Rocky Mountain Chocolate Factory, Inc.

Previous wording

The following discussion and analysis of financial condition and results of operations is qualified by reference and should be read in conjunction with the consolidated financial statements and the notes included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on 10-K, filed with the SEC on June 20, 2025, for the fiscal year ended February 28, 2025.

Current wording

The following discussion and analysis of financial condition and results of operations is qualified by reference and should be read in conjunction with the consolidated financial statements and the notes included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K, filed with the SEC on May 29, 2026, for the fiscal year ended February 28, 2026.

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 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 November 30, 2025, there were 3 Company-owned, 112 licensee-owned and 139 franchised Rocky Mountain Chocolate Factory stores operating in 36 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 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 May 31, 2026, there were 4 Company-owned, 108 licensee-owned and 138 franchised Rocky Mountain Chocolate Factory stores operating in 34 states and the Philippines.

Previous wording

On August 28, 2025, the Company entered into a first amendment to the Credit Agreement. RMC 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 RMC agreed to waive the financial covenant providing for a maximum ratio of total liabilities to total net worth for each of the fiscal quarters ending August 31, 2025 and November 30, 2025. The Company was not in compliance with the covenant as of November 30, 2025. All other covenants were met. Subsequent to November 30, 2025, the Company repaid $0.6 million of the $6.6 million outstanding.

Current wording

On August 28, 2025, the Company entered into a first amendment to the Credit Agreement. RMC 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. The additional advance of $0.6 million was repaid on December 31, 2025. The Company was not in compliance with the covenant providing for a maximum ratio of total liabilities to tangible net worth of 2.0:1.0 at May 31, 2026. The Company received a waiver from RMC and is in compliance with all other aspects of the debt agreement.

Previous 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.

Current wording

On August 28, 2025, the Company entered into a credit agreement (the "RMCF2 Credit Agreement") with RMCF2 Credit LLC ("RMCF2"), a special purpose investment entity affiliated with Jeffrey R. Geygan, the Company's former interim CEO and one of the members of the board of directors.

Previous wording

Pursuant to the new 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. Subsequent to November 30, 2025, the Company repaid $0.6 million of the $1.2 million outstanding.

Current wording

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. 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 the property, as well as the Company's accounts receivable and cash accounts. Of the $1.2 million advanced, $0.6 million was repaid on December 31, 2025. The Company was not in compliance with the covenant providing for a maximum ratio of total liabilities to tangible net worth of 2.0:1.0 at May 31, 2026. The Company received a waiver from RMCF2 and is in compliance with all other aspects of the debt agreement.

Previous wording

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 the Company's common stock at a price per share of $1.80, for total proceeds of approximately $2.7 million. We plan to subsequently register the shares for resale by the Purchaser on a Form S-1.

Current wording

On December 18, 2025, the Company entered into a securities purchase agreement with ARM-D Rocky Mountain Chocolate Holdings, LLC ("ARM-D"), pursuant to which, among other things, ARM-D agreed to subscribe for and purchase, and the Company agreed to issue and sell to ARM-D, an aggregate of 1,500,000 shares of the Company's common stock at a price per share of $1.80, for total proceeds of approximately $2.7 million, less gross issuance costs of $0.2 million. On January 23, 2026, the shares were subsequently registered for resale by ARM-D on Form S-1 that was declared effective by the SEC on February 13, 2026.

Previous wording

As a result of recent macroeconomic inflationary trends and federally imposed tariffs on certain imported items, we have experienced and expect to continue experiencing higher raw material, labor, and freight costs, although these trends have moderated during the quarter. We have experienced labor and logistics challenges, which have contributed to higher cost of goods sold. In addition, we could experience additional lost sale opportunities if our products are not available for purchase as a result of continued disruptions in our supply chain relating to an inability to obtain raw materials or packaging, or if we or our franchisees experience delays in stocking our products.

Current wording

As a result of recent macroeconomic inflationary trends and disruptions to the global supply chain, we have experienced and expect to continue experiencing higher raw material, labor, and freight costs. We have experienced labor and logistics challenges, which have contributed to lower factory, retail and e-commerce sales. In addition, we could experience additional lost sales opportunities if our products are not available for purchase as a result of continued disruptions in our supply chain relating to an inability to obtain raw materials or packaging, or if we or our franchisees experience delays in stocking our products.

Previous wording

The most important factors in 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 franchise store growth. The Company recently signed four area development agreements that include the addition of 34 new franchise stores over the next three to five years.

Current wording

The most important factors in 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 franchise store growth. In fiscal years 2026 and 2027, the Company signed five area development agreements that include the addition of forty new franchise stores over the next three to five years.

Previous wording

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.

Current wording

Our ability to successfully achieve expansion of our franchise system 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.

Previous wording

Efforts to increase same store pounds purchased from our production facility by franchised stores and to increase total Durango production depend on many factors, including new store openings, effective e-commerce initiatives, industry competition, the receptivity of our franchise system to our product introductions and promotional programs.

Current wording

Efforts to increase same store pounds purchased from our production facility by franchised stores and to increase total Durango production depend on many factors, including new store openings, effective e-commerce initiatives, industry competition, and the receptivity of our franchise system to our product introductions and promotional programs.

Previous wording

Basic loss per share improved from a loss of $(0.11) per share for the three months ended November 30, 2024 to a loss of $(0.02) per share for the three months ended November 30, 2025. Revenues decreased by 4.4% from $7.9 million for the three months ended November 30, 2024 to $7.5 million for the three months ended November 30, 2025. Operating loss was $0.7 million for the three months ended November 30, 2024 compared to an operating income of $0.1 million for the three months ended November 30, 2025.

Current wording

Basic loss per share increased from a loss of $(0.04) per share for the three months ended May 31, 2025 to a loss of $(0.12) per share for the three months ended May 31, 2026. Revenues decreased by 4.1% comparing the three months ended May 31, 2025 with to the three months ended May 31, 2026. The operating loss was $0.1 million for the three months ended May 31, 2025 compared to an operating loss of $1.0 million for the three months ended May 31, 2026. Net loss increased from a loss of $0.3 million for the three months ended May 31, 2025 to a net loss of $1.2 million for the three months ended May 31, 2026.

Previous wording

Total gross margin percentage increased to 21.4% for the three months ended November 30, 2025 compared to a gross margin of 10.0% during the three months ended November 30, 2024, due primarily to sales price increases.

Current wording

Total gross margin percentage decreased to 3.7% for the three months ended May 31, 2026 compared to a gross margin of 6.9% during the three months ended May 31, 2025, due primarily to the decline in packaged product sales. The Company is redesigning its packaged product offerings.

Previous wording

The decrease in general and administrative costs during the nine months ended November 30, 2025 compared to the nine months ended November 30, 2024, was due primarily to cost cutting measures. As a percentage of total revenues, general and administrative expenses decreased to 15.1% during the nine months ended November 30, 2025, compared to 20.7% during the nine months ended November 30, 2024.

Current wording

The decrease in franchise costs for the three months ended May 31, 2026 compared to the three months ended May 31, 2025 was due primarily to cost-cutting measures. As a percentage of total revenue, franchise costs decreased to 8.0% during the three months ended May 31, 2026, compared to 9.3% during the three months ended May 31, 2025.

Previous wording

The decrease in general and administrative costs during the three months ended November 30, 2025 compared to the three months ended November 30, 2024, was due primarily to cost cutting measures. As a percentage of total revenues, general and administrative expenses decreased to 15.4% during the three months ended November 30, 2025, compared to 18.1% during the three months ended November 30, 2024.

Current wording

The decrease in sales and marketing costs during the three months ended May 31, 2026 compared to the three months ended May 31, 2025 was due primarily to cost-cutting measures as we re-evaluate our marketing strategies. As a percentage of total revenues, sales and marketing expenses decreased to 3.1% during the three months ended May 31, 2026, compared to 3.2% during the three months ended May 31, 2025.

Previous wording

Retail operating expenses increased 122.2% during the three months ended November 30, 2025 compared to the three months ended November 30, 2024. This increase is primarily the result of the purchase of a third retail store during in August 2025 and in part due to the timing of expenses.

Current wording

Retail operating expenses increased 53.9% during the three months ended May 31, 2026 compared to the three months ended May 31, 2025. This increase is primarily the result of an increase from two company-owned stores to four company-owned stores. As a percentage of total revenues, retail operating expenses increased to 5.2% during the three months ended May 31, 2026 compared to 3.2% during the three months ended May 31, 2025.

Previous wording

Depreciation and amortization, exclusive of depreciation and amortization included in cost of sales was $0.1 million during the three months ended November 30, 2025, an increase of 77.8% from $63 thousand during the three months ended November 30, 2024. Depreciation and amortization included in cost of sales increased 10.4% from $0.21 million during the three months ended November 30, 2024 to $0.23 million during the three months ended November 30, 2025. This increase was the result of prior year investments in equipment.

Current wording

Depreciation and amortization, exclusive of depreciation and amortization included in cost of sales, was $139 thousand during the three months ended May 31, 2026, an increase of 17.8% from $118 thousand for the three months ended May 31, 2025.

Previous wording

In addition to the results provided in accordance with GAAP, we provide certain non-GAAP measures, which present results on an adjusted basis. These are supplemental measures of performance that are not required by or presented in accordance with GAAP. Adjusted gross margin is a non-GAAP measure. Adjusted gross margin is equal to the sum of our total gross margin plus depreciation and amortization calculated in accordance with GAAP. We believe adjusted gross margin is helpful in understanding our past performance as a supplement to gross margin, and other performance measures calculated in conformity with GAAP. We believe that adjusted gross margin is useful to investors because they provide a measure of operating performance and our ability to generate cash that is unaffected by non-cash accounting measures. Additionally, we use adjusted gross margin rather than gross margin to make incremental pricing decisions. Adjusted gross margin has limitations as analytical tools because they exclude the impact of depreciation and amortization expense and you should not consider it in isolation or as a substitute for any measure reported under GAAP. Our use of capital assets makes depreciation and amortization expense a necessary element of our costs and our ability to generate income. Due to these limitations, we use adjusted gross margin as measures of performance only in conjunction with GAAP measures of performance such as gross margin.

Current wording

In addition to the results provided in accordance with GAAP, we provide certain non-GAAP measures, which present results on an adjusted basis. These are supplemental measures of performance that are not required by or presented in accordance with GAAP. Adjusted gross margin is a non-GAAP measure. Adjusted gross margin is equal to the sum of our total gross margin plus depreciation and amortization calculated in accordance with GAAP. We believe adjusted gross margin is helpful in understanding our past performance as a supplement to gross margin, and other performance measures calculated in conformity with GAAP. We believe that adjusted gross margin is useful to investors because it provides a measure of operating performance and our ability to generate cash that is unaffected by non-cash accounting measures. Additionally, we use adjusted gross margin rather than gross margin to make incremental pricing decisions. Adjusted gross margin has limitations as an analytical tool because it excludes the impact of depreciation and amortization expense and you should not consider it in isolation or as a substitute for any measure reported under GAAP. Our use of capital assets makes depreciation and amortization expense a necessary element of our costs and our ability to generate income. Due to these limitations, we use adjusted gross margin as a measures of performance only in conjunction with GAAP measure of performance such as gross margin.

Previous wording

Cash and cash equivalent balances decreased from $0.7 million as of February 28, 2025 to $0.6 million as of November 30, 2025 primarily as a result of proceeds of $1.8 million from notes payable offset by changes in operating assets and liabilities that resulted in net cash outflows of $1.4 million and net cash used in financing activities of $0.5 million. Our current ratio was 1.66 to 1.0 on November 30, 2025 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 necessary to implement our long-term business plan.

Current wording

Cash and cash equivalent balances decreased from $1.2 million as of February 28, 2026 to $0.6 million as of May 31, 2026 primarily as a result of cash used in operating activities. Our current ratio was 1.13 to 1.0 on May 31, 2026 compared to 1.29 to 1.0 on February 28, 2026. We monitor current and anticipated future levels of cash and cash equivalents in relation to anticipated operating, financing and investing requirements.

Previous wording

During the nine months ended November 30, 2025, we had a consolidated net loss of $1.1 million. Operating activities used cash of $1.4 million, with the principal adjustment to reconcile net income to net cash used in operating activities being depreciation and amortization of $1.0 million and stock compensation expense of $0.2 million, partially offset by recovery on accounts and notes receivable of $0.1 million. Changes in operating assets and liabilities resulted in a net cash outflow of $1.4 million from cash used in the normal course of business. During the nine months ended November 30, 2024, we had a consolidated net loss of $3.2 million. Operating activities used cash of $7.8 million, with the principal adjustment to reconcile net income to net cash used in operating activities being depreciation and amortization of $0.7 million and a gain on the sale of assets of $0.3 million. Changes in operating assets and liabilities resulted in a net cash outflow of $7.8 million from cash used in the normal course of business.

Current wording

During the three months ended May 31, 2026, we had a consolidated net loss of $1.2 million. Operating activities used cash of $0.3 million, with the principal adjustments to reconcile net loss to net cash used by operating activities being depreciation and amortization of $0.4 million and stock-based compensation of $0.1 million. During the three months ended May 31, 2025, we had a consolidated net loss of $0.3 million. Operating activities provided cash of $0.4 million, with the principal adjustments to reconcile net loss to net cash provided by operating activities being depreciation and amortization of $0.3 million, and stock-based compensation of $0.1 million.

Previous wording

During the nine months ended November 30, 2025, cash flows used in investing activities was $0.5 million, primarily due to the purchases of property and equipment of $0.3 million, and the acquisition of the retail store in Camarillo, CA for $0.2 million. In comparison, investing activities used cash of $0.1 million during the nine months ended

Current wording

During the three months ended May 31, 2026, investing activities used cash of $264 thousand, primarily due to the purchase of property and equipment. In comparison, investing activities used cash of $177 thousand during the three months ended May 31, 2025, primarily due to purchases of property and equipment.

Previous wording

There were $1.8 million cash flows from financing activities during the nine months ended November 30, 2025 compared to $6.9 million cash flows from financing activities during the nine months ended November 30, 2024. During the nine months ended November 30, 2025, the Company received $1.8 million in proceeds from notes payable. The Company received $6.0 million in proceeds from its RMCF2 Credit Agreement, $2.2 million from the issuance and sales of common stock and $2.2 million on its revolving line of credit, offset by payment of the line of credit at maturity of $3.5 million during the nine months ended November 30, 2024. Subsequent to November 30, 2025, the Company received proceeds of $2.7 million from the issuance and sale of common stock.

Current wording

There were no cash flows from financing activities during the three months ended May 31, 2026 or during the three months ended May 31, 2025.

Previous wording

Despite improvements in the operating activities, the Company continues to rely on outside sources of financing to sustain its operations. As a result, 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 conditions above raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year after 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, we entered into the Credit Agreement with RMC. Proceeds from the Credit Agreement were used to repay a $3.5 million line of credit and for capital investments. Pursuant to the Credit Agreement, we received an advance in the principal amount of $6.0 million, which advance is evidenced by the Note. The Note will mature on the maturity date, 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 Credit Agreement is collateralized by our Durango real estate property and the related inventory and property, plant and equipment located on that property, as well as our accounts receivable and cash accounts. On August 28, 2025, we amended the agreement and received an additional advance of $0.6 million. As of November 30, 2025, $6.6 million was outstanding on the Credit Agreement. Subsequent to November 30, 2025, the Company repaid $0.6 million of the $6.6 million outstanding.

Current wording

On September 30, 2024, we entered into a Credit Agreement with RMC. Pursuant to the Credit Agreement, we received an advance in the principal amount of $6.0 million, which advance is evidenced by the Note. The Note will mature on 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 our Durango real estate property and the related inventory and property, plant and equipment located on that property, as well as our accounts receivable and cash accounts.

Previous wording

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 RMC agreed to waive the financial covenant providing for a maximum ratio of total liabilities to total net worth for each of the fiscal quarters ending August 31, 2025 and November 30, 2025. 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 November 30, 2025.

Current wording

The proceeds of the Credit Agreement were used to repay a $3.5 million expiring credit agreement and for capital investment and working capital. 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 tangible net worth and a minimum current ratio. The Company incurred $0.1 million of loan origination fees, included as a debt discount and reduction of the notes payable on the balance sheet.

Previous wording

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 each of the fiscal quarters ending August 31, 2025 and

Current wording

The proceeds of the RMCF2 Credit Agreement were used for working capital. The RMCF2 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 RMCF2 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 tangible net worth and a minimum current ratio. Loan origination fees were immaterial.

Previous wording

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.

Current wording

We will continue to explore additional means of strengthening our liquidity position and ensuring compliance with our debt financing covenants, which may include obtaining waivers from our lenders.

Previous wording

The preparation of condensed consolidated financial statements and related disclosures in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Note 1, “Nature of Operations and Summary of Significant Accounting Policies” of the Notes to the Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report and in the Notes to Consolidated Financial Statements in Part II, Item 8 in our Annual Report on Form 10-K for the fiscal year ended February 28, 2025 describe the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. There have been no material changes to the Company’s significant accounting policies disclosed in our Annual Report on Form 10-K for the fiscal year ended February 28, 2025.

Current wording

The preparation of consolidated financial statements and related disclosures in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Note 1, “Nature of Operations and Summary of Significant Accounting Policies” of the Notes to the Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report and in the Notes to Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended February 28, 2026 describe the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. There have been no material changes to the Company’s significant accounting policies disclosed in our Annual Report on Form 10-K for the fiscal year ended February 28, 2026.

Previous wording

As of November 30, 2025, we had purchase obligations of approximately $4.2 million. These purchase obligations primarily consist of contractual obligations for future purchases of commodities for use in our manufacturing.

Current wording

As of May 31, 2026, we had purchase obligations of approximately $3.7 million. These purchase obligations primarily consist of contractual obligations of between five to twelve months for future purchases of commodities for use in our manufacturing.

Previous wording

Inflationary factors such as increases in the costs of ingredients and labor directly affect the Company's operations. Most of the Company's leases provide for cost-of-living adjustments and require it to pay taxes, insurance and maintenance expenses, all of which are subject to inflation. Additionally, the Company’s future lease cost for new facilities may include potentially escalating costs of real estate and construction. There is no assurance that the Company will be able to pass on increased costs to its customers.

Current wording

Inflationary factors such as increases in the costs of raw materials and labor directly affect the Company's operations. Most of the Company's leases provide for cost-of-living adjustments and require it to pay taxes, insurance and maintenance expenses, all of which are subject to inflation. Additionally, the Company’s future lease costs for new facilities may include potentially escalating costs of real estate and construction. There is no assurance that the Company will be able to pass on increased costs to its customers.

Previous wording

We are subject to seasonal fluctuations in sales, which cause fluctuations in quarterly results of operations. Historically, the strongest sales of our products have occurred during key holidays and the summer vacation season. In addition, quarterly results have been, and in the future are likely to be, affected by the timing of new store openings and sales of franchises. Because of the seasonality of our business and the impact of new store openings and sales of franchises, results for any quarter are not necessarily indicative of results that may be achieved in other quarters or for a full fiscal year.

Current wording

We are subject to seasonal fluctuations in sales, which cause fluctuations in quarterly results of operations. Historically, the strongest sales of our products have occurred during key holidays and the summer vacation season. In addition, quarterly results have been, and in the future are likely to be, affected by the timing of new store openings and the sales of new franchise locations. Because of the seasonality of our business and the impact of new store openings and sales of new franchises, results for any quarter are not necessarily indicative of results that may be achieved in other quarters or for a full fiscal year.