8-K: Noble Romans Inc. to Restate 2022 Financials Due to Accounting Error

Noble Romans Inc. will restate its 2022 financial statements due to an error related to accounts payable and accumulated deficit, impacting prior periods.

Summary

• Noble Romans Inc. has identified an error in its previously issued financial statements for the year ended December 31, 2022.
• The error, which originated in periods prior to 2020, resulted in an understatement of accounts payable and accumulated deficit.
• The company will restate its 2022 financials to correct this error, which will also affect a small portion of interest expense previously recorded in 2023.
• The restatement will increase accounts payable by $1,156,453, from $650,582 to $1,807,035.
• The accumulated deficit will increase by $1,156,453, from $(22,953,074) to $(24,109,527).
• Management has concluded that this error resulted from material weaknesses in the company's internal control over financial reporting.
• The company anticipates filing the restated financials in its 2023 Annual Report on Form 10-K as soon as practicable after the audit is complete.

Sentiment

Score: 3

Explanation: The document reveals a significant accounting error and material weaknesses in internal controls, which are negative indicators for investors. The need for a restatement is a serious concern.

Negatives

• The company's 2022 financial statements were inaccurate due to an accounting error.
• The error resulted in an understatement of accounts payable and accumulated deficit.
• The company identified material weaknesses in its internal control over financial reporting.

Risks

• The restatement of financial statements could negatively impact investor confidence.
• Material weaknesses in internal control over financial reporting could lead to future errors.
• The company's actual results may differ materially from forward-looking statements due to various risks and uncertainties.

Future Outlook

The company anticipates filing the restated financials in its 2023 Annual Report on Form 10-K as soon as practicable after the audit is complete. The company's actual results may differ materially from forward-looking statements due to various risks and uncertainties.

Management Comments

• Management of Noble Romans, Inc. and Assurance Dimensions agreed that the company's previously issued financial statements for 2022 should be restated.
• Management concluded that the error resulted from material weaknesses in the company's internal control over financial reporting.

Industry Context

Restatements due to accounting errors are not uncommon, but they can raise concerns about a company's internal controls and financial reporting processes. This event may lead investors to scrutinize Noble Romans' financial statements more closely.

Comparison to Industry Standards

• Restatements are generally viewed negatively by the market, as they indicate a failure in a company's accounting and internal control systems.
• Companies with strong internal controls and robust accounting practices typically avoid such restatements.
• The size of the restatement, approximately $1.15 million, is significant relative to the company's total assets of $18.3 million, suggesting a material error.
• Comparable companies that have had to restate financials have often seen a negative impact on their stock price and investor confidence.

Stakeholder Impact

• Shareholders may experience a negative impact on the stock price due to the restatement.
• Creditors may be concerned about the company's financial reporting practices.
• Employees may be affected by the uncertainty surrounding the company's financial health.

Next Steps

• The company will restate its 2022 financial statements.
• The company will file the restated financials in its 2023 Annual Report on Form 10-K.
• The company will address the material weaknesses in its internal control over financial reporting.

Key Dates

Keywords

restatement, financial statements, accounting error, accounts payable, accumulated deficit, internal control, material weakness, audit