UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
or the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______ to _______
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices, including zip code) |
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
On July 11, 2024, the registrant had
Table of Contents
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3 |
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Item 1. |
3 |
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3 |
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4 |
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5 |
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Condensed Consolidated Statements of Changes in Stockholders' Equity |
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8 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
22 |
Item 3. |
28 |
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Item 4. |
28 |
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30 |
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Item 1. |
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Item 1A. |
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Item 2. |
30 |
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Item 3. |
30 |
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Item 4. |
31 |
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Item 5. |
31 |
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Item 6. |
32 |
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33 |
1
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains statements of our expectations, intentions, plans and beliefs that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are intended to come within the safe harbor protection provided by those sections. These forward-looking statements involve various risks and uncertainties. These statements, other than statements of historical fact, included in this Quarterly Report are forward-looking statements. Many of the forward-looking statements contained in this document may be identified by the use of forward-looking words such as “will,” “intend,” “believe,” “expect,” “anticipate,” “should,” “plan,” “estimate,” “potential,” or similar expressions. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future including statements expressing general views about future operating results are forward-looking statements. Management believes these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date of this Quarterly Report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to: inflationary impacts, the outcome of legal proceedings, changes in the confectionery business environment, seasonality, consumer interest in our products, consumer and retail trends, costs and availability of raw materials, competition, and the success of our co-branding strategy and the effect of government regulations. For a detailed discussion of the risks and uncertainties that may cause our actual results to differ from the forward-looking statements contained herein, please see Part II, Item 1A. “Risk Factors” and the risks described elsewhere in this Quarterly Report and the section entitled “Risk Factors” contained in Part I, Item 1A. of our Annual Report on Form 10-K for the fiscal year ended February 29, 2024, filed with the Securities and Exchange Commission (“SEC”) on June 13, 2024, as updated by this Quarterly Report.
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Rocky Mountain Chocolate Factory, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
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Three Months Ended May 31, |
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2024 |
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2023 |
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Revenues |
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Sales |
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$ |
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$ |
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Franchise and royalty fees |
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Total Revenue |
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Costs and Expenses |
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Cost of sales |
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Franchise costs |
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Sales and marketing |
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General and administrative |
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Retail operating |
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Depreciation and amortization, exclusive of depreciation |
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Total costs and expenses |
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Loss from Operations |
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Other Income (Expense) |
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Interest expense |
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( |
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( |
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Interest income |
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Other income (expense), net |
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( |
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Loss Before Income Taxes |
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( |
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( |
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Income Tax Provision (Benefit) |
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Loss from Continuing Operations |
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( |
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Earnings from discontinued operations, net of tax |
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Net Loss |
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$ |
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$ |
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Basic Loss per Common Share |
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Loss from continuing operations |
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$ |
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$ |
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Earnings from discontinued operations |
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Net loss |
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$ |
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$ |
( |
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Diluted Loss per Common Share |
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Loss from continuing operations |
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$ |
( |
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$ |
( |
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Earnings from discontinued operations |
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Net loss |
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$ |
( |
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$ |
( |
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Weighted Average Common Shares Outstanding - Basic |
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Dilutive Effect of Employee Stock Awards |
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Weighted Average Common Shares Outstanding - Diluted |
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The accompanying notes are an integral part of these consolidated financial statements.
3
Rocky Mountain Chocolate Factory, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
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May 31, 2024 |
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February 29, 2024 |
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Assets |
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Current Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, less allowance for credit losses |
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Notes receivable, current portion, less current portion of the |
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Refundable income taxes |
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Inventories |
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Other |
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Current assets held for sale |
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Total current assets |
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Property and Equipment, Net |
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Other Assets |
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Notes receivable, less current portion and allowance for credit losses |
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Goodwill |
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Intangible assets, net |
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Lease right of use asset |
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Other |
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Total other assets |
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Total Assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Current Liabilities |
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Accounts payable |
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$ |
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$ |
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Line of credit |
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Accrued salaries and wages |
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Gift card liabilities |
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Other accrued expenses |
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Contract liabilities |
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Lease liability |
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Deposit Liability |
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Total current liabilities |
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Lease Liability, Less Current Portion |
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Contract Liabilities, Less Current Portion |
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Total Liabilities |
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Stockholders' Equity |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Retained earnings (accumulated deficit) |
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( |
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Total stockholders' equity |
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Total Liabilities and Stockholders' Equity |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
4
Rocky Mountain Chocolate Factory, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
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Three Months Ended |
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2024 |
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2023 |
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Cash Flows From Operating Activities |
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Net Loss |
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$ |
( |
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$ |
( |
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Less: Earnings from discontinued operations, net of tax |
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Loss from continuing operations |
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( |
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( |
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Adjustments to reconcile net loss to net cash |
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Depreciation and amortization |
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Provision for obsolete inventory |
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Loss (gain) on sale or disposal of property and equipment |
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( |
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Expense recorded for stock compensation |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
) |
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Refundable income taxes |
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( |
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Inventories |
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Other current assets |
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( |
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Accounts payable |
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( |
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( |
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Accrued liabilities |
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( |
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Contract liabilities |
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( |
) |
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( |
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Net cash used in operating activities |
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( |
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( |
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Net cash used in operating activities |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash Flows from Investing Activities |
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Addition to notes receivable |
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( |
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Proceeds received on notes receivable |
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Proceeds from the sale of assets |
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Purchases of property and equipment |
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( |
) |
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( |
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Net cash used in investing activities |
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( |
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( |
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Net cash provided by investing activities |
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Net cash provided by (used in) investing activities |
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( |
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Cash Flows from Financing Activities |
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Proceeds from line of credit |
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Net cash provided by financing |
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Net cash provided by financing activities |
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Net Increase (Decrease) in Cash and Cash Equivalents |
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( |
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Cash and Cash Equivalents, Beginning of Period |
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Cash and Cash Equivalents, End of Period |
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$ |
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$ |
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||
The accompanying notes are an integral part of these consolidated financial statements.
5
Rocky Mountain Chocolate Factory, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders' Equity
(In thousands, except per-share amounts)
(Unaudited)
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Three Months Ended May 31, 2024 |
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Convertible Preferred Stock |
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Common Stock |
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Additional Paid-In |
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Retained |
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Total Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Earnings |
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Equity |
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Balances as of February 29, 2024 |
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— |
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$ |
- |
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$ |
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$ |
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$ |
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$ |
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Equity compensation, restricted stock units, net of shares withheld |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balances as of May 31, 2024 |
|
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— |
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$ |
- |
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$ |
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$ |
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$ |
( |
) |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
6
Rocky Mountain Chocolate Factory, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders' Equity (Continued)
(In thousands, except per-share amounts)
(Unaudited)
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Three Months Ended May 31, 2023 |
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Convertible Preferred Stock |
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Common Stock |
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Additional Paid-In |
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Retained |
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Total Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Earnings |
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Equity |
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Balances as of February 28, 2023 |
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— |
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$ |
- |
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$ |
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$ |
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$ |
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$ |
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Equity compensation, restricted stock units, net of shares withheld |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balances as of May 31, 2023 |
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— |
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$ |
- |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
7
Rocky Mountain Chocolate Factory, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The accompanying condensed 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 (dissolved in November 2023), U-Swirl International, Inc. (dissolved in October 2023) (“U-Swirl”), and U-Swirl, Inc., a Nevada corporation (“SWRL”) (collectively, the “Company”, “we”, or “RMCF”).
The Company is an international franchisor, confectionery manufacturer and retail operator. Founded in 1981, the Company is headquartered in Durango, Colorado and manufactures an extensive line of premium chocolate candies and other confectionery products (“Durango Products”). The Company also sells its candy in select locations outside of its system of retail stores.
On February 24, 2023, the Company entered into an agreement to sell its three Company-owned U-Swirl locations. Separately, on May 1, 2023, the Company entered into an agreement to sell its franchise rights and intangible assets related to U-Swirl and associated brands. As a result, the activities of the Company’s U-Swirl subsidiary that have historically been reported in the U-Swirl segment have been reported as discontinued operations. See Note 15 – Discontinued Operations in the Notes to Condensed 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.
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.
The Company does not have a material amount of financial assets or liabilities that are required under accounting principles generally accepted in the United States of America (“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 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. The Company believes the fair values of cash equivalents, accounts and notes receivable, accounts payable and line of credit approximate their carrying amounts due to their short duration.
The following table summarizes the number of stores operating under the Rocky Mountain Chocolate Factory brand at May 31, 2024:
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Stores |
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Opened |
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Closed |
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Sold |
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Stores |
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Rocky Mountain Chocolate Factory |
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Company-owned stores |
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Franchise stores - Domestic stores |
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( |
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International license stores |
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Cold Stone Creamery - co-branded |
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( |
) |
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U-Swirl - co-branded |
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Total |
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8
Rocky Mountain Chocolate Factory, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Liquidity and Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. In accordance with ASC 205-40, Going Concern, the Company’s management has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the accompanying financial statements were issued. During the three months ended May 31, 2024, the Company incurred a net loss of $
The Company’s ability to continue as a going concern is dependent on its ability to continue to implement its business plan. The Company is exploring various means of strengthening its liquidity position and ensuring compliance with its debt financing covenants, which may include the obtaining of waivers from the Lender and/or, amending its Credit Line facility. The Company is also exploring supplemental debt facilities for other operational activities. During the next twelve months the Company intends to sell its held for sale assets including an unused parcel of land near its headquarters and unused manufacturing equipment, cut overhead for manufacturing, and increase profits and gross margins through increasing chocolate price sales to its franchising system and Specialty Market customers. In addition, the Company intends to benefit from busy season of holiday product sales and add a chief financial officer to its management teams during the next twelve months. There are no assurances that the Company will be successful in implementing its business plan.
Basis of Presentation and Consolidation
The accompanying consolidated financial statements, which include the accounts of the Company and its subsidiaries, have been prepared by the Company, without audit, and reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The condensed consolidated financial statements have been prepared in accordance GAAP for interim financial reporting and Securities and Exchange Commission ("SEC") regulations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the consolidated financial statements reflect all adjustments (of a normal and recurring nature) which are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the three months ended May 31, 2024 are not necessarily indicative of the results to be expected for the entire fiscal year ending February 28, 2025. All intercompany balances and transactions have been eliminated in consolidation.
These consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended February 29, 2024, filed with the SEC on June 13, 2024. The year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP.
9
Rocky Mountain Chocolate Factory, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the estimate of the reserve for uncollectible accounts and the reserve for inventory obsolescence. The Company bases its estimates on historical experience and assumptions that the Company believes are reasonable. The Company assesses these estimates on a regular basis; however, actual results could materially differ from these estimates.
Assets Held for Sale
The Company classifies an asset as held for sale when management, having the authority to approve the action, commits to a plan to sell the asset, the sale is probable within one year and the asset is available for immediate sale in its present condition. The Company also considers whether an active program to locate a buyer has been initiated, whether the asset is marketed actively for sale at a price that is reasonable in relation to its current fair value and whether actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company initially measures an asset that is classified as held for sale at the lower of its carrying amount or fair value less costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized until the date of sale. The Company assesses the fair value of an asset less costs to sell each reporting period it remains classified as held for sale and reports any subsequent changes as an adjustment to the carrying amount of the asset, as long as the new carrying amount does not exceed the carrying amount of the asset at the time it was initially classified as held for sale. Assets are not depreciated or amortized while they are classified as held for sale.
In the first quarter of fiscal 2025, the Company commenced its plan to sell an unused parcel land in Durango, Colorado where the Company is headquartered. As of May 31, 2024, the land had a carrying value of approximately $
In the first quarter of fiscal 2025, the Company commenced its plan to sell a piece of factory machinery. As of May 31, 2024, the machinery had a carrying value of approximately $
New Accounting Pronouncements Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 enhances the disclosures required for operating segments in the Company’s annual and interim consolidated financial statements. The disclosures required under ASU 2023-07 are also required for public entities with a single reportable segment. The updates in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of the new standard on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective
10
Rocky Mountain Chocolate Factory, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
tax rate reconciliation as well as information on income taxes paid. The updates in this ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of the new standard on its consolidated financial statements.
Subsequent Events
Management evaluated all activity of the Company through the issue date of the financial statements and concluded that no subsequent events have occurred that would require recognition or disclosure in the financial statements.
On July 10, 2024, the Company sold its parcel of land in Durango, Colorado, which was classified as held for sale as of May 31, 2024 for a purchase price of approximately $
Accounts and Notes Receivable, Net
Accounts receivable represent amounts due from customers in the ordinary course of business and are recorded at the invoiced amount and do not bear interest. Notes receivable generally reflect the sale of assets. Accounts and notes receivables are stated at the net amount expected to be collected, using an estimate of current expected credit losses to determine the allowance for expected credit losses. 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. When the Company is aware of a customer’s inability to meet its financial obligation, the Company may individually evaluate the related receivable to determine the allowance for expected credit losses. The Company uses specific criteria to determine uncollectible receivables to be written off, including bankruptcy filings, the referral of customer accounts to outside parties for collection, and the length that accounts remain past due.
NOTE 2 - SUPPLEMENTAL CASH FLOW INFORMATION
($'s in thousands) |
|
Three Months Ended |
|
|||||
Cash paid (received) for: |
|
2024 |
|
|
2023 |
|
||
Interest |
|
$ |
|
|
|
|||
Income taxes |
|
|
|
|
|
( |
) |
|
Supplemental disclosure of non-cash investing activities: |
|
|
|
|
|
|
||
Sale of assets in exchange for note receivable |
|
$ |
|
|
$ |
|
||
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. The Company generally receives a fee associated with the franchise agreement or license agreement (collectively “Customer Contracts”) at the time that the Customer Contract is entered. These Customer Contracts have a term of up to
11
Rocky Mountain Chocolate Factory, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
are distinct. The resulting treatment of revenue from Customer Contracts is that the revenue is recognized proportionately over the life of the Customer Contract.
Initial Franchise Fees, License Fees, Transfer Fees and Renewal Fees
The initial franchise services are not distinct from the continuing rights or services offered during the term of the franchise agreement and are treated as a single performance obligation. Initial franchise fees are being recognized as the Company satisfies the performance obligation over the term of the franchise agreement, which is generally
The following table summarizes contract liabilities as of May 31, 2024 and May 31, 2023:
|
|
Three Months Ended |
|
|||||
($'s in thousands) |
|
2024 |
|
|
2023 |
|
||
Contract liabilities at the beginning of the period: |
|
$ |
|
|
$ |
|
||
Revenue recognized |
|
|
( |
) |
|
|
( |
) |
Contract fees received |
|
|
|
|
|
|
||
Contract liabilities at the end of the period: |
|
$ |
|
|
$ |
|
||
At May 31, 2024, annual revenue expected to be recognized in the future, related to performance obligations that are not yet fully satisfied, are estimated to be the following (amounts in thousands):
|
$ |
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
Total |
|
$ |
|
Gift Cards
The Company’s franchisees sell gift cards, which do not have expiration dates or non-usage fees. The proceeds from the sale of gift cards by the franchisees are accumulated by the Company and paid out to the franchisees upon customer redemption. ASC 606 requires the use of the “proportionate” method for recognizing breakage. The Company recognizes breakage from gift cards when the gift card is redeemed by the customer or the Company determines the likelihood of the gift card being redeemed by the customer is remote (“gift card breakage”). The determination of the gift card breakage rate is based upon Company-specific historical redemption patterns.
12
Rocky Mountain Chocolate Factory, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Durango Product Sales of Confectionary Items, Retail Sales and Royalty and Marketing Fees
Confectionary items sold to the Company’s franchisees, others and its Company-owned stores’ sales are recognized at the time of the underlying sale, based on the terms of the sale and when ownership of the inventory is transferred, and are presented net of sales taxes and discounts. 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.
NOTE 4 – DISAGGREGATION OF REVENUE
The following table presents disaggregated revenue by the method of recognition and segment:
Three Months Ended May 31, 2024
Revenues recognized over time:
($'s in thousands) |
|
Franchising |
|
|
Manufacturing |
|
Retail |
|
Total |
|
||
Franchise fees |
|
$ |
|
|
|
|
|
|
$ |
|
||
Revenues recognized at a point in time:
($'s in thousands) |
|
Franchising |
|
|
Manufacturing |
|
|
Retail |
|
|
Total |
|
||||
Durango Product sales |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Retail sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Royalty and marketing fees |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues recognized over time and point in time |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Three Months Ended May 31, 2023
Revenues recognized over time:
($'s in thousands) |
|
Franchising |
|
|
Manufacturing |
|
Retail |
|
Total |
|
||
Franchise fees |
|
$ |
|
|
|
|
$ |
|
||||
Revenues recognized at a point in time:
($'s in thousands) |
|
Franchising |
|
|
Manufacturing |
|
|
Retail |
|
|
Total |
|
||||
Durango Product sales |
|
|
|
$ |
|
|
|
|
$ |
|
||||||
Retail sales |
|
|
|
|
|
|
|
|
|
|
||||||
Royalty and marketing fees |
|
|
|
|
|
|
|
|
|
|
||||||
Total revenues recognized over time and point in time |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
13
Rocky Mountain Chocolate Factory, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 5 - INVENTORIES
Inventories consist of the following at May 31, 2024 and February 29, 2024:
($'s in thousands) |
|
May 31, 2024 |
|
|
February 29, 2024 |
|
||
Ingredients and supplies |
|
$ |
|
|
$ |
|
||
Finished candy |
|
|
|
|
|
|
||
Reserve for slow moving inventory |
|
|
( |
) |
|
|
( |
) |
Total inventories |
|
$ |
|
|
$ |
|
||
NOTE 6 – PROPERTY AND EQUIPMENT, NET
Property and equipment at May 31, 2024 and February 29, 2024 consisted of the following:
($'s in thousands) |
|
May 31, 2024 |
|
|
February 29, 2024 |
|
||
Land |
|
$ |
|
|
$ |
|
||
Building |
|
|
|
|
|
|
||
Machinery and equipment |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Transportation equipment |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense related to property and equipment totaled $
14
Rocky Mountain Chocolate Factory, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 7 – GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets consist of the following at May 31, 2024 and February 29, 2024:
|
|
|
|
|
|
|
|
|
|
|
May 31, 2024 |
|
|
February 29, 2024 |
|
|||||||||||||
($'s in thousands) |
|
Amortization Period (in Years) |
|
|
Gross |
|
|
Accumulated |
|
|
Gross |
|
|
Accumulated |
|
|||||||||||||
Intangible assets subject to amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Store design |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||||
Trademark/Non-competition agreements |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||||
Goodwill and intangible assets not subject to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Retail |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|||||||
Franchising |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Trademark |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total Goodwill and Intangible Assets |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||||
Amortization expense related to intangible assets totaled approximately $
At May 31, 2024, annual amortization of intangible assets, based upon the Company’s existing intangible assets and current useful lives, is estimated to be the following (amounts in thousands):
2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
NOTE 8 – NOTES PAYABLE AND REVOLVING CREDIT LINE
Revolving Credit Line
As of May 31, 2024, the Company had a $
15
Rocky Mountain Chocolate Factory, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Financing Rate plus
As of May 31, 2024, the Company was not in compliance with the requirement under the Credit Agreement to maintain a ratio of total assets to total current liabilities of at least
NOTE 9 – STOCK COMPENSATION PLANS
Under the Company’s 2007 Equity Incentive Plan (as amended and restated) (the “2007 Plan”), the Company may authorize and grant stock awards to employees, non-employee directors and certain other eligible participants, including stock options, restricted stock and restricted stock units.
The Company recognized $
The following table summarizes non-vested restricted stock unit transactions for common stock during the three months ended May 31, 2024:
|
|
Three Months Ended |
|
|
|
|
2024 |
|
|
Outstanding non-vested restricted stock units at beginning |
|
|
|
|
Granted |
|
|
|
|
Vested |
|
|
( |
) |
Cancelled/forfeited |
|
|
( |
) |
Outstanding non-vested restricted stock units as of |
|
|
|
|
|
|
|
|
|
Weighted average grant date fair value |
|
$ |
|
|
Weighted average remaining vesting period (in years) |
||||