Item 4. Controls and Procedures
Item 4.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, the “Exchange Act”) as of April 30, 2026. The Company’s disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of April 30, 2026, our disclosure controls and procedures were not effective because of the material weaknesses in internal control over financial reporting, as described below.
Material Weaknesses in 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 the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses are as follows:
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We did not design and maintain effective controls in response to the risks of material misstatement. Specifically, changes to existing controls or the implementation of new controls have not been sufficient to respond to changes to the risks of material misstatement in financial reporting. This contributed to the following material weaknesses;
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We did not design and maintain effective controls over segregation of duties related to manual journal entries, account reconciliations and the purchases and payables process. We did not design and maintain effective controls over review of the financial close process, including the statement of cash flows and to verify the financial statement disclosures agree to the Company’s accounting records; and
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We did not design and maintain effective controls at operating locations in the Middle East and North Africa (“MENA”), including not maintaining sufficient documentation to support an evaluation that controls over all business processes were designed and operating effectively.
These material weaknesses resulted in adjustments to property, plant, and equipment, net of accumulated depreciation, trade accounts payable, trade accounts receivable, and the statement of cash flows. These adjustments resulted in a revision of the unaudited Condensed Consolidated Financial Statements as of and for the period ended April 30, 2024, a restatement as of and for the period ended July 31, 2024 and material adjustments as of and for the period ended October 31, 2024. These material weaknesses also resulted in immaterial corrected and uncorrected misstatements in the statement of cash flows and to stock based compensation expense, unbilled receivables, prepaid expenses and other current assets, operating lease liability short-term, other long-term assets, cost of sales, property, plant and equipment, net of accumulated depreciation, income taxes payable, deferred tax assets, income tax expense costs in excess of billings on uncompleted contracts, and billings in excess of costs and estimated earnings on uncompleted contracts as of and for the year ended January 31, 2026, and in the interim periods ended April 30, 2025, July 31, 2025, and October 31, 2025.
Additionally, each of these material weaknesses could result in a material misstatement of substantially all accounts and disclosures that would result in a material misstatement in the Company’s consolidated annual or interim financial statements that would not be prevented or detected on a timely basis.
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Remediation Plan for the Material Weaknesses in Internal Control over Financial Reporting
While management, under the leadership of our CEO, has improved our internal control over financial reporting throughout the three months ended April 30, 2026, additional time and effort is required to fully complete the remediation activities. We continue to believe these actions will be effective in the remediation of the material weaknesses, but these activities currently remain ongoing.
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During the fiscal quarter ended April 30, 2026, we continued an entity wide risk assessment over our financial reporting and our internal control over financial reporting, including identification of financially relevant systems and business processes at the financial statement assertion level, and to identify controls to address the identified risks. We will continue to complete our risk assessment and enhance the design of existing controls, as well as implement new controls in future periods;
We continue to design and implement controls to identify and evaluate changes in our business and the impact on our internal control over financial reporting; Our remediation plans related to entity level controls, financial reporting controls, and business process controls include:
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Further enhancements to our segregation of duties framework within the journal entry and account reconciliation processes and the purchases and payables cycle to ensure appropriate segregation of duties within these areas;
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Ongoing updates in the design of controls for the preparation and review of the financial close process, including the statement of cash flows and to verify the financial statement disclosures agree to the Company’s accounting records;
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Implemented a new consolidation and reporting software. In connection with this implementation, we updated the processes that constitute our internal control over financial reporting, as necessary, to accommodate related changes in our business processes, including the statement of cash flows and segregation of duties for manual consolidating journal entries;
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Providing continuing training, coaching, and reviews around our internal control over financial reporting.
In addition to the items noted above, our remediation plans related to our MENA locations include the following:
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Further enhancements to the design and operation of controls over business processes that are relevant to our MENA locations;
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Providing continuing training, coaching, and reviews around our internal control over financial reporting;
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Continuing to formalize our financial reporting processes and procedures.
The Company anticipates the actions described above will strengthen the Company’s internal control over financial reporting and will address the related material weaknesses described above. However, the material weaknesses cannot be considered fully remediated until the necessary controls have been appropriately designed and implemented. The remediation process and procedures will also need to be in operation for a period of time and management conclude through testing, that these controls are operating effectively. As we continue to evaluate and improve our internal control over financial reporting, we may design or modify additional controls or certain of the remediation procedures described above.
Changes in Internal Control over Financial Reporting
As described in the "Remediation Plan for the Material Weaknesses in Internal Control over Financial Reporting" above, there were changes to our internal control over financial reporting which were identified in connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) under the Exchange during the fiscal quarter ended April 30, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II OTHER INFORMATION
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.