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Item 9A. Controls and Procedures

2023-03-16 compared with 2022-03-11 · 66 added, 32 removed, 191 unchanged (34% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, or the Exchange Act, we carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report.

Based upon that evaluation, the chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective as of December 31, 2021 to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

On an on-going basis, we review and document our disclosure controls and procedures, and our internal control over financial reporting, and we may from time to time make changes aimed at enhancing their effectiveness and ensuring that our systems evolve with our business.

Changes in internal controls over financial reporting.

During the fourth quarter, we completed the implementation of our enterprise resource planning software at our Parcus Medical and Arthrosurface subsidiaries.

In this regard, we reviewed and modified our internal controls, as necessary.

There were no other changes in our internal control over financial reporting during the three months ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2022.

The term “disclosure controls and procedures,”

as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures.

Based on the evaluation of our disclosure controls and procedures as of December 31, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective to provide reasonable assurance due to material weaknesses in internal control over financial reporting described below.

Management ’

s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States.

Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance, and it may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021.

In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in its 2013 Internal Control —

Integrated Framework .

Based on its assessment and those criteria, our management believes that our company maintained effective internal control over financial reporting as of December 31, 2021.

The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included below in this Item 9A.

s Annual Report on Internal Control over Financial Reporting

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

An effective internal control system, no matter how well designed, has inherent limitations, including the possibility of human error or overriding of controls, and limitations therefore can provide only reasonable assurance with respect to reliable financial reporting.

Because of its inherent limitations, our internal control over financial reporting may not prevent or detect all misstatements, including the possibility of human error, the circumvention or overriding of controls, or fraud.

Effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022.

In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control —

Integrated Framework (2013). 

Based on this assessment, our management concluded that as of December 31, 2022, material weaknesses were identified in March 2023 as described below, and, as a result, our internal control over financial reporting was not effective as of December 31, 2022.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Material Weaknesses

In March 2023, we identified material weaknesses in the Company’s internal control over financial reporting as of December 31, 2022 resulting from a misappropriation of assets under a legacy credit card program utilized by a limited number of our employees affiliated with one of our subsidiaries.

Specifically, in March 2023, during the process of retiring this credit card program, the Company determined that a mid-level accounting employee had charged approximately $4,000 in personal expenses on his corporate credit card, and that certain non-accounting employees also charged personal expenses of an immaterial amount in aggregate.

This accounting employee had roles in the Company’s system of internal control over financial reporting, including controls for this subsidiary’s corporate credit card program.

As a result, there were individually and in the aggregate deficiencies that represent material weaknesses including:

(i) inadequate segregation of duties;

(ii) a failure to identify fraud risks;

and (iii) a failure in the design and operating effectiveness of control activities for which the accounting employee’s competent authority was compromised.

In response, the Company performed additional analyses, reconciliations and other post-closing procedures to ensure that our consolidated financial statements included in this Form 10-K were prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”).

These control deficiencies did not have any material impact on our current or prior period consolidated annual or interim financial statements, but could have resulted in material misstatements to the annual or interim financial statements that would not have been prevented or detected. Accordingly, management concluded that the control deficiencies were material weaknesses in the Company’s internal control over financial reporting.

Deloitte & Touche LLP, our independent registered public accounting firm that audited the consolidated financial statements, has issued an audit report on our internal control over financial reporting as of December 31, 2022, which is included in Item 8 of this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

Except for the material weaknesses discussed above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the fourth quarter of our fiscal year ended December 31, 2022.

Remediation of Material Weaknesses

Our management, under the oversight of the Audit Committee, is in the process of remediating the material weaknesses in our internal control over financial reporting as noted above.

We have already implemented and will continue to implement measures designed to directly address, or contribute to, the remediation of our material weaknesses and the enhancement of our internal control over financial reporting, including:

Termination of the mid-level accounting employee referenced above and reassignment of this employee’s roles and responsibilities within impacted control activities.

Complete the transition of all employees from the legacy subsidiary credit card program to the Company’s established credit card program, which is subject to centralized review, approval, monitoring, and reconciliation processes and controls.

Enhancement of our fraud risk assessment in order to more fully tailor the design of internal control over financial reporting to ensure appropriate segregation of duties and mitigate the risk of material misstatement caused by fraud.

Enhancement of training for employees on compliance with the Company’s travel and entertainment policy and Code of Conduct, as well as its internal control over financial reporting.

The material weaknesses will not be considered remediated until management completes its remediation plan and the enhanced controls operate for a sufficient period of time and management has concluded, through testing, that the related controls are effective.

The Company will monitor the effectiveness of its remediation plan and will refine its remediation plan as appropriate.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

4 unchanged sentences

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control —

In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control —

Integrated Framework (2013) issued by COSO.

16 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. 

Management’s assessment identified that there were individually and in the aggregate deficiencies that represent material weaknesses including:

inadequate segregation of duties

failure to identify fraud risks;

a failure in the design and operating effectiveness of control activities for which the accounting employee’s competent authority was compromised.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2022, of the Company, and this report does not affect our report on such financial statements.

/s/ Deloitte & Touche LLP

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OTHER INFORMATION

On October 28, 2021, the Board of Directors elected Sheryl L.

Conley as a member of the Board effective as of October 28, 2021.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

9 unchanged sentences

The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later than 120 days after the close of our fiscal year ended December 31, 2022.

PRINCIPAL ACCOUNTING FEES AND SERVICES

PRINCIPAL ACCOUNTANT FEES AND SERVICES

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Bylaws of Anika Therapeutics, Inc., effective as of June 6, 2018

Description of Securities of Anika Therapeutics, Inc.

Lease, dated January 3, 2007, between Anika Therapeutics, Inc.

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†10.9b

Amendment to Second Amended and Restated 2003 Stock Option and Incentive Plan (adopted April 11, 2013)

Amendment to Second Amended and Restated 2003 Stock Option and Incentive Plan (adopted April 

†10.9c

Form of Incentive Stock Option Agreement under Second Amended and Restated 2003 Stock Option and Incentive Plan   

†10.9d

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****†10.13

Executive Retention Agreement, dated April 9, 2019, by and between Anika Therapeutics, Inc.

and Thomas Finnerty

Executive Retention Agreement, dated March 9, 2020, by and between Anika Therapeutics, Inc.

and David Colleran

Fixed Dollar Accelerated Share Repurchase Transaction Confirmation entered into as of May 24, 2018 by and between Morgan Stanley & Co.

10 unchanged sentences

The following materials from the Annual Report on Form 10-K of Anika Therapeutics, Inc.

for the fiscal year ended December 31, 2021, formatted in Inline XBRL:  (i) Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020;

for the fiscal year ended December 31, 2022, formatted in Inline XBRL:

 (i) Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021;

(ii) Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2022, December 31, 2021, and December 31, 2020;

(iii) Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2021, December 31, 2020, and December 31, 2019;

(iii) Consolidated Statements of Stockholders’

Equity for the Years Ended December 31, 2022, December 31, 2021, and December 31, 2020;

(iv) Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, December 31, 2021, and December 31, 2020;

and (v) Notes to Consolidated Financial Statements

and (v) Notes to Consolidated Financial Statements  

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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Pursuant to Rule 406T of Regulation S-T, XBRL (Extensible Business Reporting Language) information is deemed not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934 and otherwise is not subject to liability under these sections.

Filed or furnished herewith

FORM 10-K SUMMARY

Not applicable.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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/s/ MICHAEL LEVITZ

Executive Vice President, Chief Financial Officer and Treasurer

Executive Vice President, Chief Financial Officer

and Treasurer

Michael Levitz

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March 16, 2023

/s/ RAYMOND J.

March 10, 2022

LARSEN, PH.D.

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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.

What changed 10-K

Item 9A. Controls and Procedures