CONTROLS AND PROCEDURES.
+Added: Evaluation of Disclosure Controls and Procedures
With the participation of management, our principal executive officer and principal financial officer carried out an evaluation, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report.
−Removed: Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of March 31, 2023 because of the material weaknesses in internal control over financial reporting described below.
+Added: Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of June 30, 2023 because of the existing material weaknesses in internal control over financial reporting as previously disclosed in our annual report on Form 10-K for the year end December 31, 2022.
Notwithstanding these material weaknesses, our management, including our principal executive officer and principal financial officer, has concluded that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with GAAP for each of the periods presented.
−Removed: Material Weaknesses in Internal Control Over Financial Reporting
−Removed: A material weakness is a deficiency, or a 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.
−Removed: In connection with the preparation of our financial statements for 2020 and 2021, we identified certain control deficiencies in the design and operation of our internal control over financial reporting that constituted material weaknesses.
−Removed: The material weaknesses are:
−Removed: Material weakness related to unvouchered purchase order receipts :
−Removed: We did not design and maintain effective controls over the timely clearing of discrepancies arising from our three-way-match process.
−Removed: Specifically, controls were not designed appropriately to ensure that aged items were properly cleared from the sub-ledger and ultimately accounts payable.
−Removed: This material weakness resulted in a restatement of previously reported results related to periods prior to December 31, 2020.
−Removed: Additionally, this material weakness could result in a misstatement of accounts and disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
−Removed: Material weakness related to the application of percentage-of-completion (“POC”) accounting :
−Removed: We did not design and maintain effective controls over the completeness, occurrence, cut-off, accuracy and presentation and disclosure of revenue.
−Removed: Specifically, for revenue recognized under the percentage-of-completion input method, controls were not designed and maintained to ensure accuracy of the costs-to-date, estimates of the cost-to-complete and the determination of revenue recognized for certain project-based contracts.
−Removed: Additionally, within the Company's product sales and service revenue streams, controls were not designed and maintained to ensure the accuracy of the price and quantity, including the approval of credit memos, the existence of a customer contract, and appropriate cut-off during the revenue recognition process.
−Removed: This material weakness resulted in immaterial audit adjustments related to revenue and related contract assets and liabilities during the years ended December 31, 2021 and 2022, and out-of-period adjustments related to revenue during the year ended December 31, 2022.
−Removed: Additionally, this material weakness could result in a misstatement of accounts and disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
−Removed: Material weakness related to the segregation of duties :
−Removed: We did not design and maintain effective controls over user roles and segregation of duties for functional access to transactions.
−Removed: As a result, there was a lack of segregation of duties within the Company's financial reporting function, specifically within the accounts payable, revenue, and journal entry processes.
−Removed: This material weakness did not result in adjustments to the consolidated financial statements.
−Removed: However, this material weakness could result in a material misstatement to the accounts and disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
−Removed: Material weakness related to sufficient complement of resources :
−Removed: The Company lacked a sufficient complement of resources with (i) an appropriate level of accounting knowledge, experience and training to appropriately analyze, record and disclose accounting matters timely and accurately, and (ii) an appropriate level of knowledge and experience to establish effective processes and controls.
−Removed: REMEDIATION PLAN FOR MATERIAL WEAKNESSES
−Removed: To date we have implemented several process changes to limit the accumulation and aging of unmatched items.
−Removed: We continue to enhance policies and systems to timely clear discrepancies and prevent an accumulation of balances.
−Removed: Additionally, management is currently in the process of developing and implementing changes as a part of a comprehensive remediation plan to address the material weakness related to the application of POC accounting.
+Added: Management's Plan to Remediate the Material Weakness
+Added: During the quarter we have implemented several process changes to limit the accumulation and aging of unmatched items and the implementation of a monthly reconciliation to ensure completeness and accuracy of unmatched items.
+Added: Additionally, management is currently in the process of developing and implementing changes as a part of a comprehensive remediation plan to address the material weakness related to the application of percentage-of-completion accounting as well as the necessary processes and controls to address the segregation of duties material weakness.
We believe the remediation activities will extend through the remainder of fiscal year 2023.
+Added: The Company has hired a new Chief Accounting Officer and a Director of Technical Accounting with public company and SOX experience that are already working on the implementation of processes and controls required to remediate these material weaknesses.
+Added: Additionally, the Company engaged new consultants to perform internal audit services and to advise on remediation efforts.
Changes in Internal Control Over Financial Reporting
−Removed: Except as described above, there were no changes in internal control over financial reporting identified in the evaluation for the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
+Added: Except as described above, there were no changes in internal control over financial reporting identified in the evaluation for the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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.