Failure to comply with applicable laws or regulations, as interpreted and applied, or the Company’s reporting obligations with the SEC, and an event of default under the Existing Notes, could have a material adverse effect on the Company’s reputation, the price of its securities and its business, financial condition and results of operations. The Company cannot predict the outcome of the above-referenced matters. An unfavorable outcome could have a material adverse impact on the Company’s financial position, results of operations or liquidity or the market for its securities, and could subject the Company and/or its directors and officers to litigation or other actions from third parties or regulatory bodies related to the above-referenced matters.
The reports of EY on the consolidated financial statements of the Company as of and for the fiscal years ended December 31, 2023 and 2022 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, with the exception of providing a qualification as to the Company’s ability to continue as a going concern.
During the Company’s two most recent fiscal years and the subsequent interim period through November 19, 2024, there were no disagreements with EY 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 EY, would have caused it to make reference to the subject matter of the disagreement(s) in connection with its report. During the Company’s two most recent fiscal years and the subsequent interim period through November 19, 2024, there were no reportable events of the type described in Item 304(a)(1)(v) of Regulation S-K, except (i) for the disclosure of the material weakness in the Company’s internal control over financial reporting as disclosed in Part II, Item 9A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and (ii) that, as described in the EY Letter (as defined below), EY advised the Audit Committee, including in a discussion on November 10, 2024, in substance, that information had come to EY’s attention that if further investigated may materially impact the fairness or reliability of the financial statements issued or to be issued for the second and third quarters, or cause EY to be unwilling to rely on management’s representations or be associated with the registrant’s financial statements, and at the time of EY’s dismissal on November 19, 2024, such investigation was not complete.
The Company provided EY with a copy of the foregoing disclosure and requested EY to furnish the Company with a letter addressed to the SEC stating whether it agrees with the statements made herein. On November 20, 2024, EY furnished a copy of such letter to the Company stating that it disagrees with certain of the statements made by the Company (the “EY Letter”). A copy the EY Letter is attached hereto as Exhibit 16.1, and is incorporated herein by reference.
As set forth below, the Company disagrees with certain of the statements made by EY in the EY Letter.
First, in the fourth bullet point of the EY Letter, EY states that “The Executive Chairman asserted a view that the Audit Committee should terminate or suspend the independent investigation and/or terminate EY.” The Company disagrees with this statement, as the Executive Chairman discussed with EY, among other things, the timing of EY’s completion of its review of the Q3 Financials, the potential scenarios surrounding a possible transition to a new accounting firm if determined to do so by the Audit Committee due to the timing issues for EY to complete its review of the Q3 Financials, and what level of support the Company might expect to receive from EY during a transition to a new accounting firm.
Second, in the sixth bullet point of the EY Letter, EY states that “Subsequently, on November 19, EY learned that the person who had been Chair of the Audit Committee was no longer on the Audit Committee, and the remaining members of the Audit Committee had decided to dismiss EY as the Company’s auditor.” The Company believes that such statement suggests, incorrectly, that the Audit Committee had been reconstituted prior to a vote regarding EY’s dismissal. As noted above in paragraph three of this Amendment No. 1, the members of the Audit Committee voted to dismiss EY, and was comprised of the same members of the Audit Committee for the entirety of the investigation as of such date.
Forward-Looking Statements
Statements contained herein relating to the Company or its management’s intentions, hopes, beliefs, expectations or predictions of the future, including, but not limited to, statements relating to the filing of the Q3 Form 10-Q, the Company’s ability to regain compliance with the Nasdaq continued listing standards and the Audit Committee’s
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