Item 4. Controls and Procedures
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have established disclosure
controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange
Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and is accumulated and communicated
to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required
disclosure.
Our principal executive officer
and principal financial officer, with the assistance of other members of the Company’s management, have evaluated the effectiveness
of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act) as of the end of the period covered by this quarterly report. Based upon our evaluation, each of our principal executive
officer and principal financial officer has concluded that the Company’s internal control over financial reporting was not effective
as of the end of the period covered by this Quarterly Report on Form 10-Q because the Company has not yet completed its remediation of
the material weakness previously identified and disclosed in the Company’s Annual Report on Form 10-K for the year ended December
31, 2020, the end of its most recent fiscal year.
Specifically, management has
determined that we do not have sufficient resources in our accounting function, which restricts our ability to gather, analyze and properly
review information related to financial reporting, including applying complex accounting principles relating to consolidation accounting
and fair value estimates, in a timely manner. In addition, due to our size and nature, segregation of all conflicting duties may not always
be possible and may not be economically feasible.
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A material weakness is a control
deficiency or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual
or interim financial statements will not be prevented or detected.
Planned Remediation
Management,
in coordination with the input, oversight and support of our Audit Committee, has identified the measures below to strengthen our control
environment and internal control over financial reporting.
On
August 19, 2020, Mr. Horne resigned as our Chief Financial Officer and was appointed our President, and later became our Chief Executive
Officer. Mr. Cragun, who had served as the Company’s Chief Accounting Officer since October 1, 2018, succeeded Mr. Horne as the
Chief Financial Officer of the Company. In January 2018, we engaged the services of a financial accounting advisory firm. In January 2019,
we hired a Senior Vice President of Finance. In May 2019, we hired an Executive Vice President and General Counsel, who later became our
President and General Counsel. Finally, in January 2021, we hired a Director of Reporting. These individuals were tasked with expanding
and monitoring the Company’s internal controls, to provide an additional level of review of complex financial issues and to assist
with financial reporting. On October 7, 2019, we created an Executive Committee which is currently comprised of our Executive Chairman,
Chief Executive Officer and President. The Executive Committee meets on a daily basis to address the Company’s critical needs and
provides a forum to approve transactions which are communicated to the Company’s Chief Financial Officer and Senior Vice President
of Finance on a bi-weekly basis by our Chief Executive Officer, who also reviews all of the Company’s material transactions and
reviews the financial performance of each of our subsidiaries. On December 16, 2020, in consultation with the Chairman of the Audit Committee,
we engaged a professional services firm to review management’s assessment of compliance with Section 404 of the Sarbanes-Oxley Act
of 2002 and to identify internal control process improvement opportunities. These changes have improved and simplified our internal processes
and resulted in enhanced controls. While these changes have improved and simplified our internal processes and resulted in enhanced controls,
these enhancements have not been operating for a sufficient period of time for management to conclude, through testing, that these controls
are operating effectively. Further, as we continue to expand our internal accounting department, the Chairman of the Audit Committee shall
perform the following:
· assist with documentation and implementation of policies and procedures and monitoring of controls, and
· review all anticipated transactions that are not considered in the ordinary course of business to assist
in the early identification of accounting issues and ensure that appropriate disclosures are made in the Company’s financial statements
We are currently working to
improve and simplify our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in
our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. These material
weaknesses will not be considered to be remediated until the applicable remediated controls are operating for a sufficient period of time
and management has concluded, through testing, that these controls are operating effectively.
Despite the existence of these
material weaknesses, we believe that the consolidated financial statements included in the period covered by this Quarterly Report on
Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented
in conformity with U.S. generally accepted accounting principles.
Changes in Internal Controls over Financial Reporting.
Except as detailed above,
during the most recent fiscal quarter 2021 there were no significant changes in our internal control over financial reporting (as such
term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) 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
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.