{"url_path":"/sec/nrom/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL****CONDITION AND RESULTS OF OPERATIONS**","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":2780,"has_tables":true,"body_markdown":"**ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL****CONDITION AND RESULTS OF OPERATIONS**\n\n \n\n**Introduction**\n\n \n\nThe Company currently owns and operates nine Craft Pizza & Pub locations and one non-traditional location in a hospital. Craft Pizza & Pub is designed to have a fun, pleasant atmosphere serving pizza and other related menu items, all made fresh using fresh ingredients in the view of the customers for inside dining and offers Pizza Valet service for a quick, easy and fun way to provide carry-out for those customers who want to dine elsewhere. These units operate under the trade name “Noble Roman’s Craft Pizza & Pub.”\n\n \n\nThe Company also sells and services foodservice programs to convenience stores where the owner of the convenience store becomes the franchisee for the operation under the trade names “Noble Roman’s Pizza” and “Noble Roman’s Take-N-Bake.” The non-traditional concepts’ hallmarks include high quality pizza along with other related menu items, simple operating systems, fast service times, labor-minimizing operations, attractive food costs and overall affordability.\n\n \n\n \n\n16\n\n*Table of Contents*\n\n \n\nDuring the 12-month period ended December 31, 2025 there were no company-operated or franchised Craft Pizza & Pub restaurants opened or closed. During the same 12-month period there were approximately 60 new non-traditional outlets opened and six non-traditional outlets closed.\n\n \n\nThe Company, at December 31, 2024 and 2025, reported deferred tax assets on its balance sheet totaling $3.5 million and $3.1 million, respectively. Based on the Company’s review of its available tax credits the Company believes it is more likely than not that the deferred tax assets will be utilized.\n\n \n\n**Financial Summary**\n\n \n\nThe preparation of the consolidated financial statements in conformity with United States 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 evaluates the carrying values of its assets, including property, equipment and related costs, accounts receivable and deferred tax assets, periodically 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 values. If any impairment of an individual asset is evident, a charge will be recorded to reduce the carrying value to its estimated fair value.\n\n \n\n**Condensed Consolidated Statement of Operations Data**\n\n**Noble Roman’s, Inc. and Subsidiaries**\n\n \n\n \n\n \n\nYears Ended December 31,\n\n \n\n \n\n \n\n2024\n\n \n\n \n\n2025\n\n \n\nRevenue:\n\n \n\n \n\n \n\n \n\n \n\n \n\nRestaurant revenue – company-owned restaurants\n\n \n$8,577,148\n \n\n \n$8,771,389\n \n\nRestaurant revenue –company-owned non-traditional\n\n \n\n \n953,574\n \n\n \n\n \n1,205,657\n \n\nFranchising revenue\n\n \n\n \n5,540,968\n \n\n \n\n \n6,213,917\n \n\nAdministrative fees and other\n\n \n\n \n77,910\n \n\n \n\n \n270,496\n \n\nTotal revenue\n\n \n\n \n15,149,600\n \n\n \n\n \n16,461,459\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nOperating expenses:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nRestaurant expenses – company-owned restaurants\n\n \n\n \n7,793,798\n \n\n \n\n \n7,884,994\n \n\nRestaurant expenses – company-owned non-traditional\n\n \n\n \n1,000,646\n \n\n \n\n \n1,262,804\n \n\nFranchising expenses\n\n \n\n \n1,703,136\n \n\n \n\n \n1,709,258\n \n\nTotal operating expenses\n\n \n\n \n10,497,580\n \n\n \n\n \n10,857,056\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nDepreciation and amortization\n\n \n\n \n499,648\n \n\n \n\n \n392,948\n \n\nGeneral and administrative expenses\n\n \n\n \n2,677,334\n \n\n \n\n \n2,336,422\n \n\nTotal expenses\n\n \n\n \n13,674,562\n \n\n \n\n \n13,586,426\n \n\nOperating income\n\n \n\n \n1,475,038\n \n\n \n\n \n2,875,033\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nInterest expense\n\n \n\n \n1,637,398\n \n\n \n\n \n1,336,773\n \n\nChange in fair value of warrants\n\n \n\n \n(1,828)\n \n\n \n(52,436)\n\n(Loss) Income before income taxes\n\n \n\n \n(160,532)\n \n\n \n1,590,696\n \n\nIncome tax (benefit)\n\n \n\n \n(157,358)\n \n\n \n417,472\n \n\nNet (loss) income\n\n \n$(3,174)\n \n$1,173,224\n \n\n \n\n \n\n17\n\n*Table of Contents*\n\n \n\nThe following table sets forth the revenue, expense and margin contribution of the Company’s Craft Pizza & Pub locations and the percent relationship to its revenue: \n\n \n\n \n\n \n\nYear Ended December 31,\n\n \n\nDescription\n\n \n2024\n \n\n \n2025\n \n\nRevenue\n\n \n$8,577,148\n \n\n \n\n \n100%\n \n$8,771,389\n \n\n \n\n \n100%\n\nCost of sales\n\n \n\n \n1,814,627\n \n\n \n\n \n21.2\n \n\n \n\n \n1,818,390\n \n\n \n\n \n20.7\n \n\nSalaries and wages\n\n \n\n \n2,480,093\n \n\n \n\n \n28.9\n \n\n \n\n \n2,472,972\n \n\n \n\n \n28.2\n \n\nFacility cost including rent, common area and utilities\n\n \n\n \n1,597,271\n \n\n \n\n \n18.6\n \n\n \n\n \n1,652,862\n \n\n \n\n \n18.8\n \n\nPackaging\n\n \n\n \n268,866\n \n\n \n\n \n3.1\n \n\n \n\n \n294,975\n \n\n \n\n \n3.4\n \n\nAll other operating expenses\n\n \n\n \n1,632,941\n \n\n \n\n \n19.0\n \n\n \n\n \n1,645,795\n \n\n \n\n \n18.8\n \n\nTotal expenses\n\n \n\n \n7,793,798\n \n\n \n\n \n90.8\n \n\n \n\n \n7,884,994\n \n\n \n\n \n89.9\n \n\nMargin contribution\n\n \n$783,350\n \n\n \n\n \n9.2%\n \n$886,395\n \n\n \n\n \n10.1%\n\n \n\nThe following table sets forth the revenue, expense and margin contribution of the Company’s franchising venue and the percent relationship to its revenue:\n\n \n\n \n\n \n\nYear Ended December 31,\n\n \n\nDescription\n\n \n2024\n \n\n \n2025\n \n\nRoyalties and fees franchising\n\n \n$5,540,968\n \n\n \n\n \n100%\n \n$6,213,917\n \n\n \n\n \n100%\n\nSalaries and wages\n\n \n\n \n921,789\n \n\n \n\n \n16.6\n \n\n \n\n \n802,650\n \n\n \n\n \n12.9\n \n\nFranchisee promotion expense\n\n \n\n \n187,039\n \n\n \n\n \n3.4\n \n\n \n\n \n172,583\n \n\n \n\n \n2.8\n \n\nTravel and auto\n\n \n\n \n161,428\n \n\n \n\n \n2.9\n \n\n \n\n \n130,562\n \n\n \n\n \n2.1\n \n\nAll other operating expenses\n\n \n\n \n432,880\n \n\n \n\n \n7.8\n \n\n \n\n \n603,463\n \n\n \n\n \n9.7\n \n\nTotal expenses\n\n \n\n \n1,703,136\n \n\n \n\n \n30.7\n \n\n \n\n \n1,709,258\n \n\n \n\n \n27.5\n \n\nMargin contribution\n\n \n$3,837,832\n \n\n \n\n \n69.3%\n \n$4,504,659\n \n\n \n\n \n72.5%\n\n \n\nThe following table sets forth the revenue, expense and margin contribution of the Company-owned non-traditional venue and the percent relationship to its revenue:\n\n \n\n \n\n \n\n Year Ended December 31,\n\n \n\nDescription\n\n \n2024 \n \n\n \n\n 2025\n\n \n\nRevenue\n\n \n$953,574\n \n\n \n\n \n100%\n \n$1,205,657\n \n\n \n\n \n100%\n\nTotal expenses\n\n \n\n \n1,000,646\n \n\n \n\n \n104.9\n \n\n \n\n \n1,262,804\n \n\n \n\n \n104.7\n \n\nMargin contribution (1)\n\n \n$(47,072)\n \n\n \n(4.9)%\n \n$(57,147)\n \n\n \n(4.7)%\n\n \n\n \n\n(1)\n\nTotal revenue in 2024 and 2025 was reduced by having to move the retail operation in the hospital to a temporary location offering limited menu and operating limited hours for approximately 60 days while the regular location was being remodeled.\n\n \n\n**Results of Operations**\n\n \n\nCompany-Owned Craft Pizza & Pub\n\n \n\nThe Company-owned Craft Pizza & Pub locations generate revenue from retail sales to customers primarily from inside dining and carry-out, in addition to a lesser percentage from third-party delivery fulfillment. The revenue is recognized when the product is provided to the customer or to the third-party delivery companies.\n\n \n\n \n\n18\n\n*Table of Contents*\n\n \n\nThe revenue from this venue increased from $8.6 million in 2024 to $8.8 million in 2025. The primary reason for the increase was same store sales increases. Same store sales for the Craft Pizza & Pub restaurants were up 2.3% for 2025 versus 2024 with no menu price increase during that time. This was achieved despite a significantly weakened consumer environment through the Company’s considerable operational focus on obtaining and maintaining high customer satisfactions scores, and through the careful implementation and rotation of numerous product promotions designed for cost-conscious consumers.\n\n \n\nThe cost of sales as a percentage of revenue decreased from 21.2% in 2024 to 20.7% in 2025. The decrease was the result of promoting premium products and add-ons at point-of-purchase while simultaneously promoting value-oriented products externally. This reduction occurred despite inflationary pressures on many ingredients.\n\n \n\nSalaries and wages as a percentage of revenue decreased from 28.9% in 2024 to 28.2% in 2025. The decrease was the result of shifting some duties from higher-wage employees to lower-wage employees, and despite the continuing increase in local wage and salary rates.\n\n \n\nFacility costs, including rent, common area maintenance and utilities, as a percentage of revenue increased from 18.6% to 18.8% of revenue in 2024 compared to 2025. The primary reason for the increase was the increase in utility costs due to energy price increases.\n\n \n\nAll other operating expenses, including packaging, increased as a percentage of revenue from 22.1% in 2024 to 22.2% in 2025. The increase was the result of general inflationary pressure on substantially all costs of operations partially offset by the increase in same store sales.\n\n \n\nMargin contribution increased from 9.2% in 2024 to 10.1% in 2025. The increase in margin was largely the result of same store sales increases but also from tighter controls on food and labor costs. Same store sales increases and tighter controls offset the inflationary pressure on food products, labor costs and nearly all other operating costs.\n\n \n\nFranchising Revenue and Expense\n\n \n\nFranchise revenue consists of initial franchise fee, royalties generated by the 7% of sales by franchisees, which are mostly collected by ACH on the franchisee’s accounts on a weekly basis from sales reports received from the franchisees, commissions on equipment sales, where the Company assists the franchisees in arranging the purchase of equipment, and manufacturing allowances based on the volume of product used. Total revenue from this venue increased from $5.5 million in 2024 to $6.2 million in 2025. The increase in revenue resulted from the opening of approximately 60 more non-traditional locations in 2025, or an average of 62 new units per year during 2023, 2024 and 2025, as a result of improved market conditions and owners of convenience stores and travel plazas having the confidence to invest in order to increase their margins and profitability. In late 2023, the Company also entered into a 100-unit development agreement, to be developed over the succeeding three-year period. The franchisee operates an existing chain with a significant presence in the southern third of the United States. In addition, the Company is attracting franchise locations with other mid-size chains of convenience stores and travel plazas. At the present time the Company has approximately 75 units sold but not yet opened.\n\n \n\nAs a percentage of revenues: salaries and wages in this venue decreased from 16.6% in 2024 to 12.9% in 2025; franchise promotion expense decreased from 3.4% in 2024 to 2.8% in 2025; and all other expenses increased from 10.7% in 2024 to 11.8% in 2025. The structural overhead for this venue is now in place for continued expansion, so a substantial portion of revenue from the additional locations increases the contribution margin from this venue.\n\n \n\n \n\n19\n\n*Table of Contents*\n\n \n\nCompany-Owned Non-Traditional Locations\n\n \n\nGross revenue from this venue increased from $954,000 in 2024 to $1.2 million in 2025. This venue consists of one location in a hospital. The operation was removed from its normal location to a temporary location with very limited menu and limited hours during the remodel phase of that section of the hospital for a portion of 2024 and a longer time during 2025. At the same time the remodel was going on, the hospital was adding a new wing which expanded its occupancy capabilities significantly. After that work was completed the location was moved back to its previous location. The Company does not intend to operate any more Company-owned non-traditional locations in addition to the one location that is currently being operated.\n\n \n\nCorporate Expenses\n\n \n\nDepreciation and amortization was approximately $499,648 in 2024, and $392,948 in 2025. Additional depreciation on equipment transferred to Company-owned Craft Pizza & Pub restaurants was recorded in 2024. The Company has not opened any new Craft Pizza & Pub locations since 2021, therefore the Company expects future depreciation will remain generally consistent from year-to-year hereafter.\n\n \n\nGeneral and administrative expenses decreased from $2.6 million in 2024 to $2.3 million in 2025. The decrease in general and administrative expenses was largely the result of reductions in staffing and maintaining a strict focus on controlling corporate overhead generally.\n\n \n\nInterest expense decreased in 2025 compared to 2024 from $1.6 million to $1.3 million. The Company reduced principal on the Senior Note by $83,333 per month until April 2025 and then increased principal payments to $91,667 per month. In conjunction with the amendment in April 2025, the 3% PIK interest which had been accruing on the Senior Note was eliminated. As a result of that amendment to the Senior Note, cash interest is SOFR plus 9.0%, plus other fees with a floor of SOFR of 4.25%.\n\n \n\n**Liquidity and Capital Resources**\n\n \n\nThe Company’s current ratio was .40-to-l as of December 31, 2025 compared to .91-to-1 as of December 31, 2024. Given the maturity of the Senior Note at June 30, 2026, both the Senior Note and the subordinated convertible Notes are carried as short-term liabilities as of December 31, 2025.\n\n \n\nIn January 2017, the Company completed the offering of $2.4 million principal amount of convertible common stock at $0.50 per share and warrants to purchase up to 2.4 million shares of the Company’s Common Stock at an exercise price of $1.00 per share, subject to adjustment which brings the exercise price to $.10 per share as a result of the Senior Note extension. In 2018, $400,000 principal amount of Notes was converted into 800,000 shares of the Company’s Common Stock, in January 2019 another Note in the principal amount of $50,000 was converted into 100,000 shares of the Company’s Common Stock, and in August 2019 another Note in the principal amount of $50,000 was converted into 100,000 shares of the Company’s Common Stock, leaving principal amounts of Notes of $1.9 million outstanding as of December 31, 2019. Holders of Notes in the principal amount of $775,000 extended their maturity date to January 31, 2023. In February 2020, $1,275,000 principal amount of the Notes were repaid in conjunction with a new financing leaving a principal balance of $625,000 of subordinated convertible notes outstanding. In April 2023, the holder of $50,000 principal amount of the subordinated convertible notes were repaid by the Company leaving $575,000 outstanding. These Notes bear interest at 10% per annum, including the Notes which have not been extended, paid quarterly and are convertible to Common Stock any time prior to maturity at the option of the holder at the current exercise price of $0.50 per share.\n\n \n\nIn February 2020, the Company entered into the Agreement with Corbel, pursuant to which the Company issued to Corbel the Senior Note in the initial principal amount of $8.0 million. The Company used the net proceeds of the Senior Note as follows: (i) $4.2 million to repay the Company’s then-existing bank debt which were in the original amount of $6.1 million; (ii) $1,275,000 to repay the portion of the Company’s existing subordinated convertible debt the maturity date of which most had not previously been extended; (iii) debt issuance costs; and (iv) for working capital and other general corporate purposes, including development of new Company-owned Craft Pizza & Pub locations.\n\n \n\n \n\n20\n\n*Table of Contents*\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, which was previously applied to the Senior Note. The original maturity date of the Senior Note was February 7, 2025, however the maturity has now been extended by mutual agreement to June 30, 2026. The Senior Note requires principal payments of $91,667 per month starting in May 2025. The Company is now in discussions with several potential lenders for new financing which, if successful, will pay the balance of the Senior Note, pay the subordinated Notes payable, provide funds to repurchase all warrants issued to Corbel in connection with their financing and retire them, and to pay related costs of financing.\n\n \n\nIn view of the extension of the Senior Note, as well as 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, however, the failure to timely complete the refinancing the Company is pursuing could adversely affect the Company’s liquidity and capital resources. The Company’s cash flow projections for the next two years are primarily based on the Company’s strategy of growing the non-traditional franchising venue and operating its existing Craft Pizza & Pub locations.\n\n \n\nThe Company does not anticipate that any of the recently issued pronouncements relating to the Statement of Financial Accounting Standards will have a material impact on its Consolidated Statement of Operations or its Consolidated Balance Sheet.\n\n \n\n**Contractual Obligations**\n\n \n\nThe following table sets forth the future contractual obligations of the Company as of December 31, 2025:\n\n \n\n \n\n \n\n \n\n \n\nLess than\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nMore than\n\n \n\n \n\n \n\nTotal\n\n \n\n \n\n1 Year\n\n \n\n \n\n1-3 Years\n\n \n\n \n\n3-5 Years\n\n \n\n \n\n5 Years\n\n \n\nShort-term debt\n\n \n$6,545,824\n \n\n \n$6,545,824\n \n\n \n$-\n \n\n \n$-\n \n\n \n$-\n \n\nOperating leases\n\n \n\n \n3,514,571\n \n\n \n\n \n950,409\n \n\n \n\n \n1,611,098\n \n\n \n\n \n953,064\n \n\n \n\n \n-\n \n\nTotal\n\n \n$10,060,394\n \n\n \n$7,496,232\n \n\n \n$1,611,098\n \n\n \n$953,064\n \n\n \n$-\n \n\n \n\n(1)        The amounts do not include interest.\n\n \n\n**Forward-Looking Statements**\n\n \n\nThe statements contained above in Management’s Discussion and Analysis and elsewhere in this report concerning the Company’s future revenues, profitability, financial resources, financing efforts, 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 indicated by 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 and cost pressures, the Company’s ability to service its loan and refinance the Senior Note before its maturity in June 2026, the emergence or spread of human or animal pandemics (such as COVID-19 or the Avian Bird Flu), non-renewal of franchise agreements or the openings contemplated by the Development Agreement not occurring, shifts in market demand, the success of franchise programs, general economic conditions, changes in demand for the Company’s products or franchises, the impact of franchise regulation, the success or failure of individual franchisees, inflation, other changes in prices or supplies of food ingredients and labor and as well as the factors discussed under “Risk Factors” contained in this 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. If activist stockholder activities ensue, or if certain parties (acting individually or as a group) seek to continue or initiate interference in the Company’s business relationships, the Company’s business could be adversely impacted."}