Item 4. Controls and Procedures
ITEM 4. CONTROLS AND PROCEDURES
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 our reports filed under the Exchange Act, is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such
information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial
and Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.
We carried out an evaluation under the
supervision and with the participation of management, including our Principal Executive Officer and Principal Financial and Accounting
Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2020. Based
on that evaluation, our Chief Executive Office and Principal Financial and Accounting Officer have concluded that, our disclosure
controls and procedures were not effective as of June 30, 2020 because of a material weakness in our internal control over financial
reporting. We did not maintain effective controls over the accounting for the anti-dilution adjustment provisions contained in
the 2019 Warrants. Specifically, the control did not operate effectively relating to the accuracy and presentation and disclosure
of the accounting for certain outstanding warrant agreements. This control deficiency resulted in the misstatement of liability
warrants and the misstatement of non-cash expense resulting from required periodic “mark-to-market” adjustments of
the aforementioned warrants. If not remediated, this control deficiency could result in future material misstatements of these
accounts and disclosures that would not be prevented or detected on a timely basis. Accordingly, our management has determined
that this control deficiency constitutes a material weakness.
Restatement of Consolidated Financial Statements
On July 1, 2020, the audit committee of the board of
directors and management of the Company concluded that the Company’s previously issued audited consolidated financial
statements for the year ended December 31, 2019, should no longer be relied upon because of an error in the Company’s
accounting for the 2019 Warrants. As previously described, the error relates to the determination of the number of shares of
common stock subject to the 2019 Warrants as of December 31, 2019 as a result of certain anti-dilution adjustment provisions
contained in the 2019 Warrants. The Company filed an amended annual report on Form 10-K/A on July 7, 2020 to restate the
Company’s audited consolidated financial statements for the year ended December 31, 2019 to correctly account for the
anti-dilution adjustment provisions contained in the 2019 Warrants.
Remediation Plan
Management has developed a remediation plan to address the material
weakness. Implementation of the remediation plan consists of redesigning existing quarterly control procedures to enhance management's
accounting for any derivative or convertible securities issued by the Company. Management believes the foregoing efforts will effectively
remediate the material weakness. As the Company continues to evaluate and work to improve its internal control over financial reporting,
management may execute additional measures to address potential control deficiencies or modify the remediation plan described above.
Management will continue to review and make necessary changes to the overall design of the Company's internal control environment,
as well as to policies and procedures to improve the overall effectiveness of internal control over financial reporting.
Changes in Internal Control over Financial Reporting
Management recognizes the Company’s operations and business
have been disrupted to an unprecedented degree due to the conditions surrounding the COVID-19 pandemic spreading throughout the
United States. These disruptions have resulted in limited access to the Company’s facilities and have interfered with
management’s ability to work with its independent accountants, professional advisors and support staff in order to complete
the Company’s financial statements and related disclosures. Management is also making necessary changes to the Company’s
internal control environment and policies and procedures to improve the overall effectiveness of the Company’s internal control
in light of the disruptions caused by the ongoing COVID-19 pandemic.
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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.