Item 4. Controls and Procedures
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as of January 28, 2023, which is the end of the period covered by this Report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of that date, our disclosure controls and procedures were not effective, at a reasonable assurance level, because of the previously reported material weaknesses in internal control over financial reporting, which we view as an integral part of our disclosure controls and procedures. In making this assessment, management used the criteria set forth in the “Internal Control - Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Notwithstanding the material weaknesses in our internal control over financial reporting, we have concluded that the unaudited condensed consolidated financial statements included in this Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America. We are in the process of remediating the material weakness in our internal control, as described below under the section entitled “Remediation Plan”.
Material Weakness in Internal Control Over Financial Reporting
In Part 1, Item 4 of our Quarterly Report on Form 10-Q for the fiscal quarter ended October 29, 2022, which was filed with the Securities and Exchange Commission on December 13, 2022, management concluded that our internal control over financial reporting was not effective as of October 29, 2022. In the evaluation, management identified a material weakness in internal control related to (a) the failure to timely communicate the result of our going concern assessment to all appropriate internal parties necessary, which led to us not considering the impact of the going concern assessment on the valuation of our deferred tax assets and (b) management not appropriately designing its going concern policy control to contemplate evaluating the income tax implications when reaching a substantial doubt going concern conclusion. The material weaknesses did not result in any uncorrected misstatements in the unaudited condensed consolidated financial statements during this period, nor in any restatements of consolidated financial statements previously reported by us, and there were no changes in previously released financial results.
Remediation Plan
In response to the material weakness described above, we are in the process of remediating the deficiencies by:
1. Implementing a policy and practice that our going concern analysis is communicated and provided to appropriate members of the organization, including employees in our tax department, so they can consider the impacts of our going concern conclusion.
2. Implementing a control activity that considers results of our going concern analysis when determining the valuation of deferred taxes and other reporting and disclosures when preparing our financial statements.
While we believe the steps taken to date and those planned for implementation will improve the effectiveness of our internal control over financial reporting, we have not completed all remediation efforts. We will not be able to fully remediate these material weaknesses until management has determined through testing that the controls have been operating effectively for a sufficient period of time.
Changes in Internal Control Over Financial Reporting
Besides the remediation items noted above, there were no changes during the quarter ended January 28, 2023 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
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