Operator:

Hello and welcome to the Rocky Mountain Chocolate Factory First Quarter Earnings Conference Call. (Operator Instructions). Some of the statements made during this call may be considered forward-looking statements that involve a number of risks and uncertainties. There are several factors that could cause actual results of Rocky Mountain Chocolate Factory to differ materially from these forward-looking statements. These factors include, but are not limited to, the potential need for additional financing; the availability of suitable locations for new stores; and the availability of qualified franchisees to support new stores; customer acceptance of new products; dependence upon major customers, economic and consumer spending trends; and such other factors listed from time to time in public announcements and in Rocky Mountain Chocolate Factory’s SEC reports. In addition, please be advised that the financial results for the fiscal periods presented in this call do not necessarily indicate the results that may be expected for any future quarters or the upcoming fiscal year. To Rocky Mountain Chocolate Factory’s knowledge, the information relayed in this conference call is correct as of the date of its transmission and the company does not undertake any obligation to update this information in the future. I would now like to turn the conference over to Mr. Franklin Crail. Mr. Crail, the floor is yours, sir. Franklin Crail: Thank you, operator. Good afternoon, ladies and gentlemen and welcome to Rocky Mountain Chocolate Factory first quarter of fiscal 2013 conference call. My name is Frank Crail, I'm President of Rocky Mountain Chocolate Factory and with me here today is Mr. Bryan Merryman, the company’s Chief Operating Officer. We are going to start the call this afternoon with Bryan giving you a summary of the operating results for our first quarter and at the conclusion of his presentation, we will be happy to answer any questions you may have. So at this point, I'm going to turn the call over to Bryan. Bryan Merryman: Thanks, Frank. I would also like to thank everybody for listening to our call today. The positive trends that we saw in the fourth quarter of fiscal 2012 continue on into our first quarter of this fiscal year. We saw a double-digit revenue growth driven by increased product sales to virtually all customer categories and an increase in Aspen Leaf Yogurt retail sales related to new units and operation. We saw a slightly positive same-store sales, we executed a 100 unit Master Development Agreement covering the country of Japan and opened our second unit. At the beginning of June pursuant to that agreement all revenue segments were up over last year. Royalty and marketing fees, franchise fees, factory product sales and company-owned store sales. We also increased our quarterly dividend 10% to $0.11 per share and pursuant to a share repurchase plan approved by the Board of Directors in 2008, we resumed share purchases during the quarter by purchasing approximately 34,000 shares of our company's stock. Additionally we purchased another 130,000 shares subsequent to the end of the quarter. The average price on the 34,000 shares that we bought back during the quarter was 10.73 and the average price on approximately 130,000 shares that we bought back after the quarter ended was 10.44. Total revenues for the quarter were up 11.8%, factory revenues were up 11.2%, that was driven by an increase in specialty market sales of 13.2% and an increase in sales to franchisees and licensees of 10.3%. These increases were partially offset by a 2.8% decrease in average domestic units and operation and a decrease in same-store pounds purchased of 5%. The decrease in same-store pounds purchased was primarily related to timing of Easter, for the last six months same-stores pounds purchased were basically flat. Our retail sales increased 16.3%. We had more units in operation, the result of opening five Aspen Leaf Yogurt stores and one Rocky Mountain Chocolate Factory store in the fourth quarter in the previous fiscal year. And a 3.3% increase in Rocky Mountain Chocolate Factory company-owned store sales. Royalty and marketing fees increased 9.3%, this was driven by an increase in royalty revenue resulting from the company’s purchase base royalty structure and a 1.1% increase in same-store sales. The franchise fees increased 16.3%, this was driven by the international license fee that we collected from-- on Japan and it was mostly offset by a decrease in new domestic franchise locations. We opened 4 in the current year versus 6 in the prior year. Factory margins were up a 150 basis points, this was primarily the result of improved efficiencies associated with 10.5% higher production volumes. Operating expenses increased 16%, this was driven by costs associated with our international development effort and increase in franchise support related expenses and operating costs related to Aspen Leaf Yogurt. Net income for the quarter was $1.062 million compared with $920,000 in the prior year. Basic earnings per share increased 13.3% to $0.17 in the current year versus $0.15 in the prior year. Fully diluted earnings per share increased the same amount to $0.17 in the current year versus $0.15 in the prior year. We opened 6 stores during the quarter, 2 co-branded Rocky Mountain Chocolate Factory Cold Stone locations; 2 domestic Rocky Mountain Chocolate Factory franchise stores; and 2 international Rocky Mountain Chocolate Factory locations. We continued to generate excess cash flow during the quarter. We finished the quarter with approximately $5.1 million in cash and a current ratio of 4.7 to 1 and the company remained debt free. That's my summary of the results for the quarter and with that I will turn it back over to Frank. Franklin Crail: Thank you, Bryan. Okay, at this point we would be happy to answer your questions if you might have. Operator: [Operator Instructions] And the first question we have comes from Steve Shaw of Sidoti. Steve Shaw: Just wondering what, I know last time we spoke Bryan that you said maybe the Japanese locations might open a little faster than originally expected. Can you guys provide any color on maybe the franchise fees associated with opening those up and how we might project those? Bryan Merryman: The franchise fees, the license fee that we are going to collect this fiscal year has been paid. And so there's not going to be anymore fees associated with store openings. However we are going to continue to collect royalty on sales, provide opening orders and sell products to those stores. And in terms of the timing of openings, I think it's going to for the balance of the fiscal year we will see them get close to their annual requirement of 10 which they have until next April to hit 10, I think they will get close to that this fiscal year and I think that we will see an acceleration of that in the following year. Steve Shaw: And then the test stores in China any color you guys can provide on that whether how many or what’s planned for after the test stores if things went smoothly? Bryan Merryman: What appears most likely at this point is our first test stores in China will be in Hong Kong and while we have not secured the location yet we are hoping that this happens in the fall. Operator: The next question we have comes from Kevin Glunitz [ph], investor. Unknown Attendee: Thank you. Kind of a two part regarding franchises, I think that in discussing the Asian stores that it was mentioned in your press release that this could offset the lack of franchising that it was happening due to unfavorable credit market conditions in the U.S. in recent times. And I was wondering if you could just update us at least qualitatively on the credit situation if that’s changed for franchisees in recent months? And then secondly, one of the only negative things I could find in this press release had to do with Aspen Leaf and it sounds in page 2 you mentioned you are refining -- looking into refining the store footprint and business model I was wondering if you could be a bit more specific on that I was kind of surprised there were no stores opened in the spring quarter leading into the summer, which lay person such as myself might think a normal time to open and if that’s going to be the case in the quarter that we are in right now? Bryan Merryman: Thanks, Kevin. To address just on first part of your question unfortunately there is no update on the credit situation, it hasn’t changed for our business proposition at all. There has been some loosening of credit for certain types of individuals and businesses, but not a franchisee that's going to be in business for the first time and it is literally impossible to find people that have the capital that's required now to open new stores. So we just don’t see a lot of stores opening this year on the Rocky Mountain Chocolate factory side. In terms of Aspen leaf yoghurt, we didn’t see any stores open in terms of refining what we are doing what we have interest in right now on the Aspen Leaf yoghurt side is co branded stores. We expect to open up two small footprint co branded stores in supermarkets in August as of test and then we also have a company store that we co branded the Rocky Mountain Chocolate factory side of that will open up very shortly and so we will see 3 co-branded tests happened in this next quarter, and then we do have some interest right now we are in the process of filing our FDD and cannot sale franchises on Aspen Leaf Yogurt for this very short period of time here but we do have some interest in co branded locations but we don’t have a lot of interest in standalone Aspen Leaf Yogurt locations right now. Unknown Attendee: Thank you, just a quick follow on what’s your expectation for this fiscal year’s CapEx? Bryan Merryman: We don’t -- I mean there is not a whole lot of CapEx that we are planning this year other than maintenance CapEx in our factory. Some IT infrastructure and that's really it. We don't disclose that amount so, we don't disclose our CapEx budget for the year, but it's minimal. Operator: The next question we have comes from Timothy Call of the Capital Management Corp. Timothy Call: In the second paragraph, saying higher shipment of products to specialty market customers, what kind of customers are those? Bryan Merryman: Those are customers that are outside our system of retail stores. Timothy Call: So what will be a large example of that? Bryan Merryman: The largest example is a company called ProFlowers. Timothy Call: And when you look at those sales do you see them as recurring or do you see them as one time in nature? Bryan Merryman: No, they were recurring almost all the growth in sales is with existing customers that, have been customers for one time customers of the company. Timothy Call: And when you have factory, in the next paragraph factory sales up 13.2% in shipments to outside the company's retail store network it's again the same area? Bryan Merryman: Yes, that's what we just talked about. Timothy Call: And can you tell us the seasonality your cash flow through the year? Bryan Merryman: Well, we are really not that seasonal because of our customer mix I mean if you look at earnings from quarter-to-quarter and we definitely have some seasonality in our yoghurt and our chocolate business. The flower business is much different seasonality than chocolate business so it also gives the strong first quarter. So between everything that we do we are not that seasonal of a company, we make money and are profitable every month of the year. Operator: The next question we have comes from Brendan Merrell [ph] of Merrell Brothers [ph]. Unknown Analyst: I wanted to get some understanding on the recent share buybacks, about 3 years ago on a call, you said you would buy back shares if they trade at approximately $4 or $5 a share, even it is on a dividend at shares traded that’s low. Are you going to continue your recent buyback and at these current prices? Bryan Merryman: You know the stock’s run up quite a bit since we made those purchases. However, we also since the last time we pegged a range like that, the prospects of the company improved significantly. So we will continue to monitor availability of stock and if larger blocks like this become available, we will make a determination at the time. Unknown Analyst: Okay, thank you. And are you going to think of any other international deals like this new deal? Bryan Merryman: There's quite a bit of interest percolating on the international front, in terms of disclosing when and if we will have another international deal, we are not going to do that. Operator: (Operator Instructions). The next question we have comes from Jeff Geygan of Milwaukee Private Wealth Management. Nicholas Peters: This is actually Nick. I have a question, what has been the factors into the negative trend in pounds of product purchased from the factory by the franchisees over the last quarter and also last several years? Bryan Merryman: Well, I think over the last 6 months it’s been relatively flat. The longer-term trend of seeing negative same-store pounds purchased is really a product mix shift in the franchise system from factory-made products to store-made products. We've seen that trend for as long as I have been with the company. Nicholas Peters: Do you have any plans to change that trend or you think that’s a long term and it’s going to stay that way? Bryan Merryman: I mean there is a chance, it’s getting near where we won’t lose much more market share in our stores, but we don’t have a history there of positive same-store pounds, but the way product mix has changed over the last 10 years, hopefully we are getting near equilibrium there and we won’t see really much of a change going forward. If the economy holds together and we see comps, really low comps like the 1 to 2% range, I would suspect that we’d have pretty flat same-store pounds purchased. Nicholas Peters: Is there anything in the franchise agreement that would limit the amount that they can make on site or that they have to purchase from you? Bryan Merryman: Well, for all the franchise agreements that have been signed recently in the last 10 years or so, the franchisees pay a 10% royalty on products that they make in the store and they pay no royalty on products they buy from the factory. So when you do see a shift, you also see a shift in our royalty revenues as well. Easter caused a shift this year, where we were positive in the fourth quarter of last year and then we were negative in the first quarter of this year and that really offsets with either lower royalties or higher royalties. So there is that structure that really is an economic equivalent for the company. Also the franchise agreement requires that franchisees maintain at least 50% of their retail space that they have Rocky Mountain Chocolate Factory’s factory product. So there is also you know some legal basis for us to challenge stores that are too low. Operator: The next question we have comes from Jerry Falkner of RJ Falkner & Company. R. Jerry Falkner: Regarding the stores in Japan, can you talk a little bit about how those stores are similar to and how they might differ from a typical store in the United States and how their relationship with you in terms of purchasing product, is there any difference between those stores and the U.S. stores? Bryan Merryman: Well first of all the stores in Japan are very, very small footprint stores. They pay percentage rent and they are averaging at fund volume so far is substantially higher than a full-blown Rocky Mountain Chocolate Factory store in the U.S. Other than apples in some few supplies, they get all of the product that they sell in store from our factory here. They pay a lower royalty, but all of the-- the confection product is required to come from the company. R. Jerry Falkner: So if they have to buy basically all of the confectionery products from you, that could have some positive implications for the utilization of your factory in Durango as you go forward and open all of these Japanese stores. The factory margins this last quarter were up a pretty nice 150 basis points, what sort of capacity utilization are you at with your plant in Durango and do you think you can continue to show improvement in factory margins as the sales improves? Bryan Merryman: Well I mean I think it depends on what happens with commodity prices, but for sure as we see higher volumes, we can leverage our fixed costs and improve our purchasing power and the stores in Japan will have a much higher -- well the factory here in the U.S. will have a much higher market share in terms of store sales in Japan and so we are a little over 50% of capacity right now. So I guess quickly those are all yeses to your question. Operator: The next question we have comes from Sam Obensein [ph]. an investor. Unknown Attendee: Just wanted to see if you guys could shed a little color on commodity prices year-over-year? Bryan Merryman: Pretty even year-over-year right now, we have a favorable chocolate contract that's been offset by some other upcoming price increases. Operator: The next is a follow-up from Kevin Grunitz [ph], private investor. Unknown Attendee: Thank you. Just a follow-up on my CapEx question, understanding that your roughly $3.3 million in CapEx was on the high side last year, if you would tack a similar figure on to the $2.9 million that you pay in dividends on an annual basis, you come up with about $6.2 million. Understanding there's other items involved in your cash flow statement that would eat up more than the $5.1 million cash you have on hand, so I guess the question is would you use debt to help fund a dividend down the road? Bryan Merryman: We have no plans to do that and last year when you look at the CapEx that was building the company-owned Aspen Leaf Yogurt stores. Maintenance CapEx for our factory run roughly $250,000 a year and then we always have discretionary CapEx that we use to improve our business, but CapEx this year will be substantially less than they were last year. Operator: And next is a follow up from the location of Jeff Geygan, Milwaukee Private Wealth Management. Jeff Geygan: I commend you for doing a very nice job for last 6 to 12 months I think it’s been a challenging environment and I think you have done an excellent job frankly. The question that I have relates to the $5 million in cash that you are holding, that Mr. Glunitz [ph] referred to. What is your thinking about uses of that cash at this point given your very pristine balance sheet? Bryan Merryman: Well right now I think Jeff, the uses are the minimal CapEx that we’ve talked about, also paying the dividend and having a little bit of a reserve if we see a dip in the stock price maybe and shares become available having some bullets for that. And also if we get the opportunity down the road we would like to have some cash to potentially take equity stakes and some of the international deals that we do where we see such positive results as like we are seeing to date in Japan I am not sure that we will get that opportunity with our partners in Japan, but if we did at least right now we would like to have the flexibility to do that. Jeff Geygan: Alright that’s interesting. Based on Mr. Faulkner’s comments your press release mentioned that factory gross margin improvement of $160 basis points and your retail margin you actually give the percentage have you ever disclosed your factory gross margin percent? Bryan Merryman: Yes, we did on the call here and in this quarter it was 31.7% versus 30.2% and then you can also see both of those numbers in the queue when it gets filed. Operator: Next we have a follow up from Kevin Glunitz [ph], Investor. Unknown Attendee: Hi, just a quick one and I apologize if I missed this, do you have to do a different formulation for the candies you sell in Asia or is it identical to the U.S. sales? Bryan Merryman: So far it has been identical I think may be once we have a more critical mass that will work on developing some unique packaging items for them but they very much like American brands want the product to be the same as they are here. Operator: So it appears that we have no further at this time. We will are going to conclude our Question-and-Answer session and I would now like to turn the conference back over to management for any closing remarks, gentlemen. Franklin Crail: Thank you, Operator. I would like to thank you all again for seeing to our first quarter conference call. We look forward to talking with you in 3 months at the end of the second quarter so have a nice day and thank you again. Operator: Well thank you, sir and thank you gentlemen for your time. The conference call has now concluded. So if would like listen again this conference you may dial 1-877-344-7529 or area code 412-317-0088 beginning at 5:30 p.m. Eastern Time today. You will be prompted to enter a conference number, which will be 10016063. Please record the name and company when joining. We thank you for attending today’s presentation. At this time you may disconnect your lines. Thank you.