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Evaluation of Disclosure Controls and Procedures
−Removed: The term “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”), refers to controls and procedures that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act 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.
−Removed: As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q.
−Removed: Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were ineffective as of September 30, 2020.
−Removed: As a result of becoming a public company, we will be required, under Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting beginning with our Annual Report on Form 10-K for the year ended December 31, 2020.
−Removed: This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
−Removed: SEC rules define a material weakness as a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be detected or prevented on a timely basis.
−Removed: Previously Identified Material Weaknesses and Plans to Remediate
−Removed: Prior to October 1, 2020, we were a private company with limited accounting personnel and other resources with which to address our internal control over financial reporting.
−Removed: As of September 30, 2020, there were three material weaknesses, identified during the audits of our financial statements for the fiscal years ended December 31, 2018 and 2019 and disclosed in our Registration Statement on Form S-1, in the design of our internal control over financial
−Removed: reporting which had not yet been remediated.
−Removed: These material weaknesses relate to the lack of review of journal entries, lack of timely and effective review of financial statement account reconciliations and the lack of maintaining a sufficient complement of personnel commensurate with the accounting and financial reporting requirements of a public company.
−Removed: We have taken steps to begin to remediate the material weaknesses described above.
−Removed: During the third quarter of 2020, and as part of the quarterly close process resulting in the financial statements included in this Quarterly Report on Form 10-Q, we began implementing controls over the review process for journal entries and the timely and effective review of financial statement account reconciliations.
−Removed: We also hired a full-time Chief Financial Officer who has over 35 years of accounting and finance experience, and subsequent to the end of the quarter, we also hired a full-time Corporate Controller who has over 20 years of accounting and finance experience.
−Removed: In addition, we engaged a team of consultants with the requisite knowledge of accounting and financial reporting requirements to supplement our existing management team.
−Removed: In connection with the ongoing implementation of our plans to remediate, we continue to evaluate and further develop our existing internal controls over financial reporting, which may include the addition of new personnel, including one or more employees in our accounting and finance group, and the engagement of additional consultants.
−Removed: Any action we have taken or may take to remediate the above material weaknesses is subject to continued management review supported by testing, as well as oversight by the audit committee of our board of directors.
−Removed: We cannot assure that material weaknesses or significant deficiencies will not occur in the future or that we will be able to remediate such weaknesses or deficiencies in a timely manner, which could impair our ability to accurately and timely report our financial position, results of operations or cash flows.
−Removed: Inherent Limitations on Effectiveness of Controls and Procedures
−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 achieved.
−Removed: Further, the design of a control system must be balanced against resource constraints, and therefore, the benefits of controls must be considered relative to their costs.
−Removed: Given the inherent limitations in all systems of controls, no evaluation of controls can provide absolute assurance all control issues and instances of fraud, if any, within a company have been detected.
−Removed: These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake.
−Removed: Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of controls.
−Removed: The design of any system of controls is also 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;
−Removed: over time, controls may become inadequate because of changes in conditions or the degree of compliance with the policies and procedures may deteriorate.
−Removed: Accordingly, given the inherent limitations in a cost-effective system of controls, financial statement misstatements due to error or fraud may occur and may not be detected.
−Removed: Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance of achieving their objectives.
−Removed: We conduct periodic evaluations of our system of controls to enhance, where necessary, our control policies and procedures.
+Added: Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness 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.
+Added: Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures.
+Added: Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of March 31, 2021, our disclosure controls and procedures are not designed at a reasonable assurance level and are not effective due to the material weaknesses described below.
+Added: Discussion of Material Weaknesses
+Added: In connection with our preparation of our financial statements as of March 31, 2021 and December 31, 2020 and for the three months ended March 31, 2021 and 2020, we identified material weaknesses as defined under the Exchange Act and by the Public Company Accounting Oversight Board (United States) in our internal control over financial reporting.
+Added: The material weaknesses relate to the design of our internal control over financial reporting.
+Added: 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 financial statements will not be prevented or detected on a timely basis.
+Added: The material weaknesses that we identified related to the lack of review of journal entries, lack of timely and effective review of financial statement account balances and our lack of maintaining a sufficient complement of personnel commensurate with our accounting and reporting requirements.
+Added: Remediation Activities
+Added: We are currently in the process of remediating the material weaknesses and have taken and will continue to take steps that we believe will address the underlying causes of the material weaknesses.
+Added: The remediation efforts include (i) implementing a monthly financial statement close process that includes formal review of financial statement account balances and journal entries, (ii) creating a disclosure committee consisting of key executives and accounting personnel who review the Company’s financial statements and related disclosures and (iii) hiring a full time Chief Financial Officer as well as actively recruiting for other open positions to hire additional qualified accounting and financial reporting personnel in 2021.
+Added: While significant progress has been made to enhance our internal control over financial reporting, we are still in the process of implementing, documenting and testing these processes, procedures and controls.
+Added: We will continue to devote significant time and attention to these remediation efforts.
+Added: However, the material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
+Added: Notwithstanding the material weaknesses, management has concluded that the financial statements included elsewhere in this Quarterly Report present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with GAAP.
Changes in Internal Control Over Financial Reporting
−Removed: During the quarter ended September 30, 2020, except for the remediation activities described above, there were no changes in our internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), which materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
+Added: Other than as described above under “Remediation Activities,” there was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(f) of the Exchange Act that occurred during the quarter ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
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From time to time, we may become involved in legal proceedings arising in the ordinary course of our business.
−Removed: You should carefully consider the information described in the “Risks Factors” section of our IPO prospectus filed with the SEC on October 5, 2020.
−Removed: There have been no material changes to the risk factors described therein.
+Added: The information under this item is not required to be provided by smaller reporting companies.
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.