Business Context and Reporting Period
This Form 8-K was filed by Rocky Mountain Chocolate Factory, Inc. on November 14, 2018. The report addresses a corporate governance issue regarding the composition of the Company's Audit Committee following the passing of a board member.
Key Financial Metrics
The filing text does not provide a clear value for revenue, profit, cash flow, margins, debt, or liquidity. This report is a current report regarding a listing compliance matter and does not contain financial performance data.
Material Changes
The material change reported is the Company's non-compliance with Nasdaq Listing Rule 5605(c)(2)(A). This rule requires the Audit Committee to be composed of at least three independent directors. The non-compliance resulted from the passing of Mr. Lee N. Mortenson, a member of the Board and Audit Committee, on October 5, 2018, which left the committee with only two independent directors.
Guidance, Outlook, and Risks
Outlook and Management Commentary: The Company received a notice from Nasdaq on November 14, 2018, but is entitled to a cure period to regain compliance. This period expires on the earlier of the date of the next annual shareholders' meeting or October 5, 2019. Management states the Board is actively working to fill the vacancy and expects to be compliant by the end of the cure period.
Risks: The primary risk is the potential delisting or failure to satisfy continued listing standards if the vacancy is not filled within the cure period.
Key Facts for Investor Verification
- The Audit Committee currently has only two independent directors, violating Nasdaq requirements for three.
- The vacancy was caused by the death of Director Lee N. Mortenson on October 5, 2018.
- The Company has a cure period ending on October 5, 2019, or the next annual shareholders' meeting, whichever is earlier.
- Management expects to fill the vacancy and regain compliance within the cure period.