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Evaluation of Disclosure Controls and Procedures
−Removed: Management maintains “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our
−Removed: Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
−Removed: In making this assessment, management used the criteria set forth in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
−Removed: Based on evaluation under these criteria, management determined, based upon the existence of the material weaknesses described below, that we did not maintain effective internal control over financial reporting as of September 30, 2021.
+Added: We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.
+Added: Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud.
+Added: A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
+Added: Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
+Added: Because of the inherent limitations in all control systems, including the possibility of human error, the circumvention or overriding of controls, or fraud, no evaluation of controls can provide absolute assurance that all control issues, misstatements, errors, and instances of fraud, if any, within our organization have been or will be prevented or detected.
+Added: As of the period covered by this Quarterly Report on Form 10-Q, an evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act).
+Added: Our management concluded that as of March 31, 2022, our disclosure controls and procedures were not effective, because of the material weaknesses in our internal control over financial reporting identified by management as of December 31, 2021 (described below).
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that a reasonable possibility exists that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.
−Removed: The Company did not design and implement effective control activities based on the criteria established in the COSO framework.
−Removed: Specifically, these control deficiencies constitute material weaknesses, either individually or in the aggregate, relating to:
−Removed: (i) selecting and developing control activities and information technology that contribute to the mitigation of risks and support achievement of objectives;
−Removed: and (ii) deploying control activities through policies that establish what is expected and procedures that put policies into action.
−Removed: The following were contributing factors to the material weaknesses in control activities:
−Removed: • Insufficient resources within the accounting and financial reporting department to review the accounting implications of complex transactions.
−Removed: • Inadequate segregation of duties within the bank accounts.
−Removed: • Ineffective information technology general controls (ITGCs) in the areas of user access over certain information technology (IT) systems that support the Company’s financial reporting processes.
+Added: Material Weaknesses in Control Activities
+Added: The following were contributing factors to the material weaknesses in control activities as of December 31, 2021, several of which also were determined to be the material weaknesses at December 31, 2020:
+Added: • Insufficient resources within the accounting and financial reporting department to review the accounting for complex financial reporting transactions including areas such as business combinations, share based compensation, and the related income tax reporting.
+Added: • There are inadequate segregation of duties within the various bank accounts of the Company to prevent and detect unauthorized transactions in a timely manner.
+Added: Additionally, there are deficiencies in the segregation of duties issues within IT, human resources, and manual journal entry posting processes.
+Added: • There are inadequate information and technology general controls, including segregation of duties, change management, and user access, which were inadequate to support financial reporting applications and support automated controls and functionality.
+Added: • There are inadequate controls over physical inventory counts.
+Added: Deficiencies in control activities contributed to material accounting errors identified and corrected through 2021 and prior years.
+Added: These corrected design deficiencies in control activities were previously considered to contribute to the potential for there to have been material accounting errors in multiple financial statement account balances and disclosures.
+Added: We have concluded that significant progress has been made toward mitigating the above-mentioned control weakness as of March 31, 2022 and December 31, 2021, but we have not been able to adequately confirm the design and confirm the control weakness has been remediated as of the date of this report.
+Added: In making this assessment, management used the criteria set forth by the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Changes in Internal Control Over Financial Reporting
−Removed: There were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except for the implementation of remediation plans for the deficiency to address the material weakness identified.
−Removed: Remediation Plan and Status
+Added: There were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except for the implementation of remediation plans to address the material weaknesses discussed above.
+Added: Material Weakness Remediation Plan and Status
Our remediation efforts are ongoing and we will continue our initiatives to implement and document policies, procedures, and internal controls.
−Removed: Remediation efforts will include but are not limited to new hires in critical positions to improve segregation of duties, supervision and oversight, as well as implementation of technologies to improve effective controls.
−Removed: Remediation of the identified material weaknesses and strengthening our internal control environment will require a substantial effort throughout 2021 and beyond, as necessary.
+Added: In 2021, the Company completed the following remedial actions:
+Added: • Hired and trained additional resources within the accounting and financial reporting departments to review the accounting for warrant compensation accounting, share-based compensation accounting, and rebates.
+Added: • Hired and trained additional resources to specifically manage cash and ensure adequate segregation of duties.
+Added: • Implemented numerous general and access controls over all information technology (IT) systems that supports the Company's financial reporting processes.
+Added: • Implementation and redesign of controls over inventory count procedures.
+Added: Our management believes that these actions, and additional actions to be taken, are reasonably designed to remediate the control deficiencies identified and strengthen our internal control over financial reporting.
+Added: As we continue to evaluate and work to improve our internal control over financial reporting, management may determine to take additional measures to address control deficiencies or modify certain of the remediation measures described above.
+Added: Remediation of the identified material weaknesses and strengthening our internal control environment has continued during the period ended March 31, 2022 and will continue throughout 2022 and beyond, as necessary.
We will test the ongoing operating effectiveness of the new and existing controls in future periods.
The material weaknesses cannot be considered completely remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
−Removed: While we believe the steps taken to date and those planned for implementation will improve the effectiveness of our internal control over financial reporting, we have not completed all remediation efforts identified herein.
−Removed: Accordingly, as we continue to monitor the effectiveness of our internal control over financial reporting in the areas affected by the material weaknesses described above, we have and will continue to perform additional procedures prescribed by management, including the use of manual mitigating control procedures and employing any additional tools and resources deemed necessary, to ensure that our consolidated financial statements are fairly stated in all material respects.
−Removed: Inherent Limitations on Effectiveness of Controls
−Removed: Management, including our CEO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud.
−Removed: A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
−Removed: Further, the design of a
−Removed: control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
−Removed: Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, misstatements, errors, and instances of fraud, if any, within our organization have been or will be prevented or detected.
−Removed: These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
−Removed: Controls also can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.
−Removed: The design of any system of controls is based in part on 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.
−Removed: Projections of any evaluation of controls effectiveness to future periods are subject to risks.
−Removed: Over time, internal controls may become inadequate as a result of changes in conditions, or through the deterioration of the degree of compliance with policies or procedures.
PART II – OTHER INFORMATION
Legal Proceedings
+Added: For a summary of the Company’s risk factors, please refer to Item 9A of our Form 10-K for the year ended December 31, 2021.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.