ITEM
4.01
|
Changes
in Registrant’s Certifying Accountant.
|
(a)
|
Resignation
of Previous Independent Registered Public Accounting Firm.
|
On
July 12, 2019, BDO USA, LLP (“BDO”) sent our Board of Directors a letter to provide notice of its conclusions under
Section 10A of the Securities Exchange Act of 1934 (the “Exchange Act”) and to inform us that BDO was resigning as
our independent registered public accounting firm, effective immediately.
As
previously disclosed on May 10, 2019 in our Form 12b-25 filed with the Securities and Exchange Commission (“SEC”)
and in our related press release, the SEC initiated an inquiry after a series of negative articles about the company was anonymously
published in internet forums associated with the short-selling community. After we notified BDO of the SEC inquiry and had follow-up
communications, BDO issued a letter to the Audit Committee on March 12, 2019, citing the Audit Committee’s responsibility
under Section 10A of the Exchange Act. On March 15, 2019, a special committee of our Audit Committee (the “Special Committee”)
was formed to conduct an independent internal review to look into the matters raised by the SEC inquiry and the anonymous internet
articles. As part of the internal review, the Special Committee engaged an international law firm as independent outside counsel
(the “Special Counsel”).
The
Special Counsel, led by a former United States Attorney with extensive experience in matters of this nature, began a comprehensive
review that included: (i) reviewing documents relating to the SEC inquiry and the anonymous internet articles; (ii) gathering
and assessing relevant publicly available documents, including Secretary of State filings; (iii) reviewing and analyzing the Company’s
quarterly and annual filings with the SEC; (iv) running extensive searches on our email servers and reviewing relevant documents;
and (v) conducting appropriate interviews.
Throughout
this process, the Special Counsel was in frequent contact with the Special Committee and kept them continuously apprised of developments.
Additionally, the Special Committee and the Special Counsel communicated frequently with BDO to update BDO on the process and
address concerns or additional issues raised. These communications, which included discussions of the matters described in BDO’s
July 12, 2019 letter, continued until the week of BDO’s resignation.
Our
management and employees have fully cooperated with both the Special Committee’s review and the SEC inquiry, and Special
Counsel has presented the findings to the Audit Committee and to the Board of Directors. Following Special Counsel’s presentation
of the findings, BDO notified RCI’s Board of Directors on July 12, 2019 that, due to certain concerns relating to the procedural
aspects of the review process of the Special Committee and Special Counsel, it was providing notice to the Board in accordance
with Section 10A(b)(2) of the Exchange Act and resigning effective immediately. Specifically, BDO stated that it believes the
company has not performed sufficient investigatory procedures and has not taken timely and appropriate remedial action in response
to certain deficiencies that BDO thinks exist in the way the internal review has been conducted, including: (i) undue restriction
on the scope of the internal review; (ii) failure to initiate certain forensic procedures; (iii) refusal to provide BDO access
to pertinent interview summaries and other documents; (iv) lack of assessment as to the impact of the matters identified to date
on existing and future regulatory filings, including financial statements related footnotes; and (v) restrictions, based on privilege,
hindering BDO’s ability to properly shadow and evaluate the adequacy of the internal review.
The
Special Committee disagrees with BDO’s assessment of any procedural deficiencies in the internal review. The Special Committee
and Special Counsel believe the internal review has been both thorough and procedurally sound.
Although
the fact-finding portion of the internal review was substantially complete at the time of BDO’s resignation, BDO elected
not to receive a final report before resigning.
We
have begun the process of identifying a new independent registered public accounting firm and will disclose the engagement of
a new independent registered public accounting firm in accordance with SEC rules and regulations once the process has been completed.
We have authorized BDO to respond fully to the inquiries of our successor accountant, upon engagement, concerning the subject
matter of this Current Report and the content of BDO’s March 12, 2019 letter and any related correspondence from BDO.
Neither
of BDO’s reports on the financial statements for the past two fiscal years contained an adverse opinion or a disclaimer
of opinion, or was qualified or modified as to uncertainty, audit scope, or accounting principles.
Except
for the matters described in paragraphs one through seven above and in paragraph 11 below of this Current Report, during our two
most recent fiscal years or any subsequent interim period preceding the resignation of BDO, (i) there have been no disagreements
with BDO on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure,
which disagreement(s), if not resolved to the satisfaction of BDO, would have caused it to make reference to the subject matter
of the disagreement(s) in connection with its report; and (ii) none of the kinds of events listed in paragraphs (a)(1)(v) (A)
through (D) of Item 304 of Regulation S-K occurred while BDO was engaged.
As
disclosed in our Form 10-K’s for the years ended September 30, 2018 and September 30, 2017, BDO audited our internal control
over financial reporting as of the fiscal year end for both those periods and identified certain material weaknesses, which material
weaknesses were also identified in management’s assessment. The identification of the material weaknesses resulted in BDO
expressing an opinion that we did not maintain, in all material respects, effective internal control over financial reporting
as of September 30, 2018 and as of September 30, 2017.
We
previously provided BDO a copy of this current report on Form 8-K and requested that it furnish us with a letter addressed to
the SEC stating whether or not BDO agrees with the above statements. We have received the requested letter from BDO stating that
they agree, a copy of which is filed as Exhibit 16.1 to this report.