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Evaluation of Disclosure Controls and Procedures
−Removed: Our management conducted an evaluation of the effectiveness of our disclosure controls and procedures (as is 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: Our disclosure controls and procedures are intended to ensure that the information we are required to disclose in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including the Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures.
−Removed: Based on that evaluation, our management has concluded that, as of March 31, 2022, our disclosure controls and procedures were not effective at the reasonable assurance level because we have identified a material weakness in our internal control over financial reporting as discussed below, and such material weakness has not been remediated as of March 31, 2022.
−Removed: Our disclosure controls and procedures are designed to provide reasonable assurance of achieving the desired control objectives.
−Removed: Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met.
−Removed: In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
−Removed: Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
−Removed: Material Weakness in Internal Control Over Financial Reporting
−Removed: 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.
−Removed: Management have concluded that, as of March 31, 2022, we did not maintain effective controls over the preparation, review, presentation and disclosure of our financial statements relating to bad debt.
−Removed: Specifically, we noted the following:
−Removed: We did not design or maintain effective controls with respect to the review of the accounting for bad debt reserves, including maintaining effective controls to prevent or detect errors in the assessment of bad debt reserves.
−Removed: Specifically, our policy for bad debt reserves was primarily based on customer relationships and management’s view of the collectability of the receivables.
−Removed: The bad debt expense analysis resulted in a material adjustment to accounts receivable and bad debt expense for the year ended December 31, 2021.
−Removed: We did not maintain effective controls to identify and maintain segregation of duties to support the identification, authorization, approval, accounting for, and the disclosure of bad debt reserves.
−Removed: These control deficiencies did not result in a misstatement to our consolidated financial statements for the quarter ended March 31, 2022, following the adjustment to accounts receivable as discussed above.
−Removed: However, these control deficiencies, if not remediated, could result in a misstatement to the annual or interim consolidated financial statements which would result in a material misstatement of the annual or interim consolidated financial statements that would not be prevented or detected.
−Removed: Accordingly, our management has determined that these control deficiencies constitute material weaknesses.
−Removed: Remediation Plans
−Removed: Our management, with oversight from our Audit Committee, is in the process of developing and implementing remediation plans in response to the identified material weaknesses described above.
−Removed: Specifically, we are revising our bad debt reserve policy to consider the time of balances outstanding along with the credit worthiness of the customer and revising our review and approval policies and procedures to include segregation of duties and approvals.
−Removed: We believe the measures described above will remediate the control deficiencies we have identified and strengthen our internal control over financial reporting.
−Removed: These material weaknesses will not be considered remediated until the applicable remediated controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
−Removed: We are committed to continuing to improve our internal control processes and will continue to review, optimize and enhance our financial reporting controls and procedures.
+Added: Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as is 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.
+Added: Based on that evaluation, our management has concluded that our disclosure controls and procedures were not effective at the reasonable assurance level because we have identified a material weakness in our internal control over financial reporting that was disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and Form 10-Q for the period ended March 31, 2022.
+Added: Ongoing Remediation of Previously Identified Material Weakness
+Added: As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and Form 10-Q for the period ended March 31, 2022, we are implementing measures designed to ensure that control deficiencies contributing to the previously disclosed material weakness are remediated, such that these controls are designed, implemented, and operating effectively.
+Added: These remediation actions are ongoing, which include weekly meetings with the financial team to review any issues arising from accounts receivable and the implementation of a new policy for the identification, authorization, approval, accounting for, and the disclosure of bad debt reserves.
+Added: The new policy no longer primarily relies on management’s view of customer relationships, rather it provides supporting controls around management’s view collectability of receivables and better segregates the duties to support the identification, authorization, approval, accounting for, and the disclosure of bad debt reserves.
+Added: We expect these changes to materially improve our internal controls.
+Added: The weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
+Added: We intend to reevaluate these control processes after 180 days of testing.
+Added: Management believes the remediation of this material weakness will be completed prior to the end of fiscal 2022, however, there is no assurance as to when such remediation will be completed.
+Added: We may also conclude that additional measures may be required to remediate the material weaknesses in our internal control over financial reporting, which may necessitate additional implementation and evaluation time.
Changes in Internal Control Over Financial Reporting
−Removed: During our most recent fiscal quarter, except as otherwise disclosed above regarding the material weakness and our remediation plan, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
+Added: As noted above, the Company has been implementing measures to remediate the material weakness in our internal control over financial reporting.
+Added: Other than the remediation efforts underway, there were no changes in the Company’s internal control over financial reporting during the three-month period ended June 30, 2022, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
OTHER INFORMATION
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.