{"url_path":"/sec/nrom/10-k/2026/item-1a","section_key":"item-1a","section_title":"Item 1A RISK FACTORS**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-08","source_url":"https://www.sec.gov/Archives/edgar/data/709005/0001654954-26-005747-index.html","accession_number":"0001654954-26-005747","cik":"0000709005","ticker":"NROM","issuer_name":"NOBLE ROMANS INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/709005/0001654954-26-005747-index.html","primary_entity_key":"0000709005","primary_entity_name":"NOBLE ROMANS INC"},"word_count":2712,"has_tables":true,"body_markdown":"**ITEM 1A. RISK FACTORS**\n\n \n\nAll phases of the Company’s operations are subject to a number of uncertainties, risks and other influences, many of which are outside of its control, and any one or a combination of which could materially affect its results of operations. Important factors that could cause actual results to differ materially from the Company’s expectations are discussed below. Prospective investors should carefully consider these factors before investing in the Company’s securities as well as the information set forth under “Forward-Looking Statements” in Item 7 of this report. These risks and uncertainties include:\n\n \n\n \n\n8\n\n*Table of Contents*\n\n \n\n**Risks Related to Economic Conditions and Events**\n\n \n\n**Competition from larger companies.**\n\n \n\nThe Company competes with large national companies and numerous regional and local companies for sales and with respect to its Company-owned locations. Many of its competitors have greater financial and other resources than the Company. The restaurant industry in general is intensely competitive with respect to convenience, price, product quality and service. With respect to its non-traditional franchising, the Company believes it has advantages in competing for franchise sales on the basis of several factors, including product engineering and quality, investment cost, cost of sales, distribution, simplicity of operation and labor requirements. Activities of the Company’s competitors though could have an adverse effect on the Company’s ability to sell additional franchises or licenses or maintain and renew existing franchises or the operating results of the Company’s system.\n\n \n\n**Dependence on growth strategy.**\n\n \n\nThe Company’s growth strategy includes focusing on sales of new non-traditional franchises and continuing to open the backlog of sold but unopened non-traditional locations. The opening and success of new locations will depend upon various factors, which include: (1) the traffic generated by and viability of the underlying activity or business in non-traditional locations; (2) the continued viability of the Craft Pizza & Pub locations; (3) the ability of the franchisees of either venue to operate their locations effectively; (4) the franchisees’ ability to comply with applicable regulatory requirements; and (5) the effect of competition and general economic and business conditions including food and labor costs. Many of the foregoing factors are not within the Company’s control. There can be no assurance that the Company will be able to achieve its plans with respect to the opening and/or operation of new franchises of non-traditional locations and/or Craft Pizza & Pub locations.\n\n \n\n**Risks Related to the Company’s Indebtedness**\n\n \n\n**Ability to service and refinance outstanding indebtedness and the dilutive effect of the Company’s outstanding warrants.**\n\n \n\nAs of May 1, 2026, the Company had approximately $6.1 million in principal amount debt obligations. Of that debt, $5.5 million is in the form of a senior secured promissory note (as amended, the “Senior Note”) and $575,000 is in the form of convertible, subordinated promissory notes, which are unsecured (the “Notes”), each as described below.\n\n \n\nIn February 2020, the Company entered into a Senior Secured Promissory Note and Warrant Purchase Agreement (as amended, the “Agreement”) with Corbel Capital Partners SBIC, L.P. (the “Purchaser”). Pursuant to the Agreement, the Company issued to the Purchaser the Senior Note in the initial principal amount of $8.0 million. The Company used the net proceeds of the Agreement as follows: (i) $4.2 million to repay the Company’s then-existing bank debt which was in the original amount of $6.1 million; (ii) $1.275 million to repay the portion of the Company’s outstanding subordinated convertible debt the maturity date of which most had not previously been extended; (iii) payment of debt issuance costs; and (iv) for working capital or other general corporate purposes, including development of new Company-owned Craft Pizza & Pub locations.\n\n \n\nThe Senior Note, as amended, bears cash interest of SOFR, as defined in the Agreement, plus 9.0% with no PIK interest and a floor of 4.25% on SOFR. Interest is payable in arrears on the last calendar day of each month. The Senior Note, as amended, matures on June 30, 2026. Beginning February 28, 2023, the Senior Note required fixed principal payments in the amount of $33,333 per month during February 2023 and $83,333 per month thereafter until maturity, but was amended to $91,667 per month effective May 31, 2025.\n\n \n\n \n\n9\n\n*Table of Contents*\n\n \n\nIn conjunction with the Senior Note, the Company issued to the Purchaser a warrant (as amended, the “Corbel Warrant”) to purchase up to 2,250,000 shares of Common Stock. The Corbel Warrant, as amended in September 2023 and further amended on April 14, 2025, entitles the Purchaser to purchase from the Company, at any time or from time to time: (i) 1,200,000 shares of Common Stock at an exercise price of $0.10 per share (“Tranche 1”), (ii) 900,000 shares of Common Stock at an exercise price of $0.10 per share (“Tranche 2”), and (iii) 150,000 shares of Common Stock at an exercise price of $0.10 per share (“Tranche 3”). Tranche 3 for 150,000 shares of common stock is the only Tranche permitted to be exercised with a cashless exercise. The Purchaser has the right, within six months after the issuance of any shares under the Corbel Warrant, to require the Company to repurchase such shares for cash or for put notes, at the Company’s discretion. The Corbel Warrant expires on the tenth anniversary of the date of its issuance.\n\n \n\nIn conjunction with the Fourth Amendment to the Senior Note the Company issued to the Purchaser an additional Warrant to purchase up to 750,000 shares of the Company’s Common Stock at an exercise price of $.10 per share with a maturity date of five years from date of issuance. Since the Company did not redeem Corbel’s Senior Note by August 14, 2025, the Company issued an additional warrant to purchase up to 500,000 shares of Common Stock at an exercise price of $0.10 per share. For any month the Senior Note remains outstanding after August 14, 2025, the Company has agreed to issue additional warrants to purchase up to 250,000 shares of Common Stock each month starting with September 7, 2025 as long as the Senior Note is outstanding at an exercise price of $0.10 per share. The amendment required the Company to reimburse certain of Corbel’s expenses incurred in connection with the amendment. However, the Company has an agreement with Corbel that the Company can buy back all warrants outstanding to Corbel for $500,000 if the Senior Note is paid in full by June 10, 2026.\n\n \n\nAdditionally, the Company previously issued certain units (the “Units”) consisting of a Note in an aggregate principal amount of $50,000 and warrants (the “Warrants”) to purchase up to 50,000 shares of the Company’s Common Stock at a price of $1.00 per share. Following the refinancing described above, $575,000 in principal amount of Notes and the associated Warrants remain outstanding, however, per the terms of the agreement, the Warrants were re-priced to $0.10 per share. Notes with an outstanding principal balance of $200,000 matured and accompanying Warrants expired January 31, 2023, however $50,000 of those matured Notes was repaid to the applicable Note holder with the approval of Corbel. The remaining principal amount of $150,000 cannot be repaid until Corbel’s loan is paid because the Notes are subordinate to such loan. The maturity of the Notes with an outstanding principal balance of $425,000, and accompanying Warrants, was extended to May 31, 2025 or the repayment of the Senior Secured Loan, whichever is later.\n\n \n\nThe Company is actively pursuing refinancing of the Senior Note and has received indications of interest from various lenders. Nonetheless, there is no assurance that the Company will be able to complete the financing on favorable terms or at all.\n\n \n\n \n\n10\n\n*Table of Contents*\n\n \n\n**Risks Related to the Company’s Operations**\n\n \n\n**Dependence on success of franchisees and licensees.**\n\n \n\nWhile a portion of its revenues are being generated by Company-owned operations, a growing portion of the Company’s revenues comes from royalties and other fees generated by its franchisees which are independent operators. Their employees are not the Company’s employees. The Company is dependent on the franchisees to accurately report their weekly sales and, consequently, the calculation of royalties. The Company provides training and support to franchisees but the quality of the store operations and collectability of the receivables may be diminished by a number of factors beyond the Company’s control. For example, franchisees may not operate locations in a manner consistent with the Company’s standards and requirements or may not hire and train qualified managers and other store personnel. If they do not, the Company’s image and reputation may suffer and its revenues could decline. While the Company attempts to ensure that its franchisees maintain the quality of its brand and branded products, franchisees and licensees may take actions that adversely affect the value of the Company’s intellectual property or reputation. Overall inflation, general economic conditions, initiatives to increase the Federal minimum wage and a shortage of available labor could have an adverse financial effect on the franchisees or the Company by increasing labor and other costs.\n\n \n\n**Dependence on distributors.**\n\n \n\nThe success of the Company’s license and franchise offerings depends upon the Company’s ability to engage and retain unrelated, third-party distributors. The Company’s distributors collect and remit certain of the Company’s royalties and must reliably stock and deliver products to the Company’s franchisees as well as the Company-owned operations. The Company’s inability to engage and retain quality distributors, or a failure by distributors to perform in accordance with the Company’s standards, could have a material adverse effect on the Company. The COVID-19 pandemic had a materially adverse impact on many of the Company’s then current distributors as well as other potential distributors, especially those located in or servicing states that had or have significant and/or prolonged restrictions. Potential disruptions in distribution could result in distribution service being provided under less favorable terms to the Company and its franchisees.\n\n \n\n**Dependence on consumer preferences and perceptions.**\n\n \n\nThe restaurant industry and the retail food industry are often affected by changes in consumer tastes, national, regional and local economic conditions, demographic trends, traffic patterns and the type, number and location of competing restaurants. The Company could be substantially adversely affected by publicity resulting from food quality, illness, an infection pandemic, injury, other health concerns or operating issues stemming from one restaurant or retail outlet or a limited number of restaurants and retail outlets. The growing availability and access to new weight-loss and diet suppression drugs, such as GLP-1 medications, may have an impact on retail food industry consumption trends in general.\n\n \n\n**Interruptions in supply or delivery of food products.**\n\n \n\nDependence on frequent deliveries of product from unrelated third-party manufacturers through unrelated third-party distributors also subjects the Company to the risk that shortages or interruptions in supply caused by contractual interruptions, market conditions, inclement weather or other conditions could adversely affect the availability, quality and cost of ingredients. Factors such as inflation, which has intensified significantly since the beginning of 2021, market conditions for cheese, wheat, meats, paper, labor and other items may also adversely affect the franchisees and, as a result, can adversely affect the Company’s ability to add new franchised locations.\n\n \n\n \n\n11\n\n*Table of Contents*\n\n \n\n**Federal, state and local laws with regard to the operation of the businesses.**\n\n \n\nThe Company is subject to regulation by the FTC and various state agencies pursuant to federal and state laws regulating the offer and sale of franchises. Several states also regulate aspects of the franchisor-franchisee relationship. The FTC requires the Company to furnish to prospective franchisees a disclosure document containing specified information. Several states also regulate the sale of franchises and require registration of a franchise disclosure document with state authorities. Substantive state laws that regulate the franchisor-franchisee relationship presently exist in a substantial number of states, and bills have been introduced in Congress from time to time that would provide for federal regulation of the franchisor-franchisee relationship in certain respects. The state laws often limit, among other things, the duration and scope of non-competition provisions and the ability of a franchisor to terminate or refuse to renew a franchise. Some foreign countries also have disclosure requirements and other laws regulating franchising and the franchisor-franchisee relationship, and the Company would be subject to applicable laws in each jurisdiction where it seeks to market additional franchise units.\n\n \n\nEach franchise and Company-owned location is subject to licensing and regulation by a number of governmental authorities, which include health, safety, sanitation, building, alcohol, employment and other agencies and ordinances in the state or municipality in which the facility is located. The process of obtaining and maintaining required licenses or approvals can delay or prevent the opening of a franchise location. Vendors, such as the Company’s third-party manufacturers and distributors, are also licensed and subject to regulation by state and local health and fire codes, and U. S. Department of Transportation regulations. The Company, its franchisees and its vendors are also subject to federal and state environmental regulations. Failure of the Company or its franchisees to comply with these laws and regulations could have an adverse impact on the Company, its operations, financial results or reputation. Additionally, expenses related to compliance with these laws and regulations could have an adverse impact on the Company’s financial results.\n\n \n\n**Risks Related to Human Capital**\n\n \n\n**Dependence on key executives.**\n\n \n\nThe Company’s business has been and will continue to be dependent upon the efforts and abilities of its executive staff generally, and particularly Paul W. Mobley, its Executive Chairman and Chief Financial Officer, and A. Scott Mobley, its President and Chief Executive Officer. The loss of either of their services could have a material adverse effect on the Company.\n\n \n\n**Risks Related to the Company’s Common Stock**\n\n \n\n**Indiana law with regard to purchases of the Company’s stock.**\n\n \n\nCertain provisions of Indiana law applicable to the Company could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of the Company. Such provisions could also limit the price that certain investors might be willing to pay in the future for shares of its Common Stock. These provisions include prohibitions against certain business combinations with persons or groups of persons that become “interested shareholders” (persons or groups of persons who are beneficial owners of shares with voting power equal to 10% or more) unless the board of directors approves either the business combination or the acquisition of stock before the person becomes an “interested shareholder.”\n\n \n\n \n\n12\n\n*Table of Contents*\n\n \n\n**Inapplicability of corporate governance standards that apply to companies listed on a national exchange.**\n\n \n\nThe Company’s stock is quoted on the OTCQB, a Nasdaq-sponsored and operated inter-dealer automated quotation system for equity securities not included on the Nasdaq Stock Market. The Company is not subject to the same corporate governance requirements that apply to exchange-listed companies.  These requirements include: (1) a majority of independent directors; (2) an audit committee of independent directors, instead the Board as a whole acts as the audit committee; and (3) shareholder approval of certain equity compensation plans or equity issuances.  As a result, stockholders do not have the same governance protection as they would for a stock traded on a national exchange.\n\n \n\n**Thinly traded stock.**\n\n \n\nThe market for the Common Stock is limited, meaning that an investment in the Company’s stock is less liquid than in a stock listed on a national exchange with a higher average trading volume.  Because of this, attempts by one or more stockholders of the Company to sell significant amounts of stock may result in an imbalance in the market that materially decreases the trading price of the stock which could continue for an indefinite period of time.  Accordingly, the traded price of the stock may not reflect the Company’s equity value.  Additionally, there is no assurance that the Company’s stock will continue to be authorized for quotation by the OTCQB or any other market in the future.\n\n \n\n**Activities of activist group of investors****.**\n\n \n\nIn 2023, BTB Brands, Inc. (“BT Brands”) and its CEO and principal shareholder, Gary Copperud (“Copperud”), launched an unsuccessful proxy contest to elect Copperud to the Company’s board of directors at its  annual meeting that year.  BT Brands, Copperud and Kenneth Brimmer, BT Brands CFO, last reported beneficial ownership as a group of 1.8 million Company shares. If BT Brands were again to pursue a proxy context, the Company could incur significant expenses."}