NOTE

– STOCKHOLDERS' EQUITY

Cash Dividend

The Company paid a quarterly cash dividend of

$0.12

per common share on

March 15, 2019

to stockholders of record on

March 5, 2019.

The Company paid a quarterly cash dividend of

$0.12

per share of common stock on

June 14, 2019

to stockholders of record on

June 4, 2019.

The Company paid a quarterly cash dividend of

$0.12

per share of common stock on

September 13, 2019

to stockholders of record on

September 4, 2019.

The Company paid a quarterly cash dividend of

$0.12

per share of common stock on

December 6, 2019

to stockholders of record on

November 22, 2019.

The Company paid a quarterly cash dividend of

$0.12

per share of common stock on

March 13, 2020

to stockholders of record on

February 28, 2020.

Future declarations of dividends will depend on, among other things, the Company's results of operations, financial condition, capital requirements, 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 Company's stockholders.

As previously announced in

May 2020,

the Board of Directors suspended the Company's

first

quarter cash dividend payment to preserve cash and provide additional flexibility in the current environment as a result of the economic impact of COVID-

19.

Furthermore, the Board of Directors has suspended future quarterly dividends until the significant uncertainty of the current public health crisis and global economic climate has passed, and the Board of Directors determines that resumption of dividend payments is in the best interest of the Company and its stockholders.

Stock Repurchases

July 15, 2014,

the Company publicly announced a plan to repurchase up to

$3.0

million of its common stock in the open market or in private transactions, whenever deemed appropriate by management. On

January 13, 2015,

the Company announced a plan to purchase up to an additional

$2,058,000

of its common stock under the repurchase plan, and on

May 21, 2015,

the Company announced a further increase to the repurchase plan by authorizing the purchase of up to an additional

$2,090,000

of its common stock under the repurchase plan. The Company did

not

repurchase any shares during the

three

and

six

months ended

August 31, 2020.

As of

August 31, 2020,

approximately

$638,000

remains available under the repurchase plan for further stock repurchases.

Warrants

In consideration of Edible entering into the exclusive supplier agreement and the performance of its obligations therein, on

December 20, 2019,

the Company issued Edible a warrant (the “Warrant”) to purchase up to

960,677

shares of the Company's common stock (the “Warrant Shares”) at an exercise price of

$8.76

per share. The Warrant Shares vest in annual tranches in varying amounts following each contract year under the exclusive supplier agreement, subject to, and only upon, Edible's achievement of certain revenue thresholds on an annual or cumulative

five

-year basis in connection with its performance under the exclusive supplier agreement. The Warrant expires

six

months after the final and conclusive determination of revenue thresholds for the

fifth

contract year and the cumulative revenue determination in accordance with the terms of the Warrant.

The Company determined that the grant date fair value of the warrants was de minimis and did

not

record any amount in consideration of the warrants. The Company utilized a Monte Carlo model for purposes of determining the grant date fair value.

Stock-Based Compensation

Under the Company's

2007

Equity Incentive Plan (as amended and restated) (the

“2007

Plan”), the Company

may

authorize and grant stock awards to employees, non-employee directors and certain other eligible participants, including stock options, restricted stock and restricted stock units. On

September 17, 2020,

the Company's stockholders approved an amendment and restatement of the

2007

Plan to (

) increase the number of authorized shares under the

2007

Plan by

300,000

shares and (

) to extend the term of the

2007

Plan to

September 17, 2030.

As of the filing date of this report, there were

319,324

shares available for issuance as awards under the

2007

Plan.

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. AND SUBSIDIARIES

NOTES TO INTERIM (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS

The Company recognized

$143,719

and

$287,437

of stock-based compensation expense during the

three

- and

six

-month periods ended

August 31, 2020,

respectively, compared to

$155,416

and

$386,670

during the

three

- and

six

-month periods ended

August 31, 2019,

respectively. Compensation costs related to stock-based compensation are generally amortized over the vesting period of the stock awards.

The following table summarizes restricted stock unit activity during the

six

months ended

August 31, 2020

and

2019:

	Six Months Ended
	August 31,
	2020			2019
Outstanding non-vested restricted stock units as of February 28 or 29:		265,555			25,002
Granted		-			270,000
Vested		(47,929	)		(28,502	)
Cancelled/forfeited		-			-
Outstanding non-vested restricted stock units as of August 31:		217,626			266,500

Weighted average grant date fair value	$	9.40		$	9.40
Weighted average remaining vesting period (in years)		4.15			5.14

The Company did

not

issue any unrestricted shares of stock to non-employee directors during the

six

months ended

August 31, 2020

compared to an aggregate of

4,833

shares issued during the

six

months ended

August 31, 2019.

In connection with these non-employee director stock issuances, the Company recognized

and

$45,652

of stock-based compensation expense during the

six

months ended

August 31, 2020

and

2019,

respectively.

During the

three

- and

six

-month periods ended

August 31, 2020,

the Company recognized

$143,719

and

$287,437,

respectively, of stock-based compensation expense related to restricted stock unit grants. The restricted stock unit grants generally vest in equal annual or quarterly installments over a period of

five

six

years. During the

six

-month periods ended

August 31, 2020

and

2019,

47,929

and

28,502

restricted stock units vested and were issued as common stock, respectively. Total unrecognized compensation expense of non-vested, non-forfeited restricted stock units granted as of

August 31, 2020

was

$1,850,943,

which is expected to be recognized over the weighted-average period of

4.15

years.

The Company has

outstanding stock options as of

August 31, 2020.