Group 1 - PrimePay and Rocky Mountain Chocolate Factory (RMCF) have partnered to enhance franchise operations through technology, specifically PrimePay Payroll and ProfitKeeper, which will help franchisees streamline operations and gain insights [3] - The partnership will involve co-marketing activities such as email campaigns, conferences, events, and marketing materials to promote the program's advantages [2] - RMCF is a leading franchiser in the premium chocolate and confectionery retail sector, operating over 250 stores in the U.S. and several international locations, and is recognized in various franchise rankings [5] Group 2 - PrimePay has 38 years of experience in payroll and HR services, offering an all-in-one HCM platform designed to simplify operations and compliance for its customers [3] - RMCF has been producing premium chocolates and confectionery products since 1981 and is known as America's Chocolatier™ [5] - The common stock of RMCF is listed on the Nasdaq Global Market under the symbol "RMCF" [5]

Core Viewpoint - Rocky Mountain Chocolate Factory Inc. has acquired its Camarillo, California store from a franchisee, enhancing its presence in Southern California and aligning with its growth strategy [1][3]. Company Acquisition - The Camarillo store, operational since October 1995 and managed by Kim LaMonica since 1996, has a loyal customer base and is a community staple [2]. - This acquisition allows RMCF to integrate the store into its portfolio of Company-owned locations, aiming to enhance the customer experience with a redesigned store [2][3]. Strategic Importance - The Camarillo store is considered a cornerstone of RMCF's brand presence in Southern California, reflecting the appeal of its products in affluent communities [3]. - The acquisition supports RMCF's strategy to operate select stores for innovation, retail best practices, and profitability enhancement [3][4]. Growth Strategy - RMCF plans to leverage its Company-owned stores to launch new products, improve customer experiences, and achieve operational excellence, benefiting the broader franchise system [4]. - The company is focused on selectively expanding its retail footprint in Southern California and other attractive markets [4]. Company Overview - Rocky Mountain Chocolate Factory, Inc. is a leading franchiser of premium chocolate and confectionery retail stores, producing a wide range of products since 1981 [5]. - The company operates over 250 stores across the United States and has been recognized in Entrepreneur's Franchise 500 for 2025 and Franchise Times' Franchise 400 for 2024 [5].

Pricing Strategy - Rocky Mountain Chocolate Factory 正在通过动态定价来应对可可价格的剧烈波动 [1] - 公司每季度调整松露和巧克力椒盐脆饼的价格 [1]

Financial Data and Key Metrics Changes - The company reported a significant focus on transforming its operations and enhancing its market presence, although specific financial metrics were not disclosed during the meeting [16][23]. Business Line Data and Key Metrics Changes - The average unit volume sales currently stand at just over $600,000, indicating a target for growth through new store openings and franchisee support [17]. Market Data and Key Metrics Changes - The company is strategically expanding its store base in key markets to increase consumer awareness and access to its premium confectionery products [16][22]. Company Strategy and Development Direction - The company aims to enhance its store design, packaging, and online presence to attract both existing and new franchisees, with a vision to be the premier choice for franchisees in the premium confectionery retail sector [23]. - A comprehensive plan is in place to leverage refreshed assets and expand strategically, with a focus on improving profitability and building long-term value for shareholders [23]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic initiatives and the potential for growth, emphasizing the importance of franchisee support and market expansion [23]. - The company is committed to continuous improvement and delivering a memorable in-store experience, which is expected to stabilize and grow the business in the coming years [23]. Other Important Information - The company has revamped its e-commerce platform, which is set to go live later this month, aiming to enhance the user experience and drive store traffic through a two-step customer engagement process [21][22]. Q&A Session Summary Question: Were there any relevant stockholder questions? - No relevant stockholder questions were received during the meeting [13].

Core Viewpoint - Rocky Mountain Chocolate Factory, Inc. (RMCF) has shown mixed financial performance, with a notable shift in revenue sources and improved profitability metrics, indicating a strategic transformation within the company [1][2][3]. Financial Performance - For the first quarter of fiscal 2026, RMCF reported total revenues of $6.37 million, nearly unchanged from $6.41 million a year ago [2] - Product sales decreased by 10.6% to $4.7 million from $5.3 million, while franchise and royalty fees increased by 46.7% to $1.7 million from $1.1 million [2] - Gross profit from product and retail operations improved to $0.3 million from a loss of $0.3 million, driven by better pricing and production efficiencies [2] - Total costs and expenses fell by 18.9% to $6.5 million from $8 million, mainly due to reduced general and administrative costs [2] - The net loss narrowed to $0.3 million or $(0.04) per share from a loss of $1.7 million or $(0.26) per share last year [3] - EBITDA turned positive at $0.2 million from a loss of $1.4 million, marking the first positive EBITDA quarter in several years [3] Operational Initiatives and Strategic Execution - Management introduced a flat monthly freight fee for franchisees to encourage frequent ordering, replacing a previous structure that deterred regular restocking [4] - Pricing adjustments made in March and June have improved gross margins [4] - A new Point-of-Sale (POS) system has been adopted in over 100 stores, enhancing pricing transparency and enabling dynamic pricing strategies [4] - Enterprise Resource Planning and POS systems provide visibility into store-level operations, allowing for better assessment of manufacturing efficiency and franchisee ordering patterns [5] Management Commentary - Interim CEO Jeff Geygan noted a transition from restructuring to focused execution, highlighting alignment across teams and franchisees [6] - CFO Carrie Cass emphasized ongoing discipline in selling, general, and administrative costs as key to driving further EBITDA expansion [7] Outlook and Guidance - RMCF did not provide formal forward-looking financial guidance but expressed confidence in sustaining operational momentum through fiscal 2026 [8] - Management cited improvements in cost structure, data analytics, and franchisee performance as foundational to achieving profitability [8] Funding and Financial Position - The company has $0.9 million in cash and approximately $6 million in outstanding debt [9] - Discussions regarding capital raising are ongoing, but there are no immediate plans for dilutive financing [9] Other Developments - A new store opened in Charleston, SC, showcasing updated branding and layout, with construction planned for a flagship location in downtown Chicago [10] - A broad brand refresh is underway, including updated packaging and a redesigned e-commerce platform aimed at enhancing online conversions [11] - RMCF is pursuing store expansion with existing multi-unit franchisees and new entrants, aiming to increase the average number of stores per franchisee from 1.34 [12]

Financial Data and Key Metrics Changes - Total revenue for Q1 2026 was $6.4 million, essentially flat compared to the prior period [21] - Product sales decreased to $4.7 million from $5.3 million last year, while franchise and royalty fees increased to $1.7 million from $1.1 million [21] - Total product and retail gross profit improved to $300,000 from a negative $300,000, driven by pricing adjustments and operational efficiencies [22] - Costs and expenses decreased to $6.5 million from $8 million last year, primarily due to lower G&A costs [22] - Net loss was $300,000 or negative $0.04 per share, compared to a net loss of $1.7 million or negative $0.26 per share [22] - EBITDA for the quarter was $2 million, compared to a negative $1.4 million last year [22] Business Line Data and Key Metrics Changes - The company waived all freight charges for franchisees to drive volume and improve product freshness [7] - A flat monthly fee program for freight delivery was implemented to encourage more frequent store orders [7] - The adoption of the new POS system accelerated, enhancing visibility into operations and decision-making [9] Market Data and Key Metrics Changes - The company opened a new store in Charleston, South Carolina, featuring a refreshed brand identity [11] - Construction is expected to begin shortly on a new location in Downtown Chicago, targeting an opening ahead of the holiday season [11] Company Strategy and Development Direction - The company is focused on stabilizing the business and transitioning from a rebuilding mode to an execution mode [5] - A new consumer packaging and e-commerce platform are set to launch, aimed at enhancing brand presentation and online conversions [17] - The company is actively building a development pipeline for new units while seeking capable franchise operators [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the progress made in operational improvements and the potential for continued margin improvement [20] - The company believes it is in a better position to execute its strategy than in many years, with a focus on generating profit and returning to growth [20] Other Important Information - The company hired a new VP of operations with significant experience in manufacturing and logistics [10] - The refreshed website will include a section for new franchisees, making it more intuitive for potential operators [19] Q&A Session Summary Question: What early indicators are being watched to evaluate the impact of waived freight charges? - Management noted that order frequency has improved, encouraging franchisees to order more frequently [25] Question: What processes or decisions are expected to change with stabilized ERP data? - Management highlighted that the ERP data provides insights into manufacturing efficiencies and profitability, which will inform decision-making across departments [26] Question: How does the online strategy differ with the upcoming e-commerce relaunch? - Management emphasized the improved user interface and contemporary design of the new website, expecting positive results from the refresh [27][28] Question: What operational levers are expected to drive continued EBITDA expansion? - Management attributed positive EBITDA to improved pricing, SG&A discipline, and factory efficiencies, expecting these to continue [29] Question: What are the capital needs for expansion and improvements? - Management indicated that discussions regarding capital needs are ongoing, with no immediate plans to raise capital [35][36] Question: How is the growth strategy for new franchisees being developed? - Management stated that existing franchisees are prioritized for expansion, and new franchisees are being sourced through a network of referrals [43]

Financial Data and Key Metrics Changes - Total revenue for Q1 2026 was $6.4 million, essentially flat compared to the prior period [23] - Product sales decreased to $4.7 million from $5.3 million year-over-year, while franchise and royalty fees increased to $1.7 million from $1.1 million [23] - Total product and retail gross profit improved to $300,000 from a negative $300,000, driven by pricing adjustments and operational efficiencies [24] - Costs and expenses decreased to $6.5 million from $8 million year-over-year, primarily due to lower general and administrative costs [24] - Net loss was $300,000 or negative $0.04 per share, compared to a net loss of $1.7 million or negative $0.26 per share [24] - EBITDA for the quarter was $2 million, compared to a negative $1.4 million last year [24] Business Line Data and Key Metrics Changes - The company waived all freight charges for franchisees to drive volume and improve product freshness [8] - A flat monthly fee program for freight delivery was implemented to encourage more frequent store orders [8] - The adoption of the new POS system accelerated, enhancing visibility into operations and decision-making [11] Market Data and Key Metrics Changes - The company opened a new store in Charleston, South Carolina, featuring a refreshed brand identity [13] - Construction is expected to begin shortly on a new location in Downtown Chicago, targeting an opening ahead of the holiday season [13] Company Strategy and Development Direction - The company is focused on stabilizing the business and transitioning from a rebuilding mode to an execution mode [5][6] - A new consumer packaging and e-commerce platform are set to launch, aimed at enhancing brand presentation and online conversions [18] - The company is actively building a development pipeline for new units while seeking capable franchise operators [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the progress made and the discipline applied across the business [7] - The first quarter demonstrated foundational investments and operational improvements beginning to produce desired results, with expectations for continued growth throughout the year [22] - The company believes it is in a better position to execute its strategy than in many years, aiming for sustainable growth and long-term value creation [22] Other Important Information - The company hired a new VP of operations with significant experience in manufacturing and logistics [12] - The refreshed website will include a section for new franchisees, making it more intuitive for potential operators [21] Q&A Session Summary Question: What early indicators are being watched to evaluate the impact of the flat freight charge? - The company is monitoring order frequency, which has improved since waiving the fee, encouraging franchisees to order more frequently [28] Question: What processes or decisions are expected to change with the ERP data stabilization? - The ERP data provides insights into manufacturing efficiencies and profitability, which will inform decision-making across departments [29] Question: How does the online strategy differ with the e-commerce relaunch? - The new website features a contemporary user interface and is positioned as a core brand experience, with results expected to be reported in the future [30][31] Question: What operational levers are expected to drive continued EBITDA expansion? - Continued improvements in pricing, SG&A discipline, and factory efficiencies are anticipated to drive EBITDA growth [32] Question: What are the capital needs for expansion? - Currently, the company is not planning to raise capital but is in ongoing discussions with the board regarding future needs [39][40] Question: How is the growth strategy for new franchisees being developed? - The company is focusing on existing franchisees for expansion and employing business consultants to improve store performance [46][47]

Overview and Management Commentary [Management Commentary](index=1&type=section&id=Management%20Commentary) Interim CEO Jeff Geygan described Fiscal 2025 as the start of a "transformative era" for the company, initiating restructuring, cultural rebuilding, operational discipline, and system modernization - Fiscal 2025 marked the beginning of a major transformation focused on restructuring the business, rebuilding culture, restoring operational discipline, and modernizing core systems[2](index=2&type=chunk) - Key changes included bringing consumer packaging back in-house, implementing a new point-of-sale system, overhauling the e-commerce platform, and realigning product pricing[2](index=2&type=chunk) - With operational changes effective March 1, 2025, management believes the company has been stabilized and is now focused on disciplined, profitable growth for fiscal 2026[2](index=2&type=chunk) Operational Highlights and Strategic Initiatives [Operational and Franchise Network Improvements](index=1&type=section&id=Operational%20and%20Franchise%20Network%20Improvements) The company resolved key operational challenges, strengthened its franchise network by retiring co-packing, exiting unprofitable markets, and implementing a new pricing model - Retired the company's co-packing operations in Salt Lake City in February 2025[5](index=5&type=chunk) - Adjusted or exited unprofitable Specialty Market relationships during fiscal 2025[5](index=5&type=chunk) - A new franchise product pricing model was implemented on March 1, 2025, to address systemic margin pressures for franchisees[5](index=5&type=chunk) [Brand Modernization and Digital Enhancements](index=1&type=section&id=Brand%20Modernization%20and%20Digital%20Enhancements) The company is advancing brand modernization with new store designs, a Charleston opening, a Chicago flagship, systemwide signage, and a redesigned website launching July 2025 - A new store opened in Charleston, South Carolina on June 3, 2025, featuring the refreshed branding and design[5](index=5&type=chunk) - Construction is planned for a flagship location in downtown Chicago, with an expected opening before the holiday season[5](index=5&type=chunk) - A redesigned website is expected to launch in July 2025, followed by updated packaging aligned with the new brand identity in early August 2025[7](index=7&type=chunk) Financial Performance [Fiscal Fourth Quarter 2025 Financial Results](index=2&type=section&id=Fiscal%20Fourth%20Quarter%202025%20Financial%20Results) Q4 FY2025 revenue increased to $8.9 million, but gross loss widened to $(0.8) million due to higher raw material costs, leading to a net loss of $(2.9) million Q4 FY2025 vs. Q4 FY2024 Financial Highlights (in millions, except per share data) | Metric | Q4 FY2025 | Q4 FY2024 | | :--- | :--- | :--- | | **Total Revenue** | $8.9 | $7.3 | | **Total Product and Retail Gross Profit** | $(0.8) | $0.1 | | **Total Costs and Expenses** | $11.6 | $8.8 | | **Net Loss from Continuing Operations** | $(2.9) | $(1.6) | | **Loss per Share from Continuing Operations** | $(0.37) | $(0.25) | - The decrease in gross profit was primarily due to higher raw material costs[13](index=13&type=chunk) - The increase in total costs and expenses was mainly attributed to investments in marketing and administrative infrastructure related to the brand refresh and prototype store rollout[13](index=13&type=chunk) [Fiscal Year 2025 Financial Results](index=3&type=section&id=Fiscal%20Year%202025%20Financial%20Results) FY2025 revenue grew to $29.6 million, but gross profit significantly declined to $0.1 million due to inflationary pressures, resulting in an expanded net loss of $(6.1) million Fiscal Year 2025 vs. 2024 Financial Highlights (in millions, except per share data) | Metric | FY2025 | FY2024 | | :--- | :--- | :--- | | **Total Revenue** | $29.6 | $28.0 | | **Total Product and Retail Gross Profit** | $0.1 | $1.4 | | **Total Costs and Expenses** | $35.5 | $32.9 | | **Net Loss from Continuing Operations** | $(6.1) | $(4.9) | | **Loss per Share from Continuing Operations** | $(0.86) | $(0.77) | - The decrease in annual gross profit was primarily due to a sharp increase in the cost of cocoa, other inflationary pressures, higher overhead costs, and reduced production volume[13](index=13&type=chunk) Financial Statements [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of February 28, 2025, total assets increased to $21.2 million, but total liabilities significantly rose to $14.2 million, decreasing stockholders' equity to $7.0 million Selected Balance Sheet Data (in thousands) | Account | Feb 28, 2025 | Feb 29, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $720 | $2,082 | | Total Assets | $21,175 | $20,577 | | Total Liabilities | $14,200 | $9,941 | | Total stockholders' equity | $6,975 | $10,636 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) FY2025 total revenues increased to $29.6 million, but rising costs led to a wider loss from operations of $(5.9) million and a net loss of $(6.1) million Fiscal Year Statement of Operations Summary (in thousands) | Account | Year Ended Feb 28, 2025 | Year Ended Feb 28, 2024 | | :--- | :--- | :--- | | Total Revenue | $29,579 | $27,950 | | Total costs and expenses | $35,521 | $32,852 | | Loss from Operations | $(5,942) | $(4,902) | | Loss from Continuing Operations | $(6,122) | $(4,875) | | Net Loss | $(6,122) | $(4,172) | Conference Call and Company Information [Conference Call Information](index=3&type=section&id=Conference%20Call%20Information) The company will host a conference call on June 18, 2025, at 9:00 a.m. Eastern time to discuss its financial results - A conference call to discuss financial results is scheduled for June 18, 2025, at 9:00 a.m. Eastern time[9](index=9&type=chunk) [About Rocky Mountain Chocolate Factory, Inc.](index=3&type=section&id=About%20Rocky%20Mountain%20Chocolate%20Factory%2C%20Inc.) Rocky Mountain Chocolate Factory, Inc. is a leading franchiser of premium chocolate and confectionery retail stores, operating nearly 260 locations - The company is a leading franchiser of premium chocolate stores, operating nearly 260 locations across the United States and internationally[11](index=11&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section provides a standard disclaimer for forward-looking statements, highlighting inherent risks and uncertainties that could cause actual results to differ - The press release includes forward-looking statements that are subject to various risks and uncertainties which could cause actual results to differ materially from expectations[12](index=12&type=chunk) - Key risks include inflationary impacts, changes in the business environment, seasonality, raw material costs, and competition[14](index=14&type=chunk)

[Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This Quarterly Report contains forward-looking statements, which involve various risks and uncertainties, identifiable by specific terminology - This Quarterly Report contains forward-looking statements, which involve various risks and uncertainties, identifiable by words such as 'will,' 'intend,' 'believe,' 'expect,' and 'anticipate'[8](index=8&type=chunk) - The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law[8](index=8&type=chunk) - Key risks and uncertainties include inflationary impacts, legal proceedings, changes in the confectionery business environment, seasonality, consumer interest, costs and availability of raw materials, and competition[8](index=8&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This section presents the unaudited condensed consolidated financial statements for Rocky Mountain Chocolate Factory, Inc. and its subsidiaries, including statements of operations, balance sheets, cash flows, and changes in stockholders' equity, along with detailed notes explaining significant accounting policies and specific financial line items [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the company's unaudited condensed consolidated statements of operations, detailing revenues, costs, expenses, and net loss for the period | Metric | Three Months Ended May 31, 2025 (in thousands) | Three Months Ended May 31, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Total Revenue | $6,373 | $6,407 | $(34) | (0.5)% | | Total Costs and Expenses | $6,518 | $8,037 | $(1,519) | (18.9)% | | Loss from Operations | $(145) | $(1,630) | $1,485 | (91.1)% | | Net Loss | $(324) | $(1,658) | $1,334 | (80.5)% | | Basic Loss per Common Share | $(0.04) | $(0.26) | $0.22 | (84.6)% | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's unaudited condensed consolidated balance sheets, outlining assets, liabilities, and stockholders' equity at specific dates | Metric | May 31, 2025 (in thousands) | February 28, 2025 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------------- | :------------------------------- | :-------------------- | :------- | | Total Assets | $20,096 | $21,175 | $(1,079) | (5.1)% | | Total Liabilities | $13,364 | $14,200 | $(836) | (5.9)% | | Total Stockholders' Equity | $6,732 | $6,975 | $(243) | (3.5)% | | Cash and cash equivalents | $893 | $720 | $173 | 24.0% | | Accounts receivable, less allowance for credit losses | $2,327 | $3,405 | $(1,078) | (31.7)% | | Inventories | $4,633 | $4,630 | $3 | 0.1% | | Accounts payable | $4,172 | $4,816 | $(644) | (13.4)% | [Condensed Consolidated Statement of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) This section presents the company's unaudited condensed consolidated statement of cash flows, categorizing cash activities into operating, investing, and financing | Metric | Three Months Ended May 31, 2025 (in thousands) | Three Months Ended May 31, 2024 (in thousands) | Change (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Net Cash Provided by (Used in) Operating Activities | $350 | $(2,157) | $2,507 | | Net Cash Used in Investing Activities | $(177) | $(38) | $(139) | | Net Cash Provided by Financing Activities | $- | $750 | $(750) | | Net Increase (Decrease) in Cash and Cash Equivalents | $173 | $(1,445) | $1,618 | | Cash and Cash Equivalents, End of Period | $893 | $637 | $256 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This section presents the company's unaudited condensed consolidated statements of changes in stockholders' equity, detailing movements in capital accounts | Metric (in thousands) | May 31, 2025 | February 28, 2025 | Change (in thousands) | | :-------------------------------- | :----------- | :---------------- | :-------------------- | | Total Stockholders' Equity | $6,732 | $6,975 | $(243) | | Accumulated Deficit | $(5,712) | $(5,388) | $(324) | | Equity compensation, restricted stock units, net of shares withheld | $81 | $- | $81 | | Metric (in thousands) | May 31, 2024 | February 29, 2024 | Change (in thousands) | | :-------------------------------- | :----------- | :---------------- | :-------------------- | | Total Stockholders' Equity | $9,018 | $10,636 | $(1,618) | | Retained Earnings / (Accumulated Deficit) | $(924) | $734 | $(1,658) | | Equity compensation, restricted stock units, net of shares withheld | $40 | $- | $40 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to the condensed consolidated financial statements, explaining significant accounting policies and specific financial line items [NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=NOTE%201%20-%20NATURE%20OF%20OPERATIONS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes the company's business, revenue sources, store network, and addresses going concern considerations - Rocky Mountain Chocolate Factory, Inc. is an international franchisor, confectionery producer, and retail operator, founded in 1981 and headquartered in Durango, Colorado[24](index=24&type=chunk) - Revenues are primarily derived from sales of confectionery products to franchisees, initial franchise fees and royalties, sales at Company-owned stores, and marketing fees[25](index=25&type=chunk) | Store Type | Open at Feb 28, 2025 | Opened | Closed | Sold | Open at May 31, 2025 | | :----------------------------- | :------------------- | :----- | :----- | :--- | :------------------- | | Company-owned stores | 2 | - | - | - | 2 | | Franchise stores - Domestic | 138 | 1 | (3) | - | 136 | | International license stores | 3 | - | - | - | 3 | | Cold Stone Creamery - co-branded | 107 | - | (3) | - | 104 | | SWRL - co-branded | 10 | - | - | - | 10 | | **Total** | **260** | **1** | **(6)** | **-** | **255** | - The company incurred a net loss of **$0.3 million** and was not in compliance with a debt covenant as of May 31, 2025, raising substantial doubt about its ability to continue as a going concern, though a waiver was received[29](index=29&type=chunk) - Management plans to reduce overhead, improve manufacturing efficiencies, increase profits and gross margins, and boost sales through holiday products and e-commerce to address going concern issues[30](index=30&type=chunk) [NOTE 2 - SUPPLEMENTAL CASH FLOW INFORMATION](index=11&type=section&id=NOTE%202%20-%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) This note provides additional details on cash paid for interest and income taxes, along with non-cash investing and financing activities | Cash Paid (Received) For (in thousands) | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | | :------------------------------------- | :------------------------------ | :------------------------------ | | Interest | $188 | $35 | | Income taxes | $- | $6 | | Supplemental Non-Cash Activities (in thousands) | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | | :---------------------------------------------- | :------------------------------ | :------------------------------ | | Accounts receivable exchanged for notes receivable | $112 | $- | | Inventory accrued but not yet paid | $219 | $- | [NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS](index=11&type=section&id=NOTE%203%20%E2%80%93%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS) This note outlines the company's policies for recognizing revenue from customer contracts, including franchise fees and gift card breakage - Initial franchise fees and license fees are recognized as revenue proportionately over the term of the franchise agreement, generally **10 years**, as initial services are not distinct from continuing rights[39](index=39&type=chunk)[40](index=40&type=chunk)[42](index=42&type=chunk) | Contract Liabilities (in thousands) | May 31, 2025 | May 31, 2024 | | :---------------------------------- | :----------- | :----------- | | Beginning of period | $743 | $829 | | Revenue recognized | $(36) | $(70) | | Contract fees received | $11 | $53 | | End of period | $718 | $812 | - No gift card breakage was recognized during the three months ended May 31, 2025, or 2024, as recognition is based on historical redemption patterns or when redemption likelihood is remote[43](index=43&type=chunk) [NOTE 4 – DISAGGREGATION OF REVENUE](index=13&type=section&id=NOTE%204%20%E2%80%93%20DISAGGREGATION%20OF%20REVENUE) This note presents a detailed breakdown of the company's total revenues by segment and revenue type | Revenue Type (in thousands) | Franchising (2025) | Manufacturing (2025) | Retail (2025) | Total (2025) | Franchising (2024) | Manufacturing (2024) | Retail (2024) | Total (2024) | | :-------------------------- | :----------------- | :------------------- | :------------ | :----------- | :----------------- | :------------------- | :------------ | :----------- | | Franchise fees | $36 | $- | $- | $36 | $70 | $- | $- | $70 | | Durango Product sales | $- | $4,399 | $- | $4,399 | $- | $4,957 | $- | $4,957 | | Retail sales | $- | $- | $319 | $319 | $- | $- | $322 | $322 | | Royalty and marketing fees | $1,619 | $- | $- | $1,619 | $1,058 | $- | $- | $1,058 | | **Total Revenues** | **$1,655** | **$4,399** | **$319** | **$6,373** | **$1,128** | **$4,957** | **$322** | **$6,407** | [NOTE 5 - INVENTORIES](index=14&type=section&id=NOTE%205%20-%20INVENTORIES) This note details the composition of the company's inventories, including ingredients, finished goods, and reserves | Inventory Component (in thousands) | May 31, 2025 | February 28, 2025 | | :--------------------------------- | :----------- | :---------------- | | Ingredients and supplies | $2,791 | $2,864 | | Finished candy | $2,015 | $2,277 | | Reserve for slow moving inventory | $(173) | $(511) | | **Total inventories** | **$4,633** | **$4,630** | [NOTE 6 – PROPERTY AND EQUIPMENT, NET](index=14&type=section&id=NOTE%206%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT%2C%20NET) This note provides a breakdown of the company's property and equipment, net of accumulated depreciation, and related depreciation expense | Property and Equipment (in thousands) | May 31, 2025 | February 28, 2025 | | :------------------------------------ | :----------- | :---------------- | | Land | $124 | $124 | | Building | $5,468 | $5,415 | | Machinery and equipment | $15,019 | $14,904 | | Furniture and fixtures | $519 | $519 | | Leasehold improvements | $136 | $136 | | Transportation equipment | $326 | $326 | | Less accumulated depreciation | $(12,354) | $(12,015) | | **Property and equipment, net** | **$9,238** | **$9,409** | - Depreciation expense related to property and equipment totaled **$0.3 million** during the three months ended May 31, 2025, an increase from **$0.2 million** in the prior year[51](index=51&type=chunk) [NOTE 7 – GOODWILL AND INTANGIBLE ASSETS](index=15&type=section&id=NOTE%207%20%E2%80%93%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note details the company's goodwill and intangible assets, including their gross carrying values and accumulated amortization | Asset Type (in thousands) | May 31, 2025 Gross Carrying Value | May 31, 2025 Accumulated Amortization | February 28, 2025 Gross Carrying Value | February 28, 2025 Accumulated Amortization | | :------------------------ | :-------------------------------- | :------------------------------------ | :------------------------------------- | :----------------------------------------- | | Intangible assets subject to amortization: | | | | | | Store design | $395 | $(300) | $395 | $(295) | | Trademark/Non-competition agreements | $259 | $(151) | $259 | $(149) | | Goodwill: | | | | | | Retail | $362 | $- | $362 | $- | | Franchising | $97 | $- | $97 | $- | | Manufacturing | $97 | $- | $97 | $- | | Trademark | $20 | $- | $20 | $- | | **Total Goodwill and Intangible Assets** | **$1,230** | **$(451)** | **$1,230** | **$(444)** | - Amortization expense related to intangible assets totaled approximately **$7 thousand** during both the three months ended May 31, 2025, and 2024[52](index=52&type=chunk) [NOTE 8 – NOTE PAYABLE](index=16&type=section&id=NOTE%208%20%E2%80%93%20NOTE%20PAYABLE) This note describes the company's credit agreement, note payable terms, collateral, and compliance with debt covenants - The company entered into a credit agreement with RMC Credit Facility, LLC, a related party, for a **$6.0 million** note payable maturing on **September 30, 2027**, with interest accruing at **12%** per annum[55](index=55&type=chunk) - The Credit Agreement is collateralized by the company's Durango real estate property, related inventory and property, plant and equipment, accounts receivable, and cash accounts[55](index=55&type=chunk) - As of May 31, 2025, the company was not in compliance with the maximum liabilities to tangible net worth covenant (**2.0:1.0**) but received a waiver from the Lender[57](index=57&type=chunk) [NOTE 9 – COMMON STOCK](index=16&type=section&id=NOTE%209%20%E2%80%93%20COMMON%20STOCK) This note outlines the company's equity incentive plan, stock awards, and stock-based compensation expense - The 2024 Equity Incentive Plan authorizes a total of **1,031,940 shares** for stock awards, with **645,374 shares** available for issuance as of May 31, 2025[58](index=58&type=chunk) | Metric (in thousands) | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | | Stock-based compensation expense | $81 | $40 | - Total unrecognized stock-based compensation expense for non-vested restricted stock units was approximately **$0.4 million**, expected to be recognized over the next **1.19 years**[61](index=61&type=chunk) [NOTE 10 - EARNINGS PER SHARE](index=17&type=section&id=NOTE%2010%20-%20EARNINGS%20PER%20SHARE) This note explains the calculation of basic and diluted earnings per share and the treatment of anti-dilutive securities - Basic earnings per share is calculated using the weighted-average number of common shares outstanding, while diluted earnings per share reflects potential dilution from restricted stock units[63](index=63&type=chunk) - During the three months ended May 31, 2025, **204,445 shares** issuable upon vesting of restricted stock units were excluded from diluted EPS computation because their effect would have been anti-dilutive[64](index=64&type=chunk) [NOTE 11 – LEASING ARRANGEMENTS](index=17&type=section&id=NOTE%2011%20%E2%80%93%20LEASING%20ARRANGEMENTS) This note details the company's operating lease arrangements, lease expenses, and future lease liability maturities - The company conducts its retail operations and supports production through non-cancelable operating leases for facilities, trucking equipment, and warehouse space[65](index=65&type=chunk)[68](index=68&type=chunk) - Lease expense recognized in the consolidated statements of operations was **$0.1 million** for both the three months ended May 31, 2025, and 2024[68](index=68&type=chunk) | Lease Liabilities Maturities (in thousands) | Amount | | :---------------------------------------- | :----- | | FYE 26 | $369 | | FYE 27 | $287 | | FYE 28 | $137 | | FYE 29 | $105 | | FYE 30 | $51 | | Thereafter | $304 | | Total | $1,253 | | Less: Imputed interest | $(113) | | Present value of lease liabilities | $1,140 | - The weighted average lease term at May 31, 2025, was **5.65 years**, and the weighted average discount rate used for operating leases was **3.9%**[69](index=69&type=chunk) [NOTE 12 – COMMITMENTS AND CONTINGENCIES](index=18&type=section&id=NOTE%2012%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note discusses the company's purchase commitments for raw materials and involvement in legal disputes - The company frequently enters into **6-12 month** purchase contracts for chocolate and certain nuts at fixed prices, designated as normal under the normal purchase and sale exception for derivatives[71](index=71&type=chunk)[73](index=73&type=chunk) - The company is involved in the early stages of a legal dispute regarding the fulfillment of an agreement to sell franchise rights and intangible assets in connection with the sale of U-Swirl, but does not expect a material impact[74](index=74&type=chunk) [NOTE 13 - OPERATING SEGMENTS](index=20&type=section&id=NOTE%2013%20-%20OPERATING%20SEGMENTS) This note provides financial information for the company's reportable segments: Franchising, Manufacturing, and Retail Stores - The company classifies its business interests into three reportable segments: Franchising, Manufacturing, and Retail Stores, along with an Unallocated category, for performance evaluation and resource allocation[77](index=77&type=chunk) | Segment (in thousands) | Total Revenues (2025) | Segment Profit (Loss) (2025) | Total Assets (2025) | Total Revenues (2024) | Segment Profit (Loss) (2024) | Total Assets (2024) | | :--------------------- | :-------------------- | :--------------------------- | :------------------ | :-------------------- | :--------------------------- | :------------------ | | Franchising | $1,655 | $839 | $1,936 | $1,128 | $144 | $989 | | Manufacturing | $4,399 | $92 | $13,947 | $4,957 | $(508) | $12,947 | | Retail | $319 | $25 | $776 | $322 | $(1) | $505 | | Unallocated | $- | $(1,101) | $3,437 | $- | $(1,265) | $4,579 | | **Consolidated Net Loss** | **$6,373** | **$(324)** | **$20,096** | **$6,407** | **$(1,658)** | **$19,020** | - The Manufacturing segment's profit improved significantly from a loss of **$(508) thousand** in 2024 to a profit of **$92 thousand** in 2025[77](index=77&type=chunk)[79](index=79&type=chunk) [NOTE 14 - INCOME TAXES](index=21&type=section&id=NOTE%2014%20-%20INCOME%20TAXES) This note describes the company's accounting for income taxes, including deferred taxes and valuation allowances - The company provides for income taxes using the liability method, recognizing deferred income taxes based on temporary differences between financial reporting and income tax bases of assets and liabilities[80](index=80&type=chunk) - A valuation allowance to reduce the carrying amount of deferred income tax assets is established when it is more likely than not that some portion or all of the tax benefit will not be realized[81](index=81&type=chunk) - 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[84](index=84&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and operational results for the three months ended May 31, 2025, compared to the prior year, highlighting key trends, revenue and expense drivers, liquidity, and significant accounting policies [Overview](index=24&type=section&id=Overview) This section provides a high-level description of Rocky Mountain Chocolate Factory, Inc.'s business, store operations, and key financial arrangements - Rocky Mountain Chocolate Factory, Inc. is an international franchisor, confectionery producer, and retail operator, founded in 1981 and headquartered in Durango, Colorado[88](index=88&type=chunk) - As of May 31, 2025, the company operated **255 stores** (**2** Company-owned, **114** licensee-owned, and **139** franchised) across **34 states** and the Philippines[88](index=88&type=chunk) - The company has a **$6.0 million** credit agreement with RMC Credit Facility, LLC, a related party, with the note maturing on **September 30, 2027**[89](index=89&type=chunk) [Current Trends Affecting Our Business and Outlook](index=24&type=section&id=Current%20Trends%20Affecting%20Our%20Business%20and%20Outlook) This section discusses macroeconomic factors, seasonal business fluctuations, and strategic drivers influencing the company's future performance - Macroeconomic inflationary trends and global supply chain disruptions have led to higher raw material, labor, and freight costs, contributing to lower factory, retail, and e-commerce sales[90](index=90&type=chunk) - The business is subject to seasonal fluctuations, with the strongest sales historically occurring during key holidays and summer vacation seasons[91](index=91&type=chunk) - Continued growth in earnings depends on increasing sales of premium chocolate products from the Durango facility, franchisee support for customer visits and transaction values, ongoing e-commerce revenue growth, and new franchise store growth[92](index=92&type=chunk) [Results of Continuing Operations](index=25&type=section&id=Results%20of%20Continuing%20Operations) This section analyzes the company's financial performance for the three months ended May 31, 2025, compared to the prior year, detailing revenue and expense changes [Three Months Ended May 31, 2025 Compared To the Three Months Ended May 31, 2024](index=25&type=section&id=Three%20Months%20Ended%20May%2031%2C%202025%20Compared%20To%20the%20Three%20Months%20Ended%20May%2031%2C%202024) This section provides a comparative analysis of the company's financial results for the three months ended May 31, 2025, against the same period in the prior year [Results Summary](index=25&type=section&id=Results%20Summary) This summary highlights key financial outcomes, including basic loss per share, revenues, operating loss, and net loss for the period | Metric | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | Change | % Change | | :-------------------------- | :------------------------------ | :------------------------------ | :----- | :------- | | Basic loss per share | $(0.04) | $(0.26) | $0.22 | (84.6)% | | Revenues | $6,373 | $6,407 | $(34) | (0.5)% | | Operating loss | $(145) | $(1,630) | $1,485 | (91.1)% | | Net loss | $(324) | $(1,658) | $1,334 | (80.5)% | [REVENUES](index=25&type=section&id=REVENUES) This section details the company's revenue streams, including product sales, franchise fees, and royalty and marketing fees, and their period-over-period changes | Revenue Type (in thousands) | May 31, 2025 | May 31, 2024 | Change | % Change | | :-------------------------- | :----------- | :----------- | :----- | :------- | | Durango product and retail sales | $4,718 | $5,279 | $(561) | (10.6)% | | Franchise fees | $36 | $70 | $(34) | (48.6)% | | Royalty and marketing fees | $1,619 | $1,058 | $561 | 53.0% | | **Total** | **$6,373** | **$6,407** | **$(34)** | **(0.5)%** | - The decrease in Durango product and retail sales was primarily due to the non-renewal of an unprofitable contract with a specialty market customer[97](index=97&type=chunk) - Royalty and marketing fees increased by **$0.6 million**, driven by higher royalties on sales revenue generated from products made in the store, while franchise fee revenue decreased due to fewer store openings[100](index=100&type=chunk) [COSTS AND EXPENSES](index=26&type=section&id=COSTS%20AND%20EXPENSES) This section analyzes the company's various cost and expense categories, including cost of sales, franchise costs, and general and administrative expenses | Expense Category (in thousands) | May 31, 2025 | May 31, 2024 | Change | % Change | | :------------------------------ | :----------- | :----------- | :----- | :------- | | Total cost of sales | $4,392 | $5,586 | $(1,194) | (21.4)% | | Franchise costs | $595 | $541 | $54 | 10.0% | | Sales and marketing | $206 | $430 | $(224) | (52.1)% | | General and administrative | $1,001 | $1,239 | $(238) | (19.2)% | | Retail operating | $206 | $199 | $7 | 3.5% | | Depreciation and amortization (excl. cost of sales) | $118 | $42 | $76 | 181.0% | | **Total** | **$6,518** | **$8,037** | **$(1,519)** | **(18.9)%** | | Gross Margin (in thousands) | May 31, 2025 | May 31, 2024 | Change | % Change | | :-------------------------- | :----------- | :----------- | :----- | :------- | | Total gross margin | $326 | $(307) | $633 | 206.2% | | Gross margin percentage | 6.9% | (5.8)% | 13% | 218.8% | - The increase in gross margin percentage was primarily due to the cancellation of certain unprofitable contracts and adjusted sales prices as of **March 1, 2025**, to achieve targeted margins[103](index=103&type=chunk) - Sales and marketing costs decreased significantly due to cost-cutting measures and a re-evaluation of marketing strategies[105](index=105&type=chunk) - General and administrative costs decreased primarily due to various cost-cutting measures[106](index=106&type=chunk) - Depreciation and amortization (exclusive of amounts in cost of sales) increased by **181.0%** due to investments in computer software and production equipment[108](index=108&type=chunk) [Non-GAAP Measures](index=26&type=section&id=Non-GAAP%20Measures) This section defines and presents non-GAAP financial measures, such as adjusted gross margin, used to supplement GAAP reporting - Adjusted gross margin is a non-GAAP measure, calculated as total gross margin plus depreciation and amortization, used to supplement GAAP gross margin for understanding operating performance and cash generation[102](index=102&type=chunk) | Adjusted Gross Margin (non-GAAP, in thousands) | May 31, 2025 | May 31, 2024 | Change | % Change | | :--------------------------------------------- | :----------- | :----------- | :----- | :------- | | Total Adjusted Gross Margin | $554 | $(111) | $665 | 599.1% | | Total Adjusted Gross Margin percentage | 11.7% | (2.1)% | 14% | 658.4% | [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term and long-term obligations, focusing on working capital, cash flows, and debt covenant compliance | Metric (in millions) | May 31, 2025 | February 28, 2025 | Change | | :------------------- | :----------- | :---------------- | :----- | | Working capital | $2.2 | $2.4 | $(0.2) | | Cash and cash equivalents | $0.9 | $0.7 | $0.2 | - Operating activities provided **$0.4 million** in cash for the three months ended May 31, 2025, a significant improvement from using **$2.2 million** in the prior year[112](index=112&type=chunk) - The company's net loss and non-compliance with a debt covenant (liabilities to tangible net worth) raise substantial doubt about its ability to continue as a going concern, although a waiver was received from the Lender[115](index=115&type=chunk)[118](index=118&type=chunk) - The company continues to explore additional means of strengthening its liquidity position and ensuring compliance with debt financing covenants, which may include obtaining waivers from lenders[119](index=119&type=chunk) [Significant Accounting Policies](index=31&type=section&id=Significant%20Accounting%20Policies) This section reiterates that the preparation of financial statements involves management judgments and estimates, with no material changes to policies - The preparation of consolidated financial statements requires management to make judgments, assumptions, and estimates in conformity with GAAP[120](index=120&type=chunk) - There have been no material changes to the company's significant accounting policies disclosed in its Annual Report on Form 10-K for the fiscal year ended February 28, 2025[120](index=120&type=chunk) [Off Balance Sheet Arrangements](index=31&type=section&id=Off%20Balance%20Sheet%20Arrangements) This section confirms the absence of material off-balance sheet arrangements and outlines existing purchase obligations - As of May 31, 2025, the company had no material off-balance sheet arrangements or obligations[121](index=121&type=chunk) - The company had approximately **$2.6 million** in purchase obligations, primarily for future commodity purchases for manufacturing[121](index=121&type=chunk) [Impact of Inflation](index=31&type=section&id=Impact%20of%20Inflation) This section discusses how inflationary pressures on raw materials, labor, and lease expenses affect the company's operations and pricing strategies - Inflationary factors, such as increases in the costs of raw materials, labor, and lease-related expenses, directly affect the company's operations[122](index=122&type=chunk) - Most of the company's leases provide for cost-of-living adjustments and require payment of taxes, insurance, and maintenance expenses, all subject to inflation[122](index=122&type=chunk) - There is no assurance that the company will be able to pass on increased costs to its customers[122](index=122&type=chunk) [Seasonality](index=31&type=section&id=Seasonality) This section explains the seasonal nature of the company's sales and its impact on quarterly financial results - The company is subject to seasonal fluctuations in sales, with the strongest sales historically occurring during key holidays and the summer vacation season[124](index=124&type=chunk) - Quarterly results are affected by the timing of new store openings and sales of new franchise locations, meaning results for any quarter are not necessarily indicative of a full fiscal year[124](index=124&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Rocky Mountain Chocolate Factory, Inc. is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, the registrant is not required to provide the information regarding quantitative and qualitative disclosures about market risk[125](index=125&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, under the supervision of the Interim CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of May 31, 2025. There were no material changes in internal control over financial reporting during the quarter - Management, under the supervision and with the participation of the Interim Chief Executive Officer and Chief Financial Officer, concluded that the company's disclosure controls and procedures were effective as of **May 31, 2025**[128](index=128&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended May 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[129](index=129&type=chunk) [PART II. OTHER INFORMATION](index=33&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and other disclosures [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The company is not aware of any pending legal actions that would have a material adverse effect on its business or operations. While it may be involved in disputes in the ordinary course of business, no material adverse effects are currently expected - The company is not aware of any pending legal actions that would, if determined adversely, have a material adverse effect on its business and operations[131](index=131&type=chunk) - The company may, from time to time, become involved in disputes and proceedings arising in the ordinary course of business, but no material adverse effect is currently expected[132](index=132&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the risk factors discussed in the company's Annual Report on Form 10-K for the fiscal year ended February 28, 2025, noting that there have been no material changes to these risk factors - Readers should carefully consider the factors discussed in Part 1, Item 1A. 'Risk Factors' in the Annual Report on Form 10-K for the fiscal year ended February 28, 2025[133](index=133&type=chunk) - There have been no material changes in the company's risk factors from those disclosed in its Annual Report on Form 10-K for the fiscal year ended February 28, 2025[133](index=133&type=chunk) [Item 2. Unregistered Sale of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sale%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities and use of proceeds during the period[134](index=134&type=chunk) [Item 3. Defaults Upon Senior Securities](index=33&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities during the period[135](index=135&type=chunk) [Item 4. Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the registrant[136](index=136&type=chunk) [Item 5. Other Information](index=33&type=section&id=Item%205.%20Other%20Information) During the three months ended May 31, 2025, no directors or officers adopted or terminated Rule 10b5-1 trading arrangements. As of July 11, 2025, the company had approximately 431 record holders of its common stock - During the three months ended May 31, 2025, none of the company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement[137](index=137&type=chunk) - On **July 11, 2025**, the registrant had approximately **431 record holders** of its common stock[138](index=138&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report, including certifications pursuant to the Sarbanes-Oxley Act and Inline XBRL documents - Exhibits include Certifications Pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002, and Inline XBRL Instance Document, Taxonomy Extension Schema, and Cover Page Interactive Data File[140](index=140&type=chunk) - The certifications attached as Exhibits 32.1 and 32.2 are not deemed filed with the SEC and are not to be incorporated by reference into any other filing[140](index=140&type=chunk) [Signatures](index=35&type=section&id=Signatures) This section formally attests to the accuracy of the report, signed by the Interim Chief Executive Officer and Chief Financial Officer - The report is signed on **July 15, 2025**, by Jeffrey R. Geygan, Interim Chief Executive Officer, and Carrie E. Cass, Chief Financial Officer[146](index=146&type=chunk)

Core Insights - Rocky Mountain Chocolate Factory, Inc. is focused on rebuilding its business into a disciplined and profitable entity through various strategic initiatives aimed at enhancing operational efficiency and franchisee performance [2][3] Financial Performance - Total revenue for the first quarter of fiscal 2026 was $6.4 million, remaining essentially flat compared to the same quarter last year [5] - Gross profit from product and retail was $0.3 million, an improvement from a loss of $0.3 million in the year-ago quarter, attributed to better pricing and production efficiencies [5] - Total costs and expenses decreased to $6.5 million from $8.0 million in the previous year, primarily due to improved operating efficiencies and reduced general and administrative costs [5] - The net loss for the quarter was $0.3 million or $(0.04) per share, compared to a net loss of $1.7 million or $(0.26) per share in the same quarter last year [5] - EBITDA for the quarter was $0.2 million, a significant improvement from $(1.4) million in the year-ago quarter [5] Strategic Initiatives - The company has implemented a simplified freight program to enhance inventory freshness and realigned pricing to better reflect product value [2] - A new Point of Sale (POS) and Enterprise Resource Planning (ERP) system is being adopted to improve visibility and accountability across the franchise network [2] - A brand refresh, including new packaging and a redesigned e-commerce platform, is set to roll out systemwide this summer [3] Market Expansion - The Charleston location has shown promising performance in a previously untapped market, providing insights for future store openings [3] - A new store in Chicago is expected to open before the holiday season, with several leases currently under negotiation [3] Company Overview - Rocky Mountain Chocolate Factory, Inc. is a leading franchiser of premium chocolate and confectionery retail stores, operating nearly 260 locations across the United States and several international sites [7]