Item 4. Controls and Procedures
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the Securities Exchange Commission's (“SEC”) rules and forms, and that such information is accumulated and communicated to management, including its Global Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure.
Based on an evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act), the Company’s Global Chief Executive Officer Yueting Jia and CFO Koti Meka (Principal Executive Officer and Principal Financial and Accounting Officer , respectively) have concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2026 due to a remaining material weakness related to the design and maintenance of formal accounting policies and procedures, described below.
Material Weakness in Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined under Rule 13a-15(f) under the Exchange Act.
As of December 31, 2024 (“FY24”), the Company identified nine material weaknesses in its internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements would not be prevented or detected on a timely basis.
The Company has made substantial progress in remediating the previously identified material weaknesses in internal control over financial reporting. During 2025 (“FY25”), management designed and implemented internal controls remediating eight of the nine material weaknesses listed below:
• Ineffective control environment commensurate with the Company’s financial reporting requirements;
• Ineffective controls addressing risks of material misstatement;
• Ineffective communication and information-sharing controls among the legal, capital markets, accounting, and finance functions;
• Ineffective controls over the identification and accounting for certain non-routine, unusual, or complex transactions;
• Ineffective information technology (“IT”) general controls relevant to financial reporting;
• Ineffective controls related to maintaining integrity and ethical values within the control environment;
• Ineffective controls over the identification and disclosure of certain related-party arrangements and transactions; and
• Lack of formal cybersecurity incident reporting procedures to ensure material incidents were communicated to the Board of Directors.
Remediation Plan for Material Weaknesses in Internal Control Over Financial Reporting
In 2026, management will continue to monitor and test controls related to the material weaknesses to ensure they operate effectively over a sustained period.
To address the remaining material weakness, the Company intends to continue its remediation efforts through the further development and formalization of accounting policies, procedures. These efforts include working with third-party consultants and technical accounting advisors to assist with the documentation and enhancement of accounting policies and procedures. In the interim, the Company has implemented compensating controls, including enhanced management review procedures and formal accounting memoranda for significant and complex transactions.
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The Company will continue to monitor and test these controls to evaluate their ongoing effectiveness. However, if remediation efforts are not successfully sustained, the effectiveness of the Company’s internal control over financial reporting could be adversely affected. Internal controls are inherently subject to limitations, including human error, management judgment, resource constraints, and the risk of fraud. Additionally, turnover in key personnel within accounting, finance, or legal functions could impact the Company’s ability to maintain effective internal controls and execute its remediation activities. If the Company is unable to maintain effective internal control over financial reporting, it may not be able to accurately record, process, or report financial information on a timely basis or prepare financial statements within the timeframes required by the SEC. Any such deficiencies could adversely affect the Company’s business, reputation, investor confidence, and the market price of its Class A Common Stock. In addition, failure to maintain effective internal controls could result in increased regulatory scrutiny, litigation exposure, potential delisting of the Company’s securities, and diversion of management’s attention and resources from normal business operations, which could materially and adversely affect the Company’s financial condition and results of operations.
Changes in Internal Control Over Financial Reporting
Other than the ongoing remediation activities described above, there have been no changes in the Company’s internal control over financial reporting during the three months ended March 31, 2026, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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.