10-K405 1 0001.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark one) [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2000. [ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the transition period from ____ to____. 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 incorporation or organization) Identification No.) One Virginia Avenue, Suite 800 Indianapolis, Indiana 46204 (Address of principal executive offices) Registrant's telephone number: (317) 634-3377 Securities registered under Section 12(b) of the Act: None Securities registered under Section 12(g) of the Act: Common Stock 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. $7,689,810 as of March 20, 2001 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 13,593,701 shares of common stock as of March 20, 2001 Documents Incorporated by Reference: None NOBLE ROMAN'S, INC. FORM 10-K Year Ended December 31, 2000 Table of Contents Item # in Form 10-K Page PART I 1. Business 3 2. Properties 6 3. Legal Proceedings 6 4. Submission of Matters to a Vote of Security Holders 6 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters 7 6. Selected Financial Data 8 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 8. Financial Statements and Supplementary Data 14 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 25 PART III 10. Directors and Executive Officers of the Registrant 25 11. Executive Compensation 26 12. Security Ownership of Certain Beneficial Owners and Management 28 13. Certain Relationships and Related Transactions 30 PART IV 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K 31 2 PART 1 ITEM 1. BUSINESS General Information ------------------- Noble Roman's, Inc. (the "Company") sells and services franchises for non-traditional and co-branded foodservice operations under the trade name "Noble Roman's Pizza". The concept's hallmarks include high quality pizza products, simple operating systems, labor-minimizing operations, attractive food costs and overall affordability. The Company has over 29 years experience operating full-service pizza restaurants, giving it unique advantages in the design and consultation of foodservice systems for franchisees. Since 1997, the Company has awarded approximately 750 non-traditional and co-branded franchises in 41 states. Since the franchises are typically installed in pre-existing, high-traffic commercial and recreational facilities, a typical franchise requires an investment of approximately $25,000 to $30,000 per location. Products & Systems ------------------ Prior to franchising non-traditional and co-branded locations, the company invested approximately three years in time and manpower to engineer a selection of high quality products and easy to implement systems that would appeal to prospective franchisees. Using its 29 years of experience in operating pizza restaurants and its highly regarded, scratch-made products served in its traditional restaurants as a baseline for quality standards, the Company carefully developed specially engineered dough products that are manufactured by third party vendors and distributed throughout all 48 contiguous states by an unrelated distributor, Multifoods Distribution Group, Inc., in a ready-to-use form requiring only on-site assembly and baking. The results are products that are great tasting, quality consistent, easy to assemble and relatively low in food cost. The operating systems are also uniquely developed for simplicity of operation and for minimizing hourly labor requirements and management intensiveness. Operational layout, product pre-preparation, assembly and baking, and customer fulfillment were all designed to function efficiently and cost-effectively with minimal space requirements. Service systems are customizable by franchise venue, but generally customers select from a variety of grab-and-go products from an attractive counter-top kiosk, or select a made-and-baked-to-order traditional large pizza with their favorite toppings. All products are designed for quick assembly and baking through small, stackable conveyor ovens. A unique feature of the Noble Roman's program is the menu flexibility offered franchisees. The core package includes such items as 14" large pizzas, individual sized 7" pizzas and breadsticks with dip. From this core, franchisees may also select from the following product extensions: baked pastas, Buffalo wings, hot sandwiches and breakfast items. Many potential franchisees are looking for a complete foodservice package to fit their specific application or desire for add-on sales opportunities. Noble Roman's product extensions allow the franchisee "one-stop" franchise shopping to satisfy their complete needs through one business relationship, one franchise fee and one set of equipment. Added flexibility is provided with the Company's ongoing co-branding relationship with other traditional restaurant chains. Typical Locations & Growth Plans -------------------------------- Typical non-traditional locations include such venues as universities, recreational facilities, hotels, convenience stores, travel plazas, military bases and other types of locations with pre-existing customer 3 traffic. Additionally, the Company has national co-branding relationships with other restaurant chains for both tranditional and non-traditional locations. Co-branding allows the owner of other traditional restaurant franchise locations to add Noble Roman's products and systems to their menu offerings while utilizing their existing facility investment and overhead structure. With much of the fixed overhead required already in place, the Noble Roman's concept can be added with the potential of extremely attractive margins on the additional sales it attracts to the location. The Company has now awarded approximately 750 franchises since 1997 in 41 states, with approximately 575 of those locations open. In addition to the pipeline of sold but unopened locations, it is the Company's plan to aggressively pursue the sale of additional locations. The Company is currently involved in on-going discussions and negotiations involving many additional franchise locations. The Company plans to aggressively pursue franchising growth in non-traditional locations and co-branding opportunities in the future. Recent Strategic Events ----------------------- Over the last several years, the Company made the strategic decision to refocus its business on its non-traditional and co-branding opportunities and away from operating full-service, traditional restaurant operations. Given the potential size of the opportunities in the non-traditional and co-branding segments, and the actual rapid pace of their growth within the Company, during 1999 management determined that all financial and human resources at the Company's disposal would need to be focused on franchise services to maximize the potential for stakeholders. During 2000, the Company completed that transition and all of its restaurants, except one non-traditional unit, used for training, product development and demonstration purposes, are now franchised. The Company will continue to offer franchise services to the full-service franchises which were formerly company operated in much the same fashion as it has been doing with its non-traditional and co-branded franchises. Competition ----------- The restaurant industry in general is very competitive with respect to convenience, price, product quality and service. In addition, the Company competes for franchise sales on the basis of product engineering, investment cost, cost of sales, simplicity of operation and labor requirements. A change in the business strategy or the receptivity of one or more of the Company's competitors could have an adverse effect on the Company's ability to sell additional franchises, maintain existing franchises or sell its products through its franchise system. Many of the Company's competitors are very large, internationally established companies. Within the competitive environment of the non-traditional franchise segment of the restaurant industry, management has defined what it believes to be certain competitive advantages for the Company. First, several of the Company's competitors in the non-traditional segment are also large chains operating thousands of franchised, traditional restaurants. Because of the contractual relationships with many of their franchisees, some competitors may be unable to offer wide-scale site availability for potential non-traditional franchisees. The Company is not faced with any significant restriction since its full-service operations were highly concentrated geographically. Several of the Company's competitors in the non-traditional segment were established with little or no organizational history in owning and operating traditional foodservice locations. This lack of operating experience may be a limitation in attracting and maintaining non-traditional franchisees who, by the nature of the segment, often have little exposure to foodservice operations themselves. The Company's 4 background in traditional restaurant operations has provided it experience in structuring, planning, marketing, and cost controlling which could be of material benefit to franchisees. Seasonality of Sales -------------------- Direct sales of non-traditional franchises may be affected in minor ways by certain seasonalities and holiday periods. Franchise sales to certain non-traditional venues may be slower around major holidays such as Thanksgiving and Christmas, and during the first couple of months of the year. Franchise sales to other non-traditional venues show less or no seasonality. Additionally, in middle and northern climates where adverse winter weather conditions may hamper outdoor travel or activities, foodservice sales by franchisees may be sensitive to sudden drops in temperature or precipitation which would in turn effect Company royalties. Employees --------- As of March 26, 2001, the company employed approximately 25 persons, all of whom were engaged on a full-time basis. No employees are covered under collective bargaining agreements, and the Company believes that relations with its employees are good. Trademarks and Service Marks ---------------------------- The Company owns and protects several trademarks and service marks. Many of these, including NOBLE ROMAN'S (R), Noble Roman's Pizza(R), Noble Roman's Pizza Express(R) and THE BETTER PIZZA PEOPLE (R) are registered with the United States Patent and Trademark Office as well as with the corresponding agencies of certain other foreign governments. The company believes that its trademarks and service marks have significant value and are important to its sales and marketing efforts. Government Regulation --------------------- The company and its franchisees are subject to various federal, state and local laws affecting the operation of our respective businesses. Each Noble Roman's location is subject to licensing and regulation by a number of governmental authorities, which include health, safety, sanitation, building 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 our third party production and distribution services, are also licensed and subject to regulation by state and local health and fire codes, and Department of Transportation regulations. The Company, its franchisees and its vendors are also subject to federal and state environmental regulations. The Company is subject to Federal Trade Commission ("FTC") regulation and various state agencies and laws regulating the offer and sale of franchises. Several states also regulate aspects of the franchisor-franchisee relationship. The FTC requires us to furnish to prospective franchisees a franchise offering circular containing certain specified information. Some states also regulate the sale of franchises and require registration of the franchise offering circular 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 5 franchising and the franchisor-franchisee relationship, and the Company would be subject to applicable laws in each jurisdiction where franchised units may become established. ITEM 2. PROPERTIES The Company's headquarters are located in 8,000 square feet of leased office space in Indianapolis, Indiana. The lease for this property expires in December 2002. ITEM 3. LEGAL PROCEEDINGS The Company is involved in various litigation relating to claims arising out of its normal business operations and relating to restaurant facilities closed in 1997 and 2000. The Company believes that none of its current proceedings, individually or in the aggregate, will have a material adverse effect upon the Company beyond the amount reserved in its financial statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 6 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information ------------------ The Company's common stock is included on Nasdaq "Electronic Bulletin Board" and trades under the symbol "NROM". The following table sets forth for the periods indicated, the high and low bid prices per share of common stock as reported by Nasdaq. The quotations reflect inter-dealer prices without retail mark-up, mark-down or commissions and may not represent actual transactions.

1999 2000 2001 ---- ---- ---- Quarter Ended: High Low High Low High Low ---- --- ---- --- ---- --- March 31 2 1/16 1 9/16 2 5/8 1 1/4 1 13/16* 31/32* June 30 3 15/32 2 2 1/2 1 3/64 September 30 3 1/8 1 15/32 2 13/64 27/32 December 31 2 1 3/8 1 3/4 1 3/8 *Includes transactions through March 20, 2001.

Holder of Record ---------------- As of March 20, 2001, the Company believes there were approximately 360 holders of record of common stock. This excludes persons whose shares are held of record by a bank, brokerage house or clearing agency. Dividends --------- The Company has never declared or paid dividends on its common stock. The Company intends to retain earnings to fund the development and growth of its business and does not expect to pay any dividends within the foreseeable future. The Company's current credit facilities prohibit the Company from paying dividends or shareholder distributions. Sale of Unregistered Securities ------------------------------- During 2000, the Company entered into a series of transactions resulting in its obtaining approximately $10.4 million in additional capital. The additional capital came from investors associated with The Geometry Group in New York and certain other investors purchasing approximately $3.2 million of common stock in exchange for cash, The Provident Bank exchanging $6.5 million senior secured debt and $740 thousand PIK notes for $2.4 million of common stock and $4.9 million in no-yield preferred stock which may later be converted to common stock at $3.00 per share at the Bank's option and an officer converted $312 thousand of notes for common stock. Most of these transactions were at $1.00 per share. All of these sales were made in reliance upon the exemption from the registration requirements of the 1933 Act set forth in Section 4(2) of the 1933 Act. 7 ITEM 6. SELECTED FINANCIAL DATA (In thousands except per share data)

Year Ended December 31, ---------------------------------------------------- Statement of Operations Data: 1996 1997 1998 1999 2000 -------- -------- -------- -------- -------- Restaurant revenue $ 33,854 $ 25,369 $ 23,307 $ -- $ -- Royalties and fees 189 657 2,286 3,351 4,760 Administrative fees and other 196 79 189 458 798 -------- -------- -------- -------- -------- Total revenue 34,239 26,105 25,782 3,809 5,559 Restaurant operating expenses 31,090 24,094 26,513 -- -- Express operating expenses -- 220 839 1,611 1,903 Depreciation and amortization 1,488 1,076 59 65 58 General and administrative 2,834 2,816 841 849 1,265 Financing, acquisition and restructuring costs 1,554 6,529 -- -- -- -------- -------- -------- -------- -------- Operating income (loss) (2,727) (8,632) (2,469) 1,285 2,332 Interest 1,794 996 1,387 1,902 1,276 -------- -------- -------- -------- -------- Income before income taxes and extraordinary item (4,521) (9,627) (3,856) (617) 1055 Income taxes (benefit) (640) (4,148) (1,311) (210) 359 -------- -------- -------- -------- -------- Net income (loss) from continuing operations $ (3,881) $ (5,479) $ (2,545) $ (407) $ 696 Income (loss) from discontinued operations and extraordinary items -- 1,563 396 (10,303) (165) -------- -------- -------- -------- -------- Net income (loss) $ (3,881) $ (3,917) $ (2,150) $(10,714) $ 531 Weighted average number of common shares 4,131 4,131 4,131 6,015 11,371 Net income (loss) per share from continuing operations $ (.94) $ (1.33) $ (.62) $ (.07) $ .06 Income (loss) per share from discontinued operations and extraordinary items -- .38 .10 (1.71) (.01) -------- -------- -------- -------- -------- Net income (loss) per share $ (.94) $ (.95) $ (.52) $ (1.78) $ .05 -------- -------- -------- -------- -------- Balance sheet data (at year end): Working capital (deficit) $(16,251) $ (3,510) $ (2,241) $ (3,552) $ 1,249 Total assets 19,451 18,205 19,143 14,049 12,995 Long-term obligations 12,561 13,611 14,187 16,937 9,999 Stockholders' equity (deficit) $ 791 $ (325) $ 1,076 $ (9,235) $ 1,688

8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction ------------ Over the last several years, the Company made the strategic decision to refocus its business on its non-traditional and co-branding opportunities and away from operating full-service, traditional restaurant operations. Given the potential size of the opportunities in the non-traditional and co-branding segments, and the actual rapid pace of their growth within the Company, during 1999 management determined that all financial and human resources at the Company's disposal would need to be focused on franchise services to maximize the potential for stakeholders. During 2000, the Company completed that transition and all of its full-service, traditional restaurants are now franchised. The Company will continue to offer franchise services to the full-service franchises which were formerly company operated in much the same fashion as it has been doing with its non-traditional and co-branded franchises. The franchising concept was designed to capitalize on the rapid growth of non-traditional locations for quick service restaurants and to be simple to operate, requiring a modest investment, with minimal staffing requirements while serving great tasting pizza and related products. The concept was designed to also be convenient and quick for its customers. Based on experience to date, the Company believes that franchising offers opportunities for rapid growth for the foreseeable future. Based on the Company's 2000 operating results, its business plan, the number of franchise units now open, the backlog of units sold to be opened, the backlog of franchise prospects now in ongoing discussions and negotiations, the Company's trends and the results of its operations thus far in 2001, management has determined that it is more likely than not that the Company's deferred tax credits will be fully utilized before the tax credits expire. Therefore, no valuation allowance was established for its deferred tax asset. However, there can be no assurance that the franchising growth will continue in the future. If unanticipated events should occur in the future, the realization of all or some portion of the Company's deferred tax asset could be jeopardized. The Company will continue to evaluate the need for a valuation allowance on a quarterly basis in the future. The following table sets forth the 2000 operating results, 1999 operating results and the 1998 operating results from ongoing operations included in the Company's consolidated statement of operations. 9 ProForma Consolidated Statement of Operations Noble Roman's, Inc. and Subsidiaries

Years Ended December 31, ------------------------ 1998 1999 2000 ---- ---- ---- Royalties and fees $ 2,349,813 94.9% $ 3,351,201 88.0% $ 4,760,429 85.6% Administrative fees and other 125,093 5.1 457,824 12.0 798,538 14.4 ----------- ----- ----------- ----- ----------- ----- Total revenue 2,474,906 100.0 3,809,024 100.0 5,558,967 100.0 Express operating expenses: Salaries and wages 465,391 18.8 792,155 20.8 971,682 17.5 Trade show expense 131,079 5.3 214,046 5.6 210,000 3.8 Travel expense 70,065 2.8 162,930 4.3 240,300 4.3 Other operating expense 172,120 7.0 441,955 11.6 481,338 8.7 Depreciation and amortization 59,183 2.4 64,848 1.7 58,411 1.1 General and administrative 840,514 34.0 848,538 22.3 $ 1,265,697 22.8 ----------- ----- ----------- ----- ----------- ----- Operating income 736,554 70.2 1,284,552 33.7 2,331,539 41.9 Interest expense 1,387,011 56.0 1,901,948 49.9 1,276,266 23.0 ----------- ----- ----------- ----- ----------- ----- Income (loss) before income taxes (650,457) 14.2 (617,396) (16.2) 1,055,273 19.0 Income taxes (benefit) (221,155) 4.8 (209,915) (5.5) 358,793 6.5 ----------- ----- ----------- ----- ----------- ----- Net income (loss) $ (429,302) 9.4%$ (407,481) (10.7)%$ 696,481 12.5%

2000 Compared with 1999 ----------------------- Total revenue increased from $3.8 million to $5.6 million, or 45.9%, for 2000 compared to 1999. This increase was primarily the result of the growth in the number of franchise locations open. Royalties and fees were approximately $4.8 million for 2000 compared to $3.4 million during 1999. This increase was the result of rapid growth in the number of franchises. Salaries and wages decreased from 20.8% of revenue in 1999 compared to 17.5% of revenue in 2000. The primary reason for this decrease was the number of franchise units open in 2000 based on the Company's infrastructure which was established in 1999 for the anticipated rapid growth in 2000. Trade show expense decreased from 5.6% of revenue in 1999 compared to 3.8% of revenue in 2000. The primary reason for this decrease was that the number of trade shows remained constant while the revenue grew as a result of the additional franchised units open. 10 Travel expense was 4.3% of total revenues in both 1999 and 2000. The dollar amount of travel expense increased in relation to the growth in revenue as a result of the Company expanding its franchise area from local midwestern states to 42 states nationwide. Other operating expenses decreased from 11.6% of revenue in 1999 to 8.7% of revenue in 2000. This decrease was primarily the result of the growth in revenue as a result of the increased number of franchised units from the Company's infrastructure put in place in 1999 for the anticipated rapid growth in 2000. General and administrative expense increased from 22.3% of revenue in 1999 compared to 22.8% of revenue in 2000. This increase was the result of the administrative structure for the Company being expanded to accommodate expected accelerated growth in the future. Net income before extraordinary items increased from a loss of ($407 thousand) in 1999 to a net income of $696 thousand in 2000. This increase was primarily the result of a continuation of the rapid growth in the number of franchised units open based on the Company's infrastructure put in place in prior years in anticipation of the growth in franchising. 1999 Compared with 1998 ----------------------- Total revenue increased from $2.5 million to $3.8 million, or 54.0%, for 1999 compared to 1998. This increase was primarily the result of the growth in the number of franchise locations open. Royalties and fees were approximately $3.4 million for 1999 compared to $2.3 million during 1998. This increase was the result of rapid growth in the number of franchises. Salaries and wages increased from 18.8% of revenue in 1998 to 20.8% of revenue in 1999. The primary reason for this increase was the building of the Company's infrastructure in 1998 for anticipated growth in 1999. Trade show expense increased from 5.3% of revenue in 1998 to 5.6% of revenue in 1999. The primary reason for this increase was the increase in the number of trade shows that the Company participated in during 1999. This increase also reflects the Company's decision to participate in national trade shows commencing in 1999 as opposed to only local midwestern shows in 1998. The Company now has franchises in 42 states nationwide. Travel expense increased from 2.8% of revenue in 1998 to 4.3% of revenue in 1999. This increase was the result of the Company expanding its franchise area from local midwestern states to 42 states nationwide. Other operating expenses increased from 7.0% of revenue in 1998 to 11.6% of revenue in 1999. This increase was primarily the result of the Company's building its infrastructure in anticipation of future rapid growth and as a result of expanding its strade area from the midwestern states to nationwide. General and administrative expense decreased from 34.0% of revenue in 1998 to 22.3% of revenue in 1999. This decrease was the result of the Company's ability to leverage its administrative structure in place in 1998 for further expansion in 1999. 11 Impact of Inflation ------------------- The primary inflation factors affecting the Company's operations are food and labor costs to the franchisee. To date, the Company has been able to offset the effects of inflation in food costs without significantly increasing prices through effective cost control methods and greater purchasing power as a result of additional growth. The competition for labor has resulted in higher salaries and wages for the franchisees, however, that effect is largely minimized by the low labor requirements of the franchise concept. Liquidity and Capital Resources ------------------------------- Over the last several years, the Company made the strategic decision to refocus its business on its non-traditional and co-branding opportunities and away from operating full-service, traditional restaurant operations. Given the potential size of the opportunities in the non-traditional and co-branding segments, and the actual rapid pace of their growth within the Company, during 1999 management determined that all financial and human resources at the Company's disposal would need to be focused on franchise services to maximize the potential for stakeholders. During 2000, the Company completed that transition and all of its full-service, traditional restaurants are now franchised. The Company will continue to offer franchise services to the full-service franchises which were formerly company operated in much the same fashion as it has been doing with its non-traditional and co-branded franchises. During 2000, the Company entered into a series of transactions resulting in its obtaining approximately $10.4 million in additional capital. The additional capital came from investors associated with The Geometry Group in New York and certain other investors purchasing approximately $3.2 million of common stock in exchange for cash, The Provident Bank exchanging $6.5 million senior secured debt and $740 thousand PIK notes for $2.4 million of common stock and $4.9 million in no-yield preferred stock which may later be converted to common stock at $3.00 per share at the Bank's option and an officer converted $312 thousand of notes for common stock. Most of these transactions were at $1.00 per share. On April 30, 1999, the Company obtained $2.2 million in additional funding from various investors associated with The Geometry Group based in New York City, who purchased participating income notes of the Company (the "Participating Notes") and warrants to purchase at any time prior to December 31, 2001 an aggregate of 275 thousand shares of the Company's common stock at a price of $.01 per share. The Participating Notes mature on April 15, 2003 and are payable at that time, at the option of each investor, in cash, in shares of the Company's common stock based on a conversion price of $1.00 per share or in a combination thereof. Interest on the Participating Notes accrues at a rate per annum equal to each investor's pro rata share of the Company's revenues associated with the Company's Pizza Express. Such interest is payable in cash monthly, provided, however, that to the extent that the interest otherwise payable to an investor would exceed such investor's pro rata share of the sum of $33,534, all interest in excess of such amount shall be paid in the form of a PIK Note of the Company. Each PIK Note matures on April 15, 2003 and, similar to the Participating Notes, is payable at that time, at the option of each investor, in cash, in shares of the Company's common stock based on a conversion price of $1.00 per share or in a combination thereof. As a result of the capital raised by the Company, cash flow generated from operations, its focus on growth by franchising and the current rate of growth plus the anticipated growth, the Company believes it will have sufficient cash flow to meet its obligations and to carry out its current business plan. 12 The statements contained 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, shifts in market demand, general economic conditions and other factors, including (but not limited to) changes in demand for the Company's products or franchises, the impact of competitors' actions, and changes in prices or supplies of food ingredients and labor. 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. None. 13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Balance Sheets Noble Roman's, Inc. and Subsidiaries

Assets December 31, ------ ------------ 1999 2000 ------------ ------------ Current assets: Cash $ 29,913 $ 9,406 Accounts receivable 718,623 856,492 Note receivable -- 290,000 Inventories 437,120 74,587 Prepaid expenses 109,006 203,460 Deferred tax assets - current portion -- 1,122,551 Assets held for sale 1,500,000 -- ------------ ------------ Total current assets 2,794,662 2,556,496 ------------ ------------ Property and equipment: Equipment 813,305 822,046 Leasehold improvements 84,229 84,229 Capitalized leases -- -- ------------ ------------ 897,534 906,275 Less accumulated depreciation and amortization 327,039 377,865 ------------ ------------ Net property and equipment 570,496 528,410 ------------ ------------ Costs in excess of assets acquired, net -- -- Deferred tax asset 9,961,723 8,502,555 Other assets 721,982 1,407,307 ------------ ------------ $ 14,048,862 $ 12,994,768 ============ ============ Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Accounts payable $ 3,163,200 $ 485,093 Current portion of long-term debt 17,661 -- Note payable to officer 65,840 65,840 Deferred franchise fees 227,125 228,500 Other current liabilities 2,872,515 528,249 ------------ ------------ Total current liabilities 6,346,341 1,307,682 ------------ ------------ Long-term obligations: Notes payable to Provident Bank net of warrant value of $520,377and $213,266 in 1999 and 2000, respectively) 14,051,989 7,786,734 Notes payable to various fund affiliated with Geometry Group net of warrant valuation of $228,567 in 1999 and $159,618 in 2000 2,006,433 2,212,383 PIK notes payable to Provident Bank 583,070 -- Note payable to officer 250,000 -- PIK notes payable to officer 32,242 -- Other long-term debt 13,432 -- ------------ ------------ Total long-term obligations 16,937,166 9,999,117 ------------ ------------ Stockholders' equity: Common stock (25,000,000 shares authorized, 7,019,711outstanding in 1999 and 13,593,701 in 2000) 12,272,637 17,734,495 Preferred stock (5,000,000 shares authorized) -- 4,929,274 Accumulated deficit (21,507,281) (20,975,800) ------------ ------------ Total stockholders' equity (deficit) (9,234,645) 1,687,969 ------------ ------------ Total liabilities and stockholder's equity $ 14,048,862 $ 12,994,768 ============ ============

See accompanying note to condensed consolidated financial statements 14 Consolidated Statements of Operations Noble Roman's, Inc. and Subsidiaries

Year ended December 31, ----------------------- 1998 1999 2000 ------------ ------------ ------------ Royalties and fees $ 2,286,210 $ 3,351,201 $ 4,760,429 Administrative fees and other 188,786 457,824 798,538 ------------ ------------ ------------ Total revenue from ongoing operations 2,474,906 3,809,024 5,558,967 Operating expenses: Salaries and wages 465,391 792,155 971,682 Trade show expense 131,079 214,046 210,000 Travel expense 70,065 162,930 240,300 Other operating expenses 172,120 441,955 481,338 Depreciation and amortization 59,183 64,848 58,411 General and administrative 840,514 848,538 1,265,697 ------------ ------------ ------------ Operating income from ongoing operations 736,554 1,284,552 2,331,539 Discontinued restaurant operations: Revenue 23,306,780 -- -- Operating expenses 26,512,779 -- -- ------------ ------------ ------------ Operating income (loss) (2,469,445) 1,284,552 2,331,539 Interest and other expense 1,387,011 1,901,948 1,276,266 ------------ ------------ ------------ Income (loss) before income taxes (3,856,456) (617,396) 1,055,273 Income tax (benefit) (1,311,194) (209,915) 358,793 ------------ ------------ ------------ Net income (loss) before extraordinary item (2,545,262) (407,481) 696,481 Extraordinary item net of tax expense of $203,876 in 1998, tax benefit of $5,309,317 in 1999 and tax benefit of $85,000 in 2000 395,696 (10,306,357) (165,000) ------------ ------------ ------------ Net income (loss) $ (2,149,566) $(10,713,838) $ 531,481 ------------ ------------ ------------ Earnings per share: Net income (loss) before extraordinary item $ (.61) $ (.07) $ .06 Net income (loss) (.52) (1.78) .05 ============ ============ ============ Weighted average number of common shares outstanding 4,131,324 6,014,864 11,370,717 Fully diluted earnings per share Net income (loss) before extraordinary item $ .05 Net income (loss) .04 ============ Weighted average number of common shares outstanding 14,788,603

See accompanying note to condensed consolidated financial statements. 15 Consolidated Statements of Changes in Stockholders' Equity (Deficit) Noble Roman's, Inc. and Subsidiaries

Common Stock Preferred --------------------------- Accumulated Stock Shares Amount Deficit Total ------------ ------------ ------------ ------------ ------------ Balance at December 31, 1997 $ -- 4,131,324 $ 8,318,431 $ (8,643,879) $ (325,448) ------------ ------------ ------------ ------------ ------------ Issuance of warrants to purchase stock -- -- 708,600 -- 708,600 Issuance of common stock in exchange or certain liabilities -- 1,421,066 2,842,144 -- 2,842,144 1998 net loss -- -- -- (2,149,565) (2,149,565) ------------ ------------ ------------ ------------ ------------ Balance at December 31, 1998 -- 5,552,390 11,869,175 (10,793,444) 1,075,730 ------------ ------------ ------------ ------------ ------------ Issuance of warrants to purchase stock -- 275,000 275,000 Issuance of common stock in exchange for certain liabilities -- 90,419 90,419 Conversion of warrants to stock -- 1,467,321 38,044 38,044 1999 net loss -- (10,713,837) (10,713,837) ------------ ------------ ------------ ------------ Balance at December 31, 1999 -- 7,019,711 12,272,638 (21,507,282) (9,234,645) Issuance of preferred stock in exchange for certain liabilities 4,929,274 4,929,274 Issuance of common stock in exchange for certain liabilities and cash 6,573,989 5,461,857 5,461,857 2000 net income 531,481 531,481 ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2000 $ 4,929,274 13,593,701 $ 17,734,495 $(20,975,800) $ 1,687,969

See accompanying notes to consolidated financial statements. 16 Consolidated Statements of Cash Flows Noble Roman's, Inc. and Subsidiaries

Year ended December 31, ----------------------- OPERATING ACTIVITIES 1998 1999 2000 ------------ ------------ ------------ Net loss $ (2,149,565) $(10,713,837) $ 531,438 Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 1,113,447 970,401 248,069 Restructuring costs -- -- -- Non-cash interest -- 615,312 -- Deferred federal income taxes (1,107,319) (5,518,998) 443,793 Loss from discontinued segment -- 9,814,285 250,000 Changes in operating assets and liabilities: (Increase) decrease in: Accounts receivable (199,025) (138,782) (137,869) Inventories (42,686) 407,663 342,533 Prepaid expenses (27,211) 76,465 (94,454) Other assets (29,397) (5,113) -- Increase (decrease) in: Accounts payable (67,630) 1,252,111 (2,678,107) Other current liabilities 182,629 1,131,245 (2,344,266) Deferred franchise fees 79,700 83,625 1,375 ------------ ------------ ------------ NET CASH USED BY OPERATING ACTIVITIES (2,247,057) (2,025,623) (3,437,488) ------------ ------------ ------------ INVESTING ACTIVITIES Purchase of property and equipment (678,705) (617,511) 8,741 Sale of property and equipment 260,325 -- ------------ ------------ ------------ NET CASH USED BY INVESTING ACTIVITIES (678,705) (357,186) 8,741 ------------ ------------ ------------ FINANCING ACTIVITIES Principal payments on long-term debt and capital lease obligations (22,404) (4,908) -- Proceeds from notes payable to officer 315,840 -- -- Proceeds from long-term debt, net of debt issue costs 2,592,366 1,966,703 137,000 Issuance of capital stock -- 432,334 3,271,240 Legal fees associated with conversion of debt to equity -- (9,582) -- ------------ ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 2,885,802 2,384,547 3,408,240 ------------ ------------ ------------ INCREASE (DECREASE) IN CASH (39,960) 1,737 (20,507) Cash at beginning of year 68,136 28,176 29,913 ------------ ------------ ------------ CASH AT END OF YEAR $ 28,176 $ 29,913 $ 9,406 ============ ============ ============

17 Supplemental Schedule of Noncash Investing and Financing Activities During 2000, The Provident Bank exchanged $6.5 million senior secured debt and $740 thousand PIK notes for $2.4 million of common stock and $4.9 million in no-yield preferred stock, and an officer converted $312 thousand of notes for common stock. See accompanying notes to consolidated financial statements. 18 Notes to Consolidated Financial Statements Noble Roman's, Inc. and Subsidiaries Note l: Summary of Significant Accounting Policies General Organization: The Company sells and services franchises for non-traditional and co-branded foodservice operations under the trade name "Noble Roman's Pizza". Principles of Consolidation: The consolidated financial statements include the accounts of Noble Roman's, Inc. and its subsidiaries, Pizzaco, Inc., GNR, Inc., LPS, Inc., N.R. East, Inc. and Oak Grove Corporation ("Company"). Intercompany balances and transactions have been eliminated in consolidation. Inventories: Inventories consist of food, beverage, restaurant supplies and marketing materials and are stated at the lower of cost (first-in, first-out) or market. Property and Equipment: Equipment and leasehold improvements are stated at cost including property under capital leases. Depreciation and amortization are computed on the straight-line method over the estimated useful lives. Leasehold improvements are amortized over the shorter of estimated useful life or the term of the lease. Advertising Costs: The Company records advertising costs consistent with Statement of Position 93-7 "Reporting on Advertising Costs." This statement requires the Company to expense advertising production costs the first time the production material is used. Fair Value of Financial Instruments: The carrying amount of long-term debt net of the estimated value of the warrant approximates its fair value because the interest rates are currently at market. Because of the very limited trading in the Company's common stock, the Company does not believe that traditional methods of valuing the warrant apply; therefore, the value of the warrant reflects the Company's estimate of its value. The carrying amount of all other financial instruments approximate fair value due to the short-term maturity of these items. Use of Estimates: 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 could differ from those estimates. The Company evaluates its property and equipment and related costs in excess of assets acquired periodically to assess whether any impairment indications are present, including recurring operating losses and significant adverse changes in legal factors or business climate that affect the recovery of recorded value. If any impairment of an individual asset is evident, a loss would be provided to reduce the carrying value to its estimated fair value. Intangible Assets: Debt issue costs are amortized to interest expense ratably over the term of the applicable debt. Royalties, Administrative and Franchise Fees: Royalties are recognized as income monthly and are based on a percentage of monthly sales of franchised restaurants. Administrative fees are recognized as income monthly as earned. Initial franchise fees are recognized as income when the franchised restaurant is opened. 19 Income Taxes: The Company provides for current and deferred income tax liabilities and assets utilizing an asset and liability approach along with a valuation allowance as appropriate. The Company concluded that no valuation allowance was necessary at December 31, 1999 because it is more likely than not that the Company will earn sufficient income before the expiration of its net operating loss carry forwards to fully realize the value of its deferred tax asset. The net operating loss carry-forward is approximately $31.1 million of which approximately $30.3 million expires between the years 2012 and 2015. Management made this determination after reviewing the Company's business plans, all known facts to date, recent trends, current performance and analysis of the backlog of franchises sold but not yet open. Basic And Diluted Net Income Per Share: Net loss per share is based on the weighted average number of common shares outstanding during the respective year. When dilutive, stock options and warrants are included as share equivalents using the treasury stock method. Segment Reporting: In 1998, the Company adopted FAS 131, Disclosures about Segments of an Enterprise and Related Information. FAS 131 supersedes FAS 14, Financial Reporting for Segments of a Business Enterprise, replacing the "industry segment" approach with the "management" approach. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company's reportable segments. FAS 131 also requires disclosures about products and services, geographic areas and major customers. The adoption of FAS 131 did not affect results of operations or financial position but did affect the disclosure of segment information (see Note 12). Note 2: Recent Strategic Events Over the last several years, the Company made the strategic decision to refocus its business on its non-traditional and co-branding opportunities and away from operating full-service, traditional restaurant operations. Given the potential size of the opportunities in the non-traditional and co-branding segments, and the actual rapid pace of their growth within the Company during 1999, management determined that all financial and human resources at the Company's disposal would need to be focused on franchise services to maximize the potential for stakeholders. During 2000, the Company completed that transition and all of its full-service, traditional restaurants are now franchised. The Company will continue to offer franchise services to the full-service franchises which were formerly company operated in much the same fashion as it has been doing with its non-traditional and co-branded franchises. Note 3: Notes Payable On January 1, 1999, the Company had a note payable to The Provident Bank in the amount of $14,572,366. On April 30, 1999, the Provident Bank canceled their existing note in the amount of $14,572,366 and replaced the canceled with Tranche Y term loan in the amount of $8,000,000 and Tranche Z term loan in the amount of $6,572,366. Tranche Y term loan bears interest of 8.75% per annum payable monthly in arrears and matures on April 15, 2003. Tranche Z term loan bore interest of at 8.75% per annum to have been paid in PIK notes quarterly in arrears and was to mature on April 15, 2003. There were to have been no payments on Tranche Z term loan until such time that Tranche Y term loan was paid in full. Simultaneous with this transaction, the Company and The Provident Bank entered into a Security Purchase Agreement with TradeCo Global Securities, Inc. whereby TradeCo Global Securities, Inc., through various investors, loaned the Company $2,235,600 evidenced by a Participating Income Note which bears interest at the rate of 7.5% of certain revenues of the Company as defined in the Securities Purchase Agreement and matures on April 15, 2003. At maturity the Participating Income Note is convertible to common stock at a conversion rate of $1.00 per share. The Participating Income Note ranks 20 pari passu with The Provident Bank notes with regard to the collateral interest on all assets of the Company. In a subsequent transaction, The Provident Bank exchanged $6.5 million senior secured debt and $740 thousand PIK notes for $2.4 million in common stock and $4.9 million in no-yield preferred stock which may later be converted to common stock at $3.00 per share at its option and an officer converted $312 thousand in notes for common stock. All of these transactions were at $1.00 per share. Note 4: Contingent Liabilities for Leased Facilities The Company formerly leased its restaurant facilities under noncancelable lease agreements which generally had initial terms ranging from five to 20 years with extended renewal terms. These leases have all been assigned to a Franchisee who operates them pursuant to a Noble Roman's, Inc. Franchise Agreement. The assignment passes all liability for future lease payments to the assignee, however, the Company remains contingently liable to the landlords in the event of default by the assignee. The leases generally required the Company to pay all real estate taxes, insurance and maintenance costs. The leases provided for a specified annual rental, and some leases called for additional rental based on sales volume over specified levels at that particular location. At December 31, 2000, contingent obligations under noncancelable operating leases for 2001, 2002, 2003, 2004, 2005 and after 2005 were $1.2 million, $1.1 million, $990 thousand, $889 thousand, $631 thousand and $4.8 million, respectively. Note 5: Income Taxes The Company created an additional deferred benefit in 1998 of $1,311,194 and a deferred benefit in 1999 $209,915 as a result of its operating loss and used deferred benefits of $358,793 to offset its tax expense on income in 2000. The deferred tax asset at December 31 consists of the following:

1998 1999 2000 ---------- ---------- ---------- Deferred tax assets: Tax credit carryforwards $ 193,680 $ 172,768 $ -- Net operating loss carryforward 5,187,442 9,788,955 9,625,106 Franchise value for tax purposes of companies acquired -- -- -- ---------- ---------- ---------- Total gross deferred tax assets $5,381,120 $9,961,723 $9,625,106 ---------- ---------- ---------- Deferred tax liabilities: Property and equipment 903,042 -- -- Cost in excess of asset acquired 35,355 -- -- ---------- ---------- ---------- Total gross deferred tax liabilities 938,397 -- -- ---------- ---------- ---------- Net deferred tax asset $4,442,725 $9,961,723 $9,625,106 ========== ========== ----------

Note 6: Common Stock On December 31, 1998, the Company entered into two transactions resulting in the exchange of 1,421,066 shares of common stock for certain liabilities totaling $2,842,144. The Company issued 500,000 shares of common stock in exchange for $1.0 million of trade payables due to a certain vendor of the Company and issued 921,066 shares of common stock in exchange for $1.8 million due to The Provident Bank, the Company's principal lender. 21 In conjunction with obtaining additional financing from The Provident Bank on August 13, 1998, the Company issued a warrant to purchase 750,000 shares of common stock at any time through November 30, 2001 at $.01 per share. This warrant was valued at $708,600 which is reflected as a discount to the related note payable. The discount is being amortized over the five year term of the note. In 1998, the Company entered into an amended and restated credit facility with the Bank. In connection with such amendment the Company issued to the Bank a warrant to purchase 750,000 shares of common stock with an exercise price of $.01 per share. During 2000, the Company entered into a series of transactions resulting in its obtaining approximately $10.4 million in additional capital. The additional capital came from investors associated with The Geometry Group in New York and certain other investors purchasing approximately $3.2 million of common stock in exchange for cash, The Provident Bank exchanging $6.5 million senior secured debt and $740 thousand PIK notes for $2.4 million of common stock and $4.9 million in no-yield preferred stock which may later be converted to common stock at $3.00 per share at the Bank's option and an officer converted $312 thousand of notes for common stock. Most of these transactions were at $1.00 per share. All of these sales were made in reliance upon the exemption from the registration requirements of the 1933 Act set forth in Section 4(2) of the 1933 Act. The Company has an incentive stock option plan for key employees and officers. The options are generally exercisable three years after the date of grant and expire ten years after the date of grant. The option prices are the fair market value of the stock at the date of grant. In 2000, options to acquire 144,750 shares were granted. In 1998, options to acquire 15,000 shares were granted. Options granted and remaining outstanding at December 31, 2000 are: 6,500 common shares at $3.25 per share, 18,500 common shares at $3.68 per share, 12,750 common shares at $6.44 per share, 40,500 common shares at $1.75 per share, 60,000 common shares at $1.00 per share, 15,000 common shares at $1.385 per share, 7,250 common shares at $1.46 per share and 97,500 at $1.45 per share. As of December 31, 2000, options for 138,250 shares are exercisable. The Company adopted the disclosure requirements of Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation", effective with the 1996 financial statements, but elected to continue to measure compensation cost using the intrinsic value method in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, no compensation cost for stock options has been recognized. The value of the options granted in 1998 and 2000 were estimated to be $.76 per share and $.75 per share, respectively. Because of the very limited trading in the Company's common stock, the Company does not believe that traditional methods of valuing the options apply, therefore, it has estimated the value of the options. The following represents the pro forma net loss and earnings per share determined as if the fair value based method had been applied in measuring compensation cost as described in SFAS 123 for the years ended December 31, 1998 and December 31, 2000: 1998 2000 ---- ---- Net income (loss) $ (2,167,325) $ 459,831 Net income (loss) per share $ (.52) $ .04 22 Note 7: Loss from Discontinued Operations Pursuant to the Company's strategic decision in 1999 to refocus its business on its non-traditional and co-branding franchising opportunities, the Company closed 16 of its full-service restaurants and began franchising efforts for the remaining 31 full-service restaurants. Accordingly, in 1999 all assets associated with its full-service operations were reduced to the estimated sales price of the 31 restaurants being franchised. The reduction in the carrying value of those assets, all activities in 1999 associated with the full-service restaurants and a reserve for future costs associated with those restaurants in the amount of $1,599,032 was charged to a loss on discontinued operations. In 2000, all of the full-service restaurants were franchised and all operating results of those restaurants during the interim were charged to the reserve established in 1999. An additional charge for future costs in the amount of $250,000 was charged to a loss on discontinued operations in 2000. Note 8: Contingencies The Company is involved in various litigation relating to claims arising out of its normal business operations and relating to restaurant facilities closed in 1997. Although litigation is inherently uncertain, the Company believes that none of its current proceedings, individually or in the aggregate, will have a material adverse effect upon the Company beyond the amount reserved in its financial statements. Note 9: Certain Relationships and Related Transactions The following is a summary of transactions to which the Company and certain officers and directors of the Company are a party or have a financial interest. The Board of Directors of the Company has adopted a policy that all transactions between the Company and its officers, directors, principal shareholders and other affiliates must be approved by a majority of the Company's disinterested directors, and be conducted on terms no less favorable to the Company than could be obtained from unaffiliated third parties. Mr. Mobley loaned monies from time to time to the Company to help meet cash flow requirements and as of December 31, 1998 the balance of such loans to the Company aggregated $315,840. These amounts were converted to notes payable on May 1, 1999 in conjunction with the investment in the Company by investors affiliated with The Geometry Group. In 2000, in conjunction with the investment in the Company by investors affiliated with The Geometry Group and the conversion by The Provident Bank of certain of its loans to the Company to common stock, Mr. Mobley converted $250,000 plus his PIK notes to common stock. TradeCo Global Securities, Inc., where James Lewis is the majority shareholder, was paid $40,000 in 1999 and $30,000 in 2000 for financial advisory services. In addition, TradeCo Global Securities, Inc. was paid $11,037 in interest on Participating Income Notes in 1999 and $22,851 in 2000. James Lewis, James Lewis Family Trust, James W. Lewis, MPP, and James Lewis Family Investments, LP, were paid $51,299 in interest on Participating Income Notes in 1999 and $65,037 in 2000. The Provident Bank, on December 31, 1998, converted $1,600,000 of previous notes payable plus accrued interest to 921,066 shares of common stock. In February 2000, The Provident Bank converted $6.5 million senior secured debt and $740 thousand PIK notes for $2.4 million in common stock and $4.9 million in no-yield preferred stock which may later be converted to common stock at $3.00 per share. In 2000, The Provident Bank was paid $620,331 in 2000 for interest on its loans to the Company. 23 [LETTERHEAD OF LARRY E. NUNN $ ASSOCIATES] To the Board of Directors and Stockholders of Noble Roman's, Inc. INDEPENDENT AUDITORS' REPORT ---------------------------- We have audited the accompanying consolidated balance sheets of Noble Roman's, Inc. and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, cash flows and changes in stockholders' equity(deficit) for the years ended December 31, 2000, 1999 and 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Noble Roman's, Inc. and subsidiaries at December 31, 2000 and 1999, and the results of their operations, and their cash flows for the years ended December 31, 2000, 1999 and 1998 in conformity with generally accepted accounting principles. Columbus, Indiana March 26, 2001 24 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers and directors of the Company are: Name Age Positions with the Company ---- --- -------------------------- Paul W. Mobley 60 Chairman of the Board and Director A. Scott Mobley 37 President and Secretary Douglas H. Coape-Arnold 55 Director Donald A. Morrison, III 58 Director Bernard J. Brozek 44 Executive Vice President of Development Troy Branson 37 Executive Vice President of Franchising Wade Shanower 51 Vice President of Operations The executive officers of the Company serve at the discretion of the Board of Directors and are elected at the annual meeting of the Board. Directors are elected annually by the stockholders. The following is a brief description of the previous business background of the executive officers and directors: Paul W. Mobley has been Chairman of the Board since December 1991 and a Director since 1974. Mr. Mobley was President and Chief Executive Officer of the Company from 1981 to 1997. From 1975 to 1987, Mr. Mobley was a significant shareholder and president of a company which owned and operated 17 Arby's franchise restaurants. From 1974 to 1978, he also served as Vice President and Chief Operating Officer of the Company and from l978 to 1981 as Senior Vice President. He is the father of A. Scott Mobley. Mr. Mobley has a B.S. in Business Administration from Indiana University and is a CPA. A. Scott Mobley has been President since October 1997 and a Director since January 1992, and Secretary since February 1993. Mr. Mobley was Vice President from November 1988 to October 1997 and from August 1987 until November 1988 served as Director of Marketing for the Company. Prior to joining the Company Mr. Mobley was a strategic planning analyst with a division of Lithonia Lighting Company. Mr. Mobley has a B.S. in Business Administration from Georgetown University and an MBA from Indiana University. He is the son of Paul Mobley. Douglas H. Coape-Arnold was appointed a Director of the Company in May 1999. Mr. Coape-Arnold has been Managing General Partner of Geovest Capital Partners, L.P. since January 1997, and Managing Director of TradeCo Global Securities, Inc. since May 1994. Mr. Coape-Arnold's prior experience includes serving as Vice President of Morgan Stanley & Co., Inc. from 1982 to 1986, President & Chief Executive Officer of McLeod Young Weir Incorporated from 1986 to 1988, and Senior Vice 25 President of GE Capital's Transportation & Industrial Funding Corp. from 1988 to 1991. Mr. Coape-Arnold is a Chartered Financial Analyst. Donald A. Morrison, III has been a Director of the Company since December 1993. In January 1998, Mr. Morrison and an associate started their own independent brokerage firm offering general securities through Broker Transaction Services member NASD/SIPC, a subsidiary of Southwest Securities group. Prior to January 1998 Mr. Morrison was President and director of Traub & Company, Inc., an investment banking firm headquartered in Indianapolis, Indiana. Mr. Morrison was affiliated with Traub & Company since 1971. Bernard J. Brozek has been Executive Vice President of Development since November 2000. Prior to joining the Company, Mr. Brozek was Chief Operating Officer for Laundromax, a chain of laundry superstores, from October 1999 to November 2000. Prior to Laundromax, Mr. Brozek was Director and General Manager of Pizza Hutt Express for Tricon Global Restaurants where he had been employed for sixteen years. As Director and General Manager of Pizza Hut Express, Mr. Brozek was responsible for franchising and operations for their non-traditional locations. Troy Branson, has been Executive Vice President of Franchising for the Company since November 1997 and since 1992, he was Director of Business Development. Prior to joining the Company, Mr. Branson was an owner of Branson-Yoder Marketing Group since 1987, after graduating from Indiana University where he received a B.S. in Business. Wade Shanower has been Vice President of Express Operations since August 1999, Vice President of Full-Service Operations since November 1997 and since January 1996 he was Regional Director of Operations. Prior to joining the Company, Mr. Shanower was an owner of a Noble Roman's franchise restaurant plus two independent restaurants, which he sold in early 1995 before joining Noble Roman's. Prior to owning his own restaurants, Mr. Shanower was Vice President of Operations for American Diversified Foods, an Arby's franchisee owned in part by Paul Mobley. He has a B.S. degree from Indiana University. Section l6(a) Beneficial Ownership Reporting Compliance ------------------------------------------------------- Based solely on a review of the copies of reports of ownership and changes in ownership of the Company's common stock, furnished to the Company, or written representations that no such reports were required, the Company believes that during 1999 all filing requirements under Section 16(a) of the Securities Exchange Act of 1934 were complied with. ITEM l1. EXECUTIVE COMPENSATION The following table sets forth the cash and non-cash compensation for each of the Company's last three years awarded to or earned by the Chief Executive Officer and other executive officers of the Company whose cash compensation in 2000 exceeded $100,000. 26 SUMMARY COMPENSATION TABLE --------------------------

Long Term Annual Compensation Compensation ------------------- Securities Underlying Name and Principal Position Year Salary (l) Bonus Options # --------------------------- ---- ---------- ------ ------------------- Paul Mobley 2000 $ 240,000 $ - - Chairman of the Board 1999 240,000 - - 1998 240,000 - - A. Scott Mobley President and Secretary 2000 $ 150,000 $ - 20,000 1999 150,000 - - 1998 150,000 - - Troy Branson 2000 $ 93,754 $ 37,794 35,000 Executive Vice President of Franchising 1999 75,577 29,751 - 1998 74,250 17,495 5,000

(1) The Company did not have any bonus, retirement, or other arrangements or plans respecting compensation, except for an Incentive Stock Option Plan for executive officers and other employees and a bonus plan initiated in 1994 for certain officers and administrative employees based on profitability. Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values --------------------------------------------- The following table sets forth information concerning the number of exercisable and unexercisable stock options held at December 31, 2000 by the executive officers named in the Summary Compensation Table. Number of Securities Values of Unexercised Underlying Unexercised In-The-Money Options at 12/31/00 Options at 12/31/00 (1) Exercisable/Unexercisable Exercisable/Unexercisable ------------------------- ------------------------- Paul W. Mobley 10,000 / 0 $ 7,500 / 0 A. Scott Mobley 49,000 / 20,000 7,500 / $ 6,000 Troy Branson 17,500 / 40,000 0 / $ 12,175 -------------- (1) Based on a per share price of $1.75, the last reported transaction price of the Company's common stock on December 29, 2000. Employment Agreements --------------------- Mr. Paul Mobley has an employment agreement with the Company which fixes his base compensation at $275,000 per year, provides for reimbursement of travel and other expenses incurred in connection with his employment, including the furnishing of an automobile, health and accident insurance similar to that provided other employees, and life insurance in an amount related to his base salary. The initial term of 27 the agreement is seven years and is renewable each year for a seven-year period subject to approval by the Board. The agreement is terminable by the Company for just cause as defined in the agreement. Mr. A. Scott Mobley has an employment agreement with the Company which fixes his base compensation at $175,000 per year, provides for reimbursement of travel and other expenses incurred in connection with his employment, including the furnishing of an automobile, health and accident insurance similar to that provided other employees, and life insurance in an amount related to his base salary. The initial term of the agreement is five years and is renewable each year for a five-year period subject to approval by the Board. The agreement is terminable by the Company for just cause as defined in the agreement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of March 20, 2001, there were 13,709,701 shares of the Company's common stock outstanding and 25,000,000 shares are authorized. The following table sets forth the amount and percent of the Company's common stock beneficially owned on March 20, 2001 by (i) each director and named executive officer individually, (ii) each beneficial owner of more than five percent of the Company's outstanding common stock and, (iii) all executive officers and directors as a group:

Name and Address Amount and Nature Percent of Outstanding of Beneficial Owner of Beneficial Ownership (1) Common Stock (2) ------------------- --------------------------- ---------------------- Paul W. Mobley One Virginia Avenue, Suite 800 2,551,018 (3) 18.4% Indianapolis, IN 46204 A. Scott Mobley (1) One Virginia Avenue, Suite 800 908,826 (4) 6.3 Indianapolis, IN 46204 Provident Financial Group, Inc. One E. Fourth Street 5,332,839 (5) 33.9 Cincinnati, OH 45202 Donald A. Morrison, III 320 N. Meridian, #412 72,919 (6) * Indianapolis, IN 46204 Geovest Capital Partners, L.P. 110 E. 59th Street, 18th Floor 1,871,625 (8) 12.7 New York, N.Y. 10022 James Lewis 110 E. 59th Street, 18th Floor 4,564,136 (9) 34.4 New York, N.Y. 10022 All Executive Officers and Directors as a Group (7 Persons) 5,187,388 30.7

*Less than 1% 28 (1) All shares owned directly unless otherwise noted. (2) The percentage calculations are based upon 13,709,701 shares of our common stock issued and outstanding as of March 20, 2001 and, for each officer or director of the group, the number of shares subject to options or conversion rights exercisable currently or within 60 days of March 20, 2001. (3) This total includes a warrant to purchase 600,000 shares of stock at an exercise price of $.40 per share issued November 19, 1997 in connection with the financial restructuring with The Provident Bank, a warrant to purchase 700,000 shares of our common stock at an exercise price of $2.00 per share, in the event of (i) a change of control in Noble Roman's, (ii) the sale of substantially all of Noble Roman's assets, or (iii) the merger or consolidation of Noble Roman's with another entity and 10,000 shares subject to options granted under an employee stock option plan which are currently exercisable at $1.00 per share. (4) Includes 9,000 shares subject to options granted under an employee stock option plan which are currently exercisable at $3.25 per share for 6,500 common shares, $3.68 per share for 7,500 common shares, $6.44 per share for 5,000 common shares , $1.75 per share for 20,000 common shares and $1.00 per share for 10,000 common shares. Also includes a warrant to purchase 400,000 shares of our common stock at an exercise price of $.40 per share issued November 19, 1997 in connection with the financial restructuring with The Provident Bank and a warrant to purchase 300,000 shares of our common stock at an exercise price of $2.00 per share, in the event of (i) a change of control in Noble Roman's, (ii) the sale of substantially all of Noble Roman's assets, or (iii) the merger or consolidation of Noble Roman's with another entity. (5) This total includes warrants to purchase in the aggregate 385,000 shares of our common stock at $.01 per share. The warrants were granted to Provident Financial Group as partial consideration for its obligations pursuant to an Amended and Restated Credit Agreement. The total also includes 1,643,091 shares of our common stock which Provident's 4,929,275 shares of our preferred stock may be converted into. (6) This total includes 70,219 shares owned by Traub and Company, Inc. in its investment account, of which Mr. Morrison is shareholder. Mr. Morrison disclaims beneficial ownership of such shares beyond his interest in Traub and Company. (7) Includes warrants to purchase 1,771,605 shares beneficially owned by Geovest Capital Partners, L.P. in its investment account, of which Mr. Coape-Arnold is managing partner. Mr. Coape-Arnold disclaims beneficial ownership of such shares beyond his interest in Geovest Capital Partners. (8) Includes warrants to purchase 20,000 shares of our common stock at $.01 per share obtained from The Provident Bank and 1,000,000 shares of our common stock convertible from participating income notes. (9) This total includes 138,580 shares of our common stock owned by James Lewis Family Trust, 200,000 shares of our common stock owned by James W. Lewis MPP, 520,000 shares of our common stock convertible from participating income notes, 50,000 shares of our common stock convertible from participating income notes owned by James Lewis Family Investment, L.P., 100,000 shares of our common stock convertible from participating income notes owned by James W. Lewis IRA, 100,000 shares of our common stock convertible from participating income notes owned by James W. Lewis, MPP and a warrant to purchase 1,500,000 shares of our common stock at $.01 per share obtained from The Provident Bank. 29 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The following is a summary of transactions to which the Company and certain officers and directors of the Company were a party during 2000. The Board of Directors of the Company has adopted a policy that all transactions between the Company and its officers, directors, principal shareholders and other affiliates require the approval of a majority of the Company's disinterested directors, and be conducted on terms no less favorable to the Company than could be obtained from unaffiliated third parties. Mr. Mobley loaned monies from time to time to the Company to help meet cash flow requirements and as of December 31, 1998 the balance of such loans to the Company aggregated $315,840. These amounts were converted to notes payable on May 1, 1999 in conjunction with the investment in the Company by investors affiliated with The Geometry Group. In 2000, in conjunction with the investment in the Company by investors affiliated with The Geometry Group and the conversion by The Provident Bank of certain of its loans to the Company to common stock, Mr. Mobley converted $250,000 plus his PIK notes to common stock. TradeCo Global Securities, Inc., where James Lewis is the majority shareholder, was paid $40,000 in 1999 and $30,000 in 2000 for financial advisory services. In addition, TradeCo Global Securities, Inc. was paid $11,037 in interest on Participating Income Notes in 1999 and $22,851 in 2000. James Lewis, James Lewis Family Trust, James W. Lewis, MPP, and James Lewis Family Investments, LP, were paid $51,299 in interest on Participating Income Notes in 1999 and $65,037 in 2000. The Provident Bank, on December 31, 1998, converted $1,600,000 of previous notes payable plus accrued interest to 921,066 shares of common stock. In February 2000, The Provident Bank converted $6.5 million senior secured debt and $740 thousand PIK notes for $2.4 million in common stock and $4.9 million in no-yield preferred stock which may later be converted to common stock at $3.00 per share. In 2000, The Provident Bank was paid $620,331 in 2000 for interest on its loans to the Company. 30 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K The following consolidated financial statements of Noble Roman's, Inc. and subsidiaries are included in Item 8: Page ---- Consolidated Balance Sheets - December 31, 1999 and 2000 14 Consolidated Statements of Operations - years ended December 31, 1998, 1999 and 2000 15 Consolidated Statements of Changes in Stockholders' Equity - years ended December 31, 1998, 1999 and 2000 16 Consolidated Statements of Cash Flows - years ended December 31, 1998, 1999 and 2000 17 Notes to Consolidated Financial Statements 19 Report of Independent Auditors - Larry E. Nunn & Associates, LLC 24 (a) Exhibits Exhibit No. ----------- 3.1 Amended Articles of Incorporation of the Registrant (1) 3.2 Amended and Restated By-Laws of the Registrant 4.1 Specimen Common Stock Certificates (1) 10.3 Employment Agreement with Paul W. Mobley dated November 15, 1994 (3) 10.4 Credit Agreement with The Provident Bank dated December 1, 1995 (5) 10.6 1984 Stock Option Plan 10.7 Form of Stock Option Agreement (6) 11.1 Statement Re: Computation Per Share Earnings 21.1 Subsidiaries of the Registrant (2) 24.1 Not Applicable (unless going to sign as power of attorney for directors) -------------- (1) Incorporated by reference from Registration Statement filed by the Registrant on Form S-18 on October 22, 1982 and ordered effective on December 14, 1982 (SEC No. 2-79963C), and, for the Amended Articles of Incorporation, from the Registrant's Amendment No. 1 to the Post Effective Amendment No. 2 to Registration Statement on Form S-1 on July 1, 1985. (SEC File No.2-84150). (2) Incorporated by reference to the Registrant's Registration Statement on Form SB-2 (SEC File No. 33-66850) ordered effective on October 26, 1993. (3) Incorporated by reference from the Form 8-K filed by the registrant on February 17, 1993. (4) Incorporated by reference from the Form 8-K filed by the registrant on June 3, 1993. (5) Incorporated by reference from the Form 8-K filed by the registrant on December 5, 1995. (6) Incorporated by reference from the Form S-8 filed by the registrant on November 29, 1994 (SEC File No. 33-86804). (b) Reports on 8-K None. 31 SIGNATURES ---------- In accordance with of Section 13 or 15(d) 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: By: /s/ Paul W. Mobley ---------------------- ------------------------------------- Paul W. Mobley, Chairman of the Board In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: /s/ Paul W. Mobley ---------------------- ------------------------------------- Paul W. Mobley Chairman of the Board and Director Date: /s/ A. Scott Mobley ---------------------- ------------------------------------- A. Scott Mobley President and Director Date: /s/ Donald A. Morrison, III ---------------------- ------------------------------------- Donald A. Morrison, III Director Date: /s/ Douglas H. Coape-Arnold ---------------------- ------------------------------------- Douglas H. Coape-Arnold Director 32