Item 4. Controls and Procedures
Item 4. Controls and Procedures.
Management’s Evaluation of our Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e)) of the Exchange Act as of June 30, 2026. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in its periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Based upon their evaluation, our Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2026 due to the material weakness described in our Annual Report and updated below.
In the course of preparing our financial statements for the Annual Report, management identified a material weakness related to the inherent limitations of the accounting software used to prepare our financial statements and the limited number of accounting personnel we employ. As a result of these limitations and our limited number of accounting personnel, we previously determined that we had insufficient segregation of duties over the initiation, approval and recording of certain financial transactions. In response and during the quarter ended June 30, 2026, we implemented multiple compensating controls to mitigate these limitations.
During the quarter ended June 30, 2026, management completed a redesign of the control environment to address the inherent limitations previously identified in connection with our accounting software, including enhancements to monitoring and review procedures and the reassignment of responsibilities to strengthen segregation of duties across the initiation, approval and recording of
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transactions. In light of these actions, management does not currently expect to hire the additional accounting personnel as previously contemplated in our Annual Report in order to remediate the identified material weakness. However these revised controls must operate for a sufficient period of time for this previously identified material weakness to be remediated.
Notwithstanding this material weakness, we believe that our financial statements contained in this Quarterly Report fairly present our financial position, results of operations and cash flows for the periods covered by this report in all material respects.
Changes in Internal Control over Financial Reporting
As noted above, during the quarter ended June 30, 2026, we implemented certain measures to remediate the material weakness identified in the design and operation of our internal controls over financial reporting. During the quarter ended June 30, 2026, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) other than those noted above that occurred during the fiscal quarter covered by this report that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
Limitations of Effectiveness of Control
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. The design of any control system is based, in part, upon the benefits of the control system relative to its costs. Control systems can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. In addition, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Further, while we have made changes to our internal controls in an effort to remediate our previously identified material weakness, these efforts may not be successful or ultimately operate as we intend. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have an adverse effect on our business, operating results or financial condition.
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.