Item
4.02 – Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review
The
Company’s management detected the issue related to the Diluted EPS calculations for the Restated Periods and promptly reported
it to the Company’s Audit Committee which undertook a thorough review and investigation of the potential miscalculation and discussed
the matter with the Company’s independent audit firm as well as a nationally recognized third-party accounting firm.
On
April 19, 2022, management and the Audit Committee agreed that the Diluted EPS figures for the Restated Periods were incorrectly calculated
due to the weighting of the diluted shares outstanding, and accordingly, the Board of Directors, based on the recommendation of the Audit
Committee, concluded that the diluted weighted average shares outstanding and Diluted EPS in the Company’s previously issued financial
statements covering the Restated Periods require restatement and should no longer be relied upon. Similarly, related press releases,
earnings releases, and investor communications describing diluted weighted average shares outstanding and Diluted EPS for the Restated
Periods should no longer be relied upon.
The
Company expects that the restatements will result in the following estimated adjustments:
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an
increase in the previously reported Diluted EPS for the year ended December 31, 2021, from $0.24 to $0.41; |
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an
increase in the previously reported Diluted EPS for the fourth quarter ended December 31, 2021, from $0.15 to $0.16; and |
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a
decrease in the previously reported Diluted EPS for the third quarter September 30, 2021 from $0.20 to $0.17. |
While
the third quarter 2021 restatement resulted in a decrease of $0.03 Diluted EPS and the fourth quarter 2021 restatement resulted in an
increase of $0.01 Diluted EPS, the net difference in the full year 2021 restated Diluted EPS increased $0.17 because the Company overestimated
the weighted average shares outstanding for the full year.
The Company will amend its Annual Report on Form
10-K for the year ended December 31, 2021 to restate the previously issued annual financial statements and its Quarterly Report on Form
10-Q for the quarter ended September 30, 2021 to restate the previously issued interim financial statements. Although the Company cannot
yet estimate when it will complete the restatements and file the amended Annual Report and Quarterly Report, the Company is working
diligently and expeditiously toward completion of the restatements and intends to file such amended Annual Report and Quarterly Report
as soon as reasonably practicable.
Internal
Control Considerations
A
material weakness is a deficiency, or a combination of deficiencies, in internal controls 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. In connection with these expected restatements, management has re-evaluated the effectiveness of the Company’s
disclosure controls and procedures and internal control over financial reporting.
The
Company’s management has concluded that in light of the errors described above, as of September 30, 2021, the Company did not maintain
effective controls over the preparation, review, presentation, and disclosure of its financial statements relating to diluted
weighted average shares outstanding and Diluted EPS. Specifically, the following material weakness existed:
Misapplication
of the calculation of weighted average shares outstanding for Diluted EPS.
The
Company has already undertaken steps to improve
the system of evaluating and implementing the accounting standards that apply to its financial statements, including significantly enhancing
its accounting team through the recent hirings of a Chief Financial Officer, Director of Accounting, Senior Manager of SEC Reporting,
and Tax Manager. The Company is also providing additional training to its personnel, and has engaged a nationally recognized third-party
accounting specialist with whom Company management and accounting personnel can consult regarding the application of complex accounting
transactions, including Diluted EPS.
Caution
Regarding Forward-Looking Statements
This
report, including the exhibit hereto, may include information that constitutes “forward-looking statements” within the meaning
of the federal securities laws. Words such as “may,” “might,” “should,” “believe,” “expect,”
“anticipate,” “estimate,” “continue,” “predict,” “forecast,” “project,”
“plan,” “intend” or similar expressions, or statements regarding intent, belief, or current expectations, are
forward-looking statements. These forward-looking statements are based upon current estimates and assumptions. While the Company believes
these forward-looking statements are reasonable, undue reliance should not be placed on any such forward-looking statements, which are
based on information available to us on the date of this release. These forward-looking statements are subject to various risks and uncertainties,
including without limitation those set forth in the Company’s filings with the Securities and Exchange Commission. Thus, actual
results could be materially different. The Company expressly disclaims any obligation to update or alter statements whether as a result
of new information, future events or otherwise, except as required by law.