Rocky Mountain Chocolate Factory Inc. announced it has entered into a securities purchase agreement for a private investment in public equity ("PIPE") financing that is expected to result in gross proceeds of approximately $2.2 million to the company, before deducting offering expenses.

Pursuant to the terms of the securities purchase agreement, RMCF is selling an aggregate of 1.25 million shares of its common stock at a price of $1.75 per share. The issuance price reflects a 15% premium to the closing stock price on August 5. The PIPE financing is expected to close on or about August 6, subject to satisfaction of customary closing conditions.

The PIPE financing is being led by American Heritage Railways, a Durango-based railway and entertainment company that provides experiences world-wide. Current RMCF board member Steve Craig is also participating in the offering.

“This offering reflects an initial step for us to strengthen our balance sheet and provides the working capital needed to further advance our updated three-year strategic plan,” says Interim CEO Jeff Geygan. “We are in the final stages of completing a separate non-equity financing that we believe will provide us with the necessary capital required to execute our plans and return RMCF to a state of sustainable growth and profitability.”

“We are also pleased to welcome American Heritage Railways (AHR) as a new strategic shareholder,” Geygan adds. “AHR is one of the most renowned organizations in Durango, CO, and touches more than two million customers per year through directly owned railroads, historic attractions, and the licensing of special events at over 50 additional properties. These licensing rights include The Polar Express and Peanuts by Schulz, among others. Their customer base is a natural fit for our premium chocolate and confectionary products.”

The company intends to use the net proceeds for working capital and general corporate purposes.

The offer and sale of the foregoing securities are being made in a transaction not involving a public offering and the securities have not been registered under the Securities Act of 1933, as amended, and may not be reoffered or resold in the U.S. except pursuant to an effective registration statement or an applicable exemption from the registration requirements. Concurrently with the execution of the securities purchase agreement, RMCF and the investors entered into a registration rights agreement pursuant to which the company has agreed to file a registration statement with the Securities and Exchange Commission registering the resale of the shares of common stock sold in the PIPE financing.

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