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Item 4. Controls and Procedures

2022-05-04 compared with 2021-11-10 · 38 added, 32 removed, 8 unchanged (90% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

In designing and evaluating such controls and procedures, we recognize any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

As required by Rule 13a-15(b) of the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded our disclosure controls and procedures are not effective at September 30, 2021 due to the material weakness in internal control over financial reporting described below, which was previously disclosed in Item 9A.

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating such controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded our disclosure controls and procedures are not effective at March 31, 2022 due to the material weaknesses in internal control over financial reporting described below, which were previously disclosed in Item 9A.

“Controls and Procedures”

of our Form 10-K for the year ended December 31, 2021.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above.

However, our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent or detect all errors and fraud.

Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met.

Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our Company have been detected.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a‑15(f) under the Exchange Act.

Under the supervision of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2022 based on the guidelines established in Internal Control —

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

Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of March 31, 2022 due to the material weaknesses described below.

Material Weaknesses in Internal Control

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

As indicated above, control deficiencies in our internal control over financial reporting have been identified which constitute material weaknesses relating to inadequate design and implementation of:

information technology general controls that prevent the information systems from providing complete and accurate information consistent with financial reporting objectives and current needs;

internal controls over the preparation of the financial statements, including the insufficient review and oversight over financial reporting, journal entries and related file documentation;

internal controls to identify and manage segregation of certain accounting duties;

internal controls over estimated costs of completion on contracts where net revenues are recognized over time;

management review controls over projected financial information used in fair value financial models used for purchase accounting and intangible asset valuations.

Management has undertaken various steps to begin remediating such control deficiencies.

We have identified control deficiencies as of March 31, 2022 related to an ineffective control environment, ineffective risk assessment, and ineffective information and communication resulting from an insufficient number of trained resources with expertise in implementation and operation of internal control over financial reporting and information technology systems.

As a result, the Company had ineffective control activities related to the design and operation of process-level controls and general information technology controls across all financial reporting processes.

These control deficiencies constitute material weaknesses in our internal control over financial reporting as of March 31, 2022.

Changes in Internal Control Over Financial Reporting

We are executing our remediation plans to remediate the material weaknesses relating to our internal control over financial reporting, as described below.

These plans include a detailed risk and controls assessment, key process walkthroughs and flowchart documentation, training, and execution of determined key controls.

There were no material changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Remediation Plans

Management has undertaken various steps to continue remediating such control deficiencies and has seen improved results versus December 31, 2021.

Given an effort of this magnitude, management believes that full remediation will most likely continue to extend over the next couple of years.

The material weaknesses will not be considered remediated until management designs and implements effective controls that operate for a sufficient period of time and management has concluded through testing that these controls are effective.

We will monitor the effectiveness of our remediation plans and will make changes management determines to be appropriate.

Steps taken by management include the following:

development of an Internal Audit team responsible for a detailed work plan to assess and document the adequacy of internal control over financial reporting, continued steps to improve control processes as appropriate, validation through testing that controls are functioning as documented, and implementation of a continuous reporting and improvement process for internal control over financial reporting;

implementation of a global consolidation and planning system;

addition of members to our accounting and finance team with the appropriate qualified experience in financial reporting, consolidations, technical accounting, and application of U.S.

implementation of new controls over the revenue recognition process;

identification and mitigation of segregation of duties concerns within various accounting areas;

implementation of new controls and enhanced procedures and processes in our financial consolidation and reporting processes.

We are monitoring the effectiveness of our remediation plans and will make the changes management determines to be appropriate.

Steps taken by us during the three months ended March 31, 2022 include the following:

internal audit continued to assess and document the adequacy of internal control over financial reporting, document steps to improve control processes, conduct testing of controls, and implement continuous reporting for internal control over financial reporting;

hired additional members to our accounting and finance team with the appropriate qualified experience in financial reporting, consolidations, technical accounting, and application of U.S.

conducted broad based training over the application of the 2013 Framework for key process owners and control operators;

enhanced controls, procedures, and processes in our financial consolidation and reporting processes;

enhanced controls over critical processes, including revenue recognition, purchase accounting and financial reporting, and the related information technology systems;

identified and designed controls to address segregation of duties issues.

We plan to continue our efforts to improve, design and implement integrated processes to enhance our internal control over financial reporting, including:

implementing changes to our accounting systems and establishing general information technology controls;

adding further qualified resources to our accounting and finance team with the appropriate qualified experience in financial reporting, consolidations, tax, technical accounting, internal audit and internal controls;

providing training and education programs for financial personnel responsible for the performance of newly implemented processes and controls;

revising and enhancing control procedures for more robust control performance.

Changes in Internal Control Over Financial Reporting

We are executing our plan to remediate the material weaknesses relating to our internal control over financial reporting, as described above.

This plan includes a detailed risk and controls assessment, key process walkthroughs, and flowchart documentation, training, and execution and validation of determined key controls.

Except as otherwise described herein, there were no material changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2021 that have, or are reasonably likely to have, materially affected our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls and Procedures

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above.

However, our management, including our Chief Executive Officer and Chief Financial Officer, does not expect our disclosure controls and procedures will prevent or detect all error and fraud.

Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance its objectives will be met.

providing additional training and education programs for personnel responsible for the performance of newly implemented processes and controls to enhance our control environment;

adding additional qualified resources to our accounting and finance teams with appropriate qualified experience to enhance our control environment and risk assessment processes;

refining and enhancing certain existing controls and adding new controls to strengthen our risk assessment process;

continue our efforts to improve our financial systems and enhance our information and communication controls.

OTHE R INFORMATION

There have been no material changes to our risk factors contained in Part I, Item 1A.

"Risk Factors" of our Form 10-K for the year ended December 31, 2021.

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-Q

Item 4. Controls and Procedures