Beam Global
For the period ended Jun 30, 2024. Filed Aug 13, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 13, 2024
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. All internal control systems, no matter how well designed, have inherent limitations. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
During the period covered by this filing, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our internal controls over financial reporting. Based upon our evaluation, of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2024 due to the material weaknesses in our internal controls over financial reporting described below. In light of this fact, our management has performed additional analyses, reconciliations and other post-closing procedures and has concluded that, notwithstanding the material weaknesses in our internal control over financial reporting, the consolidated financial statements for the periods covered by and included in this Quarterly Report fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles.
The following material weaknesses existed as of December 31, 2023:
Material weaknesses:
| · | During Q4 2023, the Company implemented NetSuite ERP system to automate operations and accounting for the San Diego and Chicago locations. We did not implement program change management and user access controls to ensure that: |
| a. | IT program and data changes affecting the Company’s financial IT applications & underlying accounting records are identified, tested, authorized, and implemented appropriately, and |
| b. | Appropriate segregation of duties that would adequately restrict user access and ensure adequate review of transactions. |
| · | Because we are a small company, many employees have multiple job responsibilities, and during the implementation in Q4, access was allowed for employees to access necessary tasks. As we move forward into 2024, we will assign access to ensure the proper segregation of duties. Additionally, we need to ensure the employees are adequately trained and able to resolve issues timely. The Company needs to establish appropriate procedures for change management to ensure changes to the system are formally approved, properly restricted to appropriate personnel, and adequately tested. |
| · | In our review, we noted that the Company did not implement adequate controls relating to documentation of the review and approval of reconciliations and other schedules prepared internally to be included or disclosed in the financial statements. Many of our reports and reconciliations are performed in Excel spreadsheets, and we did not adequately validate the segregation of duties between the preparer and the approver with a signature and time stamp. NetSuite has many robust internal control features that can be configured and utilized to ensure workflow approvals are adhered to and integrated into documentation. |
Since these controls have a pervasive effect across the inventory transaction cycle, management has determined that these circumstances constitute a material weakness, based on the criteria established in the “Internal Integrated Framework” issued by COSO in 2013 and as a result, we did not maintain effective internal control over financial reporting as of June 30, 2024.
Changes in Internal Control Over Financial Reporting
The Company is continuing to actively work to remediate the material weaknesses described above, including the need for additional remediation steps and implementing additional measures to remediate the underlying causes that give rise to the material weaknesses. During the three months ended June 30, 2024, the Company has taken various actions to strengthen our internal control over financial reporting, including:
| · | Continue to review access in NetSuite ERP to ensure the proper segregation of duties and additional training courses to ensure the employees are trained and able to resolve issues timely. |
| · | Managed processes related to ordering, counting, warehousing, valuing and transacting our inventory in NetSuite ERP. |
| · | Increasing and monitoring the adequacy of staffing levels and expertise with the requisite technical knowledge and skills to support continued enhancement on the controls and procedures surrounding documentation of review and formalization of reconciliations, accounting policies and controls. |
| · | Continue to manage a segregation of duties between the preparer and the approver of reconciliation and supporting schedules which included hiring additional staff. |
The material weaknesses will be considered remediated when management concludes that, through testing, the applicable remedial controls are designed, implemented and operating effectively. As management continues to evaluate and improve disclosure controls and procedures and internal control over financial reporting, the Company may decide to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures identified.
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