STATEMENTS FINANCIAL Rocky Mountain Chocolate Factory
Report of Independent Certified Public Accountants Board of Directors and Stockholders Rocky Mountain Chocolate Factory, Inc. We have audited the accompanying balance sheets of Rocky Mountain Chocolate Factory, Inc. as of February 28, 2001 and February 29, 2000, and the related statements of income, stockholders' equity, and cash flows for each of the three years in the period ended February 28, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rocky Mountain Chocolate Factory, Inc. as of February 28, 2001 and February 29, 2000, and the results of its operations and its cash flows for each of the three years in the period ended February 28, 2001, in conformity with accounting principles generally accepted in the United States of America.
GRANT THORNTON LLP Dallas, Texas April 27, 2001
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. STATEMENTS OF INCOME FOR THE YEARS ENDED FEBRUARY 28 or 29, 2001 2000 1999 $ 18,982,948 3,588,889 22,571,837 10,190,091 1,123,506 1,170,636 2,090,579 3,742,140 -1,149,590 19,466,542 3,105,295 (660,620) -94,298 (566,322) 2,538,973 982,585 $ $ $ 1,556,388 .77 .77 2,026,075 5,418 2,031,493 $ $ $ $ 21,352,411 3,294,403 24,646,814 11,235,252 977,087 1,337,818 1,761,779 5,109,772 -1,562,632 21,984,340 2,662,474 (573,379) (419,954) 54,454 (938,879) 1,723,595 667,030 1,056,565 .41 .41 2,580,604 16,441 2,597,045 $ $ $ $ 23,193,011 3,039,517 26,232,528 12,706,474 1,101,092 1,644,320 1,821,582 6,008,416 123,903 1,508,111 24,913,898 1,318,630 (698,557) -67,080 (631,477) 687,153 265,725 421,428 .16 .16 2,665,567 11,776 2,677,343
REVENUES Sales Franchise and royalty fees Total revenues COSTS AND EXPENSES Cost of sales Franchise costs Sales & marketing General and administrative Retail operating Provision for store closures Depreciation and amortization Total costs and expenses OPERATING INCOME OTHER INCOME (EXPENSE) Interest expense Cost of unsolicited tender offer Interest income Other, net INCOME FROM OPERATIONS BEFORE INCOME TAXES INCOME TAX EXPENSE NET INCOME BASIC EARNINGS PER COMMON SHARE DILUTED EARNINGS PER COMMON SHARE WEIGHTED AVERAGE COMMON SHARE OUTSTANDING DILUTIVE EFFECT OF EMPLOYEE STOCK OPTIONS WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, ASSUMING DILUTION
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. BALANCE SHEETS AS OF FEBRUARY 28 or 29, 2001 2000 $ 87,301 2,161,457 135,768 37,574 2,800,128 113,906 270,714 5,606,848 6,820,377 $ 128,192 1,931,187 263,138 76,689 3,084,392 188,999 87,785 5,760,382 8,976,014
ASSETS CURRENT ASSETS Cash and cash equivalents Accounts receivable, less allowance for doubtful accounts of $59,342 and $139,912 Notes receivable Refundable income taxes Inventories Deferred income taxes Other Total current assets PROPERTY AND EQUIPMENT, NET OTHER ASSETS Notes receivable, less allowance for doubtful notes of $143,202 and $0 Goodwill, less accumulated amortization of $614,603 and $584,397 Other Total other assets Total assets LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt Line of credit Accounts payable Accrued salaries and wages Other accrued expenses Total current liabilities LONG-TERM DEBT, LESS CURRENT MATURITIES DEFERRED GAIN ON SALE OF ASSETS DEFERRED INCOME TAXES COMMITMENTS AND CONTINGENCIES EQUITY STOCKHOLDERS' Common stock, $.03 par value; 7,250,000 shares authorized; 1,923,284 and 2,386,879 shares issued and outstanding Additional paid-in capital Retained earnings Less notes receivable from officers and directors Total stockholders' equity Total liabilities and stockholders' equity
1,212,572 915,397 486,869 2,614,838 $ 15,042,063
55,343 1,277,603 370,514 1,703,460 $ 16,439,856
$
1,556,800 550,000 1,065,210 1,006,630 179,425 4,358,065 3,297,340 192,246 131,985
$
1,930,700 75,000 1,055,910 653,209 456,300 4,171,119 3,773,851 -61,797
57,698 2,926,612 4,246,864 (168,747) 7,062,427 $ 15,042,063
71,606 5,879,753 2,690,476 (208,746) 8,433,089 $ 16,439,856
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED FEBRUARY 28 or 29, COMMON STOCK Balance at beginning of year Repurchase and retirement of common stock Issuance of common stock Exercise of stock options Balance at end of year NOTES RECEIVABLE FROM OFFICERS AND DIRECTORS Balance at beginning of year Issuance of note Reduction of notes Balance at end of year ADDITIONAL PAID-IN CAPITAL Balance at beginning of year Repurchase and retirement of common stock Issuance of common stock Exercise of stock options Balance at end of year RETAINED EARNINGS Balance at beginning of year Net income Balance at end of year TOTAL STOCKHOLDERS' EQUITY COMMON SHARES Balance at beginning of year Repurchase and retirement of common stock Issuance of common stock Exercise of stock options Balance at end of year $ 2001 71,606 (14,808) 360 540 57,698 $ 2000 77,988 (6,404) 4 18 71,606 $ 1999 87,373 (10,080) 5 690 77,988
(208,746) 39,999 (168,747) 5,879,753 (3,065,491) 49,640 62,710 2,926,612 2,690,476 1,556,388 4,246,864 $7,062,427 2,386,879 (493,595) 12,000 18,000 1,923,284
(248,745) 39,999 (208,746) 7,046,032 (1,169,805) 844 2,682 5,879,753 1,633,911 1,056,565 2,690,476 $8,433,089 2,599,599 (213,470) 150 600 2,386,879
(248,745) (248,745) 8,719,604 (1,754,331) 699 80,060 7,046,032 1,212,483 421,428 1,633,911 $8,509,186 2,912,449 (336,000) 150 23,000 2,599,599
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 28 or 29, 2001 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Provision for doubtful accounts Asset impairment and store closure losses (Gain) Loss on sale of assets Changes in operating assets a...