Item 4. Controls and Procedures
Item 4. CONTROLS AND PROCEDURES
Based on their evaluation as of the end of the period covered by this quarterly report on Form 10-Q, our Principal Executive Officer and Principal Financial Officer have concluded that due to the material weakness in the Company’s internal control over financial reporting discussed below, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are not effective for ensuring that information the Company is required to disclose in reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information 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.
Changes in internal control over financial reporting
Other than as described below in regard to our remediation of the material weakness identified in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, no changes have occurred in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Previously Identified Material Weakness
Based on the assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025, as described in our Annual Report on Form 10-K for the year ended December 31, 2025, management concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2025 due to a material weakness related to the manual journal entry process impacting the Company’s general ledger accounts. We determined that, for a subset of journal entries that are manually entered into the Company’s general ledger, we failed to maintain effective segregation of duties. With respect to this subset of manual journal entries, it was possible for an individual to record an entry into our general ledger without prior approval. 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. As stated in our Annual Report on Form 10-K, management concluded that the existence of this material weakness did not result in any material misstatement to any of the Company’s previously issued consolidated financial statements related to these control deficiencies.
71
Table of Contents
Remediation of Material Weakness
As noted above, the underlying cause of the above described material weakness was a failure to maintain effective segregation of duties for a subset of journal entries manually entered into the Company’s general ledger. To address this weakness, in the first quarter of 2026, the Company implemented the following new control procedures:
• We reduced the number of individuals with access to the Company’s general ledger on our core system. Following this change, only a limited number of individuals within the Company’s Finance Department retain the access necessary to effect such manual entries, which we believe reduces the likelihood that a journal entry would be manually entered without the required approval (as detailed in the next bullet).
• We implemented new supervision and review processes for journal entries manually entered directly into the Company’s general ledger on our core system:
◦ Under the new process, before a manually-entered journal entry can be posted to the Company’s general ledger, a separate individual must approve the proposed journal entry. The processes also require that individuals performing the reviews have sufficient knowledge and experience in the relevant subject areas and are, therefore, qualified to perform such reviews.
◦ To ensure the new process is properly executed, a member of the Company’s financial reporting staff routinely reviews a report of manual journal entries posted to our general ledger to ensure the entries were properly supported and approved prior to entry.
While we have taken steps to implement our remediation plan, the material weakness will not be considered remediated until the enhanced controls, discussed above, operate for a sufficient period of time and management has concluded, through testing, that the related controls are effective.
72
Table of Contents
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.