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What changed in Rocky Mountain Chocolate Factory, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Rocky Mountain Chocolate Factory, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+281 added−295 removedSource: 10-K (2025-06-20) vs 10-K (2024-06-13)

Top changes in Rocky Mountain Chocolate Factory, Inc.'s 2025 10-K

281 paragraphs added · 295 removed · 183 edited across 3 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeIn addition, as a public company, we are also potentially susceptible to litigation, such as asserting violations of 24 Table of Contents securities laws. Any such claims, with or without merit, if not resolved, could be time-consuming and result in costly litigation.
Biggest changeIn addition, as a public company, we are also potentially susceptible to litigation, such as asserting violations of securities laws. Any such claims, with or without merit, if not resolved, could be time-consuming and result in costly litigation.
There can be no assurance that an adverse result in any future proceeding would not have a potentially material adverse effect on our business, results of operations, and financial condition. ITE M 4. MINE SAFETY DISCLOSURES Not Applicable. 25 Table of Contents PA RT II.
There can be no assurance that an adverse result in any future proceeding would not have a potentially material adverse effect on our business, results of operations, and financial condition. ITE M 4. MINE SAFETY DISCLOSURES Not Applicable. 23 Table of Contents PA RT II.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn addition to our production facility, we own a two-acre parcel adjacent to our production facility. As of February 29, 2024, the Company had obligations for one non-cancelable lease for our Flagship Store having an expiration date of January 31, 2026, which contains an optional ten-year renewal right.
Biggest changeAs of February 28, 2025, the Company had obligations for one non-cancelable lease for our Flagship Store having an expiration date of January 31, 2026, which contains an optional ten-year renewal right and a five-year lease for our Company owned store in Corpus Christi, TX having an expiration date of January 1, 2029.
The processes for assessing, identifying, and managing material risks from cybersecurity threats include our efforts to identify the relevant assets that could be affected, determine possible threat sources and threat events, assess threats based on their potential likelihood and impact, and identify controls that are in place or necessary to manage and/or mitigate such risks.
The processes include efforts to identify the relevant assets that could be affected, determine possible threat sources and threat events, assess threats based on their potential likelihood and impact, and identify controls that are in place or necessary to manage and/or mitigate such risks.
PROPERTIES Our production operations and corporate headquarters are located at 265 Turner Drive, Durango, Colorado 81303, which is a 53,000 square foot manufacturing facility that we own. During FY 2024, our manufacturing operations produced approximately 1.61 million pounds of chocolate products, which was a decrease of approximately 4.7% from the approximately 1.69 million pounds produced in FY 2023.
PROPERTIES Our production operations and corporate headquarters are located at 265 Turner Drive, Durango, Colorado 81303, which is a 53,000 square foot manufacturing facility that we own. During FY 2025, our manufacturing operations produced approximately 2.05 million pounds of chocolate products, which was an increase of approximately 27% from the approximately 1.61 million pounds produced in FY 2024.
We do not deem this store lease to be material in relation to our overall operations. For information as to the amount of our rental obligations under leases on both Company-owned and franchised stores, see Note 10 “Leasing Arrangements” to our consolidated financial statements included in Item 8 of this Annual Report. ITEM 3. LEGAL PROCEEDINGS
For information as to the amount of our rental obligations under leases on both Company-owned and franchised stores, see Note 10 “Leasing Arrangements” to our consolidated financial statements included in Item 8 of this Annual Report. ITEM 3. LEGAL PROCEEDINGS
ITEM 1C. CYBERS ECURITY Our Board of Directors is responsible for exercising oversight of management’s identification and management of, and planning for, risks from cybersecurity threats. We are developing processes, that seek to assess, identify, and manage material risks from cybersecurity threats to the IT systems and information that we use or will use, transmit, receive, and maintain.
ITEM 1C. CYBERS ECURITY Risk Management and Strategy We have established processes, that seek to assess, identify, and manage material risks from cybersecurity threats to the IT systems and information that we use or will use, transmit, receive, and maintain.
We have not experienced any material cybersecurity incidents, and the expenses incurred from any security incidents have been immaterial. However, as discussed under “Risk Factors” in Part I, Item 1A of this Annual Report, cybersecurity threats pose multiple and potentially material risks to us, including potentially to our results of operations and financial condition.
However, as discussed under “Risk Factors” in Part I, Item 1A of this Annual Report, cybersecurity threats pose multiple and potentially material risks to us, including to our results of operations and financial condition. We rely extensively on information technology systems and could face cybersecurity risk.
We rely extensively on information technology systems and could face cybersecurity risk. As cybersecurity threats become more frequent, sophisticated, and coordinated, it is reasonably likely that we may expend greater resources to continue to modify and enhance protective measures against such security risks ITE M 2.
As cybersecurity threats become more frequent, sophisticated, and coordinated, it is reasonably likely that we may expend greater resources to continue to modify and enhance protective measures against such security risks. Governance Our Board of Directors is responsible for exercising oversight of management’s identification and management of, and planning for, risks from cybersecurity threats.
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The processes for assessing, identifying, and managing material risks from cybersecurity threats have been integrated into the overall risk management system through the use of firewalls, antivirus and malware detection, and other security software.
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We have engaged consultants to assist us with risk mitigation and monitoring threats from both inside and outside our network, including risks of cybersecurity threats associated with the use of third-party service providers. We maintain full backups on a regular basis to protect against the loss of critical data.
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We have not experienced any material cybersecurity incidents to date that have materially affected, or that are reasonably likely to materially affect our business, strategy, results of operations or financial condition, and the expenses incurred from any security incidents have been immaterial.
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The Board’s Audit Committee routinely evaluates the Company’s cybersecurity through communications with management and the Company’s information technology 22 Table of Contents department . Systems are in place to perform ongoing testing to defend and mitigate against unwelcome intrusions and attacks.
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The interim CEO and CFO communicate with the head of the information technology department daily to monitor any potential or perceived threats to our technology infrastructure. A comprehensive and regularly tested Incident Response Plan (IRP) has been established that outlines specific steps for various types of cyber incidents.
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There are key performance indicators (KPIs) and metrics used to measure the effectiveness of the cybersecurity program, including processes to keep senior management and the Board’s Audit Committee informed. The Company also maintains a cybersecurity insurance policy to provide financial protection in the event of a critical breach.
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We employ information technology specialists and use external consulting firms to supplement our cybersecurity practices. Both the interim CEO and CFO have experience in managing teams of information technology specialists and assessing cybersecurity threats. ITE M 2.
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In July 2024, we sold an unused parcel of land in Durango, Colorado for a purchase price of approximately $0.9 million.
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We expect to exercise our renewal right for the Flagship Store. We do not deem these to be material in relation to our overall operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

174 edited+89 added−112 removed65 unchanged
Biggest changeAND SUBSIDIARIES CONSOLIDAT ED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED FEBRUARY 29 or 28, 2024 2023 2022 Cash Flows From Operating Activities Net Loss $ ( 4,171,883 ) $ ( 5,680,778 ) $ ( 341,697 ) Less: Net Income (Loss) from discontinued operations, net of tax 703,834 ( 192,422 ) 158,020 Net Loss from continuing operations ( 4,875,717 ) ( 5,488,356 ) ( 499,717 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 887,299 765,263 740,175 Provision for obsolete inventory 188,786 732,499 384,473 Provision for loss (recovery) on accounts and notes receivable ( 402,117 ) ( 277,000 ) - Asset impairment and store closure losses — 84,183 - Loss (gain) on sale or disposal of property and equipment ( 37,002 ) 11,958 ( 159,129 ) Expense recorded for stock compensation 437,829 651,016 1,073,115 Deferred income taxes — 722,163 ( 267,576 ) Changes in operating assets and liabilities: Accounts receivable 227,053 82,050 46,311 Refundable income taxes 298,916 391,643 37,999 Inventories ( 878,771 ) ( 70,069 ) ( 581,433 ) Other current assets ( 101,466 ) ( 7,246 ) ( 122,647 ) Accounts payable 974,769 661,111 200,557 Accrued liabilities 999,483 ( 1,163,216 ) 1,332,993 Contract liabilities ( 114,767 ) 5,384 26,321 Net cash (used in) provided by operating activities of continuing operations ( 2,395,705 ) ( 2,898,617 ) 2,211,442 Net cash provided by (used in) operating activities of discontinued operations ( 39,242 ) 796,126 646,712 Net cash (used in) provided by operating activities ( 2,434,947 ) ( 2,102,491 ) 2,858,154 Cash Flows from Investing Activities Addition to notes receivable ( 135,955 ) ( 64,621 ) - Proceeds received on notes receivable 163,989 62,411 109,809 Proceeds from insurance recovery - - 206,336 Proceeds from the sale or distribution of assets 112,131 27,289 2,693 Purchases of property and equipment ( 3,017,473 ) ( 1,000,015 ) ( 941,327 ) Other 9,463 10,000 ( 10,000 ) Net cash used in investing activities of continuing operations ( 2,867,845 ) ( 964,936 ) ( 632,489 ) Net cash provided by investing activities of discontinued operations 1,417,738 197,121 27,491 Net cash used in investing activities ( 1,450,107 ) ( 767,815 ) ( 604,998 ) Cash Flows from Financing Activities Repurchase of common stock through net settlement of restricted stock units - - ( 237,785 ) Proceeds from line of credit 1,250,000 - - Dividends paid and redemption of outstanding preferred stock purchase rights - - ( 61,276 ) Net cash (used in) provided by financing activities of discontinued operations - - - Net cash provided by (used in) financing activities 1,250,000 - ( 299,061 ) Net Increase (Decrease) in Cash and Cash Equivalents ( 2,635,054 ) ( 2,870,306 ) 1,954,095 Cash and Cash Equivalents, Beginning of Year 4,717,068 7,587,374 5,633,279 Cash and Cash Equivalents, End of Year $ 2,082,014 $ 4,717,068 $ 7,587,374 The accompanying notes are an integral part of these consolidated financial statements. 40 Table of Contents ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
Biggest changeAND SUBSIDIARIES CONSOLIDAT ED STATEMENTS OF CASH FLOWS (In thousands) FOR THE YEARS ENDED FEBRUARY 28 or 29, 2025 2024 Cash Flows From Operating Activities Net Loss $ ( 6,122 ) $ ( 4,172 ) Less: Earnings from discontinued operations, net of tax — 704 Loss from continuing operations ( 6,122 ) ( 4,876 ) Adjustments to reconcile loss from continuing operations to net cash used in operating activities: Depreciation and amortization 950 887 Debt issuance costs 7 — Provision for obsolete inventory 322 189 Provision for recovery on accounts and notes receivable ( 27 ) ( 402 ) Gain on sale or disposal of property and equipment ( 247 ) ( 37 ) Expense recorded for stock compensation 273 438 Changes in operating assets and liabilities: Accounts receivable ( 1,194 ) 227 Refundable income taxes ( 18 ) 299 Inventories ( 297 ) ( 879 ) Other current assets 50 ( 101 ) Accounts payable 1,109 975 Accrued liabilities ( 1,316 ) 999 Contract liabilities ( 85 ) ( 115 ) Net cash used in operating activities of continuing operations ( 6,595 ) ( 2,396 ) Net cash used in operating activities of discontinued operations — ( 39 ) Net cash used in operating activities ( 6,595 ) ( 2,435 ) Cash Flows from Investing Activities Addition to notes receivable - ( 136 ) Proceeds received on notes receivable 201 164 Proceeds from the sale or distribution of assets 2,265 112 Purchases of property and equipment ( 3,762 ) ( 3,017 ) Increase in other assets ( 359 ) - Other - 9 Net cash used in investing activities of continuing operations ( 1,655 ) ( 2,868 ) Net cash provided by investing activities of discontinued operations - 1,418 Net cash used in investing activities ( 1,655 ) ( 1,450 ) Cash Flows from Financing Activities Proceeds from line of credit 2,200 1,250 Payment on line of credit ( 3,450 ) Proceeds from notes payable 6,000 Payment of debt issuance costs ( 50 ) Issuance of common stock through securities purchase agreement 2,188 Net cash provided by financing activities 6,888 1,250 Net Decrease in Cash and Cash Equivalents ( 1,362 ) ( 2,635 ) Cash and Cash Equivalents, Beginning of Year 2,082 4,717 Cash and Cash Equivalents, End of Year $ 720 $ 2,082 The accompanying notes are an integral part of these consolidated financial statements. 37 Table of Contents ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
Because of the seasonality of our business and the impact of new store openings and sales of franchises, results for any quarter are not necessarily indicative of results that may be achieved in other quarters or for a full fiscal year.
Because of the seasonality of our business and the impact of new store openings and sales of new franchises, results for any quarter are not necessarily indicative of results that may be achieved in other quarters or for a full fiscal year.
The Warrant was to expire six months after the final and conclusive determination of revenue thresholds for the fifth contract year and the cumulative revenue determination in accordance with the terms of the Warrant. On November 1, 2022, the Company sent a formal notice to the customer terminating the agreement.
The Warrant was to expire six months after the final and conclusive determination of revenue thresholds for the fifth contract year and the cumulative revenue determination in accordance with the terms of the Warrant. On November 1, 2022, the Company sent a formal notice to the former customer terminating the agreement.
Warrants In connection with a terminated supplier agreement with a former customer of the Company, the Company issued a warrant (the “Warrant”) to purchase up to 960,677 shares of the Company’s common stock (the “Warrant Shares”) at an exercise price of $ 8.76 per share.
Warrants In connection with a terminated supplier agreement with a former customer of the Company, the Company issued a warrant (the “Warrant”) to purchase up to 960,677 shares of the Company’s common stock (the “Warrant Shares”) at an exercise price of $ 8.76 per share in 2019.
The Company has recorded a deferred tax asset related to historical U-Swirl losses and has determined that these losses are restricted due to a limitation on the deductibility of future losses in accordance with Section 382 of the Internal Revenue Code as a result of the foreclosure transaction. The Company's temporary differences are listed in Note 13.
The Company has recorded a deferred tax asset related to historical U-Swirl losses and has determined that these losses are restricted due to a limitation on the deductibility of future losses in accordance with Section 382 of the Internal Revenue Code as a result of the foreclosure transaction. The Company's temporary differences are listed in Note 12.
The result of the assessment of the Company's tax positions did not have an impact on the consolidated financial statements for the years ended February 29 or 28, 2024 or 2023. The Company does not have any significant unrecognized tax benefits and does not anticipate a significant increase or decrease in unrecognized tax benefits within the next twelve months.
The result of the assessment of the Company's tax positions did not have an impact on the consolidated financial statements for the years ended February 28 or 29, 2025 or 2024. The Company does not have any significant unrecognized tax benefits and does not anticipate a significant increase or decrease in unrecognized tax benefits within the next twelve months.
The Company’s revenues are currently derived from three principal sources: sales to franchisees and others of chocolates and other confectionery products manufactured by the Company; the collection of initial franchise fees and royalties from franchisees’ sales; sales at Company-owned stores of chocolates and other confectionery products including gourmet caramel apples; and marketing fees.
The Company’s revenues are currently derived from four principal sources: sales to franchisees and others of chocolates and other confectionery products manufactured by the Company; the collection of initial franchise fees and royalties from franchisees’ sales; sales at Company-owned stores of chocolates and other confectionery products including gourmet caramel apples; and marketing fees.
During FY 2023, the Company incurred substantial costs associated with a stockholder’s contested solicitation of proxies in connection with our 2022 annual meeting of stockholders. During FY 2023, the Company incurred approximately $4.1 million of costs associated with the contested solicitation of proxies, however there were no such comparable costs in FY 2024.
During FY 2023, the Company incurred substantial costs associated with a stockholder’s contested solicitation of proxies in connection with our 2022 annual meeting of stockholders. During FY 2023, the Company incurred approximately $4.1 million of costs associated with the contested solicitation of proxies, however, there were no such comparable costs in FY 2024 or FY 2025.
The initial limitations will continue to limit deductibility of SWRL’s and U-Swirl’s net operating loss carryovers, but the annual loss limitation will be deductible to RMCF and U-Swirl International Inc. upon the filing of joint tax returns in FY 2017 and future years.
The initial limitations will continue to limit deductibility of SWRL’s and U-Swirl’s net operating loss carryovers, but the annual loss limitation will be deductible to RMCF and U-Swirl upon the filing of joint tax returns in FY 2017 and future years.
See Note 17 – Discontinued Operations in the Notes to Consolidated Financial Statements for additional information regarding the Company's discontinued operations, including net sales, operating earnings and total assets by segment. The Company’s financial statements reflect continuing operations only, unless otherwise noted.
See Note 15 – Discontinued Operations in the Notes to Consolidated Financial Statements for additional information regarding the Company's discontinued operations, including net sales, operating earnings and total assets by segment. The Company’s financial statements reflect continuing operations only, unless otherwise noted.
(2) Represents shares remaining available under the Company’s 2007 Equity Incentive Plan. Shares available for future issuances under the 2007 Equity Incentive Plan may be issued in the form of stock options, stock appreciation rights, restricted stock and stock units, performance shares and performance units, and other stock and cash based awards.
(2) Represents shares remaining available under the Company’s 2024 Equity Incentive Plan. Shares available for future issuances under the 2024 Equity Incentive Plan may be issued in the form of stock options, stock appreciation rights, restricted stock and stock units, performance shares and performance units, and other stock and cash based awards.
The Company periodically evaluates our deferred tax assets to determine if our assumptions and estimates should change . As of February 29, 2024 and February 28, 2023, the Company had a full valuation allowance against its deferred tax assets.
The Company periodically evaluates our deferred tax assets to determine if our assumptions and estimates should change . As of February 28, 2025 and February 29, 2024, the Company had a full valuation allowance against its deferred tax assets.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide the information required by this Item. 33 Table of Contents ITEM 8.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide the information required by this Item. 31 Table of Contents ITEM 8.
Amounts are recognized for income tax related interest and penalties as a component of general and administrative expense in the statement of income and are immaterial for the years ended February 29 or 28, 2024 and 2023.
Amounts are recognized for income tax related interest and penalties as a component of general and administrative expense in the statement of income and are immaterial for the years ended February 28 or 29, 2025 and 2024.
With few exceptions, the Company is no longer subject to U.S. federal and state tax examinations in its major tax jurisdictions for periods before FY 2019.
With few exceptions, the Company is no longer subject to U.S. federal and state tax examinations in its major tax jurisdictions for periods before FY 2020.
Founded in 1981, we are headquartered in Durango, Colorado and produce an extensive line of premium chocolate products and other confectionery products (“Durango Products”). Our revenues and profitability are derived principally from our franchised/licensed system of retail stores that feature chocolate and other confectionary products including gourmet caramel apples.
Founded in 1981, we are headquartered in Durango, Colorado and produce an extensive line of premium chocolate products and other confectionery products. Our revenues and profitability are derived principally from our franchised/licensed system of retail stores that feature chocolate and other confectionery products including gourmet caramel apples.
We base our estimates on analyses, which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The Company did not identify any critical estimates used in the preparation of our consolidated financial statements for the year ended February 29, 2024.
We base our estimates on analyses, which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The Company did not identify any critical estimates used in the preparation of our consolidated financial statements for the year ended February 28, 2025.
Intangible assets are recorded at their cost. The Company performs intangible asset impairment testing on an annual basis or more frequently when events or circumstances indicate that the carrying value of a reporting unit more likely than not exceeds its fair value. The Company’s intangible assets are further described in Note 7 to the financial statements.
The Company performs intangible asset impairment testing on an annual basis or more frequently when events or circumstances indicate that the carrying value of a reporting unit more likely than not exceeds its fair value. The Company’s intangible assets are further described in Note 7 to the financial statements.
Critical Accounting Estimates 32 Table of Contents Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Except for the information below, the information required by this item is incorporated herein by reference from our Proxy Statement for our 2024 Annual Meeting of Stockholders, to be filed no later than 120 days after February 29, 2024.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Except for the information below, the information required by this item is incorporated herein by reference from our Proxy Statement for our 2025 Annual Meeting of Stockholders, to be filed no later than 120 days after February 28, 2025.
Management, with the participation of our Interim Chief Executive Officer, has evaluated the effectiveness, as of February 29, 2024, of the Company’s internal control over financial reporting. In making this evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in its publication Internal Control-Integrated Framework (2013).
Management, with the participation of our Interim Chief Executive Officer, has evaluated the effectiveness, as of February 28, 2025, of the Company’s internal control over financial reporting. In making this evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in its publication Internal Control-Integrated Framework (2013).
Based on that evaluation, management concluded that the Company’s internal control over financial reporting was effective as of February 29, 2024. Under the applicable SEC rules, we are not required to include an attestation report of our independent registered public accounting firm, CohnReznick LLP, on the Company’s internal control over financial reporting.
Based on that evaluation, management concluded that the Company’s internal control over financial reporting was effective as of February 28, 2025. Under the applicable SEC rules, we are not required to include an attestation report of our independent registered public accounting firm, CohnReznick LLP, on the Company’s internal control over financial reporting.
(the “Company”) as of February 29, 2024, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the fiscal year then ended, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “financial statements”).
(the “Company”) as of February 28, 2025 and February 29, 2024, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the fiscal years then ended, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “financial statements”).
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 29, 2024, and the results of its operations and its cash flows for the fiscal year then ended, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2025 and February 29, 2024, and the results of its operations and its cash flows for the fiscal years then ended, in conformity with accounting principles generally accepted in the United States of America.
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Rocky Mountain Chocolate Factory, Inc.
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Rocky Mountain Chocolate Factory, Inc.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not Applicable. 65 Table of Contents PAR T III. ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this item is incorporated herein by reference from our Proxy Statement for our 2024 Annual Meeting of Stockholders, to be filed no later than 120 days after February 29, 2024.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not Applicable. 59 Table of Contents PAR T III. ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this item is incorporated herein by reference from our Proxy Statement for our 2025 Annual Meeting of Stockholders, to be filed no later than 120 days after February 28, 2025.
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Additionally, quarterly results have been, and in the future are likely to be, affected by the timing of new store openings and sales of franchises.
Additionally, quarterly results have been, and in the future are likely to be, affected by the timing of new store openings and the sales of new franchise locations.
Our ability to successfully achieve expansion of our franchise systems depends on many factors not within our control including the availability of suitable sites for new store establishment and the availability of qualified franchisees to support such expansion.
Our ability to successfully achieve expansion of our franchise systems depends on many factors not within our control including the availability of suitable sites for new store locations and the availability of qualified franchisees to support our expansion plans.
ITEM 1 1. EXECUTIVE COMPENSATION The information required by this item is incorporated herein by reference from our Proxy Statement for our 2024 Annual Meeting of Stockholders, to be filed no later than 120 days after February 29, 2024. IT EM 12.
EXECUTIVE COMPENSATION The information required by this item is incorporated herein by reference from our Proxy Statement for our 2025 Annual Meeting of Stockholders, to be filed no later than 120 days after February 28, 2025. IT EM 12.
The Company’s internal control over financial reporting is a process designed under supervision of the Company’s principal executive officer and principal financial officer to provide reasonable assurance regarding the reliability of financial reporting and preparation of the Company’s consolidated financial statements for external purposes in accordance with generally accepted accounting principles.
The Company’s internal control over financial reporting is a process designed under supervision of the Company’s principal executive officer and principal financial officer to provide reasonable assurance regarding the reliability of financial reporting and preparation of the Company’s consolidated financial statements for external purposes in accordance with GAAP.
ITEM 5. M ARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the Nasdaq Global Market tier of the Nasdaq Stock Market LLC under the symbol “RMCF.” Holders On May 31, 2024, there were approximately 442 record holders of our common stock.
ITEM 5. M ARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the Nasdaq Global Market tier of the Nasdaq Stock Market LLC under the symbol “RMCF.” Holders On May 30, 2025, there were approximately 441 record holders of our common stock.
Our responsibility is to express an opinion on the Company’s financial statements based on our audit.
Our responsibility is to express an opinion on the Company’s financial statements based on our audits.
The Company’s subsidiaries, SWRL, along with U-Swirl had a history of net operating losses prior to the company’s acquisition of them and thus the Company has a related net operating loss carry forward.
The Company’s subsidiary, SWRL, along with its previous subsidiary U-Swirl, had a history of net operating losses prior to the company’s acquisition of them and thus the Company has a related net operating loss carry forward.
During the Standstill Period, ABV-Radoff agreed, subject to certain exceptions, other than in Rule 144 open market broker sale transactions where the identity of the purchaser is not known and in underwritten widely dispersed public offerings, not to sell, offer, or agree to sell directly or indirectly, through swap or hedging transactions or otherwise, the securities of the Company or any rights decoupled from the underlying securities of the Company held by ABV-Radoff to any person or entity other than the Company or an affiliate of ABV-Radoff (a “Third Party”) that, to the ABV-Radoff’s knowledge would result in such Third Party, together with its Affiliates and Associates (as such terms are defined in the Settlement Agreement), owning, controlling, or otherwise having beneficial ownership or other ownership interest in the aggregate of more than 4.9 % of the Company’s common stock outstanding at such time, or would increase the beneficial ownership or other ownership interest of any Third Party who, together with its Affiliates and Associates, has a beneficial ownership or other ownership interest in the aggregate of more than 4.9% of the shares Common Stock outstanding at such time (such restrictions collectively, the “Lock-Up Restriction”).
During the Standstill Period, ABV-Radoff agreed, subject to certain exceptions, other than in Rule 144 open market broker sale transactions where the identity of the purchaser is not known and in underwritten widely dispersed public offerings, not to sell, offer, or agree to sell directly or indirectly, through swap or hedging transactions or otherwise, the securities of the Company or any rights decoupled from the underlying securities of the Company held by ABV-Radoff to any person or entity other than the Company or an affiliate of ABV-Radoff (a “Third Party”) that, to the ABV-Radoff’s knowledge would result in such Third Party, together with its Affiliates and Associates (as such terms are defined in the Settlement Agreement), owning, controlling, or otherwise having beneficial ownership or other ownership interest in the aggregate of more than 4.9 % of the Company’s common stock outstanding at such time, or would increase the beneficial ownership or other ownership interest of any Third Party who, together with its 43 Table of Contents ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
Cost of Sales and Gross Margin Total gross margin decreased to 6.2% in FY 2024 compared to a gross margin of 16.4% during FY 2023, due primarily to an increase in overhead costs, a sharp increase in the cost of cocoa as a raw material as well as other inflationary pressures we were unable to capture through price increases, and a reduction in production volume.
Cost of Sales and Gross Margin Total gross margin decreased to 0.4% in FY 2025 compared to a gross margin of 6.2% during FY 2024, due primarily to an increase in overhead costs, a sharp increase in the cost of cocoa as a raw material as well as other inflationary pressures we were unable to capture through appropriate and timely price increases, in addition to a reduction in production volume.
Significant items subject to such estimates and assumptions include the estimate of the reserve for uncollectible accounts, revenue recognition, reserve for inventory obsolescence, and inputs for assessing goodwill impairment. The Company bases its estimates on historical experience and also on assumptions that the Company believes are reasonable.
Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the estimate of the reserve for uncollectible accounts, revenue recognition, reserve for inventory obsolescence, and inputs for assessing goodwill impairment. The Company bases its estimates on historical experience and also on assumptions that the Company believes are reasonable.
AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations The accompanying consolidated financial statements include the accounts of Rocky Mountain Chocolate Factory, Inc., a Delaware corporation, its wholly-owned subsidiaries, Rocky Mountain Chocolate Factory, Inc. (a Colorado corporation), Aspen Leaf Yogurt, LLC (“ALY”), U-Swirl International, Inc.
AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations The accompanying consolidated financial statements include the accounts of Rocky Mountain Chocolate Factory, Inc., a Delaware corporation, its wholly-owned subsidiaries, Rocky Mountain Chocolate Factory, Inc. (a Colorado corporation) and U-Swirl, Inc.
OTHER INFORMATION 64 Table of Contents During the three months ended February 29, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K under the Securities Act). ITE M 9C.
ITE M 9B. OTHER INFORMATION During the three months ended February 28, 2025 , none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K under the Securities Act). ITE M 9C.
Expense associated with trucking and warehouse leases is included in cost of sales on the consolidated statements of operations. The Company accounts for payments related to lease liabilities on a straight-line basis over the lease term.
The Company also leases trucking equipment and warehouse space in support of its production operations. Expense associated with trucking and warehouse leases is included in cost of sales on the consolidated statements of operations. The Company accounts for payments related to lease liabilities on a straight-line basis over the lease term.
These issuances were made to certain of the Company's executives. These restricted stock units were issued with an aggregate grant date fair value of $ 877,838 or $ 5.59 per share.
These issuances were made to certain of the Company's executives. These restricted stock units were issued with an aggregate grant date fair value of $ 0.9 million or $ 5.59 per share.
Litigation From time to time, the Company is involved in litigation relating to claims arising out of its operations. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated.
These contracts are not entered into for speculative purposes. Litigation From time to time, the Company is involved in litigation relating to claims arising out of its operations. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated.
The Company estimates that the potential future tax deductions of U-Swirl’s Federal net operating losses, limited by section 382, to be approximately $ 1,811,000 with a resulting deferred tax asset of approximately $ 445,000 . U-Swirl’s Federal net operating loss carryovers will expire at various dates beginning in 2026.
The Company estimates the potential future tax deductions of U-Swirl’s Federal net operating losses, limited by section 382, to be approximately $ 1.8 million with a resulting deferred tax asset of approximately $ 0.4 million. U-Swirl’s Federal net operating loss carryovers will expire at various dates beginning in 2026.
Liquidity and Capital Resources As of February 29, 2024, working capital was $1.5 million compared with $6.2 million as of February 28, 2023.
Liquidity and Capital Resources As of February 28, 2025, working capital was $2.4 million compared with $1.5 million as of February 29, 2024.
We are subject to seasonal fluctuations in sales because of key holidays and the location of our franchisees, which have traditionally been located in resort or tourist locations, and the nature of the products we sell, which are highly seasonal. Historically, the strongest sales of our products have occurred during key holidays and summer vacation seasons.
We are subject to seasonal fluctuations in sales because of key holidays and the location of our franchisees, which have traditionally been located in high traffic areas such as resorts or tourist locations, and the nature of the products we sell, which are seasonal. Historically, the strongest sales of our products have occurred during key holidays and summer vacation seasons.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm ( CohnReznick, LLP , New York, NY , PCAOB ID No. 596 ) 35 Report of Independent Registered Public Accounting Firm ( Plante & Moran, PLLC , Cleveland, Ohio , PCAOB No. 166 ) Consolidated Statements of Operations 37 Consolidated Balance Sheets 38 Consolidated Statements of Changes in Stockholders’ Equity 39 Consolidated Statements of Cash Flows 40 Notes to Consolidated Financial Statements 41 34 Table of Contents Report of Independent Regi stered Public Accounting Firm To the Stockholders and Board of Directors Rocky Mountain Chocolate Factory, Inc.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm ( CohnReznick, LLP , New York, NY , PCAOB ID No. 596 ) 33 Consolidated Statements of Operations 34 Consolidated Balance Sheets 35 Consolidated Statements of Changes in Stockholders’ Equity 36 Consolidated Statements of Cash Flows 37 Notes to Consolidated Financial Statements 38 32 Table of Contents Report of Independent Regi stered Public Accounting Firm To the Stockholders and Board of Directors Rocky Mountain Chocolate Factory, Inc.
Efforts to reverse the decline in same store pounds purchased from our production facility by franchised stores and to increase total Durango production depend on many factors, including new store openings, competition, the receptivity of our franchise system to our product introductions and promotional programs.
Efforts to increase same store pounds purchased from our production facility by franchised stores and to increase total Durango production depend on many factors, including new store openings, effective e-commerce initiatives, industry competition, the receptivity of our franchise system to our product introductions and promotional programs.
Inventories Inventories are stated at the lower of cost or net realizable value, which is adjusted for obsolete, damaged and excess inventories to the lower of cost or net realizable value based on actual differences.
AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Inventories Inventories are stated at the lower of cost or net realizable value, which is adjusted for obsolete, damaged and excess inventories to the lower of cost or net realizable value based on actual differences.
AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company’s financial instruments consist of cash and cash equivalents, trade and notes receivables, accounts payables, and its line of credit. The fair value of all instruments approximates the carrying value, because of the relatively short maturity of these instruments.
Fair Value of Financial Instruments The Company’s financial instruments consist of cash and cash equivalents, trade and notes receivables, accounts payables, line of credit, and its note payable. The fair value of all instruments approximates the carrying value, because of the relatively short maturity of these instruments.
The notes require monthly payments and bear interest rates ranging from 4.5 % to 7.0 %. The notes mature through December 2027 and all of the notes receivable are secured by the assets of the location.
The notes require monthly payments and bear interest rates at 7.0 %. The notes mature through December 2027 and all of the notes receivable are secured by the assets of the location.
Equity Compensation Plan Information The following table provides information with respect to the Company’s equity compensation plan, as of February 29, 2024, which consists solely of the Company’s 2007 Equity Incentive Plan: Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) Weighted- average exercise price of outstanding options, warrants and rights (1) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) (2) Equity compensation plans approved by the Company’s stockholders 178,656 $ 6.49 183,974 Equity compensation plans not approved by the Company’s stockholders -0- -0- -0- Total 178,656 $ 6.49 183,974 (1) Awards outstanding under the 2007 Equity Incentive Plan as of February 29, 2024 consist of 160,958 unvested restricted stock units and 17,698 outstanding stock options with a weighted-average exercise price of $6.49.
Equity Compensation Plan Information The following table provides information with respect to the Company’s equity compensation plan, as of February 28, 2025, which consists solely of the Company’s 2024 Equity Incentive Plan: Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) Weighted- average exercise price of outstanding options, warrants and rights (1) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) (2) Equity compensation plans approved by the Company’s stockholders 235,664 $ - 656,465 Equity compensation plans not approved by the Company’s stockholders -0- -0- -0- Total 235,664 $ - 656,465 (1) Awards outstanding under the 2024 Equity Incentive Plan as of February 28, 2025 consist of 235,664 unvested restricted stock units and no outstanding stock options.
Current Trends Affecting Our Business and Outlook As a result of recent macroeconomic inflationary trends and disruptions to the global supply chain, we have experienced and expect to continue experiencing higher raw material, labor, and freight costs.
Craig, one of the members of the Company's board of directors. 25 Table of Contents Current Trends Affecting Our Business and Outlook As a result of recent macroeconomic inflationary trends and disruptions to the global supply chain, we have experienced and expect to continue experiencing higher raw material, labor, and freight costs.
The Company does not have a material amount of financial assets or liabilities that are required under U.S. GAAP to be measured on a recurring basis at fair value. The Company is not a party to any material derivative financial instruments. The Company does not have a material amount of non-financial assets or non-financial liabilities that are required under U.S.
The Company does not have a material amount of financial assets or liabilities that are required under United States Generally Accepted Accounting Principles ("GAAP") to be measured on a recurring basis at fair value. The Company is not a party to any material derivative financial instruments.
Operating loss was $4.9 million in FY 2023 compared to an operating loss of $4.9 million in FY 2024. Loss from continuing operations decreased from a loss of $5.5 million in FY 2023 to a loss of $4.9 million in FY 2024.
Operating loss and loss from continuing operations was $4.9 million in FY 2024 compared to an operating loss of $5.9 million in FY 2025.
During FY 2024, investing activities used cash of $1.45 million, primarily due to the purchases of property and equipment of $3.0 million, partially offset by investing cash flow from discontinued operations (the result of the sale of U-Swirl assets) of $1.4 million.
In comparison, investing activities used cash of $1.5 million during FY 2024 primarily due to the purchases of property and equipment of $3.0 million, partially offset by investing cash flow from discontinued operations of $1.4 million.
GAAP, we provide certain non-GAAP measures, which present results on an adjusted basis. These are supplemental measures of performance that are not required by or presented in accordance with U.S. GAAP. Adjusted gross margin is a non-GAAP measure. Adjusted gross margin is equal to the sum of our total gross margin plus depreciation and amortization calculated in accordance with GAAP.
These are supplemental measures of performance that are not required by or presented in accordance with GAAP. Adjusted gross margin is a non-GAAP measure. Adjusted gross margin is equal to the sum of our total gross margin plus depreciation and amortization calculated in accordance with GAAP.
Franchise and Royalty Fees The Company recognizes franchise fees over the term of the associated franchise agreeme nt, which is generally a period of 10 years.
AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Franchise and Royalty Fees The Company recognizes franchise fees over the term of the associated franchise agreeme nt, which is generally a period of 10 years.
GAAP to be measured at fair value on a recurring basis. The Company has not elected to use the fair value measurement option, as permitted under U.S. GAAP, for any assets or liabilities for which fair value measurement is not presently required.
The Company does not have a material amount of non-financial assets or non-financial liabilities that are required under GAAP to be measured at fair value on a recurring basis. The Company has not elected to use the fair value measurement option, as permitted under GAAP, for any assets or liabilities for which fair value measurement is not presently required.
Impact of Inflation Inflationary factors such as increases in the costs of ingredients and labor directly affect the Company's operations. Most of the Company's leases provide for cost-of-living adjustments and require it to pay taxes, insurance and maintenance expenses, all of which are subject to inflation.
For FY 2026 the Company anticipates incurring substantially lower levels of capital expenditures. Impact of Inflation Inflationary factors such as increases in the costs of raw materials and labor directly affect the Company's operations. Most of the Company's leases provide for cost-of-living adjustments and require it to pay taxes, insurance and maintenance expenses, all of which are subject to inflation.
Royalties and marketing fees from franchised or licensed locations, which are based on a percent of sales are recognized at the time the sales occur.
Royalties and marketing fees from franchised or licensed locations, which are based on a percent of sales are recognized at the time the sales occur. 46 Table of Contents ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
During the years ended February 29 or 28, 2024, 2023 and 2022, the Company’s contribution was approximately $ 62,000 , $ 68,000 , and $ 67,000 , respectively, to the plan. NOTE 15 - OPERATING SEGMENTS The Company classifies its business interests into three reportable segments: Rocky Mountain Chocolate Factory, Inc.
During the years ended February 28 or 29, 2025 and 2024, the Company’s contribution to the plan was approximately $ 0.1 million and $ 0.1 million , respectively. NOTE 14 – OPERATING SEGMENTS The Company classifies its business interests into three reportable segments: Rocky Mountain Chocolate Factory, Inc.
In addition, we could experience additional lost sale opportunities 27 Table of Contents if our products are not available for purchase as a result of continued disruptions in our supply chain relating to an inability to obtain ingredients or packaging, labor challenges at our logistics providers or our production facility, or if we or our franchisees experience delays in stocking our products.
In addition, we could experience additional lost sale opportunities if our products are not available for purchase as a result of continued disruptions in our supply chain relating to an inability to obtain raw materials or packaging, or if we or our franchisees experience delays in stocking our products.
AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) On December 14, 2022 the Company entered into a Settlement Agreement and Release (the “Settlement Agreement”), by and among the Company, Bradley L. Radoff, an individual (“Radoff”), Andrew T.
Related Party Transactions On December 14, 2022 the Company entered into a Settlement Agreement and Release (the “Settlement Agreement”), by and among the Company, Bradley L. Radoff, an individual (“Radoff”), Andrew T.
The weighted average discount rate used for operating leases was 3.9 % , 3.4 % , and 3.1 % as of February 29 or 28, 2024, 2023 and 2022, respectively. The total estimated future minimum lease payments is $ 1.9 million as of February 29, 2024. 54 Table of Contents ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
The weighted average discount rate used for operating leases was 3.9 % and 3.9 % as of February 28, 2025 and February 29, 2024, respectively. The total estimated future minimum lease payments is $ 1.4 million as of February 28, 2025.
With the sale of U-Swirl, we continue to focus on our confectionery business to further enhance our competitive position and operating margin, simplify our business model, and deliver sustainable value to our stockholders.
With the sale of U-Swirl, we continue to focus on our confectionery business to further enhance our competitive position and operating margin, simplify our business model, and deliver sustainable value to our stockholders. On August 5, 2024, the Company entered into securities purchase agreements with Steven L.
GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
We also sell our confectionary products in select locations outside of our system of retail stores and license the use of our brand with certain consumer products. As of February 29, 2024, there was 2 Company-owned, 115 licensee-owned and 152 franchised Rocky Mountain Chocolate Factory stores operating in 36 states and the Philippines.
We may also sell our confectionery products in select locations outside of our system of retail stores and license the use of our brand with certain consumer products. As of February 28, 2025, there were 2 Company-owned, 117 licensee-owned and 141 franchised Rocky Mountain Chocolate Factory stores operating in 27 states and the Philippines.
The Company assesses these estimates on a regular basis; however, actual results could materially differ from these estimates. Cash Equivalents The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests.
Cash Equivalents The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests.
As of February 29, 2024, no Warrant Shares had vested and, subsequent to the termination by the Company of supplier agreement, the Company has no remaining material obligations under the Warrant. The Company determined that the grant date fair value of the Warrant was de minimis and did not record any amount in consideration of the warrants.
As of February 28, 2025, no Warrant Shares had vested and the Company has no remaining material obligations under the Warrant. The warrant expired during the year ended February 28, 2025. The Company determined that the grant date fair value of the Warrant was de minimis and did not record any amount in consideration of the warrants.
The Company drew down $1.25 million on its revolving line of credit during FY 2024 as discussed further below. The conditions above raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of these financial statements.
In comparison, financing activities provided cash of $1.3 million during FY 2024 resulting from the Company drawing down $1.3 million on its revolving line of credit. 29 Table of Contents The conditions above raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of these financial statements.
Basis of Presentation and Consolidation The accompanying consolidated financial statements, which include the accounts of the Company and its subsidiaries, have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). All intercompany balances and transactions have been eliminated in consolidation . Use of Estimates The preparation of financial statements in conformity with U.S.
Basis of Presentation and Consolidation The accompanying consolidated financial statements, which include the accounts of the Company and its subsidiaries, have been prepared in conformity with GAAP. All intercompany balances and transactions have been eliminated in consolidation .
Interpretations of and guidance surrounding income tax law and regulations change over time and may result in changes to the Company's judgments which can materially affect amounts recognized in the balance sheets and statements of operations.
Interpretations of and guidance surrounding income tax law and 54 Table of Contents ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) regulations change over time and may result in changes to the Company's judgments which can materially affect amounts recognized in the balance sheets and statements of operations.
The Company has received a waiver from the Lender as of the date of issuance of these financial statements. The Company in compliance, however, with all other aspects of the Credit Agreement. Refer to Note 1 for further information.
The Company has received a waiver from the Lender as of the date of issuance of these financial statements and is in compliance with all other aspects of the Credit Agreement.
During the year ended February 28, 2023, 960,677 shares of common stock that were issuable upon exercise of warrants, 137,294 shares of common stock that were issuable upon the vesting of restricted stock units, and 36,144 shares of common stock that were issuable upon the exercise of options were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive.
During the year ended February 28, 2025, 235,664 shares of common stock that were issuable upon the vesting of restricted stock units were excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive.
All of the Company’s financial instruments are classified as level 1 and level 2 assets within the fair value hierarchy. The Company does not have any financial instruments classified as level 3 assets.
The note payable approximates fair value due to the interest rates being consistent with market rates. All of the Company’s financial instruments are classified as level 1 and level 2 assets within the fair value hierarchy. The Company does not have any financial instruments classified as level 3 assets.
AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 2 - SUPPLEMENTAL CASH FLOW INFORMATION For the three years ended February 29 or 28: Cash paid (received) for: 2024 2023 2022 Interest $ 25,127 $ 25,000 $ 5,202 Income taxes ( 298,895 ) ( 547,763 ) 240,890 Supplemental disclosure of non-cash investing activities: Sale of assets in exchange for note receivable $ 1,000,000 $ - $ - NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS The Company recognizes revenue from contracts with its customers in accordance with Accounting Standards Codification® (“ASC”) 606, which provides that revenues are recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration expected to be received for those goods or services.
NOTE 2 – SUPPLEMENTAL CASH FLOW INFORMATION For the two years ended February 28 or 29: ($'s in thousands) Cash paid (received) for: 2025 2024 Interest $ 454 $ 25 Income taxes 88 ( 299 ) Supplemental disclosure of non-cash operating activities: Inventory accrued but not yet paid $ 297 $ - Supplemental disclosure of non-cash investing activities: Sale of assets in exchange for note receivable - 1,000 NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS The Company recognizes revenue from contracts with its customers in accordance with Accounting Standards Codification® (“ASC”) 606, which provides that revenues are recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration expected to be received for those goods or services.
Results of Continuing Operations Fiscal 2024 Compared To Fiscal 2023 Results Summary Basic loss per share decreased from a loss from continuing operations of $(0.88) per share in FY 2023 to a loss from continuing operations of $(0.77) per share in FY 2024. Revenues decreased by 8.2% from $30.4 million for FY 2023 to $28.0 million for FY 2024.
Results of Continuing Operations Fiscal 2025 Compared To Fiscal 2024 Results Summary Basic loss per share increased from a loss from continuing operations of $(0.77) per share in FY 2024 to a loss from continuing operations of $(0.86) per share in FY 2025. Revenues increased by 5.8% from $28.0 million for FY 2024 to $29.6 million for FY 2025.
Pursuant to the Asset Purchase Agreement, on the Closing Date, Purchaser paid to U-Swirl $ 2.75 million, consisting of approximately (i) $ 1.75 million in cash and (ii) $ 1.0 million evidenced by a three-year secured promissory note in the aggregate original principal amount of $ 1.0 million.
Pursuant to the Asset Purchase Agreement, on the closing date, Purchaser paid to U-Swirl $ 2.75 million, consisting of approximately (i) $ 1.75 million in cash and (ii) $ 1.0 million evidenced by a three-year 57 Table of Contents ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
Additionally, we use adjusted gross margin rather than gross margin to make incremental pricing decisions. Adjusted gross margin has limitations as analytical tools because they exclude the impact of depreciation and amortization expense and you should not consider it in isolation or as a substitute for any measure reported under GAAP.
Adjusted gross margin has limitations as analytical tools because they exclude the impact of depreciation and amortization expense and you should not consider it in isolation or as a substitute for any measure reported under GAAP. Our use of capital assets makes depreciation and amortization expense a necessary element of our costs and our ability to generate income.
The Company evaluates the collectability of its accounts and notes receivable and determines the appropriate allowance for expected credit losses based on a combination of factors, 42 Table of Contents ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) including the aging of the receivables and historical collection trends.
The Company evaluates the collectability of its accounts and notes receivable and determines the appropriate allowance for expected credit losses based on a combination of factors, including the aging of the receivables and historical collection trends.

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