Rocky Mountain Chocolate Factory, Inc. Commitments Disclosure
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Purchase contracts
The Company frequently enters into purchase contracts of between to twelve months for chocolate and certain nuts. These contracts permit the Company to purchase the specified commodity at a fixed price on an as-needed basis during the term of the contract. Because prices for these products may fluctuate, the Company may benefit if prices rise during the terms of these contracts, but it may be required to pay above-market prices if prices fall and it is unable to renegotiate the terms of the contract. As of February 28, 2026, the Company was contracted for approximately $4.6 million of raw materials under such agreements. The Company has designated these contracts as normal under the normal purchase and sale exception under the accounting standards for derivatives. These contracts are not entered into for speculative purposes.
Litigation
From time to time, the Company is involved in litigation relating to claims arising out of its operations. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated. As of February 28, 2026, the Company is involved in the early stages of a legal dispute regarding fulfillment of the agreement to sell franchise rights and intangible assets in connection with the sale of U-Swirl (see Note 16). The Company does not expect this to have a material impact on the business or financial condition. The Company is not a party to any other legal proceedings that are expected, individually or in the aggregate, to have a material adverse effect on its business, financial condition or operating results.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | May 29, 2026 | Showing above |
| 2025 | Jun 20, 2025 | |
| 2024 | Jun 13, 2024 | |
| 2023 | May 30, 2023 | |
| 2022 | May 27, 2022 | |
| 2021 | Jun 1, 2021 | |
| 2020 | May 29, 2020 | |
| 2019 | May 29, 2019 | |
| 2018 | May 15, 2018 | |
| 2017 | May 23, 2017 | |
| 2016 | May 23, 2016 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.