Rocky Mountain Chocolate Factory(RMCF) - 2024 Q4 - Annual Report

Financial Performance - Total revenue for the fiscal year ended February 29, 2024, was $27,950,687, a decrease of 8.1% from $30,432,352 in 2023[238] - Sales decreased to $22,022,310 in 2024 from $24,456,910 in 2023, representing a decline of 9.9%[238] - The company reported a net loss of $4,171,883 for 2024, compared to a net loss of $5,680,778 in 2023, indicating an improvement of 26.5%[238] - Loss from operations was $4,902,156 in 2024, slightly higher than the loss of $4,891,003 in 2023[238] - The company experienced recurring losses and negative cash flows from operations, raising substantial doubt about its ability to continue as a going concern[224] - The segment profit (loss) for FY 2024 was reported at $(4,875,717), compared to $(4,874,513) in FY 2023, indicating a slight deterioration in performance[367] Expenses and Costs - Cost of sales increased to $20,655,629 in 2024 from $20,455,373 in 2023, reflecting a rise of 1.0%[238] - General and administrative expenses decreased significantly to $6,673,929 in 2024 from $10,325,633 in 2023, a reduction of 35.0%[238] - The Company incurred total severance compensation costs of $692,295 in FY 2024, down from $928,938 in FY 2023, and $1,344,813 in FY 2022[381] - The total depreciation and amortization expense for FY 2024 was $887,299, compared to $765,263 in FY 2023, reflecting higher asset utilization[367] - The company incurred approximately $4.1 million in costs related to contested proxy solicitations during FY 2023, up from $1.7 million in FY 2022[370] Assets and Liabilities - Total assets decreased from $21,986,827 in 2023 to $20,577,218 in 2024, a decline of approximately 6.4%[241] - Current assets fell from $11,204,976 in 2023 to $9,602,650 in 2024, representing a decrease of about 14.3%[241] - Cash and cash equivalents decreased significantly from $4,717,068 in 2023 to $2,082,014 in 2024, a drop of approximately 55.9%[246] - Total liabilities increased from $7,616,663 in 2023 to $9,941,059 in 2024, an increase of about 30.5%[241] - The Company had lease liabilities totaling $1,694,471 as of February 29, 2024, with total estimated future minimum lease payments of $1.9 million[340] Inventory and Sales - Inventories increased from $3,639,780 in 2023 to $4,358,401 in 2024, a rise of approximately 19.7%[241] - Retail sales increased to $1,318,901 in 2024 from $1,084,777 in 2023, an increase of 21.6%[313] - Durango product sales recognized at a point in time decreased to $20,703,409 in 2024 from $23,372,133 in 2023, a decrease of 11.4%[313] Equity and Capital - The company’s retained earnings decreased from $4,906,032 in 2023 to $734,149 in 2024, a decline of about 85%[241] - The company’s total stockholders' equity decreased from $14,370,164 in 2023 to $10,636,159 in 2024, a decline of about 26.1%[241] - The company’s additional paid-in capital increased from $9,457,875 in 2023 to $9,895,704 in 2024, an increase of approximately 4.6%[241] Cash Flow and Financing - The company reported a net cash used in operating activities of $2,434,947 for 2024, compared to $2,102,491 in 2023, indicating a decline in cash flow[246] - The Company had a $4.0 million revolving credit line, with $2.75 million available for borrowing as of February 29, 2024[321] - The Company's current ratio as of February 29, 2024, was 1.19 to 1, below the required 1.5 to 1 under its credit agreement[257] Taxation - The effective tax rate for FY 2024 was zero, primarily due to reported losses and a full valuation allowance against deferred tax assets[353] - The Company incurred an income tax expense of $613,843 for FY 2023 despite a pretax loss, mainly due to an increase in reserves for deferred tax assets[354] Strategic Initiatives - The Company plans to sell an unused parcel of land and cut overhead for manufacturing to strengthen its liquidity position[258] - The Company intends to increase profits and gross margins through raising chocolate prices to its franchising system and Specialty Market customers[258] Discontinued Operations - Total revenue from discontinued operations for FY 2024 was $212,242, a significant decrease from $3,128,368 in FY 2023[384] - The Company completed the sale of U-Swirl for total consideration of $2.75 million, including $1.75 million in cash and a $1 million promissory note[382] - The Company filed a certificate of dissolution for U-Swirl on October 31, 2023, effectively ending its legal existence[384]