Intellicheck, Inc. 10-Q

Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2024 based on the guidelines established in the "Internal Control—Integrated Framework" (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its assessment, management concluded that the Company's internal control over financial reporting was not effective as of March 31, 2024 due to a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. The Company did not design and maintain effective controls to periodically reassess whether nexus was achieved in the states we do business. This caused us not to be able to collect sales tax from our customers and subsequently remitting those sales tax to the appropriate state tax agency. During our assessment in 2023, it was determined that we had prior period sales tax obligations on certain states, in which we failed to collect and remit the sales tax. Remediation of Material Weakness existing as of March 31, 2024 Management, under the guidance of the Audit Committee, is committed to developing and implementing a comprehensive remediation plan. Management formalized a process and will now review the Company’s revenue and whether nexus is triggered in the states in which the Company has revenues on a quarterly basis. If a new state or jurisdiction triggers nexus, our accounting system is updated accordingly. The analysis and accounting system configuration will be reviewed and approved by the Accounting and Finance department leadership. The material weakness will be considered remediated when management concludes that, through testing, the applicable remedial controls are operating effectively. Changes in Internal Control over Financial Reporting 25 Index Other than described above under "Remediation of Material Weakness existing as of March 31, 2024", there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2024 that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Part II - Other Information Item 1. LEGAL PROCEEDINGS None.