MAIA Biotechnology, Inc. 10-Q

Item 4 . Controls and Procedures. Management’s Evaluation of our Disclosure Controls and Procedures Under the supervision of and with the participation of our management, including our Chief Executive Officer, who is our principal executive officer, and our Chief Financial Officer, who is our principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2023 the end of the period covered by this Quarterly Report. The term “disclosure controls and procedures,” as set forth in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms promulgated by the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also 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 control system, misstatements due to error or fraud may occur and not be detected. Based on the evaluation of our disclosure controls and procedures as of March 31, 2023, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were not effective at the reasonable assurance level due to material weaknesses in internal control over financial reporting. Material weaknesses were identified at December 31, 2022 as previously disclosed in our Form 10-K, as filed on March 24, 2023 and related to the effectiveness of controls over our review and approval procedures with respect to financial information generated to prepare our consolidated financial statements, coupled with a lack of segregation of duties. 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 our annual or interim financial statements will not be presented or detected on a timely basis. Specifically, the Company noted 1) insufficient segregation of duties within the Company’s control activities and procedures throughout the year, and 2) an insufficient level of detail to identify all relevant risks of material misstatement including the risks associated with the accounting treatment and financial reporting of non-recurring complex transactions. These factors contributed to a material weaknesses in the application U.S. GAAP to effectively evaluate the accounting treatment for certain non-recurring complex transactions during the quarter ended September 30, 2022. Although the material weaknesses described above have not yet been fully remediated as of March 31, 2023, our management is committed to remediating identified control deficiencies, fostering continuous improvement in our internal controls and enhancing our overall internal controls environment. Our management believes that these actions, when fully implemented, will remediate the material weaknesses we have identified and strengthen our internal control over financial reporting. Our remediation efforts are ongoing and additional initiatives may be necessary. 26 Changes in Internal Control over Financial Reporting During the quarter ended March 31, 2023, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, other than the material weakness identified relating to the application of U.S. generally accepted accounting principles (“U.S. GAAP”) to effectively evaluate the accounting treatment for complex financial instruments. In light of the material weakness discussed above, we are taking steps to remediate the material weakness including the hiring of additional accounting staff. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. Plan of Remediation As we work towards remediating these material weaknesses, we will design and implement controls to properly address the risks associated with segregation of duties and to account for non-recurring complex transactions in accordance with U.S. GAAP. To assist us in the remediation and performance of remediated controls we hired a Corporate Controller, and we will expand the nature and extent of our review of technical accounting treatment internally and continue to utilize an accounting and financial reporting advisory firm with significant experience with publicly held companies to assist our management in evaluating the accounting treatment for complex transactions. We may identify future material weaknesses in our internal controls over financial reporting or fail to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley, and we may be unable to accurately report our financial results, or report them within the timeframes required by law or stock exchange regulations. We cannot assure that our existing material weakness will be remediated or that additional material weaknesses will not exist or otherwise be discovered, any of which could adversely affect our reputation, financial condition and results of operations. 27 PART II—OTHER INFORMATION