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, 2022, the end of its most recent fiscal year.
Management has identified
the following material weaknesses:
1. We do not have sufficient resources in our accounting department, which restricts our ability to gather,
analyze and properly review information related to financial reporting, including applying complex accounting principles relating to consolidation
accounting, fair value estimates and analysis of financial instruments for proper classification in the consolidated financial statements,
in a timely manner;
2. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not
be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of
transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties
during our assessment of our disclosure controls and procedures and concluded that the control deficiency that resulted represented a
material weakness;
3. Our primary user access controls (i.e., provisioning, de-provisioning, privileged access and user access
reviews) to ensure appropriate authorization and segregation of duties that would adequately restrict user and privileged access to the
financially relevant systems and data to appropriate personnel were not designed and/or implemented effectively. We did not design and/or
implement sufficient controls for program change management to certain financially relevant systems affecting our processes; and
4. The Company did not design and/or implement user access controls to ensure appropriate segregation of
duties or program change management controls for certain financially relevant systems impacting the Company’s processes around revenue
recognition and digital assets to ensure that IT program and data changes affecting the Company’s (i) financial IT applications,
(ii) digital currency mining equipment, and (iii) underlying accounting records, are identified, tested, authorized and implemented appropriately
to validate that data produced by its relevant IT system(s) were complete and accurate. Automated process-level controls and manual controls
that are dependent upon the information derived from such financially relevant systems were also determined to be ineffective as a result
of such deficiency. In addition, the Company has not effectively designed a manual key control to detect material misstatements in revenue.
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Planned Remediation
Management continues to work
to improve its controls related to our material weaknesses, specifically relating to user access and change management surrounding our
IT systems and applications. Management will continue to implement measures to remediate material weaknesses, such that these controls
are designed, implemented, and operating effectively. The remediation actions include: (i) enhancing design and documentation related
to both user access and change management processes and control activities; and (ii) developing and communicating additional policies
and procedures to govern the area of IT change management. In order to achieve the timely implementation of the above, management has
commenced the following actions and will continue to assess additional opportunities for remediation on an ongoing basis:
· Engaging a third-party specialist to assist management with improving the Company’s overall control
environment, focusing on change management and access controls;
· Implementing new applications and systems that are aligned with management’s focus on creating strong
internal controls; and
· Continuing to increase headcount across the Company, with a particular focus on hiring individuals with
strong Sarbanes Oxley and internal control backgrounds.
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 condensed 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 fiscal quarter ended June 30, 2023, 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
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