UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
Filed
by the Registrant [X]
Filed
by a Party other than the Registrant [ ]
Check
the appropriate box:
|
[ ]
|
Preliminary
Proxy Statement
|
|
|
|
|
[ ]
|
Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
|
|
|
|
|
[X]
|
Definitive
Proxy Statement
|
|
|
|
|
[ ]
|
Definitive
Additional Materials
|
|
|
|
|
[ ]
|
Soliciting
Material Pursuant Under Rule 14a-12
|
RCI
Hospitality Holdings, Inc.
(Name
of Registrant as Specified in Its Charter)
Payment
of Filing Fee (Check the appropriate box):
[X]
No fee required.
[ ]
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)
Title of each class of securities to which transaction applies:
|
|
|
(2)
Aggregate number of securities to which transaction applies:
|
|
|
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was determined):
|
|
|
(4)
Proposed maximum aggregate value of transaction:
|
|
(5)
Total fee paid:
|
|
|
[ ] Fee paid previously with preliminary materials.
|
|
[ ]
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule
and the date of its filing.
|
|
(1)
Amount Previously Paid:
|
|
|
(2)
Form, Schedule or Registration Statement No.:
|
|
|
(3)
Filing Party:
|
|
|
(4)
Date Filed:
|
|
RCI
HOSPITALITY HOLDINGS, INC.
10737
CUTTEN ROAD
HOUSTON,
TEXAS 77066
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON MONDAY, SEPTEMBER 30, 2019
The
Annual Meeting of Stockholders (the “Annual Meeting”) of RCI Hospitality Holdings, Inc. (“we,” “us”
and the “Company”) will be held at our corporate offices located at 10737 Cutten Road, Houston, Texas 77066, on Monday,
September 30, 2019 at 10:00 a.m. (Central Time) for the following purposes:
|
(1)
|
To
elect seven directors;
|
|
(2)
|
To
ratify the selection of Friedman LLP as our independent registered public accounting firm for the fiscal year ending September
30, 2019; and
|
|
(3)
|
To
act upon such other business as may properly come before the Annual Meeting.
|
Only
holders of common stock of record at the close of business on August 5, 2019, will be entitled to vote at the Annual Meeting or
any adjournment thereof. You are cordially invited to attend the Annual Meeting.
We
have elected to furnish proxy materials and our fiscal 2018 Annual Report on Form 10-K (“Annual Report”) to many of
our stockholders over the Internet pursuant to Securities and Exchange Commission rules, which should allow us to reduce costs.
On or about August 21, 2019, we began mailing to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”)
containing instructions on how to access our Proxy Statement and Annual Report and how to vote online. All stockholders who have
previously expressed a specific request to receive paper copies of proxy materials will be sent a copy of the Proxy Statement
and Annual Report by mail beginning on or about August 21, 2019. The Notice also contains instructions on how you can elect to
receive a printed copy of the Proxy Statement and Annual Report, if you only received a Notice by mail.
The Proxy Statement,
Annual Report to security holders for the year ended September 30, 2018 and proxy card are available at www.proxyvote.com.
Whether
or not you plan to attend the Annual Meeting, it is important that your shares be represented and voted at the meeting. If you
received the proxy materials by mail, you can vote your shares by completing, signing, dating, and returning your completed proxy
card, by telephone or over the Internet. If you received the proxy materials over the Internet, a proxy card was not sent to you,
and you may vote your shares only by telephone or over the Internet. To vote by telephone or Internet, follow the instructions
included in the proxy statement.
|
BY
ORDER OF THE BOARD OF DIRECTORS
|
|
|
|
ERIC
S. LANGAN
|
|
CHAIRMAN
OF THE BOARD AND PRESIDENT
|
August
21, 2019
HOUSTON,
TEXAS
RCI
HOSPITALITY HOLDINGS, INC.
10737
CUTTEN ROAD
HOUSTON,
TEXAS 77066
PROXY
STATEMENT
ANNUAL
MEETING OF STOCKHOLDERS
TO
BE HELD ON SEPTEMBER 30, 2019
This
proxy statement (the “Proxy Statement”) is being furnished to stockholders in connection with the solicitation of
proxies by the Board of Directors of RCI Hospitality Holdings, Inc., a Texas corporation (“we,” “us” and
the “Company”), for their use at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held
at our corporate offices located at 10737 Cutten Road, Houston, Texas 77066, on Monday, September 30, 2019 at 10:00 a.m. (Central
Time), and at any adjournments thereof, for the purpose of considering and voting upon the matters set forth in the accompanying
Notice of Annual Meeting of Stockholders.
We
have elected to furnish proxy materials and our fiscal 2018 Annual Report on Form 10-K
1
(“Annual Report”)
to many of our stockholders over the Internet pursuant to Securities and Exchange Commission (“SEC”) rules, which
should allow us to reduce costs. On or about August 21, 2019, we began mailing to most of our stockholders a Notice of Internet
Availability of Proxy Materials (the “Notice”) containing instructions on how to access our Proxy Statement and Annual
Report and how to vote online. All stockholders who have previously expressed a specific request to receive paper copies of proxy
materials will be sent a copy of the Proxy Statement and Annual Report by mail beginning on or about August 21, 2019. The Notice
also contains instructions on how you can elect to receive a printed copy of the Proxy Statement and Annual Report, if you only
received a Notice by mail.
The Proxy Statement, Annual Report to security holders for the year ended September 30, 2018 and
proxy card are available at www.proxyvote.com.
The cost of solicitation of proxies is being borne by us.
The
close of business on August 5, 2019 has been fixed as the record date for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting and any adjournment thereof. As of August 5, 2019, we had 9,616,598 shares of common stock,
par value $0.01 per share, issued and outstanding. The presence, in person or by proxy, of a majority of the outstanding shares
of common stock on the record date is necessary to constitute a quorum at the Annual Meeting. Each share is entitled to one vote
on all issues requiring a stockholder vote at the Annual Meeting. A plurality of the shares voted in person or represented by
proxy at the Annual Meeting will elect as directors the nominees named in Proposal Number 1. Stockholders may not cumulate their
votes for the election of directors. The affirmative vote of a majority of the shares of common stock present or represented by
proxy and entitled to vote at the Annual Meeting is required for the ratification of the appointment of Friedman LLP as our independent
registered public accounting firm (see Proposal Number 2). Abstentions and broker non-votes will be counted for purposes of determining
the presence or absence of a quorum. Abstentions and broker non-votes will not be counted as having voted either for or against
a proposal.
All
shares represented by properly executed proxies, unless such proxies previously have been revoked, will be voted at the Annual
Meeting in accordance with the directions on the proxies. If no direction is indicated, the shares will be voted
(i)
FOR
THE ELECTION OF THE NOMINEES NAMED HEREIN, and (ii)
FOR
THE RATIFICATION OF FRIEDMAN LLP AS THE COMPANY’S INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2019
.
The
Board of Directors is not aware of any other matters to be presented for action at the Annual Meeting. If any other matter is
properly presented at the Annual Meeting, however, it is the intention of the persons named in the enclosed proxy to vote in accordance
with their best judgment on such matters.
Under
the rules of the New York Stock Exchange (“NYSE”), brokers who hold shares in “street name” for customers
are precluded from exercising voting discretion with respect to the approval of non-routine matters (so called “broker non-votes”)
where the beneficial owner has not given voting instructions. Because most large brokerage firms are NYSE member organizations,
these rules affect almost all public companies and not just those listed on the NYSE. Effective July 1, 2009, the NYSE amended
its rule regarding discretionary voting by brokers on uncontested elections of directors such that any investor who does not instruct
the investor’s broker on how to vote in an election of directors will cause the broker to be unable to vote that investor’s
shares on an election of directors. Previously, the broker could exercise its own discretion in determining how to vote the investor’s
shares even when the investor did not instruct the broker on how to vote. Accordingly, with respect to the election of directors
(see Proposal Number 1), a broker is not entitled to vote the shares of common stock unless the beneficial owner has given instructions.
With respect to the ratification of the appointment of Friedman LLP as our independent registered public accounting firm (see
Proposal Number 2), a broker will have discretionary authority to vote the shares of our stock if the beneficial owner has not
given instructions.
The
enclosed Proxy, even though executed and returned, may be revoked at any time prior to the voting of the Proxy (i) by execution
and submission of a revised proxy, (ii) by written notice to our Secretary, or (iii) by voting in person at the Annual Meeting.
1
Pursuant
to our Form 8-K filed with the SEC on July 22, 2019, certain disclosure in our Annual Report on Form 10-K for the fiscal year
ended September 30, 2018 was supplemented, which supplemented disclosure includes supplemental related party
transaction disclosure and revised and supplemental executive compensation disclosure. The version of the 2018 Annual Report
included with the proxy materials furnished to stockholders is the “as filed” version of the Annual Report and
does not include the supplemented disclosure. The disclosure in this proxy statement, however, does include this supplemented
disclosure.
PROPOSAL
1
TO
ELECT SEVEN DIRECTORS FOR THE ENSUING YEAR
NOMINEES
FOR DIRECTORS
The
persons named in the enclosed Proxy have been selected by the Board of Directors to serve as proxies (the “Proxies”)
and will vote the shares represented by valid proxies at the Annual Meeting of Stockholders and adjournments thereof. Unless otherwise
instructed or unless authority to vote is withheld, the enclosed Proxy will be voted for the election of the nominees listed below.
Each duly elected director will hold office until his successor shall have been elected and qualified. Although the Board of Directors
does not contemplate that any of the nominees will be unable to serve, if such a situation arises prior to the Annual Meeting,
the persons named in the enclosed Proxy will vote for the election of such other person(s) as may be nominated by the Board of
Directors.
The
Board of Directors unanimously recommends a vote
FOR
the election of each of the nominees listed below.
All
of the nominees presently serve as directors.
Eric
S. Langan
, age 51, has been a director since 1998, and our President, CEO and Chairman since 1999. He began his career in
the hospitality industry in 1989 and has developed significant expertise in sports bar/restaurants and adult entertainment nightclubs,
including related areas of real estate development and finance. Mr. Langan built the XTC Cabaret nightclub brand and merged it
into RCI in 1998, expanding the scope of the company. He has been instrumental in bringing professional marketing, management,
finance, and technology practices and systems to the gentlemen’s club industry. As one of the original founders of the National
Association of Club Executives (ACE), Mr. Langan has been an active member of its Board of Directors since 1999. Through these
activities, Mr. Langan has acquired the knowledge and skills necessary to successfully operate adult entertainment businesses.
Travis
Reese,
age 49, became a director and our Executive Vice President in 1999. From 1997 through 1999, Mr. Reese had been a senior
network administrator at St. Vincent’s Hospital in Santa Fe, New Mexico. During 1997, Mr. Reese was a computer systems engineer
with Deloitte & Touche. From 1995 until 1997, Mr. Reese was Vice President with Digital Publishing Resources, Inc., an Internet
service provider. From 1994 until 1995, Mr. Reese was a pilot with Continental Airlines. From 1992 until 1994, Mr. Reese was a
pilot with Hang On, Inc., an airline company. Mr. Reese has an Associate’s Degree in Aeronautical Science from Texas State
Technical College. Mr. Reese has been involved in the adult entertainment industry since 1992. His experience and knowledge in
this industry is essential to the Board’s oversight of our businesses.
Luke
Lirot,
age 63, became a director on July 31, 2007. Mr. Lirot received his law degree from the University of San Francisco
in 1986. After serving as an intern in the San Francisco Public Defender’s Office in 1986, Mr. Lirot returned to Florida
and established a private law practice where he continues to practice and specializes in adult entertainment issues. He is a past
President of the First Amendment Lawyers’ Association and has actively participated in numerous state and federal legal
matters. Mr. Lirot represents as counsel scores of individuals and entities within our industry. Having practiced in this area
for over 30 years, he is aware of virtually every type of legal issue that can arise, making him an important member of the Board.
Nourdean
Anakar
, age 62, became a director on September 14, 2010. Mr. Anakar is a seasoned gaming and hospitality senior executive
with a 28 year successful track record in leading the development and management of top ranked gaming and hospitality operations
in the United States, Europe, and Latin America. He was Chairman and CEO of Sorteo Games Inc. from 2002 through 2014 and since
2015 has been a partner of the McKinney Capital Group and oversees all international developments. He received his BA in Management
Science from Duke University and CHA in Hospitality Management from the Conrad Hilton College at the University of Houston. Mr.
Anakar’s experience managing and developing businesses in industries with similar characteristics to ours make him an excellent
fit to the Board.
Yura
Barabash
, age 44, became a director on September 19, 2017. Mr. Barabash has been a Director of SportUpdate BV, private digital
media company in the Netherlands, since December 2017. Mr. Barabash has extensive corporate finance experience across multiple
industries domestically and internationally, and has been involved in multiple equity and debt financings and M&A transactions
for public and private companies in the US, China, Brazil, EU and Russia. From 2016 to June 2019 he was a Senior Vice President
of Finance at Motorsport Network LLC (www.motorsportnetwork.com) in Miami, the largest motorsport data enabled digital media company
in the world. Prior to joining Motorsport Network, he was an investment banker at Primary Capital from 2011 until 2016. Previously,
Mr. Barabash was an investment banker at Rodman & Renshaw and Merrill Lynch. He holds a B.A. from Sevastopol City University
in Ukraine and a Master in International Affairs from Columbia University in New York City, and is fluent in Russian. Mr. Barabash
is a valuable member of the Board of Directors based on his extensive corporate finance and investment banking experience
across multiple industries domestically and internationally with a wide range of transactions (debt and equity). He also possesses
extensive financial modeling and investor relationship experience and experience in diligence, governance and accounting.
Elaine
J. Martin,
age 62, became a director on August 8, 2019. She is co-founder and general partner of two privately-held Houston
area businesses for which she provides a broad array of management and accounting functions on a day-to-day basis. In 1993, she
co-founded Medco Manufacturing LLC, which develops, manufactures and sells, under Food and Drug Administration (FDA) guidelines,
equipment and disposable products used by plastic surgeons in domestic and international markets. In 1989, Ms. Martin co-founded
Aero Tech Aviation LLC, which trains foreign nationals for the Federal Aviation Administration (FAA) Air Frame and Power Plant
examination, for their license to repair US-origin aircraft. Earlier in her career, she was a Registered Nurse specializing in
cosmetic surgery. Ms. Martin received her BS in Biology and Chemistry from Houston Baptist University. Her volunteer activities
have included serving as a member of the Board of Directors of Texas A&M University Mothers’ Club (Aggie Moms). Ms.
Martin’s business acumen and experience running companies make her an important member of the Board.
Arthur
Allan Priaulx
, age 79, became a director on August 8, 2019. He has more than 45 years of experience in the communications
industry. Earlier in his career, he was Vice President and General Manager of King Features Division of Hearst Corporation, in
charge of worldwide newspaper activities and product licensing. He was also publisher of American Banker, a leading trade publication
in the financial services industry, when it was owned by Thomson Financial. In 1993, he founded Resource Media Group, a New York-based
financial media and investor relations firm. His clients included a wide range of companies, including RCI Hospitality Holdings,
Inc., for which he provided public and investor relations services from 1994 to 2013. Mr. Priaulx has been retired since 2014.
He attended Dartmouth College and University of Southampton in the U.K. He has also completed graduate-level courses at INSEAD
Business School in France and the Wharton School of the University of Pennsylvania. His volunteer activities have included serving
as national vice president of United Cerebral Palsy.
OUR
DIRECTORS AND EXECUTIVE OFFICERS
Our
directors are elected annually and hold office until the next annual meeting of our stockholders or until their successors are
elected and qualified. Officers are elected annually and serve at the discretion of the Board of Directors. There is no family
relationship between or among any of our directors and executive officers. Our Board of Directors consists of seven persons. The
following table sets forth our directors and executive officers:
Name
|
|
Age
|
|
Position
|
Eric
S. Langan
|
|
51
|
|
Director
(Chairman) and CEO/President
|
Phillip
K. Marshall
|
|
69
|
|
Chief
Financial Officer
|
Travis
Reese
|
|
49
|
|
Director
and Executive Vice President
|
Luke
Lirot
|
|
63
|
|
Director
|
Nourdean
Anakar
|
|
62
|
|
Director
|
Yura
Barabash
|
|
44
|
|
Director
|
Elaine
J. Martin
|
|
62
|
|
Director
|
Arthur
Allan Priaulx
|
|
79
|
|
Director
|
Phillip
Marshall has served as our Chief Financial Officer since May 2007. He was previously controller of Dorado Exploration, Inc., an
oil and gas exploration and production company, from February 2007 to May 2007. He previously served as Chief Financial Officer
of CDT Systems, Inc., a publicly held water technology company, from July 2003 to September 2006. In 1972, Mr. Marshall began
his public accounting career with the international accounting firm, KMG Main Hurdman. After its merger with Peat Marwick, Mr.
Marshall served as an audit partner at KPMG for several years. After leaving KPMG, Mr. Marshall was partner in charge of the audit
practice at Jackson & Rhodes in Dallas from 1992 to 2003, where he specialized in small publicly held companies. Mr. Marshall
is also a trustee of United Mortgage Trust, United Development Funding IV and United Development Funding V, publicly held real
estate investment trusts.
RELATED
TRANSACTIONS
Presently,
our Chairman and President, Eric Langan, personally guarantees all of the commercial bank indebtedness of the company. Mr. Langan
receives no compensation or other direct financial benefit for any of the guarantees.
We
paid Ed Anakar, our director of operations – club division, employment compensation of $471,154, $450,000 and $375,000 during
the fiscal years ended September 30, 2018, 2017 and 2016, respectively. Additionally, we paid Ed Anakar employment compensation
of approximately $423,000 during the 2019 fiscal year through June 30, 2019. Ed Anakar is the brother of Nourdean Anakar, a director
and Audit Committee member of the company.
In
November 2018, we borrowed $500,000 from Ed Anakar. The note bears interest at the rate of 12% per annum and matures in November
2021. The note is payable in monthly installments of interest only with a balloon payment of all unpaid principal and interest
due at maturity.
During
the last three fiscal years we utilized the services of Sherwood Forest Creations, LLC and its predecessor, Creative Steel Designs,
furniture fabrication companies that manufacture tables, chairs and other furnishings for our Bombshells locations, as well as
providing ongoing maintenance. Sherwood Forest is owned by a brother of Eric Langan, and Creative Steel was owned by his father.
Amounts billed to us for goods and services provided by Sherwood Forest were $321,353 in fiscal 2018, an aggregate of $135,322
by Sherwood Forest and Creative Steel in fiscal 2017, and $176,864 by Creative Steel in fiscal 2016. Sherwood Forest Creations
continues to provide services to the company, and billed us approximately $133,000 during the 2019 fiscal year through June 30,
2019.
Review,
Approval, or Ratification of Transactions
We
have adopted a policy that our business affairs will be conducted in all respects by standards applicable to publicly held corporations
and that we will not enter into any future transactions between us and our officers, directors and 5% shareholders unless the
terms are no less favorable than could be obtained from independent, third parties. Currently, we rely on our Audit Committee
to review related party transactions on an ongoing basis to prevent conflicts of interest. Our Audit Committee reviews a transaction
in light of the affiliations of the director, officer, or shareholder and the affiliations of such person’s immediate family.
Our Audit Committee will approve or ratify a transaction if it determines that the transaction is consistent with our best interests
and the best interests of our shareholders.
Our
Audit Committee is composed of all independent directors, including Yura Barabash, Elaine Martin, Nourdean Anakar and Arthur Allan
Priaulx. We additionally have one other independent director, Luke Lirot, who is not on the Audit Committee. The definition of
“independent” used herein is based on the independence standards of The NASDAQ Stock Market LLC.
INFORMATION
CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
All
directors are expected to make every effort to attend meetings of the Board of Directors, meetings of any Board Committees on
which such director serves, and annual meetings of stockholders. The Board of Directors held four meetings during the fiscal year
ended September 30, 2018. The Board of Directors also executed 11 written consents to action in lieu of a meeting of the Board
of Directors, which were approved unanimously. During the fiscal year ended September 30, 2018, none of our then directors attended
fewer than 75 percent of the aggregate of (i) the total number of meetings of the Board of Directors held during the period for
which he was a director, and (ii) the total number of meetings held by all committees of the Board on which he served during the
periods that he served. All of our six then directors attended the prior year’s annual meeting of stockholders. There is
no family relationship between or among any of our directors and executive officers. We have five directors who meet the definition
of “independent director” under the NASDAQ Stock Market Rules, including Nourdean Anakar, Luke Lirot, Yura Barabash,
Elaine Martin and Arthur Allan Priaulx.
Eric
Langan serves as both Chairman of the Board of Directors and Chief Executive Officer. Of our five independent directors, no director
has been designated “lead” independent director. Accordingly, all five independent directors have an equal role in
the leadership of the Board. We believe that our overall leadership structure is appropriate based on our current size.
As
a part of its oversight function, the Board of Directors monitors how management operates the company. Risk is an important part
of deliberations at the Board and committee level throughout the year. Committees consider risks associated with their particular
areas of responsibility. The Board of Directors as a whole considers risks affecting us. To that end, the Board conducts periodic
reviews of corporate risk management policies and procedures. The Board and its committees consider, among other things, the relevant
risks to us when granting authority to management and approving business strategies. Through this risk oversight process, the
Board reserves the right to make changes to our leadership structure in the future if it deems such changes are appropriate and
in the best interest of our stockholders.
AUDIT
COMMITTEE
We
have an Audit Committee whose current members are Yura Barabash, Nourdean Anakar, Elaine Martin and Arthur Allan Priaulx. All
members of the Audit Committee are independent directors. The purpose of the Audit Committee is to (i) oversee our accounting
and financial reporting processes, our disclosure controls and procedures and system of internal controls and audits of our consolidated
financial statements, (ii) oversee the relationship with our independent auditors, including appointing or changing our auditors
and ensuring their independence, and (iii) provide oversight regarding significant financial matters. The Audit Committee meets
privately with our Chief Financial Officer and with our independent registered public accounting firm and evaluates the responses
by the Chief Financial Officer both to the facts presented and to the judgments made by our outside independent registered public
accounting firm. Yura Barabash serves as the Audit Committee’s financial expert. The Audit Committee held 12 meetings during
the fiscal year ended September 30, 2018. The Audit Committee also executed one written consent to action in lieu of a meeting,
which were approved unanimously.
In
August 2015, our Board adopted a new Charter for the Audit Committee. A copy of the Audit Committee Charter can be found on our
website at
www.rcihospitality.com/investor
. The Charter establishes the independence of our Audit Committee and sets forth
the scope of the Audit Committee’s duties. The Audit Committee conducts an ongoing review of our financial reports and other
financial information prior to their being filed with the SEC, or otherwise provided to the public. The Audit Committee also reviews
our systems, methods and procedures of internal controls in the areas of: financial reporting, audits, treasury operations, corporate
finance, managerial, financial and SEC accounting, compliance with law, and ethical conduct. NASDAQ Stock Market Rules require
all members of the Audit Committee to be independent. The Audit Committee is objective, and reviews and assesses the work of our
independent registered public accounting firm and our internal accounting department.
Report
of the Audit Committee
The
Audit Committee has reviewed and discussed with management our audited financial statements for the fiscal year ended September
30, 2018. The Audit Committee discussed with BDO USA, LLP (“BDO”), our previous independent registered public accounting
firm who was engaged for the fiscal year ended September 30, 2018, the matters required to be discussed by the statement on Auditing
Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting
Oversight Board in Rule 3200T. The Audit Committee has received from BDO the written disclosures and the letter required by applicable
requirements of the Public Company Accounting Oversight Board regarding BDO’s communications with the Audit Committee concerning
independence, and has discussed with BDO the independence of BDO.
Based
on the review and discussions referred to in the paragraph above, the Audit Committee recommended to the Board of Directors that
the audited financial statements be included in our annual report on Form 10-K for the fiscal year ended September 30, 2018. This
report is furnished by the Audit Committee of our Board of Directors, whose members, at the time of this report, were:
Steven
L. Jenkins (former member)
Nourdean
Anakar
Yura
Barabash
NOMINATING
COMMITTEE
We
have a Nominating Committee whose current members are Elaine Martin, Nourdean Anakar, Luke Lirot, Yura Barabash and Arthur Allan
Priaulx. In July 2004, the Board unanimously adopted a Charter with regard to the process to be used for identifying and evaluating
nominees for director. The Charter establishes the independence of our Nominating Committee and sets forth the scope of the Nominating
Committee’s duties. NASDAQ Stock Market Rules require all members of the Nominating Committee to be independent. Pursuant
to its Charter, the Committee has the power and authority to consider Board nominees and proposals submitted by our stockholders
and to establish any procedures, including procedures to facilitate stockholder communication with the Board of Directors, and
to make any such disclosures required by applicable law in the course of exercising such authority. A copy of the Nominating Committee’s
Charter can be found on our website at
www.rcihospitality.com/investor
. The Nominating Committee held one meeting during
the fiscal year ended September 30, 2018.
Stockholders
who wish to submit a proposal for consideration by the Nominating Committee should review the proposal requirements and deadlines
referenced in the section “Future Proposals of Stockholders” below. Stockholder recommendations to the Board of Directors
should be sent to 10737 Cutten Road, Houston, Texas 77066, Attention: Corporate Secretary. Any stockholder recommendations for
consideration by the Nominating Committee should include the candidate’s name, biographical information, information regarding
any current or past relationships between the candidate and RCI Hospitality Holdings, Inc., a description of our shares beneficially
owned by the recommending stockholder, a description of all arrangements between the candidate and the recommending stockholder
and any other person under which the candidate is being recommended, a written indication of the candidate’s willingness
to serve on the Board of Directors, any other information required to be provided under securities laws and regulations, and a
written indication to provide such other information as the Nominating Committee may reasonably request. All candidates, whether
proposed by a stockholder or by any other means, will be evaluated based on the criteria established by the Board of Directors.
Minimum criteria for non-employee candidates includes financial experience and “independence” as defined under applicable
rules promulgated by the SEC pursuant to the Sarbanes-Oxley Act of 2002 and NASDAQ Stock Market Rules. Additional criteria may
include: (a) satisfactory results of any background investigation; (b) experience and expertise; (c) financial resources; (d)
time availability; (e) community involvement; (f) diversity of viewpoints, backgrounds, experiences and other demographics, and
(g) such other criteria as the Nominating Committee may determine to be relevant.
COMPENSATION
COMMITEE
We
have a Compensation Committee whose current members are Elaine Martin, Nourdean Anakar, Luke Lirot, Yura Barabash and Arthur Allan
Priaulx. In June 2014, the Compensation Committee adopted a Charter with regard to the Compensation Committee’s responsibilities,
including evaluating, reviewing and determining the compensation of our Chief Executive Officer and other executive officers.
A copy of the Compensation Committee’s Charter can be found on our website at
www.rcihospitality.com/investor
. The
Compensation Committee held one meeting during the fiscal year ended September 30, 2018.
Compensation
Committee Report
The
Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis (see below) to be included
in this Proxy Statement on Schedule 14A. Based on this review and discussion, the Compensation Committee recommended to the Board
of Directors that the Compensation Discussion and Analysis be included in this report. This report is furnished by the Compensation
Committee of our Board of Directors, whose members are:
Luke
Lirot
Nourdean
Anakar
Yura
Barabash
Elaine
Martin
Arthur
Allan Priaulx
Compensation
Committee Interlocks and Insider Participation
The
Compensation Committee is comprised of Mr. Lirot, Mr. Anakar, Mr. Barabash, Ms. Martin and Mr. Priaulx. No interlocking relationship
exists between any member of the Compensation Committee and any member of any other company’s Board of Directors or compensation
committee.
EXECUTIVE
SESSIONS
At
least twice a year, the independent directors meet in executive session without company management present. One of the purposes
of executive session meetings is to encourage and enhance communication among independent directors. Typically, executive sessions
are held immediately after the year-end Audit Committee meeting and the second fiscal quarter-end Audit Committee meeting. Additional
executive sessions may be held as needed. The independent directors held three executive sessions during the year ended September
30, 2018.
Stockholder
Communications
We
do not currently have a formal process for security holders to send communications to the Board of Directors, which we believe
is appropriate based on our size, the limited number of our stockholders and the limited number of communications which we receive.
However, we welcome comments and questions from our stockholders. Stockholders can direct communications to our Chairman and Chief
Executive Officer, Eric Langan at our executive offices, 10737 Cutten Road, Houston, Texas 77066. While we appreciate all comments
from stockholders, we may not be able to individually respond to all communications. We attempt to address stockholder questions
and concerns in our press releases and documents filed with the SEC so that all stockholders have access to information about
us at the same time. Mr. Langan collects and evaluates all stockholder communications. If the communication is directed to the
Board of Directors generally or to a specific director, Mr. Langan will disseminate the communication to the appropriate party
at the next scheduled Board of Directors meeting. If the communication requires a more urgent response, Mr. Langan will promptly
direct that communication to the appropriate executive officer or director. All communications addressed to our directors and
executive officers will be reviewed by those parties unless the communication is clearly frivolous.
COMPENSATION
DISCUSSION AND ANALYSIS
This
compensation discussion and analysis describes the material elements of the Company’s compensation programs as they relate
to our executive officers who are listed in the compensation tables appearing below. This compensation discussion and analysis
focuses on the information contained in the following tables and related footnotes. The individuals who served as the Company’s
Chief Executive Officer and Chief Financial Officer during fiscal 2018, as well as any other individuals included in the Summary
Compensation Table, are referred to as “named executive officers.”
Overview
of Compensation Committee Role and Responsibilities
The
Compensation Committee of the Board of Directors oversees our compensation plans and policies, reviews and approves all decisions
concerning the named executive officers’ compensation, which may further be approved by the Board, and administers our stock
option and equity plans, including reviewing and approving stock option grants and equity awards under the plans. The Compensation
Committee’s membership is determined by the Board and is composed entirely of independent directors.
Management
plays a role in the compensation-setting process. The most significant aspects of management’s role are to evaluate employee
performance and recommend salary levels and equity compensation awards. Our Chief Executive Officer often makes recommendations
to the Compensation Committee and the Board concerning compensation for other executive officers. Our Chief Executive Officer
is a member of the Board but does not participate in Board decisions regarding any aspect of his own compensation. The Compensation
Committee can retain independent advisors or consultants.
Compensation
Committee Process
The
Compensation Committee reviews executive compensation in connection with the evaluation and approval of an employment agreement,
an increase in responsibilities or other factors. With respect to equity compensation awarded to other employees, the Compensation
Committee or the Board grants stock options, often after receiving a recommendation from our Chief Executive Officer. The Compensation
Committee also evaluates proposals for incentive and performance equity awards, and other compensation.
Compensation
Philosophy
The
Compensation Committee emphasizes the important link between the Company’s performance, which ultimately affects stockholder
value, and the compensation of its executives. Therefore, the primary goal of the Company’s executive compensation policy
is to try to align the interests of the executive officers with the interests of the stockholders. In order to achieve this goal,
the Company attempts to (i) offer compensation opportunities that attract and retain executives whose abilities and skills are
critical to the long-term success of the Company and reward them for their efforts in ensuring the success of the Company, (ii)
align the Company’s compensation programs with the Company’s long-term business strategies and objectives, and (iii)
provide variable compensation opportunities that are directly linked to the Company’s performance and stockholder value,
including an equity stake in the Company. Our named executive officers’ compensation utilizes two primary components —
base salary and long-term equity compensation — to achieve these goals. We have not, however, granted any equity awards
to our executive officers since 2014. Additionally, the Compensation Committee may award discretionary bonuses to certain executives
based on the individual’s contribution to the achievement of the Company’s strategic objectives.
Setting
Executive Compensation
We
fix executive base compensation at a level we believe enables us to hire and retain individuals in a competitive environment and
to reward satisfactory individual performance and a satisfactory level of contribution to our overall business goals. We also
take into account the compensation that is paid by companies that we believe to be our competitors and by other companies with
which we believe we generally compete for executives.
In
establishing compensation packages for executive officers, numerous factors are considered, including the particular executive’s
experience, expertise and performance, our company’s overall performance and compensation packages available in the marketplace
for similar positions. In arriving at amounts for each component of compensation, our Compensation Committee strives to strike
an appropriate balance between base compensation and incentive compensation. The Compensation Committee also endeavors to properly
allocate between cash and non-cash compensation and between annual and long-term compensation.
The
Role of Shareholder Say-on-Pay Votes
At
our annual meeting of shareholders held on August 29, 2018, approximately 96% of the shareholders who voted on the “say-on-pay”
proposal approved the compensation of our named executive officers, as disclosed in the proxy statement. Although this advisory
shareholder vote on executive compensation is non-binding, the Compensation Committee will consider the outcome of the vote when
making future compensation decisions for named executive officers.
Base
Salary
The
Company provides executive officers and other employees with base salary to compensate them for services rendered during the fiscal
year. Subject to the provisions contained in employment agreements with executive officers concerning base salary amounts, base
salaries of the executive officers are established based upon compensation data of comparable companies in our market, the executive’s
job responsibilities, level of experience, individual performance and contribution to the business. We believe it is important
for the Company to provide adequate fixed compensation to highly qualified executives in our competitive industry. In making base
salary decisions, the Compensation Committee uses its discretion and judgment based upon personal knowledge of industry practice
but does not apply any specific formula to determine the base salaries for the executive officers.
Equity-Based
Awards—Equity Compensation Plans
Although
we have not granted any equity awards to our executive officers since 2014, the Compensation Committee has historically used equity
awards, usually in the form of stock options, primarily to motivate our named executive officers to realize benefits from longer-term
strategies that increase stockholder value, and to promote commitment and retention. Equity awards may vest either at a particular
date in the future or upon the achievement of performance criteria that the Company believes are critical to its long-term success.
The
Compensation Committee believes that stock options are an important form of long-term incentive compensation because they align
the executive officer’s interests with the interests of stockholders, since the options have value only if our stock price
increases over time. From time to time, the Compensation Committee may consider circumstances that warrant the grant of full value
awards such as restricted stock units. Examples of these circumstances include, among others, attracting a new executive to the
team; recognizing a promotion to the executive team; retention; and rewarding outstanding long-term contributions.
Our
equity grant practices require that stock options and other equity compensation have prices not less than the fair market value
on the date of grant. The fair market value of our stock option awards has historically been the NASDAQ closing price on the date
of grant.
Retirement
Savings Plan
The
Company maintains a retirement savings plan for the benefit of our executives and employees. Our Simple IRA Plan is intended to
qualify as a defined contribution arrangement under the Internal Revenue Code (the “Code”). Participants may elect
to defer a percentage of their eligible pretax earnings each year or contribute a fixed amount per pay period up to the maximum
contribution permitted by the Code. All participants’ plan accounts are 100% vested at all times. All assets of our Simple
IRA Plan are invested based on participant-directed elections. We make certain matching contributions to the Simple IRA Plan,
which are also 100% vested.
Perquisites
and Other Personal Benefits
The
Company’s executive officers participate in the Company’s other benefit plans on the same terms as other employees
on a non-discriminatory basis. These plans include medical, dental, life and disability insurance. Relocation benefits also are
reimbursed and are individually negotiated when they occur. The Company reimburses each executive officer for all reasonable business
and other expenses incurred by them in connection with the performance of their duties and obligations under their employment
agreements. The Company does not provide named executive officers with any significant perquisites or other personal benefits
except for personal travel using Company-owned automobiles and/or aircrafts.
Summary
Compensation Table
The
following table reflects all forms of compensation for services to us for the fiscal years ended September 30, 2018, 2017 and
2016 of our named executive officers.
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
All Other
|
|
|
|
|
Name and
|
|
|
|
|
Salary
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
(1)
|
|
|
Total
|
|
Principal Position
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Eric S. Langan
|
|
|
2018
|
|
|
|
1,015,384
|
|
|
|
-
|
|
|
|
-
|
|
|
|
111,191
|
|
|
|
1,126,575
|
|
President and Chief Executive Officer
|
|
|
2017
|
|
|
|
900,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
138,198
|
|
|
|
1,038,198
|
|
|
|
|
2016
|
|
|
|
878,434
|
|
|
|
-
|
|
|
|
-
|
|
|
|
122,741
|
|
|
|
1,001,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillip K. Marshall
|
|
|
2018
|
|
|
|
294,231
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,358
|
|
|
|
311,589
|
|
Chief Financial Officer
|
|
|
2017
|
|
|
|
263,942
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,519
|
|
|
|
283,461
|
|
|
|
|
2016
|
|
|
|
255,866
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26,038
|
|
|
|
281,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Travis Reese
|
|
|
2018
|
|
|
|
346,854
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,227
|
|
|
|
403,081
|
|
Executive Vice President
|
|
|
2017
|
|
|
|
320,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
48,228
|
|
|
|
368,228
|
|
|
|
|
2016
|
|
|
|
299,945
|
|
|
|
-
|
|
|
|
-
|
|
|
|
41,663
|
|
|
|
341,608
|
|
(1)
|
All
Other Compensation consists of SIMPLE IRA matching contributions, automobile expenses, and personal use of aircraft. Previously,
we have accounted for personal use of aircraft using a third-party consultant based on a standard industry fare level
rate, which is an accepted compensation basis for IRS purposes. We have revised our methodology to account for personal
use of aircraft to be the aggregate incremental cost of personal use of the company aircraft as calculated based on a
cost-per-flight-hour charge developed by a nationally recognized and independent service. The charge reflects the direct
cost of operating the aircraft, including fuel, additives, lubricants, maintenance labor, airframe parts, engine restoration,
major periodic maintenance, and an allowance for propeller maintenance. We added actual airport/hangar fees charged to
the company on a per-flight basis. The charge does not include fixed costs that do not change based on usage, such as
aircraft depreciation, home hangar expenses, and general taxes and insurance.
A
table of All Other Compensation for fiscal 2018, 2017 and 2016 for our named executive officers is presented below:
|
|
|
|
|
|
SIMPLE IRA Matching Contribution
|
|
|
Automobile Expenses
|
|
|
Personal Use of Aircraft
|
|
|
Total All Other Compensation
|
|
Name
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Eric S. Langan
|
|
|
2018
|
|
|
|
14,394
|
|
|
|
-
|
|
|
|
96,797
|
|
|
|
111,191
|
|
|
|
|
2017
|
|
|
|
12,500
|
|
|
|
45,950
|
|
|
|
79,748
|
|
|
|
138,198
|
|
|
|
|
2016
|
|
|
|
12,500
|
|
|
|
55,140
|
|
|
|
55,101
|
|
|
|
122,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillip K. Marshall
|
|
|
2018
|
|
|
|
8,834
|
|
|
|
8,524
|
|
|
|
-
|
|
|
|
17,358
|
|
|
|
|
2017
|
|
|
|
7,918
|
|
|
|
11,601
|
|
|
|
-
|
|
|
|
19,519
|
|
|
|
|
2016
|
|
|
|
7,490
|
|
|
|
18,548
|
|
|
|
-
|
|
|
|
26,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Travis Reese
|
|
|
2018
|
|
|
|
10,408
|
|
|
|
25,409
|
|
|
|
20,410
|
|
|
|
56,227
|
|
|
|
|
2017
|
|
|
|
9,600
|
|
|
|
29,104
|
|
|
|
9,524
|
|
|
|
48,228
|
|
|
|
|
2016
|
|
|
|
8,400
|
|
|
|
27,719
|
|
|
|
5,544
|
|
|
|
41,663
|
|
CEO
Pay Ratio
We
reviewed a comparison of annual total compensation of our CEO to the annual compensation of our median employee who was selected
from all employees who were employed (other than the CEO) during our fiscal year ended September 30, 2018.
The
SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s
annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable
estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported
by other companies may not be comparable to the pay ratio reported below, as other companies have different employee populations
and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their
own pay ratios.
To
identify the median employee, we selected the population of our employees as those employed on August 15, 2018, and we annualized
the compensation for any permanent employees who were not employed by us for all of fiscal 2018. We do not employ any temporary
or seasonal employees. We believe the use of total cash compensation for all employees is a consistently applied compensation
measure because the substantial portion of our employees only receive cash compensation.
The
compensation for our CEO in fiscal 2018 of $1,126,575 was approximately 64 times the compensation of our median employee of $17,617.
GRANTS
OF PLAN-BASED AWARDS
There
were no grants of plan-based awards for the year ended September 30, 2018.
Outstanding
Equity Awards at Fiscal Year-End
There
were no outstanding equity awards as of September 30, 2018.
OPTION
EXERCISES AND STOCK VESTED IN FISCAL YEAR 2018
There
were no stock options exercised nor stock that vested during the fiscal year ended September 30, 2018.
DIRECTOR
COMPENSATION
We
pay the expenses of our directors in attending board meetings. We paid no equity-based compensation during the fiscal year ended
September 30, 2018, and we paid our independent directors $20,000 in cash for the fiscal year. Following is a schedule of all
compensation paid to our directors in the year ended September 30, 2018:
|
|
Fees earned
or paid in
cash
|
|
Name
|
|
($)
|
|
Nourdean Anakar
|
|
|
20,000
|
|
Steve L. Jenkins
|
|
|
20,000
|
|
Luke C. Lirot
|
|
|
20,000
|
|
Yura Barabash
|
|
|
20,000
|
|
Eric S. Langan
|
|
|
-
|
|
Travis Reese
|
|
|
-
|
|
EMPLOYMENT
AGREEMENTS
On
May 1, 2018, we entered into new employment agreements with each of our executive officers, including Eric S. Langan, our Chief
Executive Officer and President, Phillip Marshall, our Chief Financial Officer, and Travis Reese our Executive Vice President.
Under their respective new agreements, Mr. Langan’s annual salary is $1,200,000, Mr. Marshall’s annual salary is $325,000,
and Mr. Reese’s annual salary is $390,000. Each of the agreements has a term that commenced on May 1, 2018 and ends on January
31, 2020. Each of the agreements also provides for bonus eligibility, expense reimbursement, participation in all benefit plans
maintained by us for salaried employees and two weeks paid vacation. Under the terms of the agreements, each executive is bound
to a confidentiality provision and cannot compete with us for a period upon termination of the agreement.
Further,
in the event we terminate such employee without cause or such employee terminates his employment because we reduce or fail to
pay his compensation or materially change his responsibilities, such employee is entitled to receive in one lump sum payment the
full remaining amount under the term of his employment agreement to which he would have been entitled had his agreement not been
terminated.
Currently,
our executive officers do not have long-term incentive plans or defined benefit or actuarial plans outstanding.
EMPLOYEE
STOCK OPTION PLANS
As
of September 30, 2018, there are no stock options outstanding under our 2010 Stock Option Plan, as amended.
COMPENSATION
POLICIES AND PRACTICES AS THEY RELATE TO RISK MANAGEMENT
We
attempt to make our compensation programs discretionary, balanced and focused on the long term. We believe goals and objectives
of our compensation programs reflect a balanced mix of quantitative and qualitative performance measures to avoid excessive weight
on a single performance measure. Our approach to compensation practices and policies applicable to employees and consultants is
consistent with that followed for our executives. Based on these factors, we believe that our compensation policies and practices
do not create risks that are reasonably likely to have a material adverse effect on us.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information at August 5, 2019, with respect to the beneficial ownership of shares of common
stock by (i) each person known to us who owns beneficially more than 5% of the outstanding shares of common stock, (ii) each of
our directors and nominees for the Board of Directors, (iii) each of our executive officers and (iv) all of our executive officers
and directors as a group. Unless otherwise noted below, the address of each beneficial owner listed in the table is c/o RCI Hospitality
Holdings, Inc., 10737 Cutten Road, Houston, Texas 77066. We have determined beneficial ownership in accordance with the rules
of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons
and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they
beneficially own, subject to applicable community property laws. Applicable percentage ownership is based on 9,616,598 shares
of common stock outstanding at August 5, 2019. In computing the number of shares of common stock beneficially owned by a person
and the percentage ownership of that person, we deemed outstanding shares of common stock subject to stock options or warrants
held by that person that are currently exercisable or exercisable within 60 days of August 5, 2019 and shares of common stock
issuable upon conversion of other securities held by that person that are currently convertible or convertible within 60 days
of August 5, 2019. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of
any other person. Beneficial ownership representing less than 1% is denoted with an asterisk (*).
|
|
Number of
|
|
|
|
|
Percent of
|
|
Name/Address
|
|
shares
|
|
|
Title of class
|
|
Class (1)
|
|
Executive Officers and Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric S. Langan
|
|
|
700,000
|
|
|
Common stock
|
|
|
7.28
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Phillip K. Marshall
|
|
|
13,810
|
|
|
Common stock
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Yura Barabash
|
|
|
-0-
|
|
|
Common stock
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Elaine J. Martin
|
|
|
-0-
|
|
|
Common stock
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Travis Reese
|
|
|
12,271
|
|
|
Common stock
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Nourdean Anakar
|
|
|
-0-
|
|
|
Common stock
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Luke Lirot
|
|
|
518
|
|
|
Common stock
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Arthur Allan Priaulx
|
|
|
1,200
|
|
|
Common stock
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
All of our Directors and Officers as a Group of eight persons
|
|
|
727,799
|
|
|
Common stock
|
|
|
7.57
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Other > 5% Security Holders (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dimensional Fund Advisors LP (3)
|
|
|
824,383
|
|
|
Common stock
|
|
|
8.57
|
%
|
|
(1)
|
These
percentages exclude treasury shares in the calculation of percentage of class.
|
|
|
|
|
(2)
|
A
representative of Renaissance Technologies LLC (“RTC”) has communicated to us that RTC no longer beneficially
owns more than 5% of our outstanding shares of common stock. RTC has not yet filed with the SEC a Schedule 13G/A to reflect
this change, but the change is consistent with RTC’s latest Form 13F report. RTC’s most recently available Schedule
13G/A filed on February 13, 2019 by RTC and Renaissance Technologies Holdings Corporation (the majority owner of RTC) reflects
that RTC beneficially owned 703,700 shares of common stock (which would represent 7.32% of outstanding common stock), with
sole voting power over 613,400 shares, sole dispositive power over 652,575 shares, and shared dispositive power over 51,125
shares. The address for both entities is 800 Third Avenue, New York, New York 10022.
|
|
|
|
|
(3)
|
Based
on the most recently available Schedule 13G/A filed with the SEC on February 8, 2019 by Dimensional Fund Advisors LP. Dimensional
Fund Advisors LP, an investment adviser, beneficially owned 842,179 shares of common stock, with sole voting power over 824,383
shares, and sole dispositive power over 824,383 shares. The address for Dimensional Fund Advisors LP is Building One, 6300
Bee Cave Road, Austin, Texas 78746.
|
The
Company is not aware of any arrangements that could result in a change in control of the Company.
COMPLIANCE
WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section
16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own beneficially more
than ten percent of our common stock, to file reports of ownership and changes of ownership with the Securities and Exchange Commission.
Based solely upon a review of Forms 3, 4 and 5 furnished to us during the fiscal year ended September 30, 2018, we believe that
the directors, executive officers, and greater than ten percent beneficial owners have complied with all applicable filing requirements
during the fiscal year ended September 30, 2018.
PROPOSAL
2
TO
RATIFY THE SELECTION OF FRIEDMAN LLP AS OUR INDEPENDENT REGISTERED
PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2019
The
Audit Committee of the Board of Directors has selected Friedman LLP (“Friedman”) as our independent registered public
accounting firm for the fiscal year ending September 30, 2019. Although not required by law or otherwise, the selection is being
submitted to our stockholders as a matter of corporate policy for their ratification. We wish to obtain from the stockholders
a ratification of the Audit Committee’s action in appointing the existing independent registered public accounting firm,
Friedman, for the fiscal year ending September 30, 2019. Such ratification requires the affirmative vote of a majority of the
shares of common stock present or represented by proxy and entitled to vote at the Annual Meeting.
Notwithstanding
its selection, the Audit Committee, in its discretion, may appoint another independent registered public accounting firm at any
time during or after the year if the Audit Committee believes that such a change would be in the best interests of the company
and our stockholders. If our stockholders do not ratify the appointment, the Audit Committee may reconsider whether it should
appoint another independent registered public accounting firm. A representative of Friedman is expected to be present at the Annual
Meeting with the opportunity to make a statement if he or she so desires and to respond to appropriate questions. A representative
of BDO USA, LLP, our independent registered public accounting firm for the fiscal year ended September 30, 2018 (see below), is
not expected to be present at the Annual Meeting.
The
Board of Directors unanimously recommends a vote
FOR
the ratification of Friedman as our independent registered public
accounting firm for the fiscal year ending September 30, 2019.
Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure
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 authorized BDO to respond fully to the inquiries of our successor accountant, Friedman LLP, concerning the subject matter
of BDO’s resignation 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 the current report on Form 8-K that disclosed its resignation and requested that it furnish
us with a letter addressed to the SEC stating whether or not BDO agrees with the above statements. We received the requested letter
from BDO stating that they agree with the statements insofar as they relate to BDO, a copy of which is filed as Exhibit 16.1 to
that Form 8-K (as filed with the SEC on July 18, 2019).
Engagement of New Independent Registered Public Accounting Firm
On
August 12, 2019, the Audit Committee of our Board of Directors appointed Friedman LLP to serve as our independent registered public
accounting firm for the fiscal year ending September 30, 2019, effective immediately.
During
our two most recent fiscal years and through the interim period through August 12, 2019, neither we nor anyone on our behalf consulted
Friedman regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the
type of audit opinion that might be rendered on our consolidated financial statements, and no written report or oral advice was
provided by Friedman to us that Friedman concluded was an important factor considered by us in reaching a decision as to the accounting,
auditing or financial reporting issue, or (ii) any matter that was either the subject of a disagreement (as described in Item
304(a)(1)(iv) of Regulation S-K and the related instructions) or a reportable event (as described in Item 304(a)(1)(v) of Regulation
S-K).
DISCLOSURE
ABOUT FEES
The
following table sets forth the aggregate fees paid or accrued for professional services rendered by BDO USA, LLP, our former independent
registered public accounting firm, for the audit of our annual financial statements and internal control over financial reporting,
together with audit-related services, tax, and all other services for fiscal years 2018 and 2017 (in thousands).
|
|
Fiscal 2018
|
|
|
Fiscal 2017
|
|
|
|
|
|
|
|
|
Audit fees
|
|
$
|
879
|
|
|
$
|
299
|
|
Audit-related fees
|
|
|
-
|
|
|
|
-
|
|
Tax fees
|
|
|
351
|
|
|
|
353
|
|
All other fees
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,230
|
|
|
$
|
652
|
|
“Audit
fees” include fees billed for professional services rendered in connection with the annual audit and quarterly reviews of
the Company’s consolidated financial statements, the audit of internal control over financial reporting as required by the
Sarbanes-Oxley Act of 2002, and assistance with securities filings other than periodic reports.
There
were no “Audit-related fees” in Fiscal 2018 or 2017.
The
category of “Tax fees” includes consultation related to tax compliance and tax structuring.
All
above audit services, audit-related services and tax services were pre-approved by the Audit Committee, which concluded that the
provision of such services by BDO USA, LLP was compatible with the maintenance of that firm’s independence in the conduct
of its auditing functions. The Audit Committee’s outside auditor independence policy provides for pre-approval of all services
performed by the outside auditors.
PROPOSAL
3
OTHER
MATTERS
The
Board of Directors is not aware of any other matters to be presented for action at the Annual Meeting. If any other matter is
properly presented at the Annual Meeting, however, it is the intention of the persons named in the enclosed proxy to vote in accordance
with their best judgment on such matters.
FUTURE
PROPOSALS OF STOCKHOLDERS
Proposals
for Inclusion in our 2020 Proxy Materials
Under
SEC rules, if a stockholder wants us to include a proposal in our 2020 proxy materials for presentation at our 2020 Annual Meeting
of Stockholders, then the proposal must be received at our principal executive offices at 10737 Cutten Road, Houston, Texas 77066,
Attention: Corporate Secretary, by April 23, 2020. All proposals must comply with Rule 14a-8 under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”).
Other
Proposals or Nominations to be brought before our 2020 Annual Meeting
Under
our Bylaws, a stockholder must follow certain procedures to nominate a person for election as a director or to introduce an item
of business at an Annual Meeting of Stockholders (other than a stockholder proposal submitted for inclusion in our proxy materials
under SEC rules). These procedures provide that a nomination or the introduction of an item of business at an Annual Meeting of
Stockholders must be submitted in writing to our Corporate Secretary at our principal executive offices at 10737 Cutten Road,
Houston, Texas 77066.
Any
stockholder considering introducing a nomination or other item of business should carefully review our Bylaws, which are available
at http://www.rcihospitality.com/investor.
We
must receive written notice of your intention to nominate a director or to propose an item of business at our 2020 Annual Meeting
according to this schedule:
If
the 2020 Annual Meeting is to be held within 30 days before or after the anniversary of the date of this year’s Annual Meeting
(September 30, 2019), then we must receive it not less than 90 days nor more than 120 days in advance of the anniversary of the
2019 Annual Meeting.
If
the 2020 Annual Meeting is to be held on a date not within 30 days before or after such anniversary, then we must receive it no
later than 10 days following the first to occur:
|
●
|
the
date on which notice of the date of the 2020 Annual Meeting is mailed; or
|
|
●
|
the
date public disclosure of the date of the 2020 Annual Meeting is made.
|
Upon
written request, we will provide, without charge, a copy of our Bylaws. Requests should be directed to our principal executive
offices at 10737 Cutten Road, Houston, Texas 77066, Attention: Corporate Secretary.
MISCELLANEOUS
Only
one Notice of Internet Availability of Proxy Materials (the “Notice”) is being delivered to multiple stockholders
sharing an address unless we have received contrary instructions from one or more of the stockholders sharing such address. We
undertake to deliver promptly upon request a separate copy of the Notice to any stockholder at a shared address to which a single
copy of the Notice was delivered and provide instructions as to how the stockholder can notify us that the stockholder wishes
to receive a separate copy of the Notice or other communications to the stockholder in the future. In the event a stockholder
desires to provide us with such a request, it may be given verbally by telephoning our offices at (281) 397-6730 or by mail to
our address at 10737 Cutten Road, Houston, Texas 77066, Attention: Corporate Secretary. In addition, stockholders sharing an address
can request delivery of a single copy of proxy materials and/or notices if you are receiving multiple copies upon written or oral
request to the President at the address and telephone number stated above.
|
BY
ORDER OF THE BOARD OF DIRECTORS
|
|
|
|
ERIC
S. LANGAN
|
|
CHAIRMAN
OF THE BOARD AND PRESIDENT
|
August
21, 2019
HOUSTON,
TEXAS
RCI Hospitality (NASDAQ:RICK)
Historical Stock Chart
From Apr 2024 to May 2024
RCI Hospitality (NASDAQ:RICK)
Historical Stock Chart
From May 2023 to May 2024