<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-14749
Rocky Mountain Chocolate Factory, Inc.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Colorado 84-0910696
- ---------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
265 Turner Drive, Durango, CO 81301
- ---------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 259-0554
--------------
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No .
----- -----
At July 3, 1996 there were 2,912,299 shares of common stock outstanding.
This document contains 18 pages including exhibits.
The exhibit index is located on page 16.
1
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ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
FORM 10-Q FOR THE QUARTER ENDED May 31, 1997
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements................................... 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................... 16
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
PAGE NO.
--------
Financial Statements
Balance Sheets - May 31, 1997(unaudited)
and February 28, 1997............................................... 4
Statements of Income - Three-month
periods ended May 31, 1997 (unaudited)
and May 31, 1996 (unaudited)........................................ 6
Statements of Cash Flows
Three-month periods ended
May 31, 1997 (unaudited)
and May 31, 1996 (unaudited)........................................ 7
3
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ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
BALANCE SHEETS
MAY 31, FEBRUARY 28,
1997 1997
----------- ------------
ASSETS (UNAUDITED)
CURRENT ASSETS
Cash and cash equivalents $ 1,623,693 $ 792,606
Accounts and notes receivable -
trade, less allowance for doubtful
accounts of $215,249 at May 31 and
$202,029 at February 28 1,812,786 1,729,971
Inventories 2,441,428 2,311,321
Deferred tax asset 722,595 722,595
Other 252,591 181,133
----------- -----------
Total current assets 6,853,093 5,737,626
PROPERTY AND EQUIPMENT - AT COST
Land 122,558 122,558
Building 3,644,357 3,644,357
Leasehold improvements 2,189,563 2,213,116
Machinery and equipment 6,424,195 6,446,612
Furniture and fixtures 2,521,795 2,667,420
Transportation equipment 255,011 246,499
----------- -----------
15,157,479 15,340,562
Less accumulated depreciation
and amortization (3,917,574) (3,565,194)
----------- -----------
11,239,905 11,775,368
OTHER ASSETS
Notes and accounts receivable due
after one year 54,657 82,774
Goodwill, net of accumulated
amortization of $283,245 at
May 31 and $277,344 at February 28 306,755 312,656
Deferred income taxes 43,044 43,044
Other 651,978 638,637
----------- -----------
1,056,434 1,077,111
----------- -----------
$19,149,432 $18,590,105
----------- -----------
----------- -----------
The accompanying notes are an integral part of these statements.
4
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ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
BALANCE SHEETS - CONTINUED
MAY 31, FEBRUARY 28,
1997 1997
----------- ------------
LIABILITIES AND EQUITY (UNAUDITED)
CURRENT LIABILITIES
Current maturities of long-term debt $ 991,100 $ 847,881
Accounts payable - trade 735,271 799,671
Accrued compensation 623,850 465,338
Accrued liabilities 752,018 867,961
Income taxes payable 43,714 -
Deferred Income - 93,000
----------- -----------
Total current liabilities 3,145,953 3,073,851
LONG-TERM DEBT, less current maturities 6,136,416 5,737,312
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock - authorized 7,250,000
shares, $.03 par value; issued
3,041,302 shares at May 31 and
at February 28 91,239 91,239
Additional paid-in capital 9,730,872 9,730,872
Retained earnings 1,060,686 972,565
----------- -----------
10,882,797 10,794,676
Less common stock held in treasury,
at cost - 129,003 shares at May 31
and at February 28 1,015,734 1,015,734
----------- -----------
9,867,063 9,778,942
----------- -----------
$19,149,432 $18,590,105
----------- -----------
----------- -----------
The accompanying notes are an integral part of these statements.
5
<PAGE>
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
STATEMENTS OF INCOME
(unaudited)
THREE-MONTH PERIODS ENDED
----------------------------
MAY 31, 1997 MAY 31, 1996
------------ ------------
REVENUES
Sales of candy $5,032,364 $4,259,854
Franchise and royalty fees 775,111 703,039
---------- ----------
5,807,475 4,962,893
---------- ----------
COSTS AND EXPENSES
Cost of sales 2,437,557 2,103,925
Franchise costs 546,282 485,467
General and administrative 424,150 414,058
Retail operating expenses 2,103,651 1,621,956
---------- ----------
5,511,640 4,625,406
---------- ----------
Operating income 295,835 337,487
OTHER INCOME (EXPENSE)
Interest expense (167,658) (85,214)
Interest income 15,459 10,714
---------- ----------
(152,199) (74,500)
---------- ----------
INCOME BEFORE INCOME TAX EXPENSE 143,636 262,987
INCOME TAX EXPENSE
Provision for income taxes 55,515 99,150
---------- ----------
INCOME ALLOCABLE TO COMMON STOCKHOLDERS $ 88,121 $ 163,837
---------- ----------
---------- ----------
INCOME PER COMMON AND EQUIVALENT SHARE $ .03 $ .06
---------- ----------
---------- ----------
Weighted average and equivalent shares 2,923,380 2,946,912
---------- ----------
---------- ----------
The accompanying notes are an integral part of these statements.
6
<PAGE>
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC
STATEMENTS OF CASH FLOWS
(unaudited)
THREE-MONTH PERIODS ENDED
----------------------------
MAY 31, 1997 MAY 31, 1996
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 88,121 $ 163,837
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 458,998 282,205
Gain on sale of assets (12,514) -
Changes in operating assets and
liabilities:
Notes and accounts receivable (54,698) (127,299)
Inventories (130,107) (243,880)
Other assets (71,458) (357,507)
Accounts payable (64,400) 280,935
Income taxes payable 43,714 (43,031)
Accrued liabilities 42,569 164,087
Deferred income (93,000) -
---------- -----------
Net cash provided by
operating activities 207,225 119,347
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 177,108 -
Purchase of other assets 9,374 50,055
Purchase of property and equipment (104,943) (1,081,121)
---------- -----------
Net cash used provided by (used in)
investing activities 81,539 (1,031,066)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 758,270 4,659,466
Principal payments on
long-term debt (215,947) (2,355,029)
Principal payments on line of credit - (1,000,000)
---------- -----------
Net cash provided by financing activities 542,323 1,304,437
---------- -----------
NET INCREASE IN CASH 831,087 392,718
Cash and cash equivalents
at beginning of period 792,606 528,787
---------- -----------
Cash and cash equivalents
at end of period $1,623,693 $ 921,505
---------- -----------
---------- -----------
CASH PAID (REFUNDED) DURING THE PERIOD FOR:
Interest $ 156,027 $ 86,798
---------- -----------
---------- -----------
Taxes $ (147,298) $ 154,714
---------- -----------
---------- -----------
The accompanying notes are an integral part of these statements.
7
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ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 1997
1. The interim financial statements included herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosure normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. It
is suggested that these financial statements be read in conjunction with the
financial statements and notes included in the Company's Annual Report on
Form 10-K for the year ended February 28, 1997.
2. These statements reflect all adjustments which, in the opinion of
Management, are necessary for a fair presentation of the information
contained therein. Results of operations for interim periods are not
necessarily indicative of annual results.
3. Inventories consist of the following:
MAY 31, 1997 FEBRUARY 28, 1997
------------ -----------------
Ingredients and supplies $1,130,893 $1,168,216
Finished Candy 1,310,535 1,143,105
---------- ----------
$2,441,428 $2,311,321
---------- ----------
---------- ----------
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Rocky Mountain Chocolate Factory, Inc. is a manufacturer, franchiser and
operator of two retail concepts; Rocky Mountain Chocolate Factory-TM- and
Fuzziwig's Candy Factory-TM-. Headquartered in Durango, Colorado, the Company
manufactures an extensive line of premium chocolate candies and other
confectionery products for sale at its franchised and company-owned Rocky
Mountain Chocolate Stores. Fuzziwig's Candy Factory is a new concept store that
sells hard conventional and nostalgic/unusual candies (which are not
manufactured by the Company, but procured from wholesale candy suppliers) in a
themed, self-serve environment featuring animation, movement, music, color and
entertainment.
The Company derives its revenues from four principal sources: (1) factory
sales, which consist of candy sales to its franchised store locations; (2)
retail sales, which consist of candy sales at retail by its company-owned
stores; (3) franchise fees, which consist of fees earned from the sale of
franchises; and (4) royalties and marketing fees.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
unaudited financial information and other operating data related to the
Company's operations:
(ALL AMOUNTS OTHER THAN STORE DATA IN THOUSANDS)
FIRST QUARTER FIRST QUARTER $ %
FISCAL 1998 FISCAL 1997 CHANGE CHANGE
------------- ------------- ------ ------
REVENUE COMPONENT
Factory Sales $1,834.3 $1,728.1 $106.2 6.1%
Retail Sales 3,198.1 2,531.8 666.3 26.3
Franchise Fees 203.5 193.6 9.9 5.1
Royalties/Marketing fees 571.6 509.4 62.2 12.2
-------- -------- ------ ----
Total $5,807.5 $4,962.9 $844.6 17.0%
-------- -------- ------ ----
STORE DATA
ROCKY MOUNTAIN
CHOCOLATE FACTORY FUZZIWIG'S
----------------- ------------------
MAY 31, MAY 31, MAY 31, MAY 31,
1997 1996 1997 1996
------- ------- ------- -------
NUMBER OF STORES
OPEN AT END OF PERIOD:
COMPANY 40 41 12 4
FRANCHISED 174 162 1 0
--- --- -- --
TOTAL 214 203 13 4
--- --- -- --
--- --- -- --
9
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REVENUES
FACTORY SALES. Factory sales increased $106,000 or 6.1% to $1.8 million in
the first quarter of fiscal 1998, compared to $1.7 million in the first quarter
of fiscal 1997. This increase resulted from the larger number of franchised
stores in existence throughout the quarter, augmented by the impact of a 2.8%
price increase effected in April of 1997. Same store pounds purchased from the
factory by franchised stores declined 2.8% in the first quarter of fiscal 1998
compared to the first quarter of fiscal 1997 partially offsetting the impact of
increased stores and increased price. When computing same store pounds
purchased from the factory, purchases by franchised stores open for 3 months in
each period are compared. This decline in same store pounds purchased resulted
from a shift in sales mix at franchised stores toward store made and authorized
vendor products and away from factory made products. The Company has effected a
program of new product introduction to replace products (such as sugar-free
products) currently purchased by its stores from outside vendors as a basis for
increasing same store pounds purchased from its factory. It has also effected a
rebate program rewarding stores increasing purchases of factory product with a
purchase-volume-based rebate.
RETAIL SALES. Retail sales increased $666,000 or 26.3% to $3.2 million in
the first quarter of fiscal 1998, compared to $2.5 million in the first quarter
of fiscal 1997. This increase resulted primarily from a larger number of
company-owned stores in existence throughout the quarter. Company-owned store
retail sales are anticipated to decline somewhat in fiscal 1998 from fiscal 1997
levels as a result of closure and sale of an estimated 8 stores not generating
minimum economic returns, coupled with a conscious decision to selectively limit
company-owned store additions in fiscal 1998.
ROYALTIES, MARKETING FEES AND FRANCHISE FEES. Royalties and marketing fees
increased $62,200 or 12.2% to $571,600 in the first quarter of fiscal 1998,
compared to $509,400 in the first quarter of fiscal 1997. This increase
resulted from increased royalty income from a larger number of franchised stores
operating in the first quarter of fiscal 1998 compared to the first quarter of
fiscal 1997, augmented by the effect of increased same store sales at franchised
stores of 3.4%. Franchise fee revenues in the first quarter of fiscal 1998
increased from that earned in the first quarter of fiscal 1997 ($203,500 in
comparison with $193,600). Franchise signings were 9 in the first quarter of
fiscal 1998 in comparison with 6 in the first quarter of fiscal 1997. The
Company is experiencing a constraint in the growth in the number of its Rocky
Mountain Chocolate Factory locations posed by a slowdown in the pace of
establishment of new factory outlet centers and limited availability of
locations in other environments where its concept has proven successful. Such
limited availability of locations provides an associated constraint in the
growth of franchise fee revenue and limits growth in royalty revenue to that
produced by potential increases in same
10
<PAGE>
store retail sales. The number of locations available to establish
Fuzziwig's Candy Factory stores is not location limited due to the small
number of currently existing Fuzziwig's locations. The Company believes that
further growth in its revenues will come primarily from development and
execution of sales through the potential opening of new channels of
distribution and through its efforts to increase same store factory and
retail sales from/at existing locations.
COSTS AND EXPENSES
COST OF CANDY SALES. Cost of candy sales, which includes costs incurred by
the Company to manufacture candy sold to its company-owned and franchised
stores, increased 15.9% from $2.1 million in the first quarter of fiscal 1997 to
$2.4 million in the first quarter of fiscal 1998. Cost of candy sales as a
percentage of revenue decreased to 48.4% in the first quarter of fiscal 1998
from 49.4% in the first quarter of fiscal 1997. This improvement resulted from
an increase in higher margin retail sales as a percentage of total revenue and
from the impact of a 2.8% factory price increase. Factory margins in the first
quarter of fiscal 1998 approximated those achieved in the first quarter of
fiscal 1997.
FRANCHISE COSTS. Franchise costs increased 12.5% from $485,500 in the
first quarter of fiscal 1997 to $546,300 in the first quarter of fiscal 1998. As
a percentage of the total of royalty, marketing fees and franchise fee revenues,
franchise costs increased to 70.5% of such fees in the first quarter of fiscal
1998 from 69.1% in the first quarter of fiscal 1997. Expenses of a newly-formed
Product Sales Development department devoted to the improvement in total factory
sales and in same store pounds sold from the factory is the primary cause of
this increase.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 2.4% from $414,100 in the first quarter of fiscal 1997 to $424,200 in
the first quarter of fiscal 1998. As a percentage of total revenues, general
and administrative expense declined from 8.3% in the first quarter of fiscal
1997 to 7.3% in the first quarter of fiscal 1998, primarily due to a significant
increase in total revenues, without a proportionate increase in general and
administrative expense.
RETAIL OPERATING EXPENSES. Retail operating expenses increased from $1.6
million in the first quarter of fiscal 1997 to $2.1 million in the first quarter
of fiscal 1998; an increase of 29.7%. This increase resulted primarily from the
effect of the larger number of company-owned stores in existence throughout the
first quarter. As a percentage of retail sales revenues, retail operating
expenses increased from 64.1% in the first quarter of fiscal 1997 to 65.8% in
the first quarter of fiscal 1998 primarily as a result of poor sales performance
and associated insufficient sales volume leveraging at company-owned stores
scheduled for closure. Eliminating those
11
<PAGE>
stores slated for closure, retail operating expenses as a percentage of retail
sales were 63.9% for the first quarter of fiscal 1998.
The Company in fiscal 1998 will close an estimated 8 underperforming Rocky
Mountain Chocolate Factory stores (no Fuzziwig's stores are currently slated for
closure) and sell to potential franchisees certain other stores with the goal of
improving company-owned store program profitability and of reducing the number
of company-owned stores to a nucleus of more profitable store locations.
The Company in fiscal 1998 anticipates opening few company-owned stores and
to refocus its efforts to continue to improve the profitability of the smaller
number of remaining stores. In particular, the Company is testing a new store
design in conjunction with a program of new product introduction with the goal
of increasing same store retail sales. It is coupling this effort with a
focused continued program of improving store margins and reducing expenses by
optimizing product mix, effecting control and motivational policies, practices
and programs to reduce theft and through further emphasis on a financial control
and bonus program to assure achievement of expense targets.
OTHER EXPENSE
Other expense of $152,200 incurred in the first quarter of fiscal 1998
increased 104.3% from the $74,500 incurred in the first quarter of fiscal 1997.
This increase resulted from increased interest expense caused by borrowings in
support of the Company's fiscal 1997 company-owned store expansion.
INCOME TAX EXPENSE
The Company's effective income tax rate in the first quarter of fiscal 1998
of 38.6% increased from the 37.7% rate in the first quarter of fiscal 1997 as a
result of utilization of remaining available state net operating loss
carryforwards in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
Operating cash flows in the first quarter of fiscal 1998 increased $87,900
and 73.7% from the $119,300 in the first quarter of fiscal 1997 to $207,200 in
the first quarter of fiscal 1998. This increase resulted from operating cash
flows generated by increased number of company-owned stores (reflected in
increased depreciation and amortization charges shown in the Company's statement
of cash flows).
At May 31, 1997, working capital was $3,707,140 in comparison with
$2,663,775 at February 28, 1997, a $1,043,365 increase. This increase resulted
from fixed asset financing achieved recovering cash from investments
12
<PAGE>
in company-owned store operating assets previously funded from operating cash
flows, together with the impact of improved operating cash flows, as
discussed above.
Cash and cash equivalent balances increased from $792,606 at February 28,
1997 to $1,623,693 at May 31, 1997. The Company's current ratio was 1.9/1, at
February 28, 1997 in comparison with 2.2/1 at May 31, 1997.
The Company's long-term debt is comprised primarily of real estate mortgage
financing provided by a local banking facility used to finance the Company's
factory expansion (unpaid balance as of May 31, 1997 $1,604,900), and Chattel
mortgage financing (unpaid balance as of May 31, 1997 $5,522,600) provided by
both local and national financing facilities and used to fund the fiscal 1996
and 1997 company-owned store expansion.
The Company also possessed a $2,000,000 working capital line of credit at
May 31, 1997 secured by accounts receivable and inventories which line had a
$-0- balance at that date. This line expires July, 1998.
The Company had expired its fixed asset availability lines of credit at
May 31, 1997.
For the balance of fiscal 1998, the Company anticipates making $850,000 in
capital expenditures. Of this sum, approximately $450,000 is anticipated to be
used for the opening of new company-owned stores where lease commitments have
already been made, (as discussed above, the Company has limited its expansion
program in the establishment of company-owned stores), with the balance
anticipated to be used for the purchase of additional factory equipment and
computer equipment for the Company's administrative functions.
The Company believes that cash flow from operating activities and available
bank line of working capital credit will be sufficient to service debt, fund
anticipated capital expenditures and provide necessary working capital at least
through the end of fiscal 1998. There can be no guarantee, however, that
unforeseen events will not require the Company to secure additional sources of
financing. The Company may also seek additional financing from time to time,
through borrowings or public or private offerings of equity or debt securities,
to fund its future expansion plans.
IMPACT OF INFLATION
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 company-owned store facility additions
may reflect potentially escalating cost of real estate and
13
<PAGE>
construction. There is no assurance that the Company will be able to pass on
its increased costs to its customers.
Depreciation expense is based on the historical cost to the Company of its
fixed assets, and therefore is less than it would be if it were based on current
replacement cost. While property and equipment acquired in prior years will
ultimately have to be replaced at higher prices, it is expected that replacement
will be a gradual process over many years.
SEASONALITY
The Company is subject to seasonal fluctuations in sales, which cause
fluctuations in quarterly results of operations. Historically, the strongest
sales of the Company's products have occurred during the Christmas holiday and
summer vacation seasons. 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 the Company's 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 a full fiscal year.
EFFECT OF NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128, EARNINGS PER SHARE, which is effective for
financial statements issued after December 15, 1997. Early adoption of the new
standard is not permitted. The new standard eliminates primary and fully
diluted earnings per share together with disclosure of how the per share amounts
were computed. The adoption of this new standard is not expected to have a
material impact on the disclosure of earnings per share in the financial
statements of the Company.
14
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report are forward-looking statements
that reflect assumptions made by management based on information currently
available to it, and the Company can give no assurance that the expectations or
potential occurrences reflected in such statements will be realized. Should one
or more of the uncertainties underlying such expectations materialize or
underlying assumptions prove incorrect, actual results may vary materially from
those expected.
The Company's ability to successfully achieve expansion of its Rocky
Mountain Chocolate Factory and Fuzziwig's franchise systems depends on many
factors also not within the Company's control including the availability of
suitable sites for new store establishment, the availability of qualified
franchisees to support such expansion and acceptance by the public of the
Fuzziwig's concept.
Efforts to sell, close or improve operating results of under-performing
company-owned stores depends on many factors not within the Company's control
including availability of qualified buyers and its ability to negotiate out of
existing leases under favorable terms, as well as on consumer traffic and
spending patterns.
Efforts to improve the decline in same store pounds purchased and to
increase total factory sales depends on many factors not within the Company's
control including the receptivity of its franchise system and of customers in
potential new distribution channels to its product introductions and promotional
programs, which receptivity is by no means assured.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
11.1 Statement regarding computation of earnings per common share
(filed herewith at page 18).
(b) REPORTS ON FORM 8-K
No reports on form 8-K were filed during the three months ended May 31, 1997.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
Date: July 11, 1997 /s/ Franklin E. Crail
------------- --------------------------------------
Franklin E. Crail
(Chairman of the Board, President and
Treasurer)
Date: July 11, 1997 /s/ Lawrence C. Rezentes
------------- --------------------------------------
Lawrence C. Rezentes
(Vice President - Finance)
17
<PAGE>
EXHIBIT 11.1
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
COMPUTATION OF INCOME PER COMMON SHARE
THREE-MONTH PERIODS ENDED
-----------------------------
MAY 31, 1997 MAY 31, 1996
------------ ------------
INCOME PER COMMON AND EQUIVALENT SHARE
Net income allocable to common and
common equivalent shares $ 88,121 $ 163,837
---------- ----------
---------- ----------
Weighted average number of
common shares outstanding 2,912,299 2,905,149
Net effect of dilutive stock options
based on the Treasury Stock Method
using average market price 11,081 41,763
---------- ----------
Weighted average number of common
and common equivalent shares
outstanding 2,923,380 2,946,912
---------- ----------
---------- ----------
INCOME PER COMMON
AND COMMON EQUIVALENT SHARE $ .03 $ .06
---------- ----------
---------- ----------
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 1,623,693
<SECURITIES> 0
<RECEIVABLES> 1,812,786
<ALLOWANCES> 0
<INVENTORY> 2,441,428
<CURRENT-ASSETS> 6,853,093
<PP&E> 15,157,479
<DEPRECIATION> 3,917,574
<TOTAL-ASSETS> 19,149,432
<CURRENT-LIABILITIES> 3,145,953
<BONDS> 6,136,416
0
0
<COMMON> 91,239
<OTHER-SE> 9,775,824
<TOTAL-LIABILITY-AND-EQUITY> 19,149,432
<SALES> 5,032,364
<TOTAL-REVENUES> 5,807,475
<CGS> 2,437,557
<TOTAL-COSTS> 5,511,640
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 152,199
<INCOME-PRETAX> 143,636
<INCOME-TAX> 55,515
<INCOME-CONTINUING> 88,121
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88,121
<EPS-PRIMARY> .03
<EPS-DILUTED> 00
</TABLE>
