Rocky Mountain Chocolate Factory (RMCF) FY2026 10-K Risk Factors: 78 New, 34 Dropped

What the changes say

Financing risk is more prominent, with $1.2 million of insider-affiliated debt at 12% and quarterly covenants.
Weak demand remains central: FY 2026 revenue fell 7.0% to $27.5 million, including an 11.0% product-sales decline.
Inflation, labor, freight, supply-chain disruptions and franchisee execution continue threatening sales and margins.
The company is investing in retail expansion while carrying a $4.6 million net loss and $6.0 million secured debt.

What changed since the prior 10-K

New

New
On August 28, 2025, the Company entered into a new credit agreement ("RMCF2 Credit Agreement") with RMCF2 Credit, LLC (“RMCF2”), a special purpose investment entity affiliated with Jeffrey R. Geygan, the Company's Interim Chief Executive Officer and one of the members of the Company's board of directors
The company owes an insider-affiliated lender $1.2 million at 12%, with 2027 maturity, spending limits and quarterly financial covenants.
New
Current Trends Affecting Our Business and Outlook
Inflation, labor and freight costs, supply-chain shortages, stocking delays and seasonal demand could reduce sales and profitability.
New
Our ability to successfully achieve expansion of our franchise systems depends on many factors not within our control including the availability of suitable sites for new store locations and the availability of qualified franchisees to support our expansion plans
Franchise expansion and Durango production growth depend on suitable locations, qualified franchisees, e-commerce, competition and customer acceptance.
New
Durango Product and Retail Sales
Product and retail sales fell 11.0%, or $2.7 million, partly because unfavorable specialty-market contracts were not renewed.
New
Royalties, Marketing Fees and Franchise Fees
Royalty and marketing-fee revenue depends on franchisee product sales, while servicing the franchise network carries substantial costs.
New
Cost of Sales and Gross Margin
Gross margin improved to 3.4% from 0.4% through packaging efficiencies and price increases, but remains thin.
New
General and Administrative
Cost cutting reduced general and administrative expense, but legal and professional fees rose because of financing and equity transactions.
New
Retail Operating Expenses
Buying a third retail store increased retail operating expenses 56.1%, raising the cost burden of company-owned locations.
New
Depreciation and Amortization
Technology and production-equipment investments increased depreciation, while interest expense rose to $0.8 million.
New
Liquidity and Capital Resources
Working capital declined to $2.0 million, the current ratio fell to 1.29, and operations generated a $4.6 million net loss.
New
$0.3 million, stock compensation expense of $0.3 million, gain on the sale of assets of $0.2 million, and change in operating assets and liabilities of $1.8 million
Cash flow depends on new debt and equity financing, including $1.8 million of notes payable and $2.7 million of stock proceeds.
New
Credit Agreement and Payment of Wells Fargo Credit Agreement
The $6.0 million credit agreement bears 12% interest, matures in 2027 and is secured by Durango property, inventory, equipment, receivables and cash.
New
The Company will continue to explore additional means of strengthening its liquidity position and ensuring compliance with its debt financing covenants, which may include the obtaining of waivers from our lenders
New
On August 28, 2025, we entered into the RMCF2 Credit Agreement with RMCF2
New
New Security Purchase Agreement
New
Critical Accounting Estimates
New
Opinion on the Financial Statements
New
Substantial Doubt about the Company's ability to continue as a Going Concern
New
Adjustments to reconcile loss from continuing operations to net cash
New
Expense recorded for stock compensation
New
Liquidity and Going Concern
New
Basis of Presentation and Consolidation
New
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
New
Accounts and Notes Receivable
New
Property and Equipment and Other Assets
New
Acquisitions of Company-owned Stores
New
Insurance and Self-Insurance Reserves
New
Franchise and Royalty Fees
New
Related Party Transactions
New
Basic earnings per share is computed as net earnings divided by the weighted average number of common shares outstanding during each year. Diluted earnings per share reflects the potential dilution that could occur from common shares issuable through stock options and restricted stock units
New
Advertising and Promotional Expenses
New
Fair Value of Financial Instruments
New
Except for the recent accounting pronouncements described below, other recent accounting pronouncements are not expected to have a material impact on the Company's consolidated financial statements
New
New Accounting Pronouncements Not Yet Adopted
New
NOTE 2 – SUPPLEMENTAL CASH FLOW INFORMATION
New
Non-cash additions to operating lease right of use assets and liabilities
New
NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS
New
Initial Franchise Fees, License Fees, Transfer Fees and Renewal Fees
New
Durango Product Sales of Confectionery Items, Retail Sales and Royalty and Marketing Fees
New
NOTE 4 – DISAGGREGATION OF REVENUE
New
For the Year Ended February 28, 2026
New
For the Year Ended February 28, 2025
New
For the Year Ended February 29, 2024
New
NOTE 6 – PROPERTY AND EQUIPMENT, NET
New
NOTE 7 – GOODWILL AND INTANGIBLE ASSETS
New
Amortization expense related to intangible assets totaled $ 37 thousand , $ 27 thousand and $ 28 thousand during the fiscal years ended February 28, 2026, February 28, 2025 and February 29, 2024, respectively
New
Note Payable with RMC Credit Facility, LLC
New
In connection with the Credit Agreement, the Company entered into a Deed of Trust with RMC and the Public Trustee of La Plata County, Colorado with respect to the Company’s property in Durango, Colorado
New
Credit Agreement with RMCF2 Credit, LLC
New
In connection with the RMCF2 Credit Agreement, the Company entered into a Deed of Trust with RMCF2 and the Public Trustee of La Plata County, Colorado with respect to the Company’s property in Durango, Colorado
New
Securities Purchase Agreement
New
Outstanding non-vested restricted stock units at beginning
New
Outstanding non-vested restricted stock units as of
New
Total unrecognized stock-based compensation expense for non-vested restricted stock units was approximately $ 0.3 million, and is expected to be recognized over th e next 1.2 years
New
Weighted average remaining contractual term (in years)
New
NOTE 10 – LEASING ARRANGEMENTS
New
The Company also leases trucking equipment and warehouse space in support of its production operations. Expense associated with trucking and warehouse leases is included in cost of sales on the consolidated statements of operations
New
The weighted average lease term at February 28 and 29, 2026, 2025, and 2024 was 8.4 years, 5.8 years, and 5.8 years, respectively
New
NOTE 12 - ACQUISITION OF COMPANY-OWNED STORE
New
NOTE 14 – EMPLOYEE BENEFIT PLAN
New
NOTE 15 – OPERATING SEGMENTS
New
NOTE 16 – DISCO NTINUED OPERATIONS
New
On October 31, 2023, the Company filed a certificate of dissolution with the Secretary of State of the State of Nevada with respect to U-Swirl. As a result, U-Swirl is effectively fully dissolved and no longer in legal existence
New
Earnings (loss) from discontinued operations, net of tax
New
NOTE 17 - SUBSEQUENT EVENTS
New
Disclosure Controls and Procedures and Changes in Internal Control Over Financial Reporting
New
Based on that assessment, management concluded that our internal control over financial reporting was not effective as of February 28, 2026 due to the identification of the material weakness discussed below
New
statements included in this Annual Report fairly present, in all material respects, the Company’s financial position, results of operations, and cash flows
New
Remediation Efforts to Address Material Weakness
New
ITE M 9B. OTHER INFORMATION
New
The information required by this item is incorporated herein by reference from our Proxy Statement for our 2026 Annual Meeting of Stockholders, to be filed no later than 120 days after February 28, 2026
New
ITEM 1 1. EXECUTIVE COMPENSATION
New
IT EM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
New
Equity Compensation Plan Information
New
Awards outstanding under the 2024 Equity Incentive Plan as of February 28, 2026 consist of 194,189 unvested restricted stock units and no outstanding stock options
New
ITEM 13. CERTAIN RELATIONSHIPS A ND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
New
ITEM 14. PRINCIPAL ACCOU NTANT FEES AND SERVICES
New
ITE M 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Dropped

Dropped
The Divestiture Of Our U-Swirl Business May Have Material Adverse Effects On Our Financial Condition, Results Of Operations Or Cash Flows
Risks from contingent liabilities following the 2023 sale of the U-Swirl frozen-yogurt business.
Dropped
Our Growth Is Dependent Upon Attracting And Retaining Qualified Franchisees And Their Ability To Operate Their Franchised Stores Successfully
Dependence on attracting qualified franchisees and their successful operation of stores.
Dropped
Increases In Costs Could Adversely Affect Our Operations
Inflation-driven increases in raw materials, labor, leases, taxes, insurance, maintenance and new facilities.
Dropped
Price Increases May Not Be Sufficient To Offset Cost Increases And Maintain Profitability Or May Result In Sales Volume Declines Associated With Pricing Elasticity
Inability to offset input-cost increases through pricing without reducing sales volume.
Dropped
Our Expansion Plans Are Dependent On The Availability Of Suitable Sites For Franchised Stores At Reasonable Occupancy Costs
Dependence on suitable, affordable high-traffic sites for franchised stores.
Dropped
Same Store Sales Have Fluctuated and Will Continue to Fluctuate
Fluctuations or sustained declines in same-store sales.
Dropped
Higher Labor Costs, Increased Competition For Qualified Team Members And Ensuring Adequate Staffing Increases The Cost Of Doing Business. Additionally, Changes In Employment And Labor Laws, Including Health Care Legislation And Minimum Wage Increases, Could Increase Costs For Our System-Wide Operations
Labor shortages, staffing costs, competition for workers and employment-law changes.
Dropped
The Seasonality Of Our Sales And New Store Openings Can Have A Significant Impact On Our Financial Results From Quarter To Quarter
Seasonal sales and the timing of new store openings affecting quarterly results.
Dropped
The Retailing Of Confectionery Products Is Highly Competitive And Many Of Our Competitors Have Competitive Advantages Over Us
Competition from confectionery retailers with greater brand, financial and marketing resources.
Dropped
Changes In Consumer Tastes And Trends Could Have A Material Adverse Effect On Our Operations
Changes in consumer tastes, health concerns, economic conditions, traffic and weather affecting chocolate sales.
Dropped
We Are Subject To Federal, State And Local Regulations
Federal, state and local franchise regulations, including disclosure and franchisor-franchisee requirements.
Dropped
Information Technology System Failures, Breaches Of Our Network Security Or Inability To Upgrade Or Expand Our Technological Capabilities Could Interrupt Our Operations And Adversely Affect Our Business
Technology failures, cybersecurity breaches and inability to upgrade systems disrupting company and franchisee operations.
Dropped
If We, Our Business Partners, Or Our Franchisees Are Unable To Protect Our Customers’ Data, We Could Be Exposed To Data Loss, Litigation, Liability And Reputational Damage
Dropped
We Are Subject To Periodic Litigation, Which Could Result In Unexpected Expenses Of Time And Resources
Dropped
Changes In Health Benefit Claims And Healthcare Reform Legislation Could Have A Material Adverse Effect On Our Operations
Dropped
Our Expansion Into New Markets May Present Increased Risks Due To Our Unfamiliarity With Those Areas And Our Target Customers’ Unfamiliarity With Our Brands
Dropped
Issues Or Concerns Related To The Quality And Safety Of Our Products, Ingredients Or Packaging Could Cause A Product Recall And/Or Result In Harm To The Company’s Reputation, Negatively Impacting Our Results Of Operations
Dropped
Our Financial Results May Be Adversely Impacted By The Failure To Successfully Execute Or Integrate Acquisitions, Divestitures And Joint Ventures
Dropped
Provisions In Our Organizational Documents, As Well As Provisions Of Delaware Law, Could Make It More Difficult Or Costly For A Third Party To Acquire Us, Even If Doing So Would Benefit Our Stockholders, And Could Limit Attempts To Make Changes In Our Management
Dropped
Require super-majority voting to amend some provisions in our certificate of incorporation and to amend our bylaws
Dropped
Our Common Stock Price May Be Volatile Or May Decline Regardless Of Our Operating Performance
Dropped
Changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from tariffs, inflation, natural disasters, terrorist attacks, public health outbreaks, acts of war and responses to such events
Dropped
Our Auditor’s Opinion on Our Audited Consolidated Financial Statements for the Year Ended February 28, 2025, included in this Annual Report, Contains an Explanatory Paragraph Relating to our Ability to Continue as a Going Concern
Dropped
Our Inability to Meet a Financial Covenant Contained in our Credit Facility May Adversely Affect our Liquidity, Financial Condition and Results of Operations
Dropped
The Company has received a waiver from the Lender as of the date of issuance of the consolidated financial statements and is in compliance with all other aspects of the Credit Agreement. There can be no assurance that the Lender will grant us a waiver for future noncompliance
DroppedRisks Related to the Economy
Global Or Regional Public Health Outbreaks Could Negatively Impact Our Business Operations, Financial Performance And Results Of Operations
DroppedRisks Related to the Economy
General Economic Conditions Could Have A Material Adverse Effect On Our Business, Results Of Operations And Liquidity Or Our Franchisees, With Adverse Consequences To Us
DroppedRisks Related to the Economy
We are subject to risks from changes to the trade policies, including tariff and import/export regulations by the U.S. and/or other foreign governments
DroppedRisks Related to the Economy
We Currently, And May In The Future, Have Assets Held At Financial Institutions That May Exceed The Insurance Coverage Offered By The Federal Deposit Insurance Corporation (“FDIC”), The Loss Of Which Would Have A Severe Negative Affect On Our Operations And Liquidity
DroppedRisks Related to Our Franchisees
The Financial Performance Of Our Franchisees Can Negatively Impact Our Business
DroppedRisks Related to Our Franchisees
We Have Limited Control With Respect To The Operations Of Our Franchisees, Which Could Have A Negative Impact On Our Business
DroppedRisks Related to Our Franchisees
A Significant Shift By Franchisees From Company-Manufactured Products To Products Produced By Third Parties Could Adversely Affect Our Operations
DroppedRisks Related to Our Supply Chain
Increase In Ingredient And Other Operating Costs, Including Those Caused By Weather And Food Safety, Could Adversely Affect Our Results Of Operations
DroppedRisks Related to Our Supply Chain
Disruption To Our Manufacturing Facility Or Supply Chain Could Impair Our Ability To Produce Or Deliver Finished Products, Resulting In A Negative Impact On Our Results Of Operations

All 78 risk factors

Headings as the filing states them, in filing order.

Other

01On August 28, 2025, the Company entered into a new credit agreement ("RMCF2 Credit Agreement") with RMCF2 Credit, LLC (“RMCF2”), a special purpose investment entity affiliated with Jeffrey R. Geygan, the Company's Interim Chief Executive Officer and one of the members of the Company's board of directorsNew
02Current Trends Affecting Our Business and OutlookNew
03Our ability to successfully achieve expansion of our franchise systems depends on many factors not within our control including the availability of suitable sites for new store locations and the availability of qualified franchisees to support our expansion plansNew
04Durango Product and Retail SalesNew
05Royalties, Marketing Fees and Franchise FeesNew
06Cost of Sales and Gross MarginNew
07General and AdministrativeNew
08Retail Operating ExpensesNew
09Depreciation and AmortizationNew
10Liquidity and Capital ResourcesNew
11$0.3 million, stock compensation expense of $0.3 million, gain on the sale of assets of $0.2 million, and change in operating assets and liabilities of $1.8 millionNew
12Credit Agreement and Payment of Wells Fargo Credit AgreementNew
13The Company will continue to explore additional means of strengthening its liquidity position and ensuring compliance with its debt financing covenants, which may include the obtaining of waivers from our lendersNew
14On August 28, 2025, we entered into the RMCF2 Credit Agreement with RMCF2New
15New Security Purchase AgreementNew
16Critical Accounting EstimatesNew
17Opinion on the Financial StatementsNew
18Substantial Doubt about the Company's ability to continue as a Going ConcernNew
19Adjustments to reconcile loss from continuing operations to net cashNew
20Expense recorded for stock compensationNew
21Liquidity and Going ConcernNew
22Basis of Presentation and ConsolidationNew
23NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)New
24Accounts and Notes ReceivableNew
25Property and Equipment and Other AssetsNew
26Acquisitions of Company-owned StoresNew
27Insurance and Self-Insurance ReservesNew
28Franchise and Royalty FeesNew
29Related Party TransactionsNew
30Basic earnings per share is computed as net earnings divided by the weighted average number of common shares outstanding during each year. Diluted earnings per share reflects the potential dilution that could occur from common shares issuable through stock options and restricted stock unitsNew
31Advertising and Promotional ExpensesNew
32Fair Value of Financial InstrumentsNew
33Except for the recent accounting pronouncements described below, other recent accounting pronouncements are not expected to have a material impact on the Company's consolidated financial statementsNew
34New Accounting Pronouncements Not Yet AdoptedNew
35NOTE 2 – SUPPLEMENTAL CASH FLOW INFORMATIONNew
36Non-cash additions to operating lease right of use assets and liabilitiesNew
37NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERSNew
38Initial Franchise Fees, License Fees, Transfer Fees and Renewal FeesNew
39Durango Product Sales of Confectionery Items, Retail Sales and Royalty and Marketing FeesNew
40NOTE 4 – DISAGGREGATION OF REVENUENew
41For the Year Ended February 28, 2026New
42For the Year Ended February 28, 2025New
43For the Year Ended February 29, 2024New
44NOTE 6 – PROPERTY AND EQUIPMENT, NETNew
45NOTE 7 – GOODWILL AND INTANGIBLE ASSETSNew
46Amortization expense related to intangible assets totaled $ 37 thousand , $ 27 thousand and $ 28 thousand during the fiscal years ended February 28, 2026, February 28, 2025 and February 29, 2024, respectivelyNew
47Note Payable with RMC Credit Facility, LLCNew
48In connection with the Credit Agreement, the Company entered into a Deed of Trust with RMC and the Public Trustee of La Plata County, Colorado with respect to the Company’s property in Durango, ColoradoNew
49Credit Agreement with RMCF2 Credit, LLCNew
50In connection with the RMCF2 Credit Agreement, the Company entered into a Deed of Trust with RMCF2 and the Public Trustee of La Plata County, Colorado with respect to the Company’s property in Durango, ColoradoNew
51Securities Purchase AgreementNew
52Outstanding non-vested restricted stock units at beginningNew
53Outstanding non-vested restricted stock units as ofNew
54Total unrecognized stock-based compensation expense for non-vested restricted stock units was approximately $ 0.3 million, and is expected to be recognized over th e next 1.2 yearsNew
55Weighted average remaining contractual term (in years)New
56NOTE 10 – LEASING ARRANGEMENTSNew
57The Company also leases trucking equipment and warehouse space in support of its production operations. Expense associated with trucking and warehouse leases is included in cost of sales on the consolidated statements of operationsNew
58The weighted average lease term at February 28 and 29, 2026, 2025, and 2024 was 8.4 years, 5.8 years, and 5.8 years, respectivelyNew
59NOTE 12 - ACQUISITION OF COMPANY-OWNED STORENew
60NOTE 14 – EMPLOYEE BENEFIT PLANNew
61NOTE 15 – OPERATING SEGMENTSNew
62NOTE 16 – DISCO NTINUED OPERATIONSNew
63On October 31, 2023, the Company filed a certificate of dissolution with the Secretary of State of the State of Nevada with respect to U-Swirl. As a result, U-Swirl is effectively fully dissolved and no longer in legal existenceNew
64Earnings (loss) from discontinued operations, net of taxNew
65NOTE 17 - SUBSEQUENT EVENTSNew
66Disclosure Controls and Procedures and Changes in Internal Control Over Financial ReportingNew
67Based on that assessment, management concluded that our internal control over financial reporting was not effective as of February 28, 2026 due to the identification of the material weakness discussed belowNew
68statements included in this Annual Report fairly present, in all material respects, the Company’s financial position, results of operations, and cash flowsNew
69Remediation Efforts to Address Material WeaknessNew
70ITE M 9B. OTHER INFORMATIONNew
71The information required by this item is incorporated herein by reference from our Proxy Statement for our 2026 Annual Meeting of Stockholders, to be filed no later than 120 days after February 28, 2026New
72ITEM 1 1. EXECUTIVE COMPENSATIONNew
73IT EM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSNew
74Equity Compensation Plan InformationNew
75Awards outstanding under the 2024 Equity Incentive Plan as of February 28, 2026 consist of 194,189 unvested restricted stock units and no outstanding stock optionsNew
76ITEM 13. CERTAIN RELATIONSHIPS A ND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCENew
77ITEM 14. PRINCIPAL ACCOU NTANT FEES AND SERVICESNew
78ITE M 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULESNew

Other Rocky Mountain Chocolate Factory 10-Ks

FY2025 10-K risk factors
34 risks
Company faces a going concern opinion following a $6.1 million net loss and $6.6 million operating cash burn in fiscal 2025. RMCF breached its $6.0 million credit agreement debt covenant, and the lender can demand immediate repayment. Franchisee reliance is absolute, with risks covering recruitment, third-party product shifts, and limited operational control. Sole manufacturing operations are concentrated in a single facility in Durango, Colorado.
Filed Jun 20, 2025

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The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.