This chocolate maker's cushion is wearing thin

Rocky Mountain Chocolate Factory, Inc., a US chocolate maker, booked revenue of USD 6.7m in the quarter ended in August 2026, 2.5% less than a year earlier. The operating loss widened to USD 1.1m from USD 479k, and the operating margin fell to -16.3% from -7.0%. Interest expense came to USD 211k. The net loss reached USD 1.3m, against USD 662k in the same quarter a year before. A business that loses money before interest has no operating profit left to pay the interest with.

Interest cover weakens when borrowing grows, when floating rates reset higher, or when operating profit drops while the debt stays. Here the operating result is negative, so the interest has to come from somewhere else. Cash stood at USD 416k, down from USD 2.0m, and equity fell to USD 3.0m from USD 6.1m. In October 2026 the company filed a current report with the SEC covering the completion of an acquisition and entry into a material definitive agreement. The accounts do not show how the interest is funded. I would watch the cash line, because it is the one carrying the interest.