UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2007

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Rocky Mountain Chocolate Factory, Inc.

(Exact name of registrant as specified in its charter)

Colorado
(State of incorporation)

84-0910696
(I.R.S. Employer Identification No.)

265 Turner Drive, Durango, CO 81303
(Address of principal executive offices)

(970) 259-0554
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ     No o.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and larger accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o               Accelerated filer þ               Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange act). Yes o     No þ.

On December 28, 2007 the registrant had outstanding 6,369,285 shares of its common stock, $.03 par value.

The exhibit index is located on page 20.

 

 

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.

FORM 10-Q

TABLE OF CONTENTS

				Page No.
PART I.		FINANCIAL INFORMATION
Item 1.		Financial Statements			3-11
		Statements of Income			3
		Balance Sheets			4
		Statements of Cash Flows			5
		Notes to Interim Financial Statements			6
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			11
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			18
Item 4.		Controls and Procedures			19
PART II.		OTHER INFORMATION
Item 1.		Legal Proceedings			19
Item 1A.		Risk Factors			19
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			19
Item 3.		Defaults Upon Senior Securities			19
Item 4.		Submission of Matters to a Vote of Security Holders			19
Item 5.		Other Information			20
Item 6.		Exhibits			20
SIGNATURE					20
Airport Development Agreement
Certification Filed Pursuant to Section 302 - CEO
Certification Filed Pursuant to Section 302 - CFO
Certification Furnished Pursuant to Section 906 - CEO
Certification Furnished Pursuant to Section 906 - CFO

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
STATEMENTS OF INCOME
(unaudited)

		Three Months Ended November 30,								Nine Months Ended November 30,
		2007				2006				2007				2006
Revenues
Sales		$	7,166,917			$	7,666,555			$	19,009,821			$	18,253,827
Franchise and royalty fees			1,598,554				1,427,881				4,582,614				4,388,590
Total revenues			8,765,471				9,094,436				23,592,435				22,642,417
Costs and Expenses
Cost of sales, exclusive of depreciation and amortization expense of $99,308, $104,912, $291,382 and $319,574 respectively			4,944,662				5,043,934				12,339,255				11,547,063
Franchise costs			404,762				430,040				1,184,030				1,146,655
Sales and marketing			380,331				367,695				1,076,415				1,072,447
General and administrative			596,787				571,583				1,890,529				1,790,897
Retail operating			222,613				331,115				735,806				1,143,319
Depreciation and amortization			197,365				221,571				585,357				683,016
Total costs and expenses			6,746,520				6,965,938				17,811,392				17,383,397
Income from Operations			2,018,951				2,128,498				5,781,043				5,259,020
Interest Income			25,569				12,652				84,112				49,866
Income Before Income Taxes			2,044,520				2,141,150				5,865,155				5,308,886
Income Tax Provision			778,965				809,355				2,234,630				2,006,760
Net Income		$	1,265,555			$	1,331,795			$	3,630,525			$	3,302,126
Basic Earnings per Common Share		$	.20			$	.21			$	.57			$	.51
Diluted Earnings per Common Share		$	.19			$	.20			$	.56			$	.49
Weighted Average Common Shares Outstanding			6,367,023				6,388,065				6,374,760				6,436,994
Dilutive Effect of Stock Options			173,522				209,701				164,996				235,213
Weighted Average Common Shares Outstanding, Assuming Dilution			6,540,545				6,597,766				6,539,756				6,672,207

The accompanying notes are an integral part of these financial statements.

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
BALANCE SHEETS

		November 30,
		2007				February 28,
		(unaudited)				2007
Assets
Current Assets
Cash and cash equivalents		$	2,340,724			$	2,830,175
Accounts receivable, less allowance for doubtful accounts of $198,834 and $187,519, respectively			5,358,628				3,756,212
Notes receivable			40,844				50,600
Inventories, less reserve for slow moving inventory of $136,577 and $147,700, respectively			3,911,213				3,482,139
Deferred income taxes			272,871				272,871
Other			429,351				367,420
Total current assets			12,353,631				10,759,417
Property and Equipment, Net			5,748,040				5,754,122
Other Assets
Notes receivable			285,341				310,453
Goodwill, net			939,074				939,074
Intangible assets, net			294,525				349,358
Other			116,867				343,745
Total other assets			1,635,807				1,942,630
Total assets		$	19,737,478			$	18,456,169
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable		$	1,245,615			$	898,794
Accrued salaries and wages			534,490				931,614
Other accrued expenses			850,577				585,402
Dividend payable			638,325				551,733
Deferred income			376,000				288,500
Total current liabilities		$	3,645,007			$	3,256,043
Deferred Income Taxes			685,613				685,613
Commitments and Contingencies
Stockholders’ Equity
Common stock, $.03 par value, 100,000,000 shares authorized, 6,369,285 and 6,418,905 issued and outstanding, respectively			191,079				192,567
Additional paid-in capital			11,518,690				6,987,558
Retained earnings			3,697,089				7,334,388
Total stockholders’ equity			15,406,858				14,514,513
Total liabilities and stockholders’ equity		$	19,737,478			$	18,456,169

The accompanying notes are an integral part of these financial statements.

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
STATEMENTS OF CASH FLOWS
(unaudited)

		Nine Months Ended
		November 30,
		2007				2006
Cash Flows From Operating activities
Net income		$	3,630,525			$	3,302,126
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			585,357				683,016
Provision for loss on accounts and notes receivable			25,000				—
Provision for obsolete inventory			60,000				45,000
Loss on sale of assets			28,856				61,218
Expense recorded for stock options			58,355				201,269
Changes in operating assets and liabilities:
Accounts receivable			(1,627,034	)			(2,258,419	)
Inventories			(489,074	)			(551,293	)
Other current assets			(79,101	)			79,046
Accounts payable			346,821				63,676
Deferred income			87,500				—
Accrued liabilities			(130,723	)			91,395
Net cash provided by operating activities			2,496,482				1,717,034
Cash Flows From Investing Activities
Proceeds received on notes receivable			34,868				86,186
Proceeds from sale of assets			29,000				—
Purchases of property and equipment			(498,657	)			(150,449	)
Decrease in other assets			158,800				9,890
Net cash used in investing activities			(275,989	)			(54,373	)
Cash Flows From Financing Activities
Repurchase of stock			(1,256,513	)			(3,794,944	)
Proceeds from exercise of stock options			322,300				426,124
Costs of stock dividend			(9,647	)			—
Dividends paid			(1,766,084	)			(1,480,046	)
Net cash used in financing activities			(2,709,944	)			(4,848,866	)
Net Decrease in Cash and Cash Equivalents			(489,451	)			(3,186,205	)
Cash and Cash Equivalents, Beginning of Period			2,830,175				3,489,750
Cash and Cash Equivalents, End of Period		$	2,340,724			$	303,545

The accompanying notes are an integral part of these financial statements.

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS

NOTE 1 — NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Nature of Operations

Rocky Mountain Chocolate Factory, Inc. is an international franchiser, confectionery manufacturer and retail operator in the United States, Canada and the United Arab Emirates. The Company manufactures an extensive line of premium chocolate candies and other confectionery products. The Company’s revenues are currently derived from three principal sources: sales to franchisees and others of chocolates and other confectionery products manufactured by the Company; the collection of initial franchise fees and royalties from franchisees’ sales; and sales at Company-owned stores of chocolates and other confectionery products. The following table summarizes the number of Rocky Mountain Chocolate Factory stores at November 30, 2007:

		Sold, Not
		Yet Open				Open				Total
Company-owned stores			—				5				5
Company-owned kiosks			—				—				—
Franchise stores — Domestic stores			18				265				283
Franchise Stores — Domestic kiosks			—				21				21
Franchise units — International			—				39				39

Basis of Presentation

The accompanying financial statements have been prepared by the Company, without audit, and reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and Securities and Exchange Commission regulations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the financial statements reflect all adjustments (of a normal and recurring nature) which are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the nine months ended November 30, 2007 are not necessarily indicative of the results to be expected for the entire fiscal year.

These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007.

Stock-Based Compensation

At November 30, 2007, the Company had stock-based compensation plans for employees and nonemployee directors which authorized the granting of stock awards.

Effective March 1, 2006, the Company adopted the recognition provisions of Statement of Financial Accounting Standard No. 123R, “Share-Based Payment” (“SFAS No. 123R”), using the modified-prospective transition method. Under this transition method, compensation cost includes the portion vesting in the period for (1) all share-based payments granted prior to, but not vested, as of March 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and (2) all share-based payments granted subsequent to March 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123R.

NOTE 1 — NATURE OF OPERATIONS AND BASIS OF PRESENTATION — CONTINUED

Stock-Based Compensation — Continued

The Company recognized $0 and $33,198 related equity-based compensation expense during the three and nine month periods ended November 30, 2007. Compensation costs related to share-based compensation are generally amortized over the vesting period in selling, general and administrative expenses in the statements of income.

On February 21, 2006, the Company accelerated the vesting of all outstanding stock options and recognized a share-based compensation charge related to this acceleration. The Company recognized an additional share-based compensation charge of $0 and $25,158 for the three and nine months ended November 30, 2007, respectively, related to this acceleration due to changes in certain estimates and assumptions related to employee turnover since the acceleration date. Adjustments in future periods may be necessary as actual results could differ from these estimates and assumptions.

Prior to adopting SFAS No. 123R, the Company presented all benefits from tax deductions arising from equity-based compensation as a non-cash transaction in the Statement of Cash Flows. SFAS No. 123R requires that the tax benefits in excess of the compensation cost recognized for those exercised options be classified as cash provided by financing activities. No excess tax benefit was included in net cash provided by financing activities for the nine months ended November 30, 2007.

The weighted-average fair value of stock options granted during the nine-month periods ended November 30, 2007 and November 30, 2006 was $2.69 and there were no options granted during the nine-month period ended November 30, 2006. As of November 30, 2007, there was $0 of unrecognized compensation cost related to non-vested share-based compensation that is expected to be recognized over the remainder of fiscal 2008.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model utilizing the following weighted average assumptions:

		Nine Months Ended
		November 30,
		2007				2006
Expected dividend yield			2.60	%			n/a
Expected stock price volatility			20	%			n/a
Risk-free interest rate			4.7	%			n/a
Expected life of options		5 years					n/a

NOTE 2 — EARNINGS PER SHARE

Basic earnings per share is calculated using the weighted average number of common shares outstanding. Diluted earnings per share reflects the potential dilution that could occur from common shares issuable through stock options. For the three months ended November 30, 2007 and 2006, 68,169 and 153,888 stock options, respectively, were excluded from the computation of earnings per share because their effect would have been anti-dilutive. For the nine months ended November 30, 2007 and 2006, 99,614 and 150,654 stock options, respectively, were excluded from the computation of earnings per share because their effect would have been anti-dilutive.

NOTE 3 — INVENTORIES

Inventories consist of the following:

		November 30, 2007				February 28, 2007
Ingredients and supplies		$	1,769,063			$	1,730,850
Finished candy			2,142,150				1,751,289
Total inventories		$	3,911,213			$	3,482,139

NOTE 4 — PROPERTY AND EQUIPMENT, NET

Property and equipment consists of the following:

		November 30, 2007				February 28, 2007
Land		$	513,618			$	513,618
Building			4,717,230				4,717,230
Machinery and equipment			6,773,930				6,284,433
Furniture and fixtures			692,253				673,194
Leasehold improvements			422,164				418,764
Transportation equipment			350,714				350,714
			13,469,909				12,957,953
Less accumulated depreciation			7,721,869				7,203,831
Property and equipment, net		$	5,748,040			$	5,754,122

NOTE 5 — STOCKHOLDERS’ EQUITY

Stock Dividend

On July 10, 2007 the Board of Directors declared a 5 percent stock dividend payable on July 31, 2007 to shareholders of record as of July 20, 2007. Shareholders received one additional share of Common Stock for every twenty shares owned prior to the record date. Subsequent to the dividend there were 6,380,945 shares outstanding.

All share and per share data have been restated in all periods presented to give effect to the stock dividend.

Stock Repurchases

Between August 15, 2007 and August 28, 2007, the Company repurchased 16,000 shares at an average price of $15.96 per share. Between March 1, 2007 and May 15, 2007 the Company repurchased 76,335 shares at an average price of $13.12 per share. Between June 30, 2006 and February 28, 2007 the Company repurchased 91,966 shares at an average price of $13.03 per share. Between March 24, 2006 and May 18, 2006 the Company repurchased 235,424 shares at an average price of $13.52 per share.

Cash Dividend

The Company paid a quarterly cash dividend of $0.095 per common share on September 14, 2007 to shareholders of record on September 4, 2007. The Company paid a quarterly cash dividend of $0.095 per common share on June 15, 2007 to shareholders of record on June 1, 2007. The Company paid a quarterly cash dividend of $0.086 per common share on March 16, 2007 to shareholders of record on March 2, 2007. On September 27, 2007 the Company declared a quarterly cash dividend of $0.10 per common share payable on December 14, 2007 to shareholders of record on December 3, 2007.

Future declaration of dividends will depend on, among other things, the Company’s results of operations, capital requirements, financial condition and on such other factors as the Company’s Board of Directors may in its discretion consider relevant and in the best long term interest of the shareholders.

NOTE 6 — SUPPLEMENTAL CASH FLOW INFORMATION

		Nine Months Ended
		November 30,
		2007				2006
Cash paid for:
Income taxes		$	2,084,412			$	2,065,407
Non-Cash Financing Activities
Dividend payable		$	86,592			$	46,431
Issue stock for rights and services			—				15,822

NOTE 7 — OPERATING SEGMENTS

The Company classifies its business interests into two reportable segments: Franchising and Manufacturing. The Company’s retail stores provide an environment for testing consumer behavior, various pricing strategies, new products and promotions, operating, training and merchandising techniques. Three operational stores previously classified as held for sale were reclassified as assets held and used when management’s intentions changed. All Company-owned retail stores are evaluated by management in relation to their contribution to franchising efforts and are included in the Franchising segment. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1 to the Company’s financial statements included in the Company’s annual report on Form 10-K for the year ended February 28, 2007. The Company evaluates performance and allocates resources based on operating contribution, which excludes unallocated corporate general and administrative costs and income tax expense or benefit. The Company’s reportable segments are strategic businesses that utilize common merchandising, distribution, and marketing functions, as well as common information systems and corporate administration. All inter-segment sales prices are market based. Each segment is managed separately because of the differences in required infrastructure and the difference in products and services:

Three Months Ended November 30, 2007		Franchising				Manufacturing				Other				Total
Total revenues		$	1,909,836			$	7,286,516			$	—			$	9,196,352
Intersegment revenues			—				(430,881	)			—				(430,881	)
Revenue from external customers			1,909,836				6,855,635				—				8,765,471
Segment profit (loss)			781,197				1,879,739				(616,416	)			2,044,520
Total assets			2,301,016				13,059,186				4,377,276				19,737,478
Capital expenditures			1,725				151,692				30,273				183,690
Total depreciation & amortization			47,593				104,574				45,198				197,365

Three Months Ended November 30, 2006		Franchising				Manufacturing				Other				Total
Total revenues		$	1,963,277			$	7,693,597			$	—			$	9,656,874
Intersegment revenues			—				(562,438	)			—				(562,438	)
Revenue from external customers			1,963,277				7,131,159				—				9,094,436
Segment profit (loss)			609,949				2,145,433				(614,232	)			2,141,150
Total assets			2,760,142				12,489,068				2,629,815				17,879,025
Capital expenditures			7,786				6,613				16,409				30,808
Total depreciation & amortization			57,655				110,291				53,625				221,571

Nine Months Ended November 30, 2007
Total revenues		$	5,805,270			$	19,131,712			$	—			$	24,936,982
Intersegment revenues			—				(1,344,547	)			—				(1,344,547	)
Revenue from external customers			5,805,270				17,787,165								23,592,435
Segment profit (loss)			2,290,690				5,517,451				(1,942,986	)			5,865,155
Total assets
Capital expenditures			7,718				360,682				130,257				498,657
Total depreciation & amortization			142,644				307,370				135,343				585,357

Nine Months Ended November 30, 2006
Total revenues		$	6,298,520			$	17,826,962			$	—			$	24,125,482
Intersegment revenues			—				(1,483,065	)			—				(1,483,065	)
Revenue from external customers			6,298,520				16,343,897				—				22,642,417
Segment profit (loss)			2,078,074				5,063,118				(1,832,306	)			5,308,886
Total assets			2,760,142				12,489,068				2,629,815				17,879,025
Capital expenditures			30,589				78,424				41,435				150,448
Total depreciation & amortization			181,343				335,741				165,932				683,016

NOTE 8 — GOODWILL AND INTANGIBLE ASSETS

Intangible assets consist of the following:

						November 30, 2007								February 28, 2007
						Gross								Gross
		Amortization				Carrying				Accumulated				Carrying				Accumulated
		Period				Value				Amortization				Value				Amortization
Intangible assets subject to amortization
Store design		10 Years				$	205,777			$	122,036			$	205,777			$	106,204
Packaging licenses		3-5 Years					120,830				107,914				120,830				104,164
Packaging design		10 Years					430,973				253,105				430,973				217,854
Trademark							20,000				—				20,000				—
Total							777,580				483,055				777,580				428,222
Intangible assets not subject to amortization
Franchising segment-
Company stores goodwill							1,011,458				267,020				1,011,458				267,020
Franchising goodwill							295,000				197,682				295,000				197,682
Manufacturing segment-Goodwill							295,000				197,682				295,000				197,682
Total Goodwill							1,601,458				662,384				1,601,458				662,384
Total intangible assets						$	2,379,038			$	1,145,439			$	2,379,038			$	1,090,606

Amortization expense related to intangible assets totaled $54,833 and $54,834 during the nine months ended November 30, 2007 and 2006, respectively. The aggregate estimated amortization expense for intangible assets remaining as of November 30, 2007 is as follows:

Remainder of fiscal 2008			18,300
2009			73,100
2010			73,100
2011			64,400
2012			37,700
Thereafter			7,925
Total			274,525

NOTE 9 — RECENT ACCOUNTING PRONOUNCEMENTS

In May 2007, the FASB issued FASB Staff Position FIN 48-1 that amends FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FSP FIN 48-1). FSP FIN 48-1 provides guidance on how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The Company adopted FIN 48 effective March 1, 2007 with no impact on the Company’s financial statements. The Company does not expect FIN 48-1 to have a material impact on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, which replaces FASB Statement No. 141. SFAS No. 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the acquiree and the goodwill acquired. The Statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. SFAS No. 141R is effective as of the beginning of an entity’s fiscal year that begins after December 15, 2008 (Fiscal 2010). The Company is in the process of evaluating the potential impact, if any, of the adoption of SFAS No. 141R.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51, which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. The Statement also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No.160 is effective as of the beginning of an entity’s fiscal year that begins after December 15, 2008 (Fiscal 2010). The Company is in the process of evaluating the potential impact, if any, of the adoption of SFAS No. 160.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

A Note About Forward-Looking Statements

The following discussion and analysis of the financial condition and results of operations of the Company should be read in conjunction with the unaudited financial statements and related Notes of the Company included elsewhere in this report. The nature of the Company’s operations and the environment in which it operates subject it to changing economic, competitive, regulatory and technological conditions, risks and uncertainties. The statements, other than statements of historical fact, included in this report are forward-looking statements. Many of the forward-looking statements contained in this document may be identified by the use of forward-looking words such as “will,” “intend,” “believe,” “expect,” “anticipate,” “should,” “plan,” “estimate” and “potential,” or similar expressions. Factors which could cause results to differ include, but are not limited to: changes in the confectionery business environment, seasonality, consumer interest in the Company’s products, general economic conditions, consumer trends, costs and availability of raw materials, competition and the effect of government regulation. Government regulation which the Company and its franchisees either are or may be subject to and which could cause results to differ from forward-looking statements include, but are not limited to: local, state and federal laws regarding health, sanitation, safety, building and fire codes, franchising, employment, manufacturing, packaging and distribution of food products and motor carriers. For a detailed discussion of the risks and uncertainties that may cause the Company’s actual results to differ from the forward-looking statements contained herein, please see the “Risk Factors” contained in the Company’s 10-K for the fiscal year ended February 28, 2007 which can be viewed at the SEC’s website at www.sec.gov or through our website at www.rmcf.com. These forward-looking statements apply only as of the date of this report. As such they should not be unduly relied upon for more current circumstances. Except as required by law, the Company is not obligated to release publicly any revisions to these forward-looking statements that might reflect events or circumstances occurring after the date of this report or those that might reflect the occurrence of unanticipated events.

The Company is a product-based international franchiser. The Company’s revenues and profitability are derived principally from its franchised system of retail stores that feature chocolate and other confectionery products. The Company also sells its candy in selected locations outside its system of retail stores to build brand awareness. The Company operates five retail units as a laboratory to test marketing, design and operational initiatives.

The Company is subject to seasonal fluctuations in sales because of the location of its franchisees, which are located in street fronts, tourist locations, outlet centers and regional centers. Seasonal fluctuation in sales 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. Additionally, 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 for a full fiscal year.

The most important factors in continued growth in the Company’s earnings are ongoing unit growth, increased same store sales and increased same store pounds purchased from the factory. Historically, unit growth has more than offset decreases in same store sales and same store pounds purchased.

The Company’s ability to successfully achieve expansion of its Rocky Mountain Chocolate Factory franchise system depends on many factors not within the Company’s control including the availability of suitable sites for new store establishment and the availability of qualified franchisees to support such expansion.

Efforts to reverse the decline in same store pounds purchased from the factory by franchised stores and to increase total factory sales depend on many factors, including new store openings and the receptivity of the Company’s franchise system to the Company’s product introductions and promotional programs. Same store pounds purchased from the factory by franchised stores declined approximately 9% in the first, second and third quarters and 9% in the first nine months of fiscal 2008.

As a result, the actual results realized by the Company could differ materially from the results discussed in or contemplated by the forward-looking statements made herein. Readers are cautioned not to place undue reliance on the forward-looking statements in this Quarterly Report on Form 10-Q.

Results of Operations

Three Months Ended November 30, 2007 Compared to the Three Months Ended November 30, 2006

Basic earnings per share decreased 4.8% from $.21 for the three months ended November 30, 2006 to $.20 for the three months ended November 30, 2007. Revenues decreased 3.6% from $9.1 million in the third quarter of fiscal 2007 to $8.8 million in the third quarter of fiscal 2008. Net income decreased 5.0% from the third quarter in fiscal 2007 to the third quarter in fiscal 2008. The decrease in earnings per share, operating income, and net income for the third quarter of fiscal 2008 versus the same period in fiscal 2007 was due primarily to a decrease in specialty market sales in the third quarter of fiscal 2008 versus the same period in fiscal 2007 and a decrease in same store pounds purchased from the factory partially offset by growth in the average number of franchise stores in operation and corresponding increases in revenues.

Revenues		Three Months Ended
		November 30,								$				%
($’s in thousands)		2007				2006				Change				Change
Factory sales		$	6,855.7			$	7,131.2			$	(275.5	)			(3.9	%)
Retail sales			311.3				535.4				(224.1	)			(41.9	%)
Franchise fees			278.0				154.0				124.0				80.5	%
Royalty and Marketing fees			1,320.5				1,273.8				46.7				3.7	%
Total		$	8,765.5			$	9,094.4			$	(328.9	)			(3.6	%)

Factory Sales

The decrease in factory sales was due to a 28.6% decrease in product shipments to specialty market customers for the three months ended November 30, 2007 compared to the three months ended November 30, 2006. Additionally, factory sales decreased for the three months ended November 30, 2007 due to a 9% decrease in same store pounds purchased by franchised stores partially offset by an increase in the average number of franchised stores in operation when compared to the three months ended November 30, 2006. The average number of franchised stores in operation increased to 324 in the third quarter of fiscal 2008 from 309 in the third quarter of fiscal 2007.

Retail Sales

The decrease in total retail sales was due to a decrease in the average number of stores in operation from 7 in the third quarter of fiscal 2007 to 5 in the third quarter of fiscal 2008. Same store retail sales declined 2.5% in the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007.

Royalties, Marketing Fees and Franchise Fees

The increase in royalties and marketing fees resulted from growth in the average number of domestic units in operation partially offset by a decline in same store sales. The average number of domestic units in operation grew 5.3% from 266 in the third quarter of fiscal 2007 to 280 in

the third quarter of fiscal 2008 and same store sales declined 2.5% in the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007. Franchise fee revenues in the third quarter of fiscal 2008 increased 80.5% versus the third quarter of fiscal 2007 as a result of a change in the revenue recognition policy for franchise fee revenue compared with the same period in the prior year. Historically the Company has recognized franchise fees upon completion of all significant initial services provided to the franchisee and upon satisfaction of all material conditions of the franchise agreement. Effective with the fourth quarter of fiscal 2007, the Company changed that policy to more closely coincide with industry practice, that is, to recognize franchise fees when the franchise store opens.

Costs and Expenses		Three Months Ended
		November 30,								$				%
($’s in thousands)		2007				2006				Change				Change
Cost of sales — factory adjusted		$	4,814.7			$	4,834.7			$	(20.0	)			(0.4	%)
Cost of sales — retail			130.0				209.2				(79.2	)			(37.9	%)
Franchise costs			404.8				430.0				(25.2	)			(5.9	%)
Sales and marketing			380.3				367.7				12.6				3.4	%
General and administrative			596.8				571.6				25.2				4.4	%
Retail operating			222.6				331.1				(108.5	)			(32.8	%)
Total		$	6,549.2			$	6,744.3			$	(195.1	)			(2.9	%)

		Three Months Ended
Adjusted gross margin		November 30,								$				%
		2007				2006				Change				Change
($’s in thousands)
Factory adjusted gross margin		$	2,041.0			$	2,296.5			$	(255.5	)			(11.1	%)
Retail			181.3				326.2				(144.9	)			(44.4	%)
Total		$	2,222.3			$	2,622.7			$	(400.4	)			(15.3	%)
(Percent)
Factory adjusted gross margin			29.8	%			32.2	%			(2.4	%)			(7.5	%)
Retail			58.2	%			60.9	%			(2.7	%)			(4.4	%)
Total			31.0	%			34.2	%			(3.2	%)			(9.4	%)

Adjusted gross margin is equal to gross margin minus depreciation and amortization expense. 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 accounting principles generally accepted in the United States (“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 measure of performance only in conjunction with GAAP measures of performance such as gross margin. The following table provides a reconciliation of adjusted gross margin to gross margin, the most comparable performance measure under GAAP:

		Three Months Ended
		November 30,
($'s in thousands)		2007				2006
Factory adjusted gross margin		$	2,041.0			$	2,296.5
Less: Depreciation and Amortization			99.3				104.9
Factory GAAP gross margin		$	1,941.7			$	2,191.6

Cost of Sales

The decrease in factory margin is due primarily to lower manufacturing efficiencies associated with lower production volume and higher commodity prices during the third quarter of fiscal 2008 versus the same period in the prior year. The decrease in Company-owned store margin is due primarily to mix of product sold during the third quarter of fiscal 2008 versus the third quarter of fiscal 2007, associated with a decrease in the average number of Company stores in operation.

Franchise Costs

The decrease in franchise costs for the three months ended November 30, 2007 compared with the three months ended November 30, 2006 is due to decreased professional fees. As a percentage of total royalty and marketing fees and franchise fee revenue, franchise costs decreased to 25.3% in the third quarter of fiscal 2008 from 30.1% in the third quarter of fiscal 2007. This decrease as a percentage of royalty, marketing and franchise fees is primarily a result of higher franchise revenues relative to costs.

Sales and Marketing

The increase in sales and marketing costs for the three months ended November 30, 2007 versus the corresponding period in the prior year is due to increased marketing and promotional costs.

General and Administrative

The increase in general and administrative costs in the third quarter of fiscal 2008 versus the same period in the prior year is due primarily to an increase in public company costs partially offset by lower compensation costs. As a percentage of total revenues general and administrative expenses increased to 6.8% in the third quarter of fiscal 2008 compared to 6.3% in the third quarter of fiscal 2007.

Retail Operating Expenses

The decrease was due primarily to a decrease in the average number of stores during the third quarter of fiscal 2008 versus the third quarter fiscal 2007. Retail operating expenses, as a percentage of retail sales, increased from 61.8% in the third quarter of fiscal 2007 to 71.5% in the third quarter of fiscal 2008 due to a lower decrease in costs relative to the decrease in revenues associated with a decrease in the average number of Company stores in operation.

Depreciation and Amortization

Depreciation and amortization of $197,000 in the third quarter of fiscal 2008 decreased 10.9% from $222,000 incurred in the third quarter of fiscal 2007, due to the sale or closure of two Company-owned stores and certain assets becoming fully depreciated.

Interest Income

Interest income of $26,000 realized in the third quarter of fiscal 2008 represents an increase of $13,000 from the $13,000 realized in the third quarter of fiscal 2007 due primarily to higher interest income from invested cash and notes receivable. Cash balances were higher primarily as a result of fewer shares of the Company stock being repurchased in the third quarter of fiscal 2008 compared with the same period of fiscal 2007.

Income Tax Expense

The Company’s effective income tax rate in the third quarter of fiscal 2008 was 38.1% which is an increase of 0.3% compared to the third quarter of fiscal 2007. The increase in the effective tax rate is primarily due to increased income in states with higher income tax rates.

Nine Months Ended November 30, 2007 Compared to the Nine Months Ended November 30, 2006

Basic earnings per share increased 11.8% from $.51 for the nine months ended November 30, 2006 to $.57 for the nine months ended November 30, 2007. Revenues increased 4.2% for the nine months ended November 30, 2006 compared to the nine months ended November 30, 2007. Operating income increased 9.9% from $5.3 million in the nine months ended November 30, 2006 to $5.8 million in the nine months ended November 30, 2007. Net income increased 9.9% from $3.3 million in the nine months ended November 30, 2006 to $3.6 million in the nine months ended November 30, 2007. The increase in earnings per share, operating income, and net income for the first nine months of fiscal 2008 versus the same period in fiscal 2007 was due primarily to an increase in product shipments to specialty markets and growth in the average number of franchise stores in operation, and the corresponding increase in revenue.

Revenues

		Nine Months Ended
		November 30,								$				%
($’s in thousands)		2007				2006				Change				Change
Factory sales		$	17,787.2			$	16,343.9			$	1,443.3				8.8	%
Retail sales			1,222.7				1,909.9				(687.2	)			(36.0	%)
Franchise fees			449.5				460.8				(11.3	)			(2.5	%)
Royalty and marketing fees			4,133.1				3,927.8				205.3				5.2	%
Total		$	23,592.5			$	22,642.4			$	950.1				4.2	%

Factory Sales

Factory sales increased for the nine months ended November 30, 2007 compared to the same period in fiscal 2007 due to an increase of 49.5% in product shipments to specialty markets and growth in the average number of stores in operation to 322 in the first nine months of fiscal 2008 from 306 in the same period in fiscal 2007. Same store pounds purchased in the first nine months of fiscal 2008 were down approximately 9% from the same period in the prior year, more than offsetting the increase in the average number of franchised stores in operation and partially offsetting the increase in specialty market sales. The Company believes the decrease in same store pounds purchased is due primarily to a product mix shift from factory products to products made in the stores and softening in the retail sector of the economy.

Retail Sales

The decline in total retail sales was due to a decrease in the average number of Company-owned stores in operation from 8 in fiscal 2007 to 5 in fiscal 2008. Same store retail sales increased 1.8% in the first nine months of fiscal 2008 compared to the first nine months of fiscal 2007.

Royalties, Marketing Fees and Franchise Fees

The increase in royalties and marketing fees resulted from growth in both the average number of domestic units in operation and same store sales. The average number of domestic units in operation grew 6.1% from 263 in the first nine months of fiscal 2007 to 279 in the first nine months of fiscal 2008 and same store sales grew 0.7% in the first nine months of fiscal 2008 compared to the first nine months of fiscal 2007. Franchise fee revenues declined 2.5% from the nine months ended November 30, 2006 to the nine months ended November 30, 2007 as a result of a change in the revenue recognition policy for franchise fee revenue compared with the same period in the prior year. Historically the Company has recognized franchise fees upon completion of all significant initial services provided to the franchisee and upon satisfaction of all material conditions of the franchise agreement. Effective with the fourth quarter of fiscal 2007, the Company changed that policy to more closely coincide with industry practice, that is, to recognize franchise fees when the franchise store opens.

Costs and Expenses		Nine Months Ended
		November 30,								$				%
($’s in thousands)		2007				2006				Change				Change
Cost of sales — factory adjusted		$	11,849.2			$	10,794.8			$	1,054.4				9.8	%
Cost of sales — retail			490.1				752.3				(262.2	)			(34.9	%)
Franchise costs			1,184.0				1,146.7				37.3				3.3	%
Sales and marketing			1,076.4				1,072.4				4.0				0.4	%
General and administrative			1,890.5				1,790.9				99.6				5.6	%
Retail operating			735.8				1,143.3				(407.5	)			(35.6	%)
Total		$	17,226.0			$	16,700.4			$	525.6				3.1	%

Adjusted gross margin		Nine Months Ended
		November 30,								$				%
($’s in thousands)		2007				2006				Change				Change
Factory adjusted gross margin		$	5,938.0			$	5,549.1			$	388.9				7.0	%
Retail			732.6				1,157.6				(425.0	)			(36.7	%)
Total		$	6,670.6			$	6,706.7			$	36.1				0.5	%
(Percent)
Factory adjusted gross margin			33.4	%			34.0	%			(0.6	%)			(1.8	%)
Retail			59.9	%			60.6	%			(0.7	%)			(1.2	%)
Total			35.1	%			36.7	%			(1.6	%)			(4.4	%)

Adjusted gross margin is equal to gross margin minus depreciation and amortization expense. 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 accounting principles generally accepted in the United States (“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 measure of performance only in conjunction with GAAP measures of performance such as gross margin. The following table provides a reconciliation of adjusted gross margin to gross margin, the most comparable performance measure under GAAP:

		Nine Months Ended
		November 30,
($’s in thousands)		2007				2006
Factory adjusted gross margin		$	5,938.0			$	5,549.1
Less: Depreciation and Amortization			291.4				319.6
Factory GAAP gross margin		$	5,646.6			$	5,229.5

Cost of Sales

Factory margins declined 60 basis points from the nine months ended November 30, 2006 to the nine months ended November 30, 2007 due primarily to increased costs and mix of product sold during the first nine months of fiscal 2008 versus the same period in the prior year. Company-owned store margin declined 70 basis points from the nine months ended November 30, 2006 to the nine months ended November 30, 2007 due primarily to a change in mix of product sold associated with a decrease in the average number of company stores in operation.

Franchise Costs

The increase in franchise costs is due to increased professional fees. As a percentage of total royalty and marketing fees and franchise fee revenue, franchise costs decreased to 25.8% in the first nine months of fiscal 2008 from 26.1% in the first nine months of fiscal 2007.

Sales and Marketing

Sales and marketing costs were approximately the same for the nine months ended November 30, 2007 compared with the nine months ended November 30, 2006.

General and Administrative

The increase in general and administrative costs for the first nine months of fiscal 2008 versus the same period in fiscal 2007 is due primarily to increased professional fees, expense associated with a grant of non-employee director stock options and a loss on the sale of assets. Partially offsetting these increases was a decrease in employee stock option compensation expense from the first nine months of fiscal 2008 compared with the same period in fiscal 2007. As a percentage of total revenues, general and administrative expenses increased to 8.0% in the nine months ended November 30, 2007 compared to 7.9% in the nine months ended November 30, 2006.

Retail Operating Expenses

The decrease in retail operating expenses was due primarily to a decrease in the average number of Company-owned stores during the first nine months of fiscal 2008 versus the first nine months of fiscal 2007. Retail operating expenses, as a percentage of retail sales, increased from 59.9% in the first nine months of fiscal 2007 to 60.2% in the first nine months of fiscal 2008 due to a lower decrease in costs relative to the decrease in revenues associated with a decrease in the average number of Company stores in operation.

Depreciation and Amortization

Depreciation and amortization of $585,000 in the first nine months of fiscal 2008 decreased 14.3% from the $683,000 incurred in the first nine months of fiscal 2007 due to the sale or closure of four Company-owned stores and certain assets becoming fully depreciated.

Interest Income

Interest income of $84,000 realized in the first nine months of fiscal 2008 represents an increase of $34,000 from the $50,000 realized in the first nine months of fiscal 2007, due primarily to higher interest income on higher average cash balances.

Income Tax Expense

The Company’s effective income tax rate in the third quarter of fiscal 2008 was 38.1% which is an increase of 0.3% compared to the third quarter of fiscal 2007. The increase in the effective tax rate is primarily due to increased income in states with higher income tax rates.

Liquidity and Capital Resources

As of November 30, 2007, working capital was $8.7 million, compared with $7.5 million as of February 28, 2007, an increase of $1.2 million. The increase in working capital was primarily due to operating results less the payment of $1.8 million in cash dividends and the repurchase and retirement of $1.3 million of the Company’s common stock.

Cash and cash equivalent balances decreased from $2.8 million as of February 28, 2007 to $2.3 million as of November 30, 2007 as a result of cash flows provided by operating activities less than cash flows used by financing and investing activities. The Company’s current ratio was 3.39 to 1 at November 30, 2007 in comparison with 3.30 to 1 at February 28, 2007. The Company monitors current and anticipated future levels of cash and cash equivalents in relation to anticipated operating, financing and investing requirements.

The Company has a $5.0 million ($5.0 million available as of November 30, 2007) working capital line of credit collateralized by substantially all of the Company’s assets with the exception of the Company’s retail store assets. The line is subject to renewal in July, 2008.

The Company believes cash flows generated by operating activities and available financing will be sufficient to fund the Company’s operations at least through the end of fiscal 2009.

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 the Company 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.

Depreciation expense is based on the historical cost to the Company of its fixed assets, and is therefore potentially 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 for a full fiscal year.

New Accounting Pronouncements

In May 2007, the FASB issued FASB Staff Position FIN 48-1 that amends FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FSP FIN 48-1). FSP FIN 48-1 provides guidance on how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The Company adopted FIN 48 effective March 1, 2007 with no impact on the Company’s financial statements. The Company does not expect FIN 48-1 to have a material impact on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, which replaces FASB Statement No. 141. SFAS No. 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the acquiree and the goodwill acquired. The Statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. SFAS No. 141R is effective as of the beginning of an entity’s fiscal year that begins after December 15, 2008 (Fiscal 2010). The Company is in the process of evaluating the potential impact, if any, of the adoption of SFAS No. 141R.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51, which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. The Statement also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No.160 is effective as of the beginning of an entity’s fiscal year that begins after December 15, 2008 (Fiscal 2010). The Company is in the process of evaluating the potential impact, if any, of the adoption of SFAS No. 160.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company does not engage in commodity futures trading or hedging activities and does not enter into derivative financial instrument transactions for trading or other speculative purposes. The Company also does not engage in transactions in foreign currencies or in interest rate swap transactions that could expose the Company to market risk. However, the Company is exposed to some commodity price and interest rate risks.

The Company frequently enters into purchase contracts of between six to eighteen 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 November 30, 2007, all of the Company’s long-term debt was paid in full. The Company also has a $5.0 million bank line of credit that bears interest at a variable rate. As of November 30, 2007, no amount was outstanding under the line of credit. The Company does not believe that it is exposed to any material interest rate risk related to line of credit.

The Chief Financial Officer and Chief Operating Officer of the Company has primary responsibility over the Company’s long-term and short-term debt and for determining the timing and duration of commodity purchase contracts and negotiating the terms and conditions of those contracts.

Item 4. Controls and Procedures

Under the supervision and with the participation of management, including the principal executive officer and principal financial officer, the Company has evaluated the effectiveness of the design and operation of the disclosure controls and procedures within 90 days of the filing date of this quarterly report, and, based on their evaluation, the Company’s principal executive officer and principal financial officer have concluded that these controls and procedures are effective. There were no material changes in the Company’s internal controls or in other factors that could materially affect these controls subsequent to the date of their evaluation. Disclosure controls and procedures are the Company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files under the Exchange Act is accumulated and communicated to management, including the principal executive officer the principal financial officer, as appropriate to allow timely decisions regarding required disclosure. There were no changes in the Company’s internal control over financial reporting that occurred during the last quarter that has materially affected, or is reasonable likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not currently involved in any material legal proceedings other than routine litigation incidental to its business.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part 1, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended February 28, 2007. There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

								(d) Approximate
						(c) Total Number of		Dollar Value of
						Shares Purchased as		Shares that May Yet
						Part of Publicly		Be Purchased Under
		(a) Total Number of		(b) Average Price		Announced Plans or		the Plans or
Period		Shares Purchased		Paid per Share		Programs(1)		Programs(2)
September 2007		-0-		-0-		-0-		4,649,960
October 2007		-0-		-0-		-0-		4,649,960
November 2007		-0-		-0-		-0-		4,649,960
Total		-0-		-0-		-0-		4,649,960

Item 3. Defaults Upon Senior Securities

     None

Item 4. Submission of Matters to a Vote of Security Holders

     None

Item 5. Other Information

     None

Item 6. Exhibits

	3.1		Articles of Incorporation of the Registrant, as amended, incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K of the Registrant for the year ended February 28, 2007
	3.2		By-laws of the Registrant, as amended on December 11, 2007, incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K of the Registrant filed on December 14, 2007
	10.1		* Airport Development Agreement between The Grove, Inc. and the Registrant
	31.1		* Certification Filed Pursuant To Section 302 Of The Sarbanes-Oxley Act of 2002, Chief Executive Officer
	31.2		* Certification Filed Pursuant To Section 302 Of The Sarbanes-Oxley Act of 2002, Chief Financial Officer
	32.1		* Certification Furnished Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002, Chief Executive Officer
	32.2		* Certification Furnished Pursuant To Section 906 of The Sarbanes-Oxley Act of 2002, Chief Financial Officer

Signature

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.

EXHIBIT INDEX

3.1		Articles of Incorporation of the Registrant, as amended, incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K of the Registrant for the year ended February 28, 2007
3.2		By-laws of the Registrant, as amended on December 11, 2007, incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K of the Registrant filed on December 14, 2007
10.1		* Airport Development Agreement between The Grove, Inc. and the Registrant
31.1		* Certification Filed Pursuant To Section 302 Of The Sarbanes-Oxley Act of 2002, Chief Executive Officer
31.2		* Certification Filed Pursuant To Section 302 Of The Sarbanes-Oxley Act of 2002, Chief Financial Officer
32.1		* Certification Furnished Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002, Chief Executive Officer
32.2		* Certification Furnished Pursuant To Section 906 of The Sarbanes-Oxley Act of 2002, Chief Financial Officer