ESCALADE INC 10-Q

Item 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Escalade maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rules 13a-15(e) and 15d-15(e). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, could provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In connection with the preparation of the Company’s financial statements for the fiscal year ended December 31, 2023, the Company evaluated the effectiveness of the Company’s disclosure controls and procedures and identified material weaknesses in the Company’s internal control over financial reporting. 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 a company’s annual or interim financial statements will not be prevented or detected on a timely basis. 18 The Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2024. The Company did not design and maintain effective disclosure controls and procedures because of the following material weaknesses in internal control over financial reporting: ● Information technology general controls particularly as such controls related to user access, program change management, and ineffective complementary user-organization controls, which limited management’s ability to rely on technology dependent controls relevant to the preparation of the Company’s consolidated financial statements. ● Controls over the period end close process, including the review and approval process of journal entries, account reconciliations, segregation of duties conflicts, and consolidation of intercompany entries. ● Documentation and design of controls related to various key financial statement accounts and assertions. ● The risk assessment, control activities, information and communication, and monitoring components of the Company’s internal control framework such that internal control weaknesses were not detected, communicated, addressed with mitigating control activities, or remediated. These material weaknesses did not result in a misstatement of the Company’s financial statements; however, they could have resulted in misstatements of interim or annual consolidated financial statements and disclosures that would result in a material misstatement that would not be prevented or detected. Notwithstanding such material weaknesses, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s consolidated financial statements included in the Quarterly Report are fairly stated in all material respects in accordance with generally accepted accounting principles in the United States of America for each of the periods presented. Remediation Plan and Status The Company’s management and the Company’s Audit Committee are committed to achieving and maintaining a strong internal control environment. Management, with the Audit Committee’s oversight, is actively engaged in the planning for, and implementation of, remediation efforts to address the above described material weaknesses. In response to the material weaknesses discussed above, we plan to continue efforts already underway to remediate internal control over financial reporting, including the following: ● We engaged with a third-party resource to support our internal control testing and remediation efforts. ● We have hired an Internal Auditor, a senior level position. ● We conducted a risk assessment over our internal control environment, and we prioritized individual control deficiencies for remediation, including those which aggregated to the above material weaknesses. ● We are in the process of documenting and executing remediation action items, including expansion of mitigating controls where appropriate. ● We are implementing tools to enhance and centralize general information technology components. Management and our Audit Committee will monitor these specific remedial measures and the effectiveness of our overall control environment. The identified material weaknesses in internal control over financial reporting will only be considered remediated when the relevant controls have operated effectively for a sufficient period of time for management to conclude that they have been remediated. We can provide no assurance as to when the remediation of these material weaknesses will be completed to provide for an effective control environment. Changes in Internal Control over Financial Reporting Management of the Company has evaluated, under the supervision of and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the third quarter of 2024. 19 There have been no changes to the Company’s internal control over financial reporting that occurred since the beginning of the Company’s first quarter of 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS. None.