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Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q.
−Removed: Based on the evaluation of our disclosure controls and
−Removed: procedures as of September 30, 2022, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2022.
−Removed: Remediation of the Previously Reported Material Weakness
+Added: 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 a result of a material weakness in our internal control over financial reporting as previously disclosed in the 2022 Annual Report on Form 10-K, our disclosure controls and procedures were not effective as of March 31, 2023.
+Added: Material Weakness in Internal Control Over Financial Reporting
Under standards established by the Public Company Accounting Oversight Board, 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 prevented or detected and corrected on a timely basis.
−Removed: During the audit of our financial statements, for the fiscal years ended December 31, 2019 and 2020, we and our independent registered public accounting firm identified a material weakness in our financial close and reporting process.
−Removed: Specifically, that process was not adequately designed, documented, and executed to support the accurate and timely reporting of the Company’s financial results with respect to complex, non-routine transactions, such as business combinations.
−Removed: Consequently, we inappropriately accounted for our entry into a stock purchase agreement with Telegraph Hill Partners Management Company LLC (Telegraph Hill Partners), through its affiliates Telegraph Hill Partners IV, L.P.
−Removed: (THP LP) and THP IV Affiliates Fund, LLC (THP LLC, and collectively with THP LP, THP) on January 14, 2019, pursuant to which THP acquired majority control of Teknova (the THP Transaction), including as to certain tax benefits and the allocation of transaction costs across periods.
−Removed: Our audited financial statements presented the THP Transaction in accordance with GAAP, however, such adjustments amounted to a material weakness.
−Removed: The material weakness remained un-remediated as of December 31, 2021.
−Removed: As a result of the material weakness, we hired accounting employees and engaged consultants with specific technical accounting experience necessary to assist with complex, non-routine transactions.
−Removed: We also designed and implemented additional controls and procedures both as it relates to our financial close and reporting process as well as complex, non-routine transactions.
−Removed: As a result of our actions, we believe our material weakness was remediated as of March 31, 2022.
+Added: During the audit of our financial statements, for the fiscal year ended December 31, 2022, we and our independent registered public accounting firm identified a material weakness in our accounting for income taxes.
+Added: Specifically, the Company did not have the appropriate complement of tax resources commensurate with the nature and complexity associated with the Company’s income tax accounting process.
+Added: Our audited financial statements present income taxes in accordance with GAAP, however, such adjustments amounted to a material weakness.
+Added: The material weakness remained un-remediated as of March 31, 2023.
+Added: Management’s Plan to Remediate the Material Weakness
+Added: We have begun taking measures, and plan to continue to take measures, to remediate the material weakness related to our accounting for income taxes.
+Added: These measures include engaging accounting personnel and/or consultants with specific income tax accounting experience necessary to assist with our accounting for income taxes as well as implementing and adopting additional controls and procedures.
+Added: These remediation measures may be time consuming, costly, and might place significant demands on our financial and operational resources.
+Added: We believe that the remediation plan’s design and implementation will effectively remediate the material weakness;
+Added: however, until the remediation activities are fully implemented, and the operational effectiveness of related internal controls is validated through testing, the material weakness described above will continue to exist.
Changes in Internal Control Over Financial Reporting
−Removed: During the quarter ended September 30, 2022, we implemented a new enterprise resource planning (ERP) system, which we expect to improve our transactional processing and financial reporting.
−Removed: We believe the implementation of the ERP system and related changes to internal controls will strengthen our ability to scale our business and enhance our internal control over financial reporting.
−Removed: We have taken the necessary steps to monitor and maintain appropriate internal control over financial reporting during the system change and will continue to monitor the impact of this implementation on our processes and procedures, as well as the impact on our internal control over financial reporting.
−Removed: There were no other changes in our internal control over financial reporting during the quarter ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
−Removed: We believe the material weakness discussed above was remediated during the quarter ended March 31, 2022.
+Added: There were no changes in our internal control over financial reporting during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.