Riley Exploration Permian, Inc. 10-Q

Item 4. Controls and Procedures Evaluation of disclosure controls and procedures Our management establishes and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure. We have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, with the participation of our CEO and CFO, as well as other key members of our management. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of March 31, 2021 because of the material weakness in our internal control over financial reporting. As of March 31, 2021, we have identified material weaknesses in our 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 our annual or interim financial statements will not be prevented or detected on a timely basis. In particular, we had not yet designed an effective financial reporting process and did not complete thorough reviews of financial reports in a timely manner to allow for an appropriate level of analysis that would have identified these errors. These errors principally related to (i) accounting for stock-based compensation and our failure to record compensation expense for certain vested stock-based compensation grants in the correct reporting period, (ii) accounting for dividend distributions and our failure to record a declared dividend in the reporting period in which the dividend was declared, (iii) accounting for derivative settlements, and (iv) controls over preparation and review of the Company’s statement of cash flows were not effective. As of the date hereof, we have not fully re-designed, implemented and tested internal controls to remediate the material weaknesses. Each of the material weaknesses could result in a misstatement of our financial statements or disclosures that would result in a material misstatement of our annual or interim consolidated financial statements that would not be prevented or detected. Our management is in the process of developing its remediation plan to address the material weaknesses identified in the quarter. These plans are subject to ongoing management review. The material weaknesses identified above will not be considered remediated until our remediation efforts have been fully implemented and we have concluded that these controls are operating effectively. Consequently, if these or another material weakness or significant deficiencies occur in the future, it could affect the financial results that we report which could result in a restatement of our financial statements or cause us to fail to meet our reporting obligations. Changes in internal control over financial reporting The internal controls over financial reporting after the Merger are now the controls which REP LLC had in place prior to the Merger. There have been no other changes in our internal control over financial reporting that occurred for the quarter 51 PART II: OTHER INFORMATION ending March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As noted above, the Company is in the process of developing a remediation plan to address the material weaknesses described above. 52 PART II: OTHER INFORMATION