What changed in this filing

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Item 4. Controls and Procedures

2023-08-08 compared with 2023-05-10 · 22 added, 23 removed, 34 unchanged (57% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures.

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and

principal financial officer, to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2023.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2023.

Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective at a reasonable assurance level, due to the material weaknesses previously identified and disclosed in our 2022 Annual Report and listed below.

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

Management determined that the previously disclosed material weaknesses in its internal control over financial reporting continue to exist at March 31, 2023.

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

Management determined that the previously disclosed material weaknesses in its ICFR continue to exist at June 30, 2023.

Specifically:

Control Environment, Risk Assessment and Monitoring Activities – We did not maintain appropriately designed entity-level controls impacting the control environment and effective monitoring controls to prevent or detect material misstatements to the consolidated financial statements.

These deficiencies were attributed to (i) a lack of a sufficient number of qualified resources and inadequate oversight and accountability over the performance of control activities, (ii) ineffective identification and assessment of risks to properly design and implement relevant controls, and (iii) ineffective evaluation and determination as to whether the components of internal control were present and functioning.

These deficiencies were attributed to (i) a lack

of a sufficient number of qualified resources and inadequate oversight and accountability over the performance of control activities, (ii) ineffective identification and assessment of risks to properly design and implement relevant controls, and (iii) ineffective evaluation and determination as to whether the components of internal control were present and functioning.

Control Activities – These material weaknesses contributed to the following additional material weaknesses within certain business processes:

8 unchanged sentences

This resulted in the restatement of the Company’s interim unaudited condensed consolidated financial statements.

• STI - Although management did not conduct a formal assessment of internal controls over financial reporting of STI as of March 31, 2023, management has identified material weaknesses in internal controls over financial reporting relating to STI as follows:

• STI - Although management did not conduct a formal ICFR assessment of STI as of June 30, 2023, management has identified material weaknesses in STI’s ICFR as follows:

◦ We did not design, implement and monitor general information technology controls in the areas of program change management, user access, and segregation of duties for systems supporting substantially all of STI’s internal control processes.

3 unchanged sentences

Remediation Plan for Existing Material Weaknesses

We are in the process of, and continue to focus on, designing and implementing effective measures to strengthen our internal controls over financial reporting (“ICFR”) and remediate the material weaknesses.

We are in the process of, and continue to focus on, designing and implementing effective measures to strengthen our ICFR and remediate the material weaknesses.

Our planned remediation efforts include the following:

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and we will concentrate on retaining key accounting, IT, and operational personnel.

Additionally, we will continue to engage additional resources with specific focus on STI internal controls as well as future business combinations.

Finally, we will continue to enhance the design and operation of monitoring controls and other activities that will allow us to timely assess the design and the operating effectiveness of controls over financial reporting.

In 2023, we have engaged an outside global consulting firm to support our continued enhancement of the design and operation of monitoring controls and other activities that will allow us to timely assess the design and the operating effectiveness of our ICFR.

In addition to enhancing our ICFR overall, the consulting firm has been specifically focused on the identification of new controls and the improvement of existing controls related to STI, inventory management, revenue recognition and accounts receivable as well as business combination controls for future acquisitions.

Control Activities:

• Inventory – We are in the process of implementing planned information system enhancements and the expansion of current information system capabilities, which will result in more reliance on a combination of manual and automated controls.

Additionally, we will enhance existing controls and will implement new controls over the accounting, processing and recording of inventory.

• Inventory – We continue to implement planned information system enhancements and the expansion of current information system capabilities, which will result in improved reliance on automated controls and less reliance on manual controls.

Additionally, we are enhancing existing controls and are implementing new controls over the accounting, processing and recording of inventory.

Specifically, we have strengthened the operation of control activities over inventory-in-transit, deploying multiple levels of review and validation of information and supporting documentation.

We expect to deploy final phases of information system enhancements in 2023.

• Revenue Recognition – We have begun to evaluate information system capabilities in order to reduce the manual calculations within this business process.

Additionally, we will continue to enhance the design of existing controls to ensure completeness and accuracy of underlying source data for revenue recognition and customer billing.

We expect to deploy final phases of information system enhancements by the end of 2023.

• Revenue Recognition and Accounts Receivable – We are in the process of evaluating our information system capabilities in order to reduce the manual calculations within the revenue recognition business processes.

We have begun to deploy information systems enhancements targeted at eliminating manual processes.

Additionally, we are enhancing the design of existing controls to ensure completeness and accuracy of underlying source data for revenue recognition and customer billing.

Lastly, we will continue to supplement our accounting staff with more experienced personnel which will enable us to incorporate an additional level of review.

• F oreign Currency – We have begun information system enhancements which will automate this currently manual process.

In the interim, we continue to enhance the design of existing controls and processes related to the foreign currency translation process and over the consolidation of foreign entities into the Company’s condensed consolidated financial statements.

• Other Areas – We have begun remediation activities, which include enhancing the design and operating effectiveness of controls around our ICFR.

We are actively working with an outside firm to assist management with (i) reviewing our current processes, procedures, and systems to assess our ICFR to identify opportunities to enhance the design of controls to address relevant risks identified by management, and (ii) enhancing and implementing protocols to retain sufficient documentary evidence of operating effectiveness of such controls.

• Foreign Currency – We have implemented information system enhancements which automate this previously manual process.

We will we utilize the enhancements in parallel with our manual process for the near term until we are fully automated.

We have continued to enhance the design of existing controls and processes related to the foreign currency translation process and over the consolidation of foreign entities into our condensed consolidated financial statements.

• Other Areas – We are in the process of remediation activities, including enhancing the design and operating effectiveness of controls around our ICFR.

We are actively working with an outside global consulting firm to assist us with (i) reviewing our current processes, procedures, and systems to assess our ICFR to identify opportunities to enhance the design of controls to address relevant risks identified by management, and (ii) enhancing and implementing protocols to retain sufficient documentary evidence of operating effectiveness of such controls.

Additional activities in process include the following:

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Changes in Internal Control over Financial Reporting

We acquired STI on January 11, 2022.

The scope of management’s assessment of the effectiveness of the Company’s disclosure controls and procedures for fiscal year end 2022 did not include the internal control over the financial reporting of STI, in accordance with the SEC’s staff guidance that permits exclusion of acquisitions from their final assessment of internal control over financial reporting for the fiscal year in which the acquisition occurred.

STI will be included in management’s final assessment of internal control over financial reporting for fiscal year end 2023.

Other than as discussed above, there were no other changes to our internal control over financial reporting during the three months ended March 31, 2023, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

Other than as discussed above, there were no other changes to our internal control over financial reporting during the three months ended June 30, 2023, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

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