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Item 9A. Controls and Procedures

2024-03-07 compared with 2023-03-03 · 59 added, 73 removed, 106 unchanged (55% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the "Exchange Act")) as of December 31, 2022 (the “Evaluation Date”).

Based upon that evaluation, our CEO and CFO concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) are accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our chief executive and interim chief financial officer (same person), evaluated the effectiveness of our disclosure controls and procedures (defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the "Exchange Act")) as of December 31, 2023 (the “Evaluation Date”).

Based upon that evaluation, our management concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) are accumulated and communicated to our management, including our chief executive and interim chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting.

As defined by the SEC in Rule 13a-15(f) and 15d-15(f) under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of, our CEO and CFO, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

As defined by the SEC in Rule 13a-15(f) and 15d-15(f) under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of, our chief executive and interim chief financial officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our internal control system is designed to provide reasonable assurances to our management and the board of directors regarding the preparation and fair presentation of published financial statements.

2 unchanged sentences

Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our CEO and CFO assessed the effectiveness of our internal control over financial reporting as of December 31, 2022.

In making this assessment, our CEO and CFO used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework .

Based on that assessment and using the COSO criteria, our CEO and CFO have concluded that, as of December 31, 2022, our internal control over financial reporting was not effective due to the lack of a formalized and complete set of policy and procedure documentation evidencing our Company’s system of internal controls over financial reporting (“Lack of Formal Documentation”).

Such Lack of Formal Documentation is not uncommon our a company of our size due to personnel and financial limitations.

Our management intends to work to remediate the Lack of Formal Documentation, which is expected to include the hiring of an independent consulting or accounting firm to review and document its internal control system to ensure compliance with COSO.

However, our financial position could make it difficult for it to implement this remediation.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023.

In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework .

Based on that assessment and using the COSO criteria, our management have concluded that, as of December 31, 2023, our internal control over financial reporting was effective.

Changes in Internal Control over Financial Reporting

Over the past several years, we implemented significant measures to remediate past instances of ineffectiveness of our internal control over financial reporting, The remediation measures consisted of the engagement of accounting consultants as needed to provide expertise on specific areas of the accounting guidance, the hiring of individuals with appropriate experience in internal controls over financial reporting, and the modification to our accounting processes and enhancement to our financial control.

Further, we expanded our board of directors to include a majority of independent disinterested directors;

established an audit, compensation, and corporate governance committee of the board of directors;

and adopted a formal policy with respect to related party transactions.

15d-15(d) that occurred during the fiscal year ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

During 2023, the Company undertook an initiative, utilizing internal resources and outside experts, to review and further document its policies and procedures to strengthen and insure its internal controls over financial reporting.

This included developing and preparing updated and incremental standard operating procedures and policies documentation.

These related to, among others, the procedure for recording transaction in the company’s general ledger and the manner in which the Company accounts for various types of transactions, as well as policies relating to purchasing, travel and entertainment, revenue recognition, electronic fund transfers and electronic document retention and backup.

The Company views this process as an ongoing initiative as new systems and procedures are implemented and adopted in connection with the Company’s growth and business expansion and intends to continue to allocate internal resources and engage outside consultants, as it deems appropriate, to insure the strength of its ongoing internal controls over financial reporting.

Other than as described above, there was no change to our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) identified in connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) that occurred during the fiscal year ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Attestation Report of the Registered Public Accounting Firm

1 unchanged sentence

Other Information

On February 28, 2023, the Board appointed Jon R.

Levine as the Company's Chief Executive Officer and Edward Gildea as Chairman of the Board.

Effective February 28, 2023, the Company entered into an amended and restated employment agreement with each of Jon R.

Levine, President and Chief Executive Officer (the "Levine Agreement") and Timothy Shaw, Chief Operating Officer (the "Shaw Agreement") and a new employment agreement with Susan M.

Villare, Chief Financial Officer (the "Villare Agreement") (the Levine Agreement, the Shaw Agreement and the Villare Agreement, collectively the "Employment Agreements").

Pursuant to the Levine Agreement, Mr.

Levine will receive a base salary of $375,000, effective March 1, 2023, with a target bonus opportunity equal to 60% of his then-applicable annual base salary and a maximum bonus opportunity equal to 120% of his then-applicable annual base salary.

Pursuant to the Villare Agreement, Ms.

Villare will receive a base salary of $300,000, effective March 1, 2023, with a target bonus opportunity equal to 60% of her then-applicable annual base salary and a maximum bonus opportunity equal to 120% of her then-applicable annual base salary.

Pursuant to the Shaw Agreement, Mr.

Shaw will receive a base salary of $325,000, effective March 1, 2023, with a target bonus opportunity equal to 60% of his then-applicable annual base salary and a maximum bonus opportunity equal to 120% of his then-applicable annual base salary.

Villare, and Mr.

Shaw (each, an “Executive”) is entitled to severance payments and benefits upon certain terminations of employment under the terms of their respective Employment Agreement.

Upon termination of an Executive’s employment by the Company without Cause or by an Executive for Good Reason (each as defined in the Employment Agreements), each Executive is entitled to severance payments equal to:

(i) 12 months of his/her base salary, payable over 12 months following termination;

(ii) the aggregate sum of the Company’s share of medical, dental, and vision insurance premiums for such Executive and his/her dependents for a 12 month period, payable over 12 months following termination;

(iii) in the event such termination occurs less than six months following the commencement of the fiscal year, such Executive shall be entitled to receive a prorated target bonus, prorated based on the number of days actually employed in such fiscal year (the “Pro Rata Bonus”), payable on the severance commencement date;

and (iv) in the event such termination occurs six months or later following the commencement of the fiscal year, an amount equal to the target bonus (the “Target Bonus”), payable on the severance commencement date.

In addition, upon such termination, the Executive’s equity awards that are subject to vesting based solely upon such Executive’s continued service with the Company and would have vested during the 12 month period following the date of termination of employment will vest.

Notwithstanding the foregoing, to the extent a termination by the Company without Cause or by an Executive for Good Reason during a Change in Control Protection Period (as defined in the Employment Agreements), each Executive is entitled to receive a cash lump sum payment equal to:

(a) the sum of 24 months of the Executive’s base salary;

(b) two times the Executive’s target bonus for the calendar year in which the date of termination occurs;

(c) the aggregate sum of the Company’s share of medical, dental, and vision insurance premiums for the Executive and his/her dependents for a 24 month period;

(d) if in the event such termination occurs less than six months following the commencement of the fiscal year, such Executive shall be entitled to receive the Pro Rata Bonus, payable on the severance commencement date;

and (e) in the event such termination occurs six months or later following the commencement of the fiscal year, an amount equal to the Target Bonus, payable on the severance commencement date.

In addition, upon such termination, any of the Executive’s unvested equity awards outstanding immediately prior to the date of termination will automatically become fully vested and exercisable as of the date of termination.

In the event an Executive’s employment with the Company is terminated as a result of his/her death or Disability (as defined in the Employment Agreements), then in addition to Accrued Benefits (as defined in the Employment Agreements), the Company will pay such Executive or his/her estate or representative the Pro Rata Bonus.

The foregoing description of each Employment Agreement is qualified in its entirety by reference to the respective Employment Agreement, which are filed as Exhibits 10.18, 10.19, and 10.20 hereto and are incorporated herein by reference.

Insider Trading Arrangements

On December 4, 2023 , Jon Levine , the President, Chief Executive Officer and Interim Chief Financial Officer of the Company ("Mr.

Levine"), adopted a trading arrangement for the sale of shares of the Company’s common stock (the "Mr.

Levine's Trading Plan”) that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c).

Levine’s Trading Plan (i) authorizes the agent to sell only such number of shares of the Company’s common stock as are necessary to satisfy tax withholding obligations arising from each incremental vesting of the compensatory restricted stock units awarded to Mr.

Levine in November 2023 pursuant to the terms of such plan beginning on November 7, 2024;

and (ii) is in effect from December 4, 2023 through the earlier of the date on which all sales have been completed pursuant to the terms of such plan, the termination of the plan as provided for therein, or November 15, 2026.

On December 6, 2023 , Timothy Shaw , the Chief Operating Officer of the Company ("Mr.

Shaw"), adopted a trading arrangement for the sale of shares of the Company’s common stock (“Mr.

Shaw’s Trading Plan”) that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c).

Shaw’s Trading Plan (i) authorizes the agent to sell only such number of shares of the Company’s common stock as are necessary to satisfy tax withholding obligations arising from each incremental vesting of the compensatory restricted stock units awarded to Mr.

Shaw in September 2023 pursuant to the terms of such plan beginning on September 1, 2024;

and (ii) is in effect from December 6, 2023 through the earlier of the date on which all sales have been completed pursuant to the terms of such plan, the termination of the plan as provided for therein, or September 15, 2026.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

8 unchanged sentences

• accountability for adherence to the Code.

The information required by this Item 10 is incorporated herein by reference to our definitive included in our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the U.S.