Noble Roman'S Inc

Well, good afternoon, everyone. My name is Scott Mobley and I'm president and CEO of NOPA Romans. Also here with me today is Paul Mobley, our executive chairman and CFO. Paul.

Good afternoon, everyone. And thanks for joining us on the call. Before we begin, I want to refer you to the safe harbor statement contained in the earnings press release. This conference call will contain forward-looking statements and business assessments of the kind referred to in that statement. So those provisions apply to this conference call as well.

Okay, well, with that out of the way, we'll get into the substance of the call. I assume that all of you have studied the press release and all those details. In summary, the year finished with net income at roughly breakeven and operating income of about $1.5 million. As discussed in the press release, comparisons to 23 are made a little difficult with the ERTC factored in. But backing out those ERTC funds, 2023 is also about breakeven. However, as we discussed in the press release, 2024 has several one-time charges. Those are backed out for the sake of looking forward and for comparison purposes. show considerable gain from 23 to 24. Looking at the craft pizza and pubs, we had same store sales increase of about 2.9% in the fourth quarter of 24. In the first quarter of 25, this year we had same store sales increase of 1.2%. And that's despite the fact that the first two months were pretty bad weather months and despite the downturn in consumer spending. And actually, January and February combined, looking at them together, were up only about 0.5%, but March was up about 2.4%. So in addition to the bad weather those first two months, I began to see some trends in the underlying data that started worrying me with regard to consumer spending. So in mid-February, we quickly redirected our promotional activities, and we went – from a limited-time product special to a more value-oriented approach. So we rushed that through in two weeks and had it in place by the beginning of March. As you know, in April it was announced that, in fact, consumer confidence had dropped to the lowest level since the beginning of the pandemic. So we've been maintaining a value orientation from roughly March 1 through present time. And that's produced some positive results beyond even March. In the second quarter for April and May, looking at those combined on an operationally comparative basis, we're looking at same-store sales increase of about 6%. June so far appears to be running about that rate, but obviously we're only a third of the way through June, and June can be a little unpredictable. It's a heavy vacation month. That's helpful to some of our units and careful to others. We'll have a lot more first and second quarter in our next call. In the non-traditional venue, we ended up with 68 new openings in 2024, which is great progress. We hope to be in that 60 to 70 range again this year. Overall franchising revenue is up $876,000, or 18.8%. And as stated in the press release, on a real comparative basis, it was up even more when you factor in one-time adjustments, such as how ongoing fees are recognized now based on when manufacturers ship product to distributors, rather than when distributors ship product to our franchisees, as we've always done in the past. So in the total of one-time changes that are taken into account, the revenue from franchising There have been slightly over 1 million or about 22% increase. As we've always noted, the first quarter is the quietest quarter for franchise sales and openings for a variety of reasons, but that picks back up here in the second quarter. For example, we're right in the middle of opening. And we have between three and five new openings on the schedule for the next two to three weeks or so. Again, we'll have more information on that as we develop into the next call with you. A few brief notes on operating costs, especially as it relates to craft pizza and pub operations, but really generally for our franchisees as well. For 2024, our CPP operating costs as a whole were up about 1.5 percentage points. Restaurant management had variable costs pretty well under control and even made some strategic headway on labor despite increasing salaries and wages. were mostly inflationary in nature. The food cost was pressured from a combination of added marketing as well as elevated cheese prices. In the first quarter, it's much the same, though we faced a bit of an onslaught of price increases from a wide variety of sources, including things like credit card fee rates and just normal type of product increases. Over time, we've negotiated some of these away, On a few others, we switched providers. And on a few others, we basically had to live with it. Fortunately, by the first part of the second quarter, though, cheese prices had gone from well above average to a good bit below average. So we received a tailwind that lasted maybe six weeks or so. Cheese prices are back to slightly elevated. If you look at all cheese, it counts for about 50% of the cost of pizza. That's a benchmark that we keep our eyes on closely. Our focus remains on generating top-line growth in the craft business. It will result in margin improvement over time. And with that, our focus remains on what we perceive as our core strengths. That's the product in our dining rooms, where we continue to have a four-week Google average of 4.8. Eventually, we'll exit this period of consumer spending sensitivity, and that will help us in making a move from price value promotion to more of a product enhancement promotion, of which we have several in the wings. Okay, well, with that brief overview, we'll now take your questions. If you want to ask a question and you logged in with your full name when you joined the call, You can press 5 and the star key on your phone. Again, 5 star. When it's your turn to ask a question, you'll hear a voice saying that your line has been unmuted. And hearing that your line is unmuted, you should go ahead to ask the question. So again, press 5 star if you have a question, and we'll get going. Todd, go ahead.

Hey, I appreciate you taking my questions. I was wondering if you could give us an update on the refinancing discussions in order to replace the Corbell credit line.

Sure. The refinancing is progressing very well at this point. We had engaged a placement agent called London Manhattan Company, which we'd used successfully four times in the past. We had several very interested prospects off of that search, and put them on the phone with myself and with Mark Jagir of London Manhattan, and in most cases, Scott as well. And those conversations went extremely well. And we had people and they were actually committing on the phone that we'd be getting a term sheet right away. But then something would happen the next day. We'd get an email saying we decided to pass. Well, we didn't know what was going on there, but we thought we had some interference and We had an informant to come forward and said we did have interference. And if Sarah didn't want that to happen, was calling our list of investors. How they got that list, we don't know. But anyway, that's what was happening. And we went quiet for a little while. And then in talking with Carbell and our good relationship we've had for years, And they also have a good relationship with London Manhattan. They've done several deals that London Manhattan has brought to their attention as well. But they suggested that they gave us the name of another placement agency that they said they could not recommend because they didn't have firsthand knowledge. But they knew they had placed a lot of deals. very successfully and a lot of deals they had shown to them very successfully. And so I had spent some time talking with them back and forth. Bottom line, we ended up engaging them not too long ago. They worked on a teaser sheet that they were going to send out, sent to me for critique, which I made a few suggestions to and they sent the teaser sheet out. a little over a week ago and by Thursday of last week they had gotten 27 statements of interest from different investors and 27 people had signed an NDA agreement to get additional information which they've been working on and I understand it was, I haven't talked to them today, but it was supposed to go out to those investors that signed NDA agreements yesterday afternoon. So I'm assuming it did. So they thought they had very good interest based off of that teaser they sent out and before they had full information out to them. So that's where we stand at this point, and they have high confidence that they will place the loan.

I know the Corbell note was only – listed as a $5.5 million in long-term liability as of December 31st. I assume it's come down a little bit since then. What amount will you be looking to refinance, and is there a chance that we could get this done before the August deadline where we have to give Corbell what, another half million warrants?

Yes, sir. We think there's a highly good chance we'll have it done. And I'll call your attention to the fact that that $5,000 was shown as long-term, but you've also a short-term portion in there, which was well over a million. So in total, the Corbell loan had a balance of around $6,700,000. Now, we are paying that down. Until I got the extension, we were paying it down straight of 7.75%. above SOFR and but then we were paying some extra fees plus we're paying a three percent PIC interest which was adding to the principal every month well in reading I got rid of the PIC interest in lieu of with the PIC interest we've got SOFR plus nine percent interest cash interest and no PIC interest so our monthly are now $91,667 a month on principal being reduced. So around this time, the payoff on that loan is about $6.5 million.

Okay. Thanks for the clarity on that. And last question, are you willing to give any guidance as far as revenues and earnings and kind of a, new C-Store locations opening up for this year?

We don't give out guidance on earnings. We never have and we're not doing that so now. But I can tell you that from a C-Store non-traditional perspective, we're still signing up lots of new deals. We did 68 last year new agreements or new openings and that We had a combined revenue from that department of about 22%, as Scott said. And we're expecting similar results this year with 60 to 70 new units. All of that additional revenue from those new units is pretty much dropping to the bottom line because our fixed cost in that division is already in place. have any variable increase or any appreciable variable increase in fixed costs. So it's going very well. We're very satisfied with it. And the non-traditional is growing rapidly.

All right.

Thanks, Scott. Appreciate it. Thank you for taking my questions.

Sure. Lee, go ahead.

Hi, it's been a trip for shareholders. If I was a genie and you were to grant me two of the five wishes I'm going to ask for, I'd be thrilled. One, timely, accurate reporting. Two, clean, profitable earnings. Three, you touched on in the last call, loan refinancing. Four, some idea that you guys are on the same side as us, like with some insider purchases. And if none of these could happen, a possible sale of the company to a financially strong who can, you know, improve Noble Romans and grow the company profitably. I know these are tough questions, but if you guys would like to comment on that, I'd appreciate it.

Lee? It has been a long, tough battle for the company and for the shareholders, principal shareholders. It's been a tough battle. We've fought some very strong odds with the market, with the way things have gone with many other pizza companies around during that time who are no longer around now, and others who are still around but doing... much bigger losses. As far as accurate reporting, we think we've been good at reporting. We haven't had any reason to believe otherwise. There wasn't a change of a method of reporting income from what we've done for all the years that we've been in business up until now. We think the better method to begin with, because it was the actual usage, Because the distributors are the only one that has actual usage, because they sell the product to the franchisees. But we changed. And we changed reluctantly, but we changed to recording it when the distributors record it as a liability. There's a big problem with that, because we don't know when the distributors record that. There's some guesswork in that. Now, we confirmed it all with the distributors for this report, so we know that that's accurate on that basis. But going forward, it's a very difficult thing to predict. We know exactly what the distributors distribute because they send reports by every location, every product, when it was delivered, when it was shipped, to the franchisee, and therefore when it was used. As far as timely reports, I can't give you any reason that this report took so long. It was promised to be done timely, within the time frames allowed. It didn't happen. Now, a little bit of that delay was I'll take the blame for that. But that was only for a week or so. The rest of it is not on me. The week or so was because it took me a long time to negotiate that deal for the extension because they were asking for a lot of things, which I was not going to give them because it was not in the best interest of the shareholders. I told them that. It all boiled down to a discussion one Sunday night around 11 o'clock at night. And I'd had a really good relation with Corbell. I still do. But they knew that I'd negotiated hard for our benefit, and they did as well for their benefit. But anyway, they were asking for things to get the extension. I told them about it. 11 or 12 o'clock on a Sunday night, I said, Michael, you're not going to get these. I'm done. I've made you the best offer you're going to get, and I'll take other plans if you don't go along with it. And you have already verbally agreed to it. Now I want you to put it on paper so we can get it signed. So I hung up at that point and said, I'm done. That's all I'm negotiating. The next morning about 10 o'clock, he called me back and said, Paul, we're going to do it. We'll take your offer the way you've had it. We'll write it up and get it to you. So that was the end of that, and we did it. Now, so far as that delayed the report for about a week because they had to have that extension done because of deadline on the Corbell notes. But once we got it extended out to June of 26, that was no longer an excuse or an issue. So the auditors took on more explanation I can give you, and I don't know. I don't know why they took so long. But the only explanation I can give you because of the actions and how long it took to respond to things, they had taken on more work than they could handle. They had the resources for it. And therefore, they couldn't get to it on a timely basis. That's my assumption. I don't know that. I just know it took a long time. And it took me really forcing my hand the last time to get it done when we did. Now, we were in serious danger of being delisted and taking enforcement action by SEC because of the delays, the lengthy delays. Well, everyone had told me there was no remedy for that, that we would be held accountable for those delays and we could be delisted. I said, well, there's nothing like trying, so I'm going to call them. I called the enforcement agent at the SEC, and I called the principal in charge at OTCB, and I said, you've got to grant us an extension. Here's why. I went through the whole story about the fact that the auditors were behind, they didn't get it done, and they aren't meeting the deadline. And we talked back and forth for quite some time. I had to answer a lot of tough questions. But in the end, the guy from OTCB said, how much time do you need? Well, at that point, I thought for sure we'd have it done in two weeks. And I said, Well, give us two weeks. And I'm pretty sure we can get it done in that time. He gave, he sent the email back. He said, after considering your request and considering your situation, we're going to grant you a three-week extension until June the 8th. So I knew from the conversation I'd had with him, we were not going to get another extension. So I started putting the pressure on Our auditor was stunned, and then I find out the audit partner in charge of our audit was going to take a two-week vacation and wouldn't be back until June 15th. Well, I really started turning up the pressure at that point. I said, this is not acceptable. We have to have our report, and we're going to have it by June the 6th. The end result was the auditor, the managing partner of the audit firm, took on the responsibility of finishing it up. But that was a hard grind, because number one, she wasn't familiar. Number two, she was not really an auditor by design. The audit partner in charge of our audit was really the only audit partner they had. And so they were pushing right up until the afternoon on June the 8th, saying it was impossible to finish before the deadline. And I said, it's not impossible, it's just a little harder. So we're going to do it. And we did get it done. I wrote it up. I added some things in the report that I didn't necessarily agree with, whether I did or not. bottom line is we had to get the report filed and that's what we did and that's how we proceeded that ended up on friday night about 10 30 before we actually got the changes all made in the comprised so we could follow it and then we found out on saturday there were other problems arose because they didn't complete everything and so we had do some more work on Saturday to get the corrections made. And then on Monday, Saturday we got it set up, and I got the sign off from the audit firm that it was okay to file, and I got the sign off from the former audit firm saying it was okay to file. He had been okay anyway, but he was just kind of waiting until everything got resolved with the current auditor. and he was ready to sign off. And so he did on Monday and Sunday afternoon, Saturday afternoon. Then Sunday morning, we had the NK set up for filing through Issuer Direct at 6 a.m. on Monday morning, because that's when SEC began accepting filings again. And It was all set up to be filed at that time. And about 8 o'clock, we learned from Issuer Direct that they couldn't file it because the audit firm had not given them their ID number, which they have to do to be registered to file with the FCC. And so when I went to chase them down, we were not getting any answer at all. So we called yelling emergency all over the place in the firm. I figured somebody there would know the ID number and we could get it and file. We did finally get the new manager of the firm who had been finishing up the project on Friday and Saturday to respond to give us the ID number to file. but said she would not be able to have any other conversation because she was already out of the country on vacation. So I got that to Issuer Direct, and they were able to turn it around and get it filed by 9.30 or 10 o'clock. I don't know exactly what time it was, but around that. So it was filed. We had already sent out the press release, and the 10K followed as soon as we could get an ID number to file under. I think I answered all your questions, Lee, but if you have something else, let me know.

Well, you answered a couple of them. I just think, you know, you guys have to take responsibility. And I'm sorry you hired an accounting firm that's a bunch of morons. Not my fault. But, you know, it would be nice to see accurate, timely reporting. We've had a couple of years now where you didn't make or lose any money. Be nice to see some profits. Nice to see you guys purchase a little stock to let us know you care. I know these are, you know, if you can't do anything, you know, where are we going? What's your long-term plan?

I think we've made our long-term plan very clear. It's to concentrate on expanding the non-traditional at this point, which doesn't require capital. and it's working. We added 68 new ones last year. We improved our profitability quite a bit when you take out the ERTC claim and you add back in those one-time adjustments, which were really not necessary at all. And we had a great growth in that revenue stream. And we're on track to add that many more again this year That's our long-term plan. That's what we're doing, and that's what we said we're going to do, and we're executing it.

All right. Then we should see earnings, and we should see timely reporting, and we should see higher stock price. All right.

We will see. If I have anything to do with it, you will see timely reporting. But the new rules on accountants and who's eligible to – conduct these audits is very limited. There's not a wide choice of people out there doing them that's willing to do them. And I can't do anything about that other than work around it the best way we can and put as much pressure as possible on the people to perform what they're obligated to perform.

Thank you for your time.

All right. Thanks, Lee. Other questions? Bill, go ahead.

Yes. When do you think the March 31 10Q will be ready is my first question. My second question is, is there going to be a stockholders meeting this year?

I, in negotiating the extension on the 10K, I also, at the same time, negotiated an extension for the 10Q because we couldn't do the 10Q until we got the 10K done because all those numbers carry forward. So I got the extension on the 10Q to June 30th. Now, I don't intend to take until June 30th to get it out. I've already told the accountants I'm going to file it ahead of time. It's time for you to get on board.

And the answer is, yeah, we'll have a meeting this year.

Do you know about when that will be, do you think?

Probably August or September, according to our attorneys.

Okay. All right. Thank you.

Yep. Other questions? Mark, go ahead.

Okay. After a lot of that, I think I have an easy one for you. Those same store sales seem pretty impressive for this year. I don't think you hit the first quarter. It might be like 6%. What do you attribute that to? Obviously, it seems like a lot of good Google reviews online, things like that, but what else do you attribute that to?

So, we've It had pretty good comparative same-store sales relative to the industry and segment, probably going back to around the fourth quarter. And we kind of laid the groundwork for that coming out of the COVID years by trying to stick to the basics that we believe that our craft pizza and pubs excel at, the product experience and the dining room experience. We've been focusing a lot of attention on really operational basics in that regard. And that sort of has a building effect over time. The other element is really keeping a very close eye on the data I look at and sift through lots of operational data on a daily basis. Our eyes on where consumer spending is heading and reacting to that as quickly as possible and putting in place value promotions where we need to do that. We've been in a value-driven market and we've sort of been oscillating our promotions based on that fact. We have a number of other promotions in the wing that will be more margin advantageous for the company, but it just has, the timing on that hasn't been appropriate. But yes, The first two months here, April and May, about 6% same-store sales. I look at that on an operational comparative basis. It's a little different than a reporting basis. I look Monday to Monday, Tuesday to Tuesday, compared to last year, whereas when we report, we report on a calendar basis, so there could be a little bit of difference. But looking at it from a Monday to Monday type comparative basis. Those two months were running about 6% up. June, so far, following the same trend, but again, we're not very far into June, and June is a little bit of a different animal operationally. Does that help? Mark?

Sorry, yes. Yes, thank you very much.

Yep, thanks, Mark. Any other questions? Give it another minute or a second. Anybody with a question? All right. Well, I'm not seeing any additional questions. So on that note, it looks like we're done. That concludes our time today. Everyone participating and being involved, really do appreciate that. Everyone have a great evening. We'll be terminating the session connection now, and we'll be back soon. Thanks.