Rocky Mountain Chocolate Factory, Inc. Stock Compensation Disclosure

NOTE 9 - STOCK COMPENSATION PLANS

In FY 2021, stockholders approved an amendment and restatement of the 2007 Equity Incentive Plan (as amended and restated, the “2007 Plan”). The 2007 Plan allows awards of stock options, stock appreciation rights, stock awards, restricted stock and stock units, performance shares and performance units, and other stock- or cash-based awards. As of February 29, 2024, total shares authorized under the 2007 Plan was 985,340, and 183,974 shares were available for issuance.

The Company also issued 19,591 restricted stock units outside of the 2007 Plan, of which 7,393 had service vesting conditions and 12,198 had performance vesting conditions, further discussed below. The grant date fair value of the non plan awards was $4.86 per share.

During the year ended February 29, 2024, the Company issued a total of 157,145 restricted stock units, inclusive of the 2007 Plan and non plan awards, of which 95,151 restricted stock units are subject to vesting based on the achievement of company performance goals and 61,994 restricted stock units that vest over time. These issuances were made to certain of the Company's executives. These restricted stock units were issued with an aggregate grant date fair value of $877,838 or $5.59 per share. The performance-based restricted stock units will vest following the end of the Company’s fiscal year ending February 2026 with respect to the target number of performance-based restricted stock units if the Company achieves metrics related to return on equity, Specialty Market gross margin, average unit volume, and social media engagement lifetime value during the performance period, subject to continued service through the end of the performance period. The performance-based restricted stock units may vest from 75% to 110% of target units based upon actual performance. The time-based restricted stock units vest 33% annually on the anniversary date of the award until August 11, 2026.

During the year ended February 28, 2023, the Company issued 36,144 stock options and issued 94,892 performance-based restricted stock units subject to vesting based on the achievement of performance goals. These issuances were made to certain of the Company's executives. The stock options were issued with an aggregate grant date fair value of $77,267 or $2.14 per share. The performance-based restricted stock units were issued with an aggregate grant date fair value of $298,582 or $6.29 per share, based upon a target issuance of 47,446 shares of common stock. The stock options granted vest with respect to one-third of the shares on the last day of the Company’s current fiscal year ending February 29, 2024, and vest as to remaining shares in equal quarterly increments on the last day of each quarter until the final vesting on February 28, 2025. The performance-based restricted stock units will vest following the end of the Company’s fiscal year ending February 2025 with respect to the target number of performance-based restricted stock units if the Company achieves an annualized total shareholder return of 12.5% during the performance period, subject to continued service through the end of the performance period. The Compensation Committee of the Board of Directors has discretion to determine the number of performance-based restricted stock units between 0-200% of the target number that will vest based on achievement of performance below or above the target performance goal.

The Company recognized $437,829 and $651,016 of stock-based compensation expense during the years ended February 29 and 28, 2024 and 2023, respectively. Compensation costs related to stock-based compensation are generally amortized over the vesting period of the stock awards. Refer to Note 16 for further discussion of the equity impact of the prior CEO termination.

Except as noted above, restricted stock units generally vest in equal annual installments over a period of five to six years. During the year ended February 29 and 28, 2024 and 2023, restricted stock units vested and issued as 48,890 and 70,781 shares of common stock, respectively. Total unrecognized compensation expense of non-vested,

non-forfeited restricted stock units and stock options granted as of February 29, 2024 was $408,275, which is expected to be recognized over the weighted-average period of 1.9 years. Total unrecognized compensation expense of non-forfeited, performance vesting, restricted stock units as of February 28, 2023 was $628,966, which is expected to be recognized over the weighted-average period of 1.7 years.