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Item 4. Controls and Procedures

2024-11-14 compared with 2024-08-14 · 24 added, 17 removed, 27 unchanged (60% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Executive Chairman of the Board and Chief Executive Officer and Interim Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of June 30, 2024.

Our objective in designing our disclosure controls and procedures is that they provide reasonable assurance of achieving their objectives of ensuring that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Interim Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based upon this evaluation, due to the existence of the material weaknesses found in our internal controls over financial reporting described below, our Chief Executive Officer and Interim Chief Financial Officer concluded that, as of June 30, 2024, our disclosure controls and procedures were not effective at the reasonable assurance level.

As disclosed in our Form 10-K for the year ended December 31, 2023 and Form 10-Q for the quarter ended March 31, 2024, for the reasons set forth therein, our Chief Executive Officer and Interim Chief Financial Officer had previously concluded that, as of March 31, 2023, June 30, 2023, September 30, 2023 December 31, 2023 and March 31, 2024 our disclosure controls and procedures were not effective at the reasonable assurance level.

Based upon this evaluation, due to the existence of the material weaknesses found in our internal controls over financial reporting described below, our Chief Executive Officer and Interim Chief Financial Officer concluded that, as of September 30, 2024, our disclosure controls and procedures were not effective at the reasonable assurance level.

As disclosed in our Form 10-K for the year ended December 31, 2023 and Forms 10-Q for the quarters ended March 31, 2024 and June 30, 2024, for the reasons set forth therein, our Chief Executive Officer and Interim Chief Financial Officer had previously concluded our disclosure controls and procedures were not effective at the reasonable assurance level.

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.

In preparation of our financial statements for the period covered by this report, we identified material weaknesses in internal control over financial reporting related to our control environment that existed as of June 30, 2024, as described below.

The Company has developed a plan to remediate the internal control weaknesses that were previously identified and we continue to make progress to implement the plan.

The plan includes a change in the Company’s Chief Financial Officer, hiring additional accounting staff and changing the third-party technical accounting consultants.

The material weaknesses in internal control over financial reporting related to our control environment that were previously identified are described below.

Specifically, we identified material weaknesses with respect to (1) the lack of segregation of duties, (2) the lack of designed and operating review controls with respect to oversight of the financial reporting process, (3) errors with respect to the review of work performed by service providers, (4) errors in connection with accounting for the royalty obligation acquired in the merger with Old Catheter, (5) use of an incorrect discount rate in calculating the fair value of the royalty obligation, and (6) timing of revenue recognition.

Notwithstanding the identified material weaknesses, management believes that the Financial Statements and related financial information included in this Quarterly Report, its quarterly report for the quarter ended March 31, 2024, and in its Quarterly and Annual Reports filed during and with respect to the year ended December 31, 2023, fairly present, in all material respects, our consolidated balance sheets, statements of operations, shareholders’ equity and cash flows as of and for the periods presented.

Notwithstanding the identified material weaknesses, management believes that the Financial Statements and related financial information included in this Quarterly Report, its quarterly report for the quarters ended March 31, 2024 and June 30, 2024, and in its Quarterly and Annual Reports filed during and with respect to the year ended December 31, 2023, fairly present, in all material respects, our consolidated balance sheets, statements of operations, stockholders’ equity and cash flows as of and for the periods presented.

Remediation Plan

Management is in the process of developing a remediation plan and believes significant progress has been made, including the following remediation items:

Segregation of duties –All payroll items are now reviewed by our Interim Chief Financial Officer prior to processing the payroll.

Invoices are entered by one clerk and checks cut by another, after approval from the Interim CFO authorizing which invoices to pay.

Checks are signed by the Chief Executive Officer.

Wires are entered by one clerk and approval is required by the Interim Chief Financial Officer.

Addition of a permanent Chief Financial Officer would strength the reviews/controls already in place and a search is currently in process.

Lack of designed and operating review controls with respect to oversight of the financial reporting process – A third party contractor prepares the financial reports and they are reviewed and approved by management prior to inclusion in any filings.

Addition of a permanent Chief Financial Officer will create an additional layer of review.

Management is in the process of implementing a remediation plan and believes significant progress has been made, including the following remediation items:

Segregation of duties –We have added additional professional accounting personnel and have retained a new third party technical accounting consultant.

In addition, we have reviewed and updated our accounting systems descriptions for sales/accounts receivable/cash receipts and purchasing/accounts payable and cash disbursements/payroll process and general ledger process and all employees have been trained on the updated procedures.

Lack of designed and operating review controls with respect to oversight of the financial reporting process – We have recently changed our third party technical accounting consultants who assist in the financial reporting process.

We believe that the new consulting group will improve our financial reporting process.

Errors with respect to the review of work performed by service providers – work performed by service providers is reviewed and any errors identified are sent back to service provider for resolution before being incorporated into the company’s financial reports.

Errors in connection with accounting for the royalty obligations acquired in the merger with Old Catheter – the first royalty calculations did not include the royalty for LockeT inventor.

Any new contracts are now reviewed by the Interim Chief Financial Officer for any assets or liabilities that would need to be recorded.

Use of an incorrect discount rate in calculating the fair value of the royalty obligation – Calculations are reviewed by management to ensure inputs are reasonable prior to incorporating the calculations into the Company’s financial reports.

In addition, we have recently changed third party technical consultants, and we believe that the new consulting group will improve our financial reporting process.

Errors in connection with accounting for the royalty obligations acquired in the merger with Old Catheter – the initial royalty calculations did not include the royalty payable to the LockeT inventor.

The process includes review by the Interim Chief Financial Officer of material contracts for any assets, liabilities or disclosures that would need to be recorded.

Use of an incorrect discount rate in calculating the fair value of the royalty obligation in the draft financial statements (which were corrected prior to release) – Calculations are reviewed by management to ensure inputs are reasonable prior to incorporating the calculations into the Company’s financial reports.

We have recently changed third party technical consultants, and we believe that the new consulting group will improve our financial reporting process.

Timing of revenue recognition – Revenue is recognized when product is delivered to the customer.

5 unchanged sentences

Changes in Internal Control over Financial Reporting

Except as noted above, there have been no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Except as noted above, there have been no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

10 unchanged sentences

Reference is made to the information disclosed under Item 3 — " Legal Proceedings " in the Fiscal 2023 10-K.

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and Quarterly Report on Form 10-Q filed for the period ended June 30, 2024.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Previously Reported.

DEFAULTS UPON SENIOR SECURITIES

MINE SAFETY DISCLOSURES

Not applicable.

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.

What changed 10-Q

Item 4. Controls and Procedures