Company filed counterclaims for damages for breach of contract against all
of the Plaintiffs in the approximate amount of $3.6 million plus attorneys'
fees, interest and other cost of collection, or a total of over $5 million. On
September 21, 2011, the Company filed motions for partial summary judgment as to
liability against the Plaintiffs on the Company's counterclaims. As a result,
the Company was granted partial summary judgment as to liability against the
Plaintiffs/Counterclaim-Defendants on the Company's counterclaims against the
Plaintiffs. In this partial summary judgment, the Court determined that the
Plaintiffs were liable to the Company for direct damages and consequential
damages, including future royalties, for breach of their franchise agreements.
In addition, the Court determined that, as a matter of law, Noble Roman's was
entitled to recover attorneys' fees associated with obtaining preliminary
injunctions, fees resulting from the prosecution of Noble Roman's counterclaims
and fees for defending against fraud claims against the Company and certain of
its officers. The amount of the award is to be determined at trial. The Company
requested the Court to order mandatory mediation as to the Indiana Franchise Act
claim and the Company's counterclaim for damages. The Court has agreed to grant
the request but, as of yet, has not specified a date.
Note 5 - The note payable to Wells Fargo Bank, N.A. is reflected in current
liabilities in the amount of $3.4 million because, under the current
amortization schedule, the entire balance is due on October 1, 2012.
Note 6 - As reflected on the Condensed Consolidated Statements of Cash Flows,
during the three months ended March 31, 2012, the Company paid alternative
minimum tax for the year 2009.
Note 7 - The Company evaluated subsequent events through the date the financial
statements were issued and filed with the Securities and Exchange Commission.
There were no subsequent events that required recognition or disclosure beyond
what is disclosed in this report regarding refinancing of the Company's debt as
discussed under Liquidity and Capital Resources.
9
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General Information
-------------------
Noble Roman's, Inc., an Indiana corporation incorporated in 1972 with two
wholly-owned subsidiaries, Pizzaco, Inc. and N.R. Realty, Inc., sells and
services franchises and licenses for non-traditional foodservice operations
under the trade names "Noble Roman's Pizza", "Noble Roman's Take-N-Bake",
"Tuscano's Italian Style Subs" and "Tuscano's Grab-N-Go Subs". The concepts'
hallmarks include high quality pizza and sub sandwiches, along with other
related menu items, simple operating systems, fast service times,
labor-minimizing operations, attractive food costs and overall affordability.
Since 1997, the Company has focused its efforts and resources primarily on
franchising and licensing for non-traditional locations and now has awarded
franchise and/or license agreements in 49 states plus Washington, D.C., Puerto
Rico, the Bahamas, Italy and Canada. Although from 2005 to 2007 the Company sold
some franchises for its concepts in traditional restaurant locations, the
Company is currently focusing all of its sales efforts on (1) selling franchises
for non-traditional locations primarily in convenience stores and entertainment
facilities and (2) license agreements for grocery stores to sell the Noble
Roman's Take-n-Bake Pizza. Pizzaco, Inc. is the owner and operator of the two
Company locations used for testing and demonstration purposes. The Company has
no plans to operate any other locations. References in this report to the
"Company" are to Noble Roman's, Inc. and its subsidiaries, unless the context
requires otherwise.
Products & Systems
------------------
The Company's non-traditional franchises provide high-quality products, simple
operating systems, labor minimizing operations and attractive food costs.
Noble Roman's Pizza
The hallmark of Noble Roman's Pizza is "Superior quality that our customers can
taste." Every ingredient and process has been designed with a view to produce
superior results.
o Crust made with only specially milled flour with above average protein
and yeast.
o Fresh packed, uncondensed sauce made with secret spices, parmesan
cheese and vine-ripened tomatoes.
o 100% real cheese blended from mozzarella and Muenster, with no soy
additives or extenders.
o 100% real meat toppings, again with no additives or extenders - a
distinction compared to many pizza concepts.
o Vegetable and mushroom toppings that are sliced and delivered fresh,
never canned.
o An extended product line that includes breadsticks and cheesy stix
with dip, pasta, baked sandwiches, salads, wings and a line of
breakfast products.
o A fully-prepared pizza crust that captures the made-from-scratch
pizzeria flavor which gets delivered to the franchise location
shelf-stable so that dough handling is no longer an impediment to a
consistent product.
Noble Roman's Take-N-Bake
The Company 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 stores and as a stand-alone offering for grocery
stores. The take-n-bake program in grocery stores is being offered as a license
agreement rather than a franchise agreement. In convenience stores, take-n-bake
is an available menu offering under the existing franchise agreement. The
10
Company uses the same high quality pizza ingredients for its take-n-bake pizza
as with its standard pizza, with slight modifications to portioning for
increased home baking performance.
Tuscano's Italian Style Subs
Tuscano's Italian Style Subs is a separate restaurant concept that focuses on
sub sandwich menu items. Tuscano's was designed to be comfortably familiar from
a customer's perspective but with many distinctive features that include an
Italian-themed menu. The franchise fee and ongoing royalty for a Tuscano's is
identical to that charged for a Noble Roman's Pizza franchise. For the most
part, the Company awards Tuscano's franchises for some of the same facilities as
Noble Roman's Pizza franchises, although Tuscano's franchises are also available
for locations that do not have a Noble Roman's Pizza franchise.
Tuscano's Grab-N-Go Subs
Noble Roman's has developed a grab-n-go service system for a selected portion of
the Tuscano's menu. The grab-n-go system is designed to add sales opportunities
at existing non-traditional Noble Roman's Pizza and/or Tuscano's Subs locations.
Franchisees that opened prior to the development of the grab-n-go service system
may add it as an option. The grab-n-go system has already been integrated into
the operations of several existing locations and is now available to all
franchisees. New, non-traditional franchisees have the opportunity to open with
both take-n-bake pizza and grab-n-go subs when they acquire a Noble Roman's
franchise or license.
Business Strategy
-----------------
The Company's business strategy includes in the following four elements:
1. Focus on revenue expansion through two primary growth vehicles:
Sales of Non-Traditional Franchises and Licenses. The Company believes that in
today's macroeconomic circumstances, it has an opportunity for increasing unit
growth and revenue within its non-traditional venues, particularly with
convenience stores, travel plazas and entertainment facilities. The Company's
franchises in non-traditional locations are foodservice providers within a host
business, and usually require a substantially less investment compared to a
stand-alone traditional location. Non-traditional franchises and licenses are
most often sold into pre-existing facilities as a service and/or revenue
enhancer for the underlying business. Although the Company's current focus is on
non-traditional franchise or license expansion, the Company will still seek to
capitalize on other franchising opportunities as they present themselves.
As a result of the Company's major focus being on non-traditional franchising
and licensing, its requirements for overhead and operating cost are
significantly less than if it were focusing on traditional franchising. In
addition, the Company does not operate restaurants except for two restaurants it
uses for product testing, demonstration and training purposes. This allows for a
more complete focus on selling and servicing franchises and licenses to pursue
increased unit growth.
Licensing the Company's Take-N-Bake Program. In September 2009, the Company
introduced a take-n-bake pizza as an addition to its menu offering. The
take-n-bake pizza is designed as a stand-alone offering for grocery stores and
an add-on component for new and existing convenience store franchisees or
licensees. Since September 2009, when the Company started offering take-n-bake
pizza to grocery store chains, through May 8, 2012, the Company has signed
agreements with 1,084 grocery store locations to operate the take-n-bake pizza
11
program and has opened take-n-bake pizza in approximately 881 of those
locations. The Company is currently in discussions with numerous grocery store
operators for additional take-n-bake locations. Beginning in August 2011, the
Company introduced six new "Signature Specialty Take-N-Bake Pizza" combinations
to its current standard offerings. These pizzas feature unique, fun combinations
of ingredients with proven customer appeal in other Company venues, and include
Hawaiian pizza, Four Cheese pizza, BBQ Pork pizza, BBQ Chicken pizza, Hoppin'
Jalapeno pizza and Parmesan Tomato pizza. The Company's strategy with these new
combinations is to secure more shelf space in existing locations, to add to the
appeal of the program in order to attract new locations, and to generally
increase sales of the Company's products.
At the start of 2011, seeking to supplement the take-n-bake pizza offering and
expand merchandising space, the Company introduced several carton-to-shelf
retail items that require no assembly at the grocery store and help expand the
merchandising visibility of the Noble Roman's brand. These items include Noble
Roman's Pasta Sauce, Noble Roman's Deep-Dish Lasagna with Italian Sausage, Noble
Roman's Spicy Cheese Sauce and Noble Roman's Cheesy Stix.
To further accelerate the growth of take-n-bake pizza in grocery stores, the
Company has focused on signing agreements with various grocery store
distributors to market the take-n-bake pizza program to the distributors'
current customer base. As of May 8, 2012, the Company had signed 12 grocery
distributors to the program, and continues to pursue others as well.
2. Leverage the results of extensive research and development advances.
The Company has invested a great deal in the time and effort to create what it
considers to be competitive advantages in its product and systems for
non-traditional and grocery take-n-bake locations. The Company will continue to
make these investments the focal point in its marketing process. The Company
believes that the quality of its products, the cost effectiveness of those
products, its relatively simple production and service systems as well as its
diverse, modularized menu offerings contribute to the Company's strategic
advantages and growth potential. Every ingredient and process was designed with
a view to producing superior results. The menu items were developed to be
delivered in a ready-to-use form requiring only on-site assembly and baking
except for take-n-bake pizza which is sold to bake at home, and the new
carton-to-shelf retail items which require no assembly. The Company believes
this process results in products that are great tasting, quality consistent,
easy to assemble, and relatively low in food cost requiring very low amounts of
labor, allowing for a significant competitive advantage due to the speed at
which its products can be prepared, baked and served to customers.
For example, in convenience stores and travel plazas, at competitive retail
prices, the margins on selling Noble Roman's products, after cost of product and
royalty, provides the franchisees with a gross margin on the sales of
approximately 65% to 70%. The Company believes it maintains a competitive
advantage in product cost by using carefully selected independent third-party
manufacturers and independent third-party distributors. This allows the Company
to contract for proprietary products and services with highly efficient
suppliers that have the potential of keeping costs extremely low when compared
to typical, competing systems whereby the franchisor attempts to own and operate
production and distribution systems of their own much less efficiently.
3. Expand the Company's overall capacity to generate new franchises and
licenses.
To increase the capacity of the Company to generate, follow-up on and close new
franchise and licensing leads, the Company has made two strategic decisions.
First, the Company's Chairman and CEO has assumed the lead position at all of
12
the Company's trade shows across the country, which is the primary means for
demonstrating its product and system advantages to thousands of prospective
non-traditional and grocery operators. This focus by the Company's CEO has
underscored the Company's current, overriding orientation towards new revenue
generation. Additionally, in January 2012, the Company recruited a new, proven
sales executive to further help generate, follow-up on and close leads for new
franchises, with a particular focus on its non-traditional convenience store and
travel plaza venues. The Company was able to accomplish this without increasing
corporate overhead by eliminating other positions and spreading those
responsibilities across other, existing personnel.
4. Aggressively communicate the Company's competitive advantages to its target
market of potential franchisees and licensees.
The Company utilizes four basic methods of reaching potential franchisees and
licensees and to communicate its product and system advantages. These methods
include calling from both acquired and in-house prospect lists, frequent direct
mail campaigns to targeted prospects, web-based lead capturing, and live
demonstrations at trade and food shows. In particular, the Company has found
that conducting live demonstrations of its systems and products at carefully
selected trade and food shows across the country allows it to demonstrate
advantages that can otherwise be difficult for a potential prospect to
visualize. There is no substitute for actually tasting the difference in a
product's quality to demonstrate the advantages of the Company's product
quality. The Company carefully selects those national and regional trade and
food shows where it either has an existing relationship or considerable previous
experience to know that they offer favor opportunities for fruitful lead
generation.
Business Operations
-------------------
Distribution
------------
Primarily all of the Company's products are manufactured pursuant to the
Company's recipes and formulas by third-party manufacturers pursuant to
contracts between the Company and the various manufacturers. The contracts
require the manufacturers to produce various ingredients and sell them to
Company-approved distributors at a price negotiated between the Company and the
manufacturer.
At present, the Company has distribution agreements with 11 primary distributors
strategically located throughout the United States. The distribution agreements
require the primary distributors to maintain adequate inventories of all
ingredients to meet the needs of the Company's franchisees and licensees for
weekly deliveries to the franchisee/licensee locations plus the grocery store
distributors in their respective territories. The primary distributors purchase
the ingredients from the manufacturer, under payment terms agreed upon by the
manufacturer and the distributor, and distribute the ingredients to the
franchisee/licensee at a price fixed by the distribution agreement, which is
their landed cost plus a contracted mark-up for distribution. Payment terms to
the distributor are agreed upon between each franchisee/licensee and the
distributor. In addition, the Company has agreements with 12 grocery store
distributors located in various parts of the country which are required to buy
their products from one of the primary distributors to distribute take-n-bake
products to their grocery store customers.
Franchising
-----------
The Company sells franchises into various non-traditional and traditional
venues.
13
The initial franchise fee is as follows:
-----------------------------------------------------------------------------
Non-Traditional, Traditional
Franchise except Hospitals Hospitals Stand-Alone
-----------------------------------------------------------------------------
Noble Roman's Pizza $ 6,000 $10,000 $15,000
-----------------------------------------------------------------------------
Tuscano's Subs $ 6,000 $10,000 $15,000
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Noble Roman's & Tuscano's $10,000 $18,000 $18,000
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The franchise fees are paid upon signing the Franchise Agreement and, when paid,
are deemed fully earned and non-refundable in consideration of the
administration and other expenses incurred by the Company in granting the
franchises and for the lost and/or deferred opportunities to grant such
franchises to any other party.
Licensing
---------
Noble Roman's Take-n-Bake Pizza licenses for grocery stores are controlled by a
supply agreement. The supply agreement generally requires the licensee to
purchase proprietary ingredients from a Noble Roman's approved distributor, to
assemble the products using only Noble Roman's approved ingredients and recipes,
to package the products using shrink wrap, to place the products in Noble
Roman's Pizza boxes and to display products in a manner approved by Noble
Roman's using Noble Roman's point-of-sale marketing materials. Pursuant to the
distribution agreements, the distributors place an additional mark-up, as
determined by the Company, above their normal selling price, on the key
ingredients for a fee to the Company in lieu of royalty. The distributors are to
segregate this additional mark-up upon invoicing the licensee and hold the
amount in trust for the Company and remit such fees to the Company within ten
days after the end of each month.
Financial Summary
-----------------
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results may differ from those
estimates. The Company periodically evaluates the carrying values of its assets,
including property, equipment and related costs, accounts receivable and
deferred tax asset, to assess whether any impairment indications are present due
to (among other factors) recurring operating losses, significant adverse legal
developments, competition, changes in demand for the Company's products or
changes in the business climate that affect the recovery of recorded value. If
any impairment of an individual asset is evident, a charge will be provided to
reduce the carrying value to its estimated fair value.
14
The following table sets forth the percentage relationship to total revenue of
the listed items included in Noble Roman's consolidated statements of operations
for the three-month periods ended March 31, 2011 and 2012, respectively.
Three Months Ended
March 31,
--------------------------
2011 2012
---------- --------
Royalties and fees 92.9 % 92.7 %
Administrative fees and other .5 .4
Restaurant revenue 6.6 6.9
----- -----
Total revenue 100.0 % 100.0 %
Operating expenses:
Salaries and wages 13.1 % 13.2 %
Trade show expense 5.0 6.6
Travel expense 2.6 2.7
Other operating expense 9.9 9.7
Restaurant expenses 6.6 6.5
Depreciation and amortization .8 1.7
General and administrative 22.7 21.5
----- -----
Total expenses 60.7 61.9
----- -----
Operating income 39.3 38.1
Interest and other expense 5.5 5.2
----- -----
Income before income taxes 33.8 32.9
Income tax expense 13.4 13.0
----- -----
Net income 20.4 % 19.9 %
===== =====
Results of Operations
---------------------
Total revenue increased from $1,802,017 to $1,837,662 for the three-month period
ended March 31, 2012 compared to the corresponding period in 2011. One-time
fees, franchisee fees and equipment commissions ("upfront fees") increased from
$62,625 to $84,178 in the first quarter 2012 compared to the first quarter 2011.
Royalties and fees increased from $1,612,163 to $1,619,388 for the three-month
period ended March 31, 2012 compared to the corresponding period in 2011. The
breakdown of royalties and fees, less upfront fees, for the three month periods
ended March 31, 2011 and 2012, respectively, was: royalties and fees from
non-traditional franchises other than grocery stores were $1,050,878 and
$1,014,754; fees from the grocery stores were $282,861 and $324,155; and
royalties and fees from traditional locations were $278,424 and $280,479.
Included in royalties and fees from traditional locations were $200,000 in the
three-month periods of both years for royalties and fees recognized as
collectible from traditional locations which are no longer operating.
Restaurant revenue increased from $118,852 to $126,849 for the three-month
period ended March 31, 2012 compared to the corresponding period in 2011. This
increase was a result of same store sales increases.
Salaries and wages increased from 13.1% of total revenue to 13.2% of total
revenue for the three-month period ended March 31, 2012 compared to the
corresponding period in 2011. This slight increase was the result of adding an
additional sales executive in accordance with the Company's strategy to increase
its efforts on franchising and licensing non-traditional locations, partially
offset by the elimination of another employee by combining responsibilities.
Actual salaries and wages increased from $237,644 to $243,459.
15
Trade show expenses increased from 5.0% of total revenue to 6.6% of total
revenue for the three-month period ended March 31, 2012 compared to the
corresponding period in 2011. This increase was the result of scheduling more
trade shows for grocery stores consistent with the Company's strategy of
accelerating the growth in the number of grocery store locations for its
take-n-bake offering.
Travel expenses increased from 2.6% of total revenue to 2.7% of total revenue
for the three-month period ended March 31, 2012 compared to the corresponding
period in 2011. Actual travel expense increased from $46,885 to $48,915 for the
three-month period ended March 31, 2012 compared to the corresponding period in
2011.
Other operating expenses decreased, as a percentage of total revenue, from 9.9%
to 9.7% for the three-month period ended March 31, 2012 compared to the
corresponding period in 2011. Actual operating expenses decreased from $178,942
to $178,201. The reduction in operating expenses was a result of the Company's
continuing efforts to control costs.
Restaurant expenses decreased as a percentage of total revenue from 6.6% to 6.5%
for the three-month period ended March 31, 2012 compared to the corresponding
period in 2011. Actual restaurant operating expenses increased from $118,564 to
$119,243. The Company only operates two restaurants which it is uses for
demonstration, training and testing purposes.
General and administrative expenses decreased as a percentage of total revenue
from 22.7% to 21.5% for the three-month period ended March 31, 2012 compared to
the corresponding period in 2011. Actual general and administrative expense
decreased from $408,388 to $395,717 for the three-month period ended March 31,
2012 compared to the corresponding period in 2011. This decrease was primarily
the result of the Company's continuing efforts to control costs.
Total expenses increased as a percentage of total revenue from 60.7% to 61.9%
for the three-month period ended March 31, 2012 compared to the corresponding
period in 2011. Actual expenses increased from $1,093,972 to $1,137,196 for the
three-month period ended March 31, 2012 compared to the corresponding period in
2011. These increases were primarily the result of the increase in trade show
expense and the addition of a sales executive consistent with the Company's
strategy to accelerate growth.
Operating income decreased as a percentage of total revenue from 39.3% to 38.1%
for the three-month period ended March 31, 2012 compared to the corresponding
period in 2011. Actual operating income decreased from $708,045 to $700,466 for
the three-month period ended March 31, 2012 compared to the corresponding period
in 2011. This slight decrease was a result of the Company's strategy of seeking
increases in future revenue by the addition of a sales executive and additional
trade shows.
Interest expense decreased as a percentage of total revenue from 5.5% to 5.2%
for the three-month period ended March 31, 2012 compared to the corresponding
period in 2011. This decrease was primarily the result of a decrease in the
principal amount of notes payable outstanding. The Company anticipates added
interest cost in the second quarter upon closing of a planned refinancing due to
the write-off of the unamortized portion of the Wells Fargo loan closing cost
and for terminating the interest rate swap contract; however, going forward the
Company expects to have a lower effective interest rate.
Net income decreased from $368,012 to $365,079 for the three-month period ended
March 31, 2012 compared to the corresponding period in 2011.
16
Liquidity and Capital Resources
-------------------------------
The Company's current strategy is to grow its business by concentrating on
franchising new non-traditional locations, licensing convenience stores to add
Noble Roman's to their locations pursuant to a license agreement, licensing
grocery stores to sell take-n-bake pizza and to sell retail products through
grocery stores. The Company has developed a licensing concept for convenience
stores, take-n-bake pizza for grocery stores and other retail products to sell
through grocery stores all as a means to accelerate non-traditional unit growth
and as a way to increase revenue without any significant increase in expenses.
Additionally, the Company does not operate any restaurants except for two
locations for testing and demonstration purposes. This strategy requires limited
overhead and operating expense and does not require significant capital
investment.
The Company's current ratio was .9-to-1 on March 31, 2012 compared to .8-to-1 on
December 31, 2011.
The principal amount of the note payable to Wells Fargo Bank, N.A. is reflected
in current liabilities in the amount of $3.4 million because, under the current
amortization schedule, the entire balance is due on October 1, 2012. The Company
is in the process of seeking to refinance its debt with a $5 million term loan
to be amortized over 48 months and with the proceeds to be used to repay the
existing note to Wells Fargo Bank in the amount of $3.4 million, to repay the
note payable to officer of $1.3 million and to pay other costs related thereto.
It is anticipated that the new term loan transaction will close within the next
two to three weeks. The Company expects the new term loan will bear an annual
interest rate of LIBOR plus 4% compared to the annual interest rate on the Wells
Fargo Bank loan of LIBOR plus 4.25% and the current note payable to officer with
an annual interest rate of 8%. In addition, the existing interest rate swap
contract, which the Company entered into in February 2008, will be terminated,
which fixed the rate on 50% of the principal balance of the Wells Fargo loan at
an annual interest rate of 8.2%.
As a result of the financial arrangements described above and the Company's cash
flow projections, the Company believes it will have sufficient cash flow to meet
its obligations and to carry out its current business plan for the foreseeable
future. The Company's cash flow projections are based on the Company's strategy
of focusing entirely on growth in non-traditional venues and the growth in the
number of grocery store locations licensed to sell the take-n-bake pizza.
The Company does not anticipate that any of the recently issued Statement of
Financial Accounting Standards will have a material impact on its Statement of
Operations or its Balance Sheet.
Forward Looking Statements
--------------------------
The statements contained above in Management's Discussion and Analysis
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, non-renewal of franchise agreements, shifts in market demand,
general economic conditions, the Company's ability to successfully complete the
planned refinancing, changes in demand for the Company's products or franchises,
17
the success or failure of individual franchisees and changes in prices or
supplies of food ingredients and labor as well as the factors discussed under
"Risk Factors" as contained in the Company's annual report on Form 10-K. 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.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
The Company's exposure to interest rate risk relates primarily to its
variable-rate debt. As of March 31, 2012, the Company had outstanding variable
interest-bearing debt in the aggregate principal amount of $3.375 million. The
Company's current borrowings are at a variable rate tied to the London Interbank
Offered Rate ("LIBOR") plus 4.25% per annum adjusted on a monthly basis. To
mitigate interest rate risk, the Company purchased a swap contract fixing the
rate on 50% of the principal balance outstanding at 8.2%. The Company expects
that after completion of the proposed refinancing that is in process, the
Company will then have variable rate debt of $5 million at an annual interest
rate of LIBOR plus 4% and the swap contract will be terminated. Based on the new
debt structure, for each 1% increase in LIBOR the Company would incur increased
interest expense of approximately $44,000 over the succeeding twelve-month
period.
ITEM 4. Controls and Procedures
Based on his evaluation as of the end of the period covered by this report, Paul
W. Mobley, the Company's Chief Executive Officer and Chief Financial Officer,
has concluded that the Company's disclosure controls and procedures and internal
controls over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended) are effective. There have
been no changes in internal controls over financial reporting during the period
covered by this report that have materially affected, or are reasonably likely
to materially affect, the Company's internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
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 in June 2008 (Cause No. 29D01 0806 PL 739).
The Court issued an Order dated December 23, 2010 granting summary judgment in
favor of the Company against all of the Plaintiffs. As a result, the Plaintiffs'
allegations of fraud against the Company and certain of its officers were
determined to be without merit. Plaintiffs filed numerous motions and an appeal
to the Indiana Court of Appeals, in an attempt to reverse the December 23, 2010
summary judgment. All of the motions failed and the Indiana Court of Appeals
dismissed the appeal with prejudice. Plaintiffs' last attempt to vacate the
summary judgment award was their attempt to vacate the Order on the grounds of
misconduct of third parties. On December 1, 2011, the Judge denied their motion
and specifically found "that there was absolutely no evidence of misconduct" and
the Court admonished Plaintiffs and Plaintiffs' counsel for making such
unfounded allegations. The fraud charges against the Company and certain of its
officers are dismissed entirely and Plaintiffs have no appeal rights remaining.
The Company then filed a motion for sanctions against the Plaintiffs and their
attorney for the frivolous filings. On February 28, 2012, the Court granted the
Company's request for sanctions and ordered the Plaintiffs and their attorney to
18
pay the Company $8,326 by April 23, 2012. Plaintiffs and their attorney have
asked the Court to reconsider the grant of sanctions and requested a hearing.
The Judge has set a hearing for May 23, 2012. The Company obtained summary
judgment on its counterclaims against the Plaintiffs; however, the amounts of
damages have not yet been determined by the Court.
The Complaint was originally against the Company and certain officers and
institutional lenders. The Plaintiffs are former franchisees of the Company's
traditional location venue. The Plaintiffs alleged that the Defendants
fraudulently induced them to purchase franchises for traditional locations
through misrepresentations and omissions of material facts regarding the
franchises. In addition to the above claims, one group of franchisee-Plaintiffs
in the same case had asserted a separate claim under the Indiana Franchise Act
on which the Court's Order denied the Company's motion for summary judgment as
the Court determined that there is a genuine issue of material fact but did not
render any opinion on the merits of the claim. The Company denies any liability
on the Indiana Franchise Act claim and will continue to vigorously defend
against this claim.
The Company filed counterclaims for damages for breach of contract against all
of the Plaintiffs in the approximate amount of $3.6 million plus attorneys'
fees, interest and other cost of collection, or a total of over $5 million. On
September 21, 2011, the Company filed motions for partial summary judgment as to
liability against the Plaintiffs on the Company's counterclaims. As a result,
the Company was granted partial summary judgment as to liability against the
Plaintiffs/Counterclaim-Defendants on the Company's counterclaims against the
Plaintiffs. In this partial summary judgment, the Court determined that the
Plaintiffs were liable to the Company for direct damages and consequential
damages, including future royalties, for breach of their franchise agreements.
In addition, the Court determined that, as a matter of law, Noble Roman's was
entitled to recover attorneys' fees associated with obtaining preliminary
injunctions, fees resulting from the prosecution of Noble Roman's counterclaims
and fees for defending against fraud claims against the Company and certain of
its officers. The amount of the award is to be determined at trial. The Company
requested the Court to order mandatory mediation as to the Indiana Franchise Act
claim and the Company's counterclaim for damages. The Court has agreed to grant
the request but, as of yet, has not specified a date.
ITEM 6. Exhibits.
(a) Exhibits: See Exhibit Index appearing on page 21.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NOBLE ROMAN'S, INC.
Date: May 14, 2012 By: /s/ Paul W. Mobley
---------------------------------------
Paul W. Mobley, Chairman,
Chief Executive Officer,
Chief Financial Officer
and Principal Accounting Officer
(Authorized Officer and Principal
Financial Officer)
20
Index to Exhibits
Exhibit
Number Description
------ -----------
3.1 Amended Articles of Incorporation of the Registrant, filed
as an exhibit to the Registrant's Amendment No. 1 to the
Post Effective Amendment No. 2 to Registration Statement
on Form S-1 filed July 1, 1985 (SEC File No.2-84150), is
incorporated herein by reference.
3.2 Amended and Restated By-Laws of the Registrant, as
currently in effect, filed as an exhibit to the
Registrant's Form 8-K filed December 23, 2009, is
incorporated herein by reference.
3.3 Articles of Amendment of the Articles of Incorporation of
the Registrant effective February 18, 1992 filed as an
exhibit to the Registrant's Registration Statement on Form
SB-2 (SEC File No. 33-66850), ordered effective on October
26, 1993, is incorporated herein by reference.
3.4 Articles of Amendment of the Articles of Incorporation of
the Registrant effective May 11, 2000, filed as Annex A
and Annex B to the Registrant's Proxy Statement on
Schedule 14A filed March 28, 2000, is incorporated herein
by reference.
3.5 Articles of Amendment of the Articles of Incorporation of
the Registrant effective April 16, 2001 filed as Exhibit
3.4 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 2005, is incorporated herein by
reference.
3.6 Articles of Amendment of the Articles of Incorporation of
the Registrant effective August 23, 2005, filed as Exhibit
3.1 to the Registrant's current report on Form 8-K filed
August 29, 2005, is incorporated herein by reference.
4.1 Specimen Common Stock Certificates filed as an exhibit to
the Registrant's Registration Statement on Form S-18 filed
October 22, 1982 and ordered effective on December 14,
1982 (SEC File No. 2-79963C), is incorporated herein by
reference.
4.2 Form of Warrant Agreement filed as Exhibit 4.1 to the
Registrant's current report on Form 8-K filed August 29,
2005, is incorporated herein by reference.
10.1 Employment Agreement with Paul W. Mobley dated January 2,
1999 filed as Exhibit 10.1 to Registrant's Annual Report
on Form 10-K for the year ended December 31, 2005, is
incorporated herein by reference.
10.2 Employment Agreement with A. Scott Mobley dated January 2,
1999 filed as Exhibit 10.2 to Registrant's Annual Report
on Form 10-K for the year ended December 31, 2005, is
incorporated herein by reference.
21
10.3 1984 Stock Option Plan filed with the Registrant's Form
S-8 filed November 29, 1994 (SEC File No. 33-86804), is
incorporated herein by reference.
10.4 Noble Roman's, Inc. Form of Stock Option Agreement filed
with the Registrant's Form S-8 filed November 29, 1994
(SEC File No. 33-86804), is incorporated herein by
reference.
10.5 Settlement Agreement with SummitBridge dated August 1,
2005, filed as Exhibit 99.2 to the Registrant's current
report on Form 8-K filed August 5, 2005, is incorporated
herein by reference.
10.6 Loan Agreement with Wells Fargo Bank, N.A. dated August
25, 2005 filed as Exhibit 10.1 to the Registrant's current
report on Form 8-K filed August 29, 2005, is incorporated
herein by reference.
10.7 First Amendment to Loan Agreement with Wells Fargo Bank,
N.A. dated February 4, 2008, filed as Exhibit 10.1 to the
Registrant's current report on Form 8-K filed February 8,
2008, is incorporated herein by reference.
10.8 Registration Rights Agreement dated August 1, 2005 between
the Company and SummitBridge National Investments filed as
an Exhibit to the Registrant's Form S-1 filed on April 19,
2006, is incorporated herein by reference.
10.9 Second Amendment to Loan Agreement with Wells Fargo Bank,
N.A. dated November 10, 2010 filed as Exhibit 10.7 to the
Registrant's current report on Form 10-Q filed on November
10, 2010, is incorporated herein by reference.
10.10 Third Amendment to Loan Agreement with Wells Fargo Bank,
N.A. dated March 10, 2011, filed as Exhibit 10.10 to the
Registrant's current report on Form 10-K filed on March
13, 2012, is incorporated herein by reference.
10.11 Promissory Note payable to Paul Mobley dated November 1,
2010 filed as Exhibit 10.8 to the Registrant's current
report on Form 10-Q filed November 10, 2010, is
incorporated herein by reference.
10.12 Fourth Amendment to Loan Agreement with Wells Fargo Bank,
N.A. dated July 19, 2011, filed as Exhibit 10.12 to the
Registrant's current report on Form 10-K filed on March
13, 2012, is incorporated herein by reference.
10.13 Fifth Amendment to Loan Agreement with Wells Fargo Bank,
N.A. dated October 28, 2011, filed as Exhibit 10.13 to the
Registrant's current report on Form 10-K filed on March
13, 2012, is incorporated herein by reference.
10.14 Sixth Amendment to Loan Agreement with Wells Fargo Bank,
N.A. dated December 1, 2011, filed as Exhibit 10.14 to the
Registrant's current report on Form 10-K filed on March
13, 2012, is incorporated herein by reference.
22
10.15 Seventh Amendment to Loan Agreement with Wells Fargo Bank,
N.A. dated January 30, 2012, filed as Exhibit 10.15 to the
Registrant's current report on Form 10-K filed on March
13, 2012, is incorporated herein by reference.
10.16 Amended Promissory Note to Paul Mobley dated December 21,
2011, filed as Exhibit 10.16 to the Registrant's current
report on Form 10-K filed on March 13, 2012, is
incorporated herein by reference.
21.1 Subsidiaries of the Registrant filed in the Registrant's
Registration Statement on Form SB-2 (SEC File No.
33-66850) ordered effective on October 26, 1993, is
incorporated herein by reference.
31.1 C.E.O. and C.F.O. Certification under Rule
13a-14(a)/15d-14(a)
32.1 C.E.O. and C.F.O. Certification under Section 1350
101 Interactive Financial Data
23