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 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/A for the year ended December 31, 2023, 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, related party transactions, fair value estimates, accounting contingencies and analysis of financial instruments for proper
classification in the consolidated financial statements, in a timely manner;
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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 crypto assets to ensure that IT program and data changes affecting the Company’s (i) financial IT applications,
(ii) crypto assets 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.
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 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 September 30, 2024, 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.