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The Company maintains disclosure controls and procedures, defined in Rule 13a-15(e) under the Exchange Act, that are designed to ensure that the information required to be filed or submitted with the SEC under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management of the company with the participation of its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
−Removed: In connection with the preparation of this Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, an evaluation was performed under the supervision and with the participation of management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures.
−Removed: Based on their evaluation, they have concluded that our disclosure controls and procedures were not effective as of June 30, 2022.
+Added: In connection with the preparation of this Quarterly Report on Form 10-Q for the quarter ended December 31, 2022, an evaluation was performed under the supervision and with the participation of management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures.
+Added: Based on their evaluation, they have concluded that our disclosure controls and procedures were not effective as of December 31, 2022.
This determination is based on the previously reported material weakness management previously identified in our internal control over financial reporting, as described below.
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We believe the completion of these processes should remedy our disclosure controls and procedures.
−Removed: We will continue to monitor these issues.
+Added: We will continue to monitor this issue.
Previously Reported Material Weakness in Internal Control Over Financial Reporting
In our Annual Report for the year ended September 30, 2022, filed with the SEC on December 14, 2022, management concluded that our internal control over financial reporting was not effective as of September 30, 2022.
−Removed: In the evaluation, management identified a material weakness in internal control related to the proper design and implementation of controls over our estimates relating to the impairment of goodwill, indefinite-lived intangibles and long-lived assets, specifically over the precision of management’s review of certain assumptions.
+Added: In the evaluation, management identified a material weakness in internal control related to the proper design and implementation of controls over management's review of the Company's accounting for business combinations, specifically related to the identification of and accounting for intangible assets acquired in a business combination.
Remediation Efforts to Address Material Weakness
Management is committed to the remediation of the material weakness described above, as well as the continued improvement of the Company’s internal control over financial reporting.
−Removed: As such, we have added controls to increase the precision of the review of all assumptions used in the impairment valuation model.
+Added: As such, we have added controls to enhance management's review of purchase documents to identify intangible assets acquired and controls to increase the precision of the review of all assumptions used in the intangible asset valuation models.
We will also conduct senior management reviews of any and all material estimates that are applied in these instances.
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Changes in Internal Control Over Financial Reporting
−Removed: On October 18, 2021, we completed our acquisition of eleven gentlemen’s clubs, six related real estate properties, and associated intellectual property (see Note 4 to our unaudited condensed consolidated financial statements).
−Removed: Management has considered this transaction material to the results of operations, cash flows, and financial position from the date of acquisition through June 30, 2022, and believes that the internal controls and procedures of the acquisition have a material effect on internal controls over financial reporting.
−Removed: We are currently in the process of incorporating the internal controls of the acquired group into the internal controls over financial reporting for our assessment of and report on internal controls over financi al reporting for September 30, 2023.
−Removed: Other than as described above, there were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
+Added: Other than as described above, there were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II—OTHER INFORMATION
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.