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Item 4. Controls and Procedures

2024-05-09 compared with 2023-11-09 · 24 added, 26 removed, 10 unchanged (83% of the section changed)

1 unchanged sentence

Disclosure Controls and Procedures

We are subject to the periodic reporting requirements as defined in Rule 13a-15(e) of the Exchange Act that require designing disclosure controls and procedures to provide reasonable assurance that the information we disclose in reports we file or submit with the SEC are recorded, processed, summarized, and reported within the time periods specified in the rules and forms.

We are subject to the periodic reporting requirements of the Exchange Act which requires designing disclosure controls and procedures to provide reasonable assurance that information we disclose in reports we file or submit under

the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s management conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures of the Exchange Act).

Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer each concluded, as of the end of the period, that our disclosure controls and procedures were not effective as of September 30, 2023, due to material weaknesses in internal control over financial reporting that were disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as described below.

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 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 on the evaluation of our disclosure controls and procedures as of March 31, 2024, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of such date due to material weaknesses in internal control over financial reporting.

In light of the conclusion that our disclosure controls and procedures are considered ineffective as of March 31, 2024, we have applied procedures and processes as necessary to ensure the reliability of our financial reporting in regard to this quarterly report.

Accordingly, the Company believes, based on its knowledge, that:

(i) this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the period covered by this report;

and (ii) the financial statements, and other financial information included in this quarterly report, fairly present in all material respects our financial condition, results of operations and cash flows as of and for the periods presented in this quarterly report.

Material Weaknesses in Internal Control Over Financial Reporting

1 unchanged sentence

Under standards established by the PCAOB, a material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely basis.

The material weaknesses in financial reporting as of September 30, 2023 are summarized as follows:

● We determined that we did not have sufficient accounting systems and procedures in-place, particularly in the areas of revenue recognition, processing of accounts payable, prepaid expenses, and inventory costing and management.

● We determined that we did not have sufficient policies and procedures to ensure the appropriate review and approval of user access rights to our accounting system, and lack of approval of journal entries and segregation of duties in our financial reporting process.

● We determined that our information technology infrastructure does not provide sufficient safeguards required by the COBIT framework.

Remediation Efforts to Address Previously-Identified Material Weaknesses

As previously described in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2022, Management has evaluated the material weaknesses described above and implemented a remediation plan to address its material weaknesses.

During the three-month period ending September 30, 2023 we continued implementing a broad range of remedial procedures to address the material weaknesses in our internal control over financial reporting and accounting functions.

While significant actions to improve our internal processes continue to be implemented, the enhanced controls have not operated for a sufficient period-of-time to demonstrate that the material weakness have been remediated as of September 30, 2023.

Our material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period-of-time and management has concluded, through testing, that the controls operate effectively.

We are committed to improving our internal control processes and will continue to diligently and vigorously review our financial reporting controls and procedures.

We are working to complete the remediation of our material weaknesses by the end of fiscal year 2023.

The material weaknesses in financial reporting as of March 31, 2024 are summarized as follows:

● We determined that we have not sufficiently or adequately designed or implemented control activities and have a lack of documentation, review and approval of certain control activities.

Additionally, those activities are not sufficiently monitored and tested;

● We determined that we do not have sufficient qualified accounting personnel to support the preparation of financial statements that are in compliance with U.S.

GAAP and SEC reporting requirements;

● We determined that we have not sufficiently or adequately designed or implemented information technology general controls over in-scope business processes and financial reporting systems.

Changes in Internal Control over Financial Reporting

Under the applicable SEC rules, management is required to evaluate any changes in internal control over financial reporting that occurred during each fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As discussed in “Item 9A.

Controls and Procedures” of the 2022 Report, we have undertaken a broad range of remedial procedures to address material weaknesses in our internal control over financial reporting.

These remedial procedures continued throughout the three months ended September 30, 2023 and will continue throughout the remainder of 2023.

While we continue to implement remediation efforts and design enhancements to our internal control procedures, we believe there were no other changes to our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act during the third quarter of 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the first quarter of fiscal 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, as specified above.

Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met.

Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures, or our internal controls, will prevent all error and all fraud.

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.

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.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any,

within the Company have been detected.

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 or fraud.

Additionally, controls can be circumvented by individuals or groups of persons or by an unauthorized override of the controls.

Accordingly, because of the inherent limitations in our control system, misstatements in our public reports due to error or fraud may occur and not be detected.

PART II - OTHER INFORMATION

Legal Proceedings.

See Note 14 - Commitments and Contingencies in our September 30, 2023 Condensed Financial Statements, included in Part I, Item 1, Financial Statements (Unaudited), of this Quarterly Report.

Unregistered Sales of Equity Securities and Use of Proceeds.

Defaults Upon Senior Securities.

Mine Safety Disclosures.

See Note 15 - Commitments and Contingencies in our March 31, 2024 Condensed Financial Statements, included in Part I, Item 1, Financial Statements (Unaudited), of this Quarterly Report.

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.

What changed 10-Q

Item 4. Controls and Procedures