APi Group Corp 10-Q

Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures designed to provide reasonable assurance that information, which is 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. 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 March 31, 2021 due to the material weakness in internal control over financial reporting described below, which was previously disclosed in Item 9A. “Controls and Procedures” of our Form 10-K for the year ended December 31, 2020. 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 revenue is recognized over time; and • management review controls over projected financial information used in fair value financial models used for purchase accounting and intangible asset valuations 33 Management has undertaken various steps to begin remediating such control deficiencies . 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; and • adding qualified resources with knowledge, experience and training in the application of U.S. GAAP. We plan to continue our efforts to improve, design and implement integrated processes to enhance our internal control over financial reporting, including: • engaging a third-party firm to assist us in implementing a global consolidation and planning system; • implementing changes to our accounting systems, new controls, procedures and processes in our financial statement close process and, importantly, adding new members to our accounting and finance team with the appropriate qualified experience in financial reporting, consolidations, tax, technical accounting, internal audit and internal controls; • adding further qualified resources to financial reporting, consolidations, tax, technical accounting, financial planning and analysis, and internal audit teams as we further enhance our internal control structure; • enhancing the monitoring controls surrounding the design and operation of our internal controls over financial reporting; and • providing training and education programs for financial personnel responsible for the performance of newly implemented processes and controls. Changes in Internal Control Over Financial Reporting We are executing our plan to remediate the material weaknesses relating to our internal controls over financial reporting, as described above. This plan includes a detailed risk and controls assessment, detailed flowcharts, key process walkthroughs, and documentation, training, and execution 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 March 31, 2021 that have materially affected, or are reasonably likely to materially affect, 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. 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. 34 P ART II. OTHE R INFORMATION Item 4. Mine Safety Disclosures Information regarding mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this quarterly report. Item 5. Risk Factors There were no material changes to the risk factors disclosed in the section entitled “Risk Factors” of our Form 10-K. Item 6. Exhibits Exhibit No. Description of Exhibits 10.18* Form of Restricted Stock Unit Agreement (Management – Time-Based Vesting) – APi Group Corporation 2019 Equity Incentive Plan . 10.19* Form of Restricted Stock Unit Agreement (Management – Performance-Based Vesting) – APi Group Corporation 2019 Equity Incentive Plan. 31.1* Certification by Russell A. Becker, Chief Executive Officer, pursuant to Exchange Act Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification by Thomas A. Lydon, Chief Financial Officer, pursuant to Exchange Act Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certifications by Russell A. Becker, Chief Executive Officer, and Thomas A. Lydon, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 95.1* Mine Safety Disclosures. 101.INS* XBRL Instance Document. 101.SCH* XBRL Taxonomy Extension Schema Document. 101.DEF* XBRL Taxonomy Extension Definition Linkbase Document. 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document. 101.LAB* XBRL Taxonomy Extension Label Linkbase Document. 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document. * Filed herewith ** Furnished herewith 35 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized. APi GROUP CORPORATION May 12, 2021 /s/ Russell A. Becker Russell A. Becker Chief Executive Officer (Duly Authorized Officer) May 12, 2021 /s/ Thomas A. Lydon Thomas A. Lydon Chief Financial Officer (Principal Financial Officer) 36