Rocky Mountain Chocolate Factory, Inc.
For the period ended Feb 28, 2026. Filed May 29, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2026 · Filed May 29, 2026
RMCF$0.83+7.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2025-02-28; filed 2025-06-20.
0000950170-25-088556
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2026-02-28; filed 2026-05-29.
0001193125-26-248296
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 70 previous paragraphs and 81 current paragraphs.
39 unchanged; 23 reworded; 14 added; 7 removed; 1 previous and 5 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
On August 28, 2025, the Company entered into a first amendment to the credit agreement (as amended, the "Credit Agreement"), with RMC Credit Facility LLC, a Colorado limited liability company ("RMC" or "Lender"), dated September 30, 2024. The Lender agreed to make an additional advance to the Company in the principal amount of $0.6 million, There was no change to other terms of the agreement. In connection with the amendment, the Company and the Lender agreed to waive the financial covenant providing for a maximum ratio of total liabilities to total net worth for each of the year ending February 28, 2026. The Company was not in compliance with the covenant as of February 28, 2026. The Company has received a waiver through August 31, 2026 from the Lender as of the date of issuance of the financial statements in respect of such non-compliance and is in compliance with all other aspects of the Credit Agreement. As of February 28, 2026, the Company repaid $0.6 million of the $6.6 million outstanding.
Current report
Pursuant to the RMCF2 Credit Agreement, RMCF2 agreed to make an advance to the Company in the principal amount of $1.2 million, which advance is evidenced by a promissory note (the “RMCF2 Note”). The RMCF2 Note matures on September 30, 2027 and interest accrues at a rate of 12% per annum and is payable monthly in arrears. All outstanding principal and interest will be due on the maturity date.
Current report
The RMCF2 Credit Agreement contains customary events of default as well as customary affirmative and negative covenants, including, without limitation, certain reporting obligations and certain limitations on liens, encumbrances, and indebtedness. The RMCF2 Credit Agreement also limits capital expenditures to $3.5 million per year and contains two financial covenants measured quarterly: a maximum ratio of total liabilities to total net worth and a minimum current ratio. Pursuant to the RMCF2 Credit Agreement, RMCF2 agreed to waive the financial covenant providing for a maximum ratio of total liabilities to total net worth for the fiscal year ending February 28, 2026. At February 28, 2026, all covenants were met with the exception of the covenant for the maximum ratio of total liabilities to total net worth. The Company has received a waiver through August 31, 2026 from RMCF2 as of the date of issuance of the financial statements in respect of such non-compliance and is in compliance with all other aspects of the RMCF2 Credit Agreement. As of February 28, 2026, the Company repaid $0.6 million of the $1.2 million outstanding.
Current report
On December 18, 2025, the Company entered into a securities purchase agreement with ARM-D Rocky Mountain Chocolate Holdings LLC (the “Purchaser”) , pursuant to which, among other things, the Purchaser agreed to subscribe for and purchase, and the Company agreed to issue and sell to the Purchaser, an aggregate of 1,500,000 shares of common stock at a price per share of $1.80, for total gross proceeds of approximately $2.7 million, less stock issuance costs of $0.2 million. On January 23, 2026, the shares were subsequently registered for resale by the Purchaser on a Form S-1 that was declared effective by the SEC on February 13, 2026.
Current report
Royalty and marketing fees increased during FY 2026 compared to FY 2025 primarily due to the decrease in sales of products to our network of franchised retail stores. The royalty agreements allow for an increase in the royalty percentage due from the franchisees if the franchisee sales of product made in the stores exceeds or increases a certain percentage over the sale of Durango product items sold in franchised stores.
Current report
Total gross margin increased to 3.4% in FY 2026 compared to a gross margin of 0.4% during FY 2025, due primarily to the efficiencies obtained by relocating our consumer packaging operations back to our Durango production facility and sales price adjustments to offset inflationary pressures.
Current report
The Company made capital expenditures of $0.7 million and $3.8 million during FY 2026 and FY 2025, respectively.
Current report
Income Tax Provision
Current report
Adjusted Gross Margin
Current report
New Credit Agreement
Current report
On August 28, 2025, we entered into the RMCF2 Credit Agreement with RMCF2.
Current report
The RMCF2 Credit Agreement contains customary events of default as well as customary affirmative and negative covenants, including, without limitation, certain reporting obligations and certain limitations on liens, encumbrances, and indebtedness. The RMCF2 Credit Agreement limits capital expenditures to $3.5 million per year and also contains two financial covenants measured quarterly: a maximum ratio of total liabilities to total net worth and a minimum current ratio. Pursuant to the RMCF2 Credit Agreement, the Company and RMCF2 agreed to waive the financial covenant providing for a maximum ratio of total liabilities to total net worth for the fiscal year ending February 28, 2026. The Company was not in compliance with the liabilities to tangible net worth covenant of 2.0:1.0 but was in compliance with all other covenants as of February 28, 2026.
Current report
New Security Purchase Agreement
Current report
On December 18, 2025, the Company entered into a securities purchase agreement with the Purchaser, pursuant to which, among other things, the Purchaser agreed to subscribe for and purchase, and the Company agreed to issue and sell to the Purchaser, an aggregate of 1,500,000 shares of common stock at a price per share of $1.80, for total gross proceeds of approximately $2.7 million, less stock issuance costs of $0.2 million. On January 23, 2026, the shares were subsequently registered for resale by the Purchaser on a Form S-1 that was declared effective by the SEC on February 13, 2026.
Removed paragraphs (7)
Previous report
On May 1, 2023, subsequent to the end of FY 2023, the Company completed the sale of substantially all of the assets of its wholly-owned subsidiary and frozen yogurt business, U-Swirl International, Inc. The aggregate sale price of U-Swirl was $2.75 million, consisting of (i) $1.75 million in cash and (ii) $1.0 million evidenced by a three-year secured promissory note. The business divestiture of the U-Swirl segment was preceded by a separate sale of the Company’s three owned U-Swirl locations on February 24, 2023. The consolidated financial statements present the historical financial results of the former U-Swirl segment as discontinued operations for all periods presented. See Note 15 of the Notes to Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data“, of this Annual Report for information on this divestiture.
Previous report
With the sale of U-Swirl, we continue to focus on our confectionery business to further enhance our competitive position and operating margin, simplify our business model, and deliver sustainable value to our stockholders.
Previous report
During FY 2023, the Company incurred substantial costs associated with a stockholder’s contested solicitation of proxies in connection with our 2022 annual meeting of stockholders. During FY 2023, the Company incurred approximately $4.1 million of costs associated with the contested solicitation of proxies, however, there were no such comparable costs in FY 2024 or FY 2025.
Previous report
Royalty and marketing fees decreased during FY 2025 compared to FY 2024 was primarily due to the Company offering more favorable royalty agreements within our updated franchise agreement designed to increase the amount of Durango product items sold in franchised stores. The change in franchise fee revenue during FY 2025 compared to FY 2024 was not material.
Previous report
Total gross margin decreased to 0.4% in FY 2025 compared to a gross margin of 6.2% during FY 2024, due primarily to an increase in overhead costs, a sharp increase in the cost of cocoa as a raw material as well as other inflationary pressures we were unable to capture through appropriate and timely price increases, in addition to a reduction in production volume. Additionally, costs incurred increased as a result of the Company undertaking actions to relocate its consumer packaging operations to Salt Lake City, Utah, in response to limited labor availability in the Durango labor pool, which led to elevated production costs, decreased operating efficiencies, and a large write-off of inventory value recognized in cost of sales. This business arrangement was wound down between January 1, 2025 and February 28, 2025 after our peak holiday selling season. The Company estimates the impact of this contributed a negative $1.5 million. We now have all of our consumer packaging assets returned to our Durango production facility, which will have an immediate and positive impact on gross margin and profitability through efficiencies at that location.
Previous report
Income Tax Provision (Benefit)
Previous report
The Company made an average of $3.4 million per year in capital expenditures during FY 2024 to FY 2025. For FY 2026 the Company anticipates incurring substantially lower levels of capital expenditures.
Reworded paragraphs (23)
Previous wording
Rocky Mountain Chocolate Factory, Inc., a Delaware corporation, and its subsidiaries (including its operating subsidiary with the same name, Rocky Mountain Chocolate Factory, Inc., a Colorado corporation) (“RMCF”) (referred to as the “Company,” “we,” “us,” or “our”) is an international franchisor, confectionery producer and retail operator. Founded in 1981, we are headquartered in Durango, Colorado and produce an extensive line of premium chocolate products and other confectionery products. Our revenues and profitability are derived principally from our franchised/licensed system of retail stores that feature chocolate and other confectionery products including gourmet caramel apples. We may also sell our confectionery products in select locations outside of our system of retail stores and license the use of our brand with certain consumer products. As of February 28, 2025, there were 2 Company-owned, 117 licensee-owned and 141 franchised Rocky Mountain Chocolate Factory stores operating in 27 states and the Philippines.
Current wording
Rocky Mountain Chocolate Factory, Inc., a Delaware corporation, and its subsidiaries (including its operating subsidiary with the same name, Rocky Mountain Chocolate Factory, Inc., a Colorado corporation) (“RMCF”) (referred to as the “Company,” “we,” “us,” or “our”) is an international franchisor, confectionery producer and retail operator. Founded in 1981, we are headquartered in Durango, Colorado and produce an extensive line of premium chocolate products and other confectionery products. Our revenues and profitability are derived principally from our franchised/licensed system of retail stores that feature chocolate and other confectionery products including gourmet caramel apples. We may also sell our confectionery products in select locations outside of our system of retail stores and license the use of our brand with certain consumer products. As of February 28, 2026, there were three Company-owned, 111 licensee-owned and 139 franchised Rocky Mountain Chocolate Factory stores operating in 34 states and the Philippines.
Previous wording
On September 30, 2024, the Company repaid the amount owed under its credit agreement with Wells Fargo Bank N.A. (the "Wells Fargo Credit Agreement") and entered into a new credit agreement (the “Credit Agreement”) with RMC Credit Facility, LLC (“RMC”). Pursuant to the Credit Agreement, the Company received an advance in the principal amount of $6.0 million, which advance is evidenced by a promissory note (the “Note”). The Note will mature on September 30, 2027 (the “Maturity Date”), and interest will accrue at a rate of 12% per annum and is payable monthly in arrears. All outstanding principal and interest will be due on the Maturity Date. RMC is a special purpose investment entity affiliated with Steven L. Craig, one of the members of the Company's board of directors.
Current wording
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.
Previous wording
The most important factors for continued growth in our earnings are our ability to increase the sales of premium chocolate products produced in our Durango production facility, and the support of our franchisees in increasing the frequency of customer visits and the average value of each customer transaction, along with ongoing e-commerce revenue growth, and new franchised store growth.
Current wording
The most important factors for continued growth in our earnings are our ability to increase the sales of premium chocolate products produced in our Durango production facility, and the support of our franchisees in increasing the frequency of customer visits and the average value of each customer transaction, along with ongoing e-commerce revenue growth, and new franchised store growth. In FY 2026 the Company signed four area development agreements that include the addition of 34 new franchise stores over the next three to five years.
Previous wording
Basic loss per share increased from a loss from continuing operations of $(0.77) per share in FY 2024 to a loss from continuing operations of $(0.86) per share in FY 2025. Revenues increased by 5.8% from $28.0 million for FY 2024 to $29.6 million for FY 2025. Operating loss and loss from continuing operations was $4.9 million in FY 2024 compared to an operating loss of $5.9 million in FY 2025.
Current wording
Basic loss per share decreased from a loss from continuing operations of $(0.86) per share in FY 2025 to a loss from continuing operations of $(0.56) per share in FY 2026. Revenues decreased by 7.0% from $29.6 million for FY 2025 to $27.5 million for FY 2026. Operating loss and loss from continuing operations was $5.9 million in FY 2025 compared to an operating loss of $3.6 million in FY 2026.
Previous wording
The increase in total sales for FY 2025 compared to FY 2024 was primarily due to a 9%, or $2.0 million, increase in sales of products to our network of franchised and licensed retail stores, Specialty Markets customers, and e-commerce customers, and also reflective of price increases.
Current wording
The decrease in total sales for FY 2026 compared to FY 2025 was primarily due to a 11%, or $2.7 million, decrease in sales of products to our network of franchised and licensed retail stores, Specialty Markets customers, and e-commerce customers, and partially offset by price increases. Certain unfavorable specialty market contracts were not renewed in FY26.
Previous wording
We continue to rationalize product offerings to improve production efficiencies, while adding new products we believe can generate high sales volumes and gross profit margins at or above our average level for bulk and packaged items. We continue to focus our marketing efforts to increase total pounds purchased by franchise locations.
Current wording
We continue to improve production efficiencies, while adding new products we believe can generate high sales volumes and gross profit margins at or above our average level for bulk and packaged items. We continue to focus our marketing efforts to increase total pounds purchased by franchise locations.
Previous wording
The decrease in franchise costs in FY 2025 compared to FY 2024 was due primarily to prior year investments in human capital and the ongoing brand update and store redesign expense, an initiative that is now complete and spanned nearly two years. As a percentage of total royalty and marketing fees and franchise fee revenue, franchise costs decreased to 43.4% in FY 2025 from 43.5% in FY 2024. This decrease as a percentage of royalty, marketing and franchise fees is primarily a result of higher royalty fees partially offset by higher costs associated with providing a high level of customer service to our entire franchise network which had been lacking in prior years. As a percentage of total revenue, franchise costs decreased to 8.2% during FY 2025, compared to 9.2% during FY 2024.
Current wording
Franchise costs remained relatively unchanged during FY 2026 compared to FY 2025. As a percentage of total royalty and marketing fees and franchise fee revenue, franchise costs decreased to 40.0% in FY 2026 from 43.4% in FY 2025. This decrease as a percentage of royalty, marketing, and franchise fees is primarily a result of higher royalty fees partially offset by higher costs associated with providing a high level of customer service to our entire franchise network which had been lacking in prior years. As a percentage of total revenue, franchise costs increased to 8.9% during FY 2026, compared to 8.2% during FY 2025.
Previous wording
The decrease in sales and marketing costs during FY 2025, compared to FY 2024, was due primarily to changes with the organization of the department under which fewer marketing executives were hired to address gaps in our historic marketing plan, and a more focused ad spend was undertaken to direct resources to achieve a higher return on investment. As a percentage of total revenues, sales and marketing expenses decreased to 6.7% during FY 2025, compared to 7.6% during FY 2024.
Current wording
The decrease in sales and marketing costs during FY 2026, compared to FY 2025, was due primarily to operational efficiencies and changes with the organization of the department under which fewer marketing executives were hired to address gaps in our historic marketing plan, and a more focused ad spend was undertaken to direct resources to achieve a higher return on investment. As a percentage of total revenues, sales and marketing expenses decreased to 3.5% during FY 2026, compared to 6.7% during FY 2025.
Previous wording
The decrease in general and administrative costs during FY 2025, compared to FY 2024, was due in part to headcount rationalization designed to improve efficiency and collaboration across departments. The Company continued to incur an elevated level of professional fees related to support our Board of Directors and costs associated with compensation obligations for our former Chief Executive Officer. The Company had additional legal and professional costs associated with an equity raise and the refinancing of our credit facility. We also had a variety of technology and corporate matters requiring outside consulting services. As a percentage of total revenues, general and administrative expenses decreased to 21.3% during FY 2025, compared to 23.9% during FY 2024.
Current wording
The decrease in general and administrative costs during FY 2026, compared to FY 2025, was due in part to cost cutting measures offset by an elevated level of professional fees. The Company had additional legal and professional costs associated with an equity raise and changes to our credit facilities. As a percentage of total revenues, general and administrative expenses decreased to 19.8% during FY 2026, compared to 21.3% during FY 2025.
Previous wording
Retail operating expenses increased 6.7% during FY 2025 compared to FY 2024. This increase is primarily the result of the mid-year FY 2024 addition of the Company's Corpus Christi, TX location. As a percentage of total revenues, retail operating expenses remained relatively unchanged at 2.4% during FY 2025 compared to 2.4% during FY 2024.
Current wording
Retail operating expenses increased 56.1% during FY 2026 compared to FY 2025. This increase is primarily the result of the purchase of a third retail store in August 2025. As a percentage of total revenues, retail operating expenses increased to 4.1% during FY 2026 compared to 2.4% during FY 2025.
Previous wording
Depreciation and amortization, exclusive of depreciation and amortization included in cost of sales, was $0.2 million during FY 2025, an increase from $0.1 million during FY 2024. Depreciation and amortization included in cost of sales increased 3.3% during FY 2024 to FY 2025. This increase was the result of ongoing investment in production equipment.
Current wording
Depreciation and amortization, exclusive of depreciation and amortization included in cost of sales, was $0.5 million during FY 2026, an increase from $0.2 million during FY 2025. Depreciation and amortization included in cost of sales increased 18.8% during FY 2025 to FY 2026. This increase was the result of deprecating prior year investment in updating technology and production equipment.
Previous wording
Other expense was $0.2 million during FY 2025, compared to other income of $26 thousand during FY 2024. This represents interest expense of $0.5 million during FY 2025 compared to $0.1 million during FY 2024, a gain on disposal of assets of $0.2 million during FY 2025 with no such costs in FY 2024, and interest income of $27 thousand during FY 2025 compared to $0.1 million during FY 2024.
Current wording
Other expense was $0.8 million during FY 2026, compared to other income of $0.2 million during FY 2025. This represents interest expense of $0.8 million during FY 2026 compared to $0.5 million during FY 2025 and interest income of $54 thousand during FY 2026 compared to $27 thousand during FY 2025.
Previous wording
We had no income tax expense during the years ended February 28, 2025 and or February 29, 2024 due to our loss from operations. See Note 12 to the financial statements for a description of income taxes, deferred tax assets, and associated reserves.
Current wording
We had income tax expense of $0.2 million during the year ended February 28, 2026. We had no income tax expense during the years ended February 28, 2025 and February 29, 2024 due to our loss from operations. See Note 13 to the financial statements for a description of income taxes, deferred tax assets, and associated reserves.
Previous wording
As of February 28, 2025, working capital was $2.4 million compared with $1.5 million as of February 29, 2024. The increase in working capital was due primarily to an equity capital raise of $2.2 million, a refinancing of the Company's previous revolving credit facility into a 3-year note payable that generated an additional $2.5 million of balance sheet liquidity, and the sale of assets that generated $2.3 million, offset by $3.8 million of capital investment in the Durango production facility, plus net change in accounts receivable and accounts payable. Expected future cash requirements include supporting current operations and building inventory including capital expenditures to support our business.
Current wording
As of February 28, 2026, working capital was $2.0 million compared with $2.4 million as of February 28, 2025. The decrease in working capital was due primarily to a net change in accounts receivable and accounts payable. Expected future cash requirements include supporting current operations and building inventory including capital expenditures to support our business.
Previous wording
Cash and cash equivalent balances decreased from $2.1 million as of February 29, 2024 to $0.7 million as of February 28, 2025 primarily as a result of cash used by operating and investing activities. Our current ratio was 1.34 to 1.0 on February 28, 2025 compared to 1.19 to 1.0 on February 29, 2024. We monitor current and anticipated future levels of cash and cash equivalents in relation to anticipated operating, financing and investing requirements.
Current wording
Cash and cash equivalent balances increased from $0.7 million as of February 28, 2025 to $1.2 million as of February 28, 2026 primarily as a result of proceeds of $1.2 million from the RMCF2 Credit Agreement and gross proceeds of $2.7 million from the sale of 1,500,000 shares of common stock pursuant to a securities purchase agreement with the Purchaser. Our current ratio was 1.29 to 1.0 on February 28, 2026 compared to 1.34 to 1.0 on February 28, 2025. We monitor current and anticipated future levels of cash and cash equivalents in relation to anticipated operating, financing and investing requirements.
Previous wording
During FY 2025, we had a consolidated net loss of $6.1 million. Operating activities used cash of $6.6 million, with the principal adjustments to reconcile net income to net cash used in operating activities being depreciation and amortization of $1.0 million, provision for obsolete inventory of $0.3 million, stock compensation expense of $0.3 million, and gain on the sale of assets of $0.2 million. During FY 2024, we had a consolidated net loss of $4.2 million, less net loss from discontinued operations of $0.7 million. Operating activities used cash of $2.4 million, with the principal adjustments to reconcile net income to net cash used in operating activities being depreciation and amortization of $0.9 million, provision for obsolete inventory of $0.2 million and stock compensation expense of $0.4 million.
Current wording
During FY 2026, we had a consolidated net loss of $4.6 million. Operating activities used cash of $1.8 million, with the principal adjustments to reconcile net income to net cash used in operating activities being depreciation and amortization of $1.4 million, decrease in inventory reserve of $0.4 million, stock compensation expense of $0.3 million, deferred income taxes of $0.2 million, provision for recovery on accounts and notes receivable of $0.2 million, and change in operating assets and liabilities of $1.3 million. During FY 2025, we had a consolidated net loss of $6.1 million. Operating activities used cash of $6.6 million, with the principal adjustments to reconcile net income to net cash used in operating activities being depreciation and amortization of $1.0 million, increase in inventory reserve of
Previous wording
During FY 2025, investing activities used cash of $1.7 million, primarily due to the purchases of property and equipment of $3.8 million, partially offset by the proceeds from the sale of assets of $2.3 million. In comparison, investing activities used cash of $1.5 million during FY 2024 primarily due to the purchases of property and equipment of $3.0 million, partially offset by investing cash flow from discontinued operations of $1.4 million.
Current wording
During FY 2026, investing activities used cash of $0.8 million, primarily due to the purchases of property and equipment of $0.6 million and acquisition of the retail store in Camarillo, California of $0.2 million. Investing activities used cash of $1.7 million during FY 2025 primarily due to the purchases of property and equipment of $3.8 million, partially offset by investing cash flow from the sale of assets of $2.3 million.
Previous wording
During FY 2025, financing activities provided cash of $6.9 million, primarily due to proceeds from notes payable of $6.0 million, proceeds from the line of credit of $2.2 million, and issuance of common stock through the securities purchase agreement of $2.2 million, partially offset by the payment on the line of credit of $3.5 million and payment of debt issuance costs of $0.1 million. In comparison, financing activities provided cash of $1.3 million during FY 2024 resulting from the Company drawing down $1.3 million on its revolving line of credit.
Current wording
During FY 2026, financing activities provided cash of $3.1 million, primarily due to proceeds from notes payable of $1.8 million and issuance of common stock through a securities purchase agreement with the Purchaser of $2.7 million, partially offset by stock issuance costs of $0.2 million, payment on notes payable of $1.2 million, and payment of debt issuance costs of $10 thousand. In comparison, financing activities provided cash of $6.9 million during FY 2025 primarily due to proceeds from notes payable of $6.0 million, proceeds from drawing on a line of credit of $2.2 million, and issuance of common stock of $2.2 million, partially offset by the payment on the line of credit of $3.5 million and payment of debt issuance costs of $0.1 million.
Previous wording
The conditions above raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of these financial statements. In addition, our independent registered public accounting firm, in their report on the Company’s February 28, 2025, audited financial statements, raised substantial doubt about the Company’s ability to continue as a going concern.
Current wording
The Company’s recurring negative cashflows from operations and heavy reliance on debt and equity financing to sustain its operations raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of these financial statements. In addition, our independent registered public accounting firm, in their report on the Company’s February 28, 2026, audited financial statements, raised substantial doubt about the Company’s ability to continue as a going concern.
Previous wording
On September 30, 2024, the Company entered into a new credit agreement (the “Credit Agreement”) with RMC Credit Facility, LLC ("RMC"). Pursuant to the Credit Agreement, the Company received an advance in the principal amount of $6.0 million, which advance is evidenced by a promissory note (the “Note”). The Note will mature on September 30, 2027 (the “Maturity Date”), and interest will accrue at a rate of 12% per annum and is payable monthly in arrears. All outstanding principal and interest will be due on the Maturity Date. The Credit Agreement is collateralized by the Company’s Durango real estate property and the related inventory and property, plant and equipment located on that property, as well as the Company’s accounts receivable and cash accounts.
Current wording
On September 30, 2024, the Company entered into a (the “Credit Agreement”). Pursuant to the Credit Agreement, the Company received an advance in the principal amount of $6.0 million, which advance is evidenced by a promissory note (the “Note”). The Note will mature on September 30, 2027 (the “Maturity Date”), and interest will accrue at a rate of 12% per annum and is payable monthly in arrears. All outstanding principal and interest will be due on the Maturity Date. The Credit Agreement is collateralized by the Company’s Durango real estate property and the related inventory and property, plant and equipment located on that property, as well as the Company’s accounts receivable and cash accounts.
Previous wording
The proceeds of the Credit Agreement were used as follows: (i) $3.5 million was used to repay the Wells Fargo Credit Agreement and (ii) the remaining balance was used for continued capital investment and working capital needs. The Credit Agreement contains customary events of default, including nonpayment of principal and interest when due, failure to comply with covenants, and a change of control of the Company, as well as customary affirmative and negative covenants, including, without limitation, certain reporting obligations and certain limitations on liens, encumbrances, and indebtedness. The Credit Agreement also limits our capital expenditures to $3.5 million per year and contains two financial covenants measured quarterly: a maximum ratio of total liabilities to total net worth and a minimum current ratio.
Current wording
On August 28, 2025, we amended the Credit Agreement and received an additional advance of $0.6 million. The additional $0.6 million borrowed was repaid on December 31, 2025. As of February 28, 2026, $6.0 million was outstanding on the Credit Agreement. The Credit Agreement contains customary events of default, including nonpayment of principal and interest when due, failure to comply with covenants, and a change of control of the Company, as well as customary affirmative and negative covenants, including, without limitation, certain reporting obligations and certain limitations on liens, encumbrances, and indebtedness. The Credit Agreement also limits our capital expenditures to $3.5 million per year and contains two financial covenants measured quarterly: a maximum ratio of total liabilities to total net worth and a minimum current ratio. In connection with the amendment, the Company and the Lender agreed to waive the financial covenant providing for a maximum ratio of total liabilities to total net worth of 2.0:1.0 for the fiscal year ending February 28, 2026. The Company was not in compliance with that covenant of, but was in compliance with all other covenants as of February 28, 2026.
Previous wording
The Company was not in compliance with the requirement under the Credit Agreement to limit annual capital expenditures to $3.5 million as of February 28, 2025, nor was the Company in compliance with the liabilities to tangible net worth of 2.0:1.0 as of February 28, 2025. The Company has received a waiver from the Lender as of the date of issuance of these financial statements and is in compliance with all other aspects of the Credit Agreement.
Current wording
The Company was not in compliance with the liabilities to tangible net worth of 2.0:1.0 as of February 28, 2026. The Company has received a waiver from the Lender through August 31, 2026 as of the date of issuance of these financial statements and is in compliance with all other aspects of the Credit Agreement.
Previous wording
In connection with the Credit Agreement and the Note, 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. RMC is a special purpose investment entity affiliated with Steven L. Craig, one of the members of the Company's board of directors.
Current wording
In connection with the RMCF2 Credit Agreement and the RMCF2 Note, 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
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
$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.
Current report — wording carried from elsewhere
The proceeds of the Credit Agreement were used as follows: (i) $3.5 million was used to repay the Wells Fargo Credit Agreement and (ii) the remaining balance was used for continued capital investment and working capital needs.
Current report — wording carried from elsewhere
Pursuant to the RMCF2 Credit Agreement, RMCF2 agreed to make an advance to the Company in the principal amount of $1.2 million, which advance is evidenced by the RMCF2 Note. The RMCF2 Note matures on September 30, 2027 and interest accrues at a rate of 12% per annum and is payable monthly in arrears. All outstanding principal and interest will be due on the maturity date. The RMCF2 Credit Agreement is collateralized by the Company's Durango real estate property and the related inventory and property, plant and equipment located on that property, as well as the Company's accounts receivable and cash accounts. As of February 28, 2026, the Company repaid $0.6 million of the $1.2 million outstanding.
Current report — wording carried from elsewhere
The Company was not in compliance with the liabilities to tangible net worth of 2.0:1.0 as of February 28, 2026. The Company has received a waiver from the Lender through August 31, 2026 as of the date of issuance of these financial statements and is in compliance with all other aspects of the Credit Agreement.
Current report — wording carried from elsewhere
We will continue to explore additional means of strengthening our liquidity position and ensuring compliance with our debt-financing covenants, which may include the obtaining of waivers from our lenders.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
On August 5, 2024, the Company entered into securities purchase agreements with Steven L. Craig, an existing director of the Company and American Heritage Railways, Inc. a company affiliated with Allen C. Harper who joined the board of directors in December 2024 (the “Investors”), pursuant to which, among other things, the Investors agreed to subscribe for and purchase, and the Company agreed to issue and sell to the Investors in a private placement, an aggregate of 1,250,000 of shares of the Company’s common stock at a price per share equal to $1.75, for total proceeds of approximately $2.2 million. On September 5, 2024, the Company filed a Form S-1 registering the shares sold in the private placement. The Form S-1 was declared effective by the SEC on October 9, 2024.