DC Advisory
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.The following update should be read in conjunction with our previous descriptions of the corporate developments of NROM, which can be accessed with the SEARCH function on our home page. There have been no operating results reported since those of 9/30/19 so our further update in that regard awaits the audited yearend report.

Noble Roman’s announced last week the most substantial financing in recent years, allowing for consolidation of previous debt, reducing potential equity dilution, and providing funds for renewed expansion.

The new financing consists of an $8M Senior Secured Promissory Note and Warrant Purchase Agreement. It has allowed for retirement of the $4.2 million previous bank note (down from the original $6.1M) as well as $1.275M convertible subordinated debt. The portion of the $8M above the $5.5M debt repayment will be earmarked for the construction in 2020 of three new Craft Pizza and Pub (NRCPP) locations as well as general working capital and the debt issuance cost. That will bring the company-owned total NRCPP locations to seven, targeted by 12/31/20.


The new note bears an interest rate of LIBOR plus 7.75%, which at the current time would be about 9.4%, plus “payment-in-kind, ‘PIK'” interest of 3%, which will be added to the principal amount of the note. The note matures on 2/7/2025 and does not require principal payments until 2/28/2023 when monthly principal payments of $33,333 will commence and continue monthly until maturity. There are warrants, which mature in  6 years, attached to the new note, to purchase 1.2M shares at $0.57, 900K shares at $0.72 and 150K shares at $0.97. The purchaser is required to exercise the $0.57 warrant if the Common Stock trades over $1.40 per share for a specified period, the $0.72 warrant if the Common Stock trades over $1.50. Only the third tranche (for 150,000 shares at $0.97) can be exercised on a cashless basis, so the first two tranches will provide new funds, when exercised, to the Company at no additional transaction cost. The dilutive result of the new financing (before saving on the old) would then be a total 2.25M shares which will bring in $1.33M of funds to use for growth.

While the total interest rate on the note is obviously steep, NROM management is reacting to the  desirability to renew its expansion of NRCPP units and is confident that the return on investment will be substantially more than the cost of capital. Also, there are prepayment terms that would allow for refinancing (presumably at a more attractive rate) if the company’s financial progress takes place as management expects over the next year or two. Lastly, substantial dilution has been avoided by the retirement of $1.275M worth of convertible debentures (at $0.50/share) with warrants attached at $1.00 per share, all of which (3.82M shares)could have been exercised on a “cashless” basis, without bringing any funds into Noble Roman’s.

The comparative situation therefore provides 1.6M fewer shares of dilution and $1.33M of extra equity capital, clearly an advantageous situation. While $1.9M more debt must be paid down by 2025, the extra $1.33M of capital would provide most of it.


This new financing amounts to what might be considered a fresh start for the expansion plans of Noble Roman’s. Management has new capital for expansion, as well as support of their franchising effort, and the next new company operated NRCPP (in Brownsburg, outside of Indianapolis) is already planned to open in late March.  According to Scott Mobley, President, this new location “will have a surprise addition”, to be described further “close to the grand opening late in March”.

While we await the final operating results from calendar 2019, if developments proceed as planned over the next year or two, NROM should have demonstrated a great deal more progress relative to the build out of company NRCPPs, expansion of the franchise network of NRCPPs, and further expansion of the 700 plus franchised non-traditional locations.

Roger Lipton