TRUPANION, INC. 10-Q

Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures 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. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of such date, our disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting, specifically with respect to (1) the design of information technology general controls ("ITGCs") in the areas of user access and program change-management over certain information technology ("IT") systems, and (2) the processing of transactions performed by an unaffiliated general agent. These material weaknesses were disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 ("Annual Report"). Prior to filing this Quarterly Report on Form 10-Q, we have performed additional procedures for the quarter ended September 30, 2024. Based on these procedures and notwithstanding such material weaknesses in internal control over financial reporting, management has concluded that the consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in accordance with U.S. GAAP. Remediation As previously disclosed in Part II, I tem 9A of our Annual Report, we are in the process of remediating the material weaknesses in internal control over financial reporting. We have hired additional staff and retained a global independent accounting and consulting firm to assist us with ongoing risk assessments and control design. We have also established ongoing reporting about remediation activities and status to the Audit Committee, developed an overall remediation plan for identified deficiencies and implemented tools to track our progress. The actions that we are taking are subject to ongoing senior management review as well as Audit Committee oversight. We are committed to maintaining a strong internal control environment and believe that we have made progress toward remediation. We continue to implement our remediation plan for the current material weaknesses in internal control over financial reporting. The identified material weaknesses 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. Changes in Internal Control Except for changes relating to the material weaknesses identified above and remediation efforts, there have been no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Limitations on Effectiveness of Controls and Procedures In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. 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. 41 PART II - OTHER INFORMATION