Item 4. Controls and Procedures
Item 4. Controls and Procedures
Limitations on Effectiveness of Controls and
Procedures
In designing and evaluating our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), management recognizes that any
controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired
control objectives. We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud.
Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures
must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of
the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide
absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure
controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Evaluation of Disclosure Controls and Procedures
Management is responsible for establishing
and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Our internal
control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial
reporting and the preparation of our unaudited condensed consolidated financial statements for external purposes in accordance with
U.S. GAAP.
Internal control systems, no matter how well designed,
have inherent limitations, including the possibility of human error or overriding of controls. Because of the inherent limitations, only
reasonable assurance with respect to financial statement preparation and presentation can be provided and misstatements may not be prevented
or detected. Management evaluated the design and effectiveness of the Company’s internal control over financial reporting as of
March 31, 2025 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control
Integrated Framework 2013. Based on its evaluation, management concluded that our internal control over financial reporting was not effective
as of March 31, 2025 due to material weaknesses in our internal control over financial reporting. 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 annual or interim financial statements will not be prevented or detected on a timely basis.
Consistent with December 31, 2024, the Company did not effectively
design, implement and operate effective process-level control activities related to inventory management.
33
Evaluation of Disclosure Controls and Procedures
(continued)
As a result of these deficiencies, material misstatements were identified
and corrected in the consolidated financial statements as of and for the year ended December 31, 2024. Because there is a reasonable possibility
that material misstatements of the consolidated financial statements will not be prevented or detected on a timely basis, we concluded
the deficiencies represent material weaknesses in our internal control over financial reporting and our internal controls over financial
reporting was not effective as of March 31, 2025. However, we have been in the process of remediating the internal control integrated
framework in order to address this weakness.
Our Chief Executive Officer and Chief
Financial Officer have taken additional steps to support that the unaudited condensed consolidated financial statements as of and
for the three-month period ended March 31, 2025 are presented fairly in accordance with U.S. GAAP.
Changes in Internal Control over Financial
Reporting
There were no changes in our internal control
over financial reporting (as such term is defined in Exchange Act Rule 13a–15(f) and 15d-15(f)) during the most recent fiscal quarter
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Remediation Plan
Subsequent to the year ended December 31, 2024, and under the direction
of our Chief Executive Officer and Chief Financial Officer, we have been developing and implementing a comprehensive plan to remediate
the identified material weaknesses. We began implementing certain measures as part of the remediation plan including: (i) development
of a detailed plan addressing the material weaknesses related to the control environment, risk assessment and monitoring, (ii) institution
of policies and processes to support the functioning of internal controls over financial reporting, (iii) design and implementation of
a comprehensive risk assessment process, (iv) installation of new ERP system (v) hiring/outsourcing of individuals with appropriate skills
and experience.
The material weaknesses being addressed by the
above-mentioned remediation plan will not be considered remediated until the applicable controls operate for a sufficient period of time,
and management concludes, through testing, that these controls are operating effectively. This has not occurred to date.
Although we have commenced the remediation
process and intend to complete it as promptly as possible, we cannot estimate how long it will take to remediate these material
weaknesses. In addition, new material weaknesses may be discovered that require additional time and resources to remediate. Until
the remediation is complete, we plan to continue to perform additional analyses and other procedures to ensure that our unaudited
condensed consolidated financial statements are prepared in accordance with U.S. GAAP.
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PART II – OTHER INFORMATION
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.