Rocky Mountain Chocolate Factory(RMCF) - 2022 Q4 - Annual Report

Revenue Growth - Revenues increased by 37.7% from $23.5 million in FY 2021 to $32.3 million in FY 2022, with factory sales rising by 29.2% to $22.37 million[197][198] - Total revenue for the year ended February 28, 2022, was $32,342,579, an increase of 37.5% from $23,480,705 in 2021[255] - Sales increased to $25,227,495 in 2022 from $19,179,447 in 2021, representing a growth of 31.5%[255] - Total revenues for FY 2022 amounted to $33,416,321, with external customer revenue of $32,342,579 after intersegment eliminations[364] - The company experienced a 70.0% increase in sales to its network of franchised and licensed retail stores in FY 2022, despite a 40.7% decrease in shipments to customers outside this network[199] Store Performance - Same store pounds purchased from franchised and co-branded licensed stores increased by 58.9% overall in FY 2022 compared to FY 2021, with quarterly increases of 325.5% in Q1 and 63.8% in Q2[195] - Same store sales at domestic franchise locations increased by 18.9% in FY 2022 compared to FY 2020, indicating recovery from COVID-19 disruptions[202] - The company operated a total of 337 stores under its brand and subsidiaries as of February 28, 2022, including 160 domestic franchise stores[267] Profitability and Loss - Operating loss decreased from $(3.5) million in FY 2021 to $(484,000) in FY 2022, while net loss improved from $(900,000) to $(342,000) in the same period[197] - The company reported a net loss of $342,000 in FY 2022, an improvement from a net loss of $900,000 in FY 2021[221] - Consolidated net loss for 2022 was $(341,697), compared to a net loss of $(899,777) in 2021, showing an improvement of 62%[255] Costs and Expenses - The company incurred approximately $1.7 million in costs related to a contested proxy solicitation during FY 2022, compared to no such costs in FY 2021[189] - General and administrative expenses rose to 23.3% of total revenues in FY 2022, up from 22.4% in FY 2021, largely due to costs associated with a contested proxy solicitation[210] - Total cost of sales increased by 23.1% from $26,186.8 thousand in FY 2021 to $32,240.8 thousand in FY 2022[204] - The company reported a total cost of sales of $19,167,672 in 2022, up from $16,118,625 in 2021, an increase of 12.7%[255] Cash and Liquidity - Cash and cash equivalents increased from $5.6 million as of February 28, 2021, to $7.6 million as of February 28, 2022, due to financing activities[220] - Working capital improved to $9.7 million as of February 28, 2022, compared to $9.0 million in FY 2021, aided by liquidity preservation efforts[219] - The Company has a $5.0 million revolving credit line, with $5.0 million available for borrowing as of February 28, 2022, and was in compliance with all financial covenants[224] Investments and Capital Expenditures - The Company anticipates making approximately $1.7 million in capital expenditures for FY 2023, an increase from an average of $695,000 per year over the previous three years, to invest in machinery and equipment[226] - Capital expenditures for FY 2022 totaled $947,690, with significant investments in Manufacturing and Retail segments[364] Tax and Deferred Tax - The total income tax expense for FY 2022 was $35,382, compared to an income tax benefit of $(891,914) in FY 2021 and an expense of $368,500 in FY 2020[351] - The effective tax rate for FY 2022 was (11.6)%, significantly lower than 49.8% in FY 2021 and 26.3% in FY 2020, primarily due to permanent differences in expense valuation[351] - The net deferred tax assets increased to $1,388,271 in FY 2022 from $1,144,764 in FY 2021, reflecting a gain associated with the revaluation of deferred tax assets[354] Franchise and Licensing - The strategic alliance with Edible Arrangements resulted in purchases of approximately $1.7 million in FY 2022, accounting for 5.3% of total revenues, down from $3.5 million or 15.1% in FY 2021[185][199] - Franchise fee revenue decreased in FY 2022 due to fewer franchise closures compared to FY 2021[203] - The Company recognized a ten percent (10%) royalty on all sales of products sold at franchise locations, excluding those purchased from the Company[288] Inventory and Assets - Total inventories as of February 28, 2022, were valued at $4,354,202, an increase from $4,062,885 in 2021, representing a growth of approximately 7.2%[316] - Goodwill and intangible assets totaled $8,212,306 as of February 28, 2022, compared to $5,050,854 in 2021, indicating a significant increase of approximately 62.5%[319] Other Financial Metrics - The Company recognized $1,073,115 in stock-based compensation expense for FY 2022, compared to $511,835 in FY 2021[293] - The Company recognized gift card breakage of $89,525 in FY 2022, compared to $53,160 in FY 2021[277] - The allowance for doubtful accounts associated with notes receivable was $112,287 as of February 28, 2022, unchanged from the previous year[271]