Item 4. Controls and Procedures
Item 4 – Controls and Procedures
As of March 31, 2024, our chief executive officer and chief financial officer have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a–15(e) of the Securities Exchange Act of 1934 ("the Exchange Act"), which are our controls and other procedures that are designed to ensure that information required to be disclosed in our periodic reports with the SEC is recorded, processed, summarized and reported within the required time periods. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is communicated to our management to allow timely decisions regarding required disclosure.
Based on the evaluation, our chief executive officer and chief financial officer concluded that, as of the evaluation date, our disclosure controls and procedures were not effective in allowing timely decisions regarding disclosure to be made about material information required to be included in our periodic reports with the SEC. The conclusion that our disclosure controls and procedures were not effective was due to the presence of material weaknesses in our internal control over financial reporting, as that term is defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act, as previously disclosed in Part II, Item 9A of our 2023 Annual Report ("Item 9A"). In light of the material weakness identified by management, we have performed additional analyses and procedures in order to conclude that our condensed financial statements as of and for the three months ended March 31, 2024 are fairly presented, in all material respects, in accordance with GAAP, as further described below.
Description of Material Weaknesses and Management's Remediation Initiatives
As previously reported in Item 9A, management identified a material weakness in internal control over financial reporting with respect to information technology general controls in the area of user access management within an application supporting the Company’s accounting and reporting processes, which resulted in certain segregation of duties conflicts. As such, certain of the Company’s manual business process controls dependent upon the information derived from this application were also ineffective.
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The Company and its Board of Directors are committed to maintaining a strong internal control environment. As such, the following measures were implemented and in place prior to December 31, 2023:
• Privileged administrative access to the application was removed for finance department personnel.
• Additional control design enhancements were implemented for user access provisioning, modification, and removals from the application to ensure all access changes to the application are subject to formal documentation and approval.
In addition to the actions taken during the fourth quarter of 2023, management continued implementation of the remediation plan to enhance the design of information technology general controls during the quarter ended March 31, 2024. Specifically, management implemented the following additional measures to further ensure its controls and procedures are operating effectively:
• Ongoing monitoring of enhanced user provisioning controls.
• Evaluation of resources of finance department, including the hiring of additional personnel to enhance resources to ensure proper segregation of duties within applications that support financial reporting processes.
While management continues to take steps towards implementing the remediation plan, the material weakness will not be considered fully remediated until the controls have operated effectively, as evidenced through testing, for a sufficient amount of time.
However, after giving full consideration to the material weakness described above, and based on a number of other factors, including the measures implemented prior to March 31, 2024 to remediate the material weakness in internal control over financial reporting, and the performance of procedures by management designed to ensure that information required to be disclosed is communicated to our management to allow timely decisions regarding required disclosure, management has concluded that the consolidated financial statements included in this report on Form 10-Q present fairly, in all material respects, the Company’s financial position, the results of its operations and its cash flows for each of the periods presented in conformity with GAAP and that disclosures to be made about material information required to be included in our periodic reports with the SEC were made timely and properly included in this report on Form 10-Q.
Other than the implementation of additional measures outlined in the remediation plan for the material weakness noted above, there has been no change in our internal control over financial reporting which has occurred during, or subsequent to, the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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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.