Attached files
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| EX-31.2 - EXHIBIT 31.2 - RESPONSE BIOMEDICAL CORP | ex31-2.htm |
| EX-31.1 - EXHIBIT 31.1 - RESPONSE BIOMEDICAL CORP | ex31-1.htm |
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A
Amendment No. 3
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DOCUMENTS INCORPORATED BY REFERENCE
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The Registrant makes available free of charge on or through its website (http://www.responsebio.com) its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The material is made available through the Registrant's website as soon as reasonably practicable after the material is electronically filed with or furnished to the U.S. Securities and Exchange Commission, or SEC. All of the Registrant's filings may be read or copied at the SEC's Public Reference Room at 100 F Street, N.E., Room 1580, Washington D.C. 20549. Information on the hours of operation of the SEC's Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a website (http://www.sec.gov) that contains reports and proxy and information statements of issuers that file electronically.
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EXPLANATORY NOTE
This Amendment No. 3 on Form 10-K/A (this “Amendment”) amends the Annual Report on Form 10-K (the “Original Annual Report”) for the year ended December 31, 2011, which was originally filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2012. We are filing this Amendment in response to a comment letter received from the SEC (the “Comment Letter”) in connection with its review of the conclusion of internal control over financial reporting contained in Item 9A. We have modified Item 9A in this Amendment to reflect our revised conclusion on the effectiveness of our disclosure controls and procedures and internal control over financial reporting. In addition, we have added disclosure on the changes in internal control over financial reporting implemented by management.
Except as described above, no attempt has been made in this Amendment to modify or update other disclosures presented in the Original Annual Report. This Amendment does not reflect events occurring after the filing of the Original Annual Report or modify or update those disclosures, including the exhibits to the Original Annual Report affected by subsequent events. Accordingly, this Amendment should be read in conjunction with our filings with the SEC subsequent to the filing of the Original Annual Report, including any amendments to those filings.
ITEM 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), as of the end of the period covered by this report.
In connection with the restatements of our financial statements for the year ended December 31, 2010 disclosed in our Form 20-F/A filed on November 9, 2011, the Company’s principal executive officer and principal financial officer had determined that due to material weaknesses in internal control over financial reporting discovered, that the Company’s disclosure controls and procedures were not effective as of December 31, 2010.
The Company implemented a remediation plan to address these material weaknesses in our Internal Control Over Financial Reporting noted in our Form 20-F/A, which is described below. The Company believes that this remediation plan eliminated such material weaknesses.
However, as disclosed below, based on the material weakness related to the accounting for forfeitures of stock options, our principal executive officer and principal financial officer have concluded that, as of December 31, 2011, the Company’s disclosure controls and procedures were not effective.
Management’s Report on Internal Control Over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of the Company’s management, including its principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
As mentioned in the above section, some material weaknesses were identified in the Company’s Internal Control Over Financial Reporting in connection with the restatements that were disclosed in our Form 20-F/A filed November 9, 2011. The following material weaknesses were identified by management:
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1.
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Control environment – The Company did not maintain an effective control environment. The control environment, which is the responsibility of senior management, sets the tone of the organization, influences the control consciousness of its people, and is the foundation for all other components of internal control over financial reporting. A tone and control consciousness that consistently emphasized adherence to accurate financial reporting and enforcement of our policies and procedures was not maintained by the prior management team. This control deficiency fostered a lack of sufficient appreciation for internal control over financial reporting, allowed for management override of internal controls in certain circumstances and resulted in an ineffective process for monitoring the adherence to our policies and procedures.
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2.
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Documentation, training and testing – The Company did not update its written policies and procedures with respect to internal control over financial reporting following the Company’s 2010 management reorganization and restructuring to reflect changes in the management team and reporting authorities. The Company’s written policies and procedures were not consistently followed, due to inadequate training of staff and the failures noted elsewhere. In addition, an adequate assessment of internal controls was not made by management at the time.
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3.
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Documentation and communication of contract terms – The Company did not maintain effective document control and records of contracts with its distributors. Certain terms of contracts were documented in oral or side agreements and were not properly disclosed to the Company’s board of directors and its external auditors or legal advisors.
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4.
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Revenue recognition – The Company did not maintain effective revenue recognition controls and policies. When persuasive evidence of a purchase order did not exist, when oral or side agreements existed, when contingencies existed with respect to the acceptance of the product, or when distributors did not have the ability or intent to pay independent of payment by the end-user customer, this information was not properly communicated to the Company’s board of directors, external auditors and legal advisors. Goods were shipped and revenue recognized in violation of the Company’s written policies and procedures.
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Anti-fraud program – The Company did not maintain an effective anti-fraud program designed to detect and prevent fraud, such as a whistle-blower program and an ongoing program to manage identified fraud risks.
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The Company’s management implemented a remediation plan, which included the following:
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1.
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Updated the Company’s controls, policies and procedures to reflect the reorganization and restructuring that occurred in prior years.
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2.
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Improved the documentation of controls and the testing of controls, including the use of a qualified outside consultants, in order to ensure that the internal controls in place over financial reporting are effective or to remediate any controls that, subsequent to the appropriate testing being completed, were concluded to be ineffective.
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3.
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Updated the Company’s controls and procedures regarding order entry and processing.
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4.
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Commenced additional training of staff and management on revenue recognition.
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5.
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Implemented a Whistleblower Policy to facilitate reporting directly to the Company’s Audit Committee any suspected improper activity.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even an effective system of internal control will provide only reasonable assurance that the objectives of the internal control system are met.
As previously reported on its Current Report on Form 8-K filed on March 29, 2012, at December 31, 2011, the Company recorded a material adjustment which was a result of incorrectly recognizing the effect of forfeitures on stock based compensation previously recorded. This adjustment was due to a material weakness related to the accounting treatment for forfeitures of stock options. This material weakness resulted in a material overstatement of stock based compensation in the Company’s financial statements for the quarters ended March 31, 2011, June 30, 2011, and September 30, 2011. Stock based compensation was correctly reported in the Company’s annual consolidated financial statements for the year ended December 31, 2011.
Based on the material weakness related to the accounting for forfeitures, our principal executive officer and principal financial officer have concluded that our internal control over financial reporting was not effective as of December 31, 2011.
Management is committed to continuing to improve the Company’s internal control processes and will continue to diligently and vigorously review the Company’s financial reporting controls and procedures.
Changes in Internal Control Over Financial Reporting
Management is implementing a remediation plan to address the material weakness related to the accounting for forfeitures of stock options noted above. The remediation plan includes the following:
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educate and train personnel on the accounting treatment for forfeitures of stock options;
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configure the software program used by the Company to manage information and calculations pertaining to its stock options and related stock based compensation to account for stock based compensation in accordance with generally accepted accounting principles;
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perform a detailed review of the stock based compensation transactions generated by the software program used by the Company; and
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review of stock based compensation by a qualified person.
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POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby appoint Jeffrey L. Purvin and W.J. Adams as attorney-in-fact with full power of substitution, severally, to execute in the name and on behalf of the registrant and each such person, individually and in each capacity stated below, one or more amendments to this Annual Report on Form 10-K, which amendments may make such changes in this Annual Report as the attorney-in-fact acting in the premises deems appropriate and to file any such amendments to this Annual Report on Form 10-K with the Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K /A to be signed on its behalf by the undersigned thereunto duly authorized.
| Response Biomedical Corp. | |||
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Dated: October 4, 2012
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By:
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/s/ Jeffrey L. Purvin | |
| Jeffrey L. Purvin | |||
| Chief Executive Officer | |||
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Dated: October 4, 2012
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By:
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/s/ W.J. Adams | |
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W.J. Adams
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Chief Financial Officer
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Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K / A has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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Dated: October 4, 2012
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By:
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/s/ Dr. Peter A. Thompson | |
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Dr. Peter A. Thompson
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Chairman of Board of Directors
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Dated: October 4, 2012
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By:
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/s/ * | |
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Dr. Anthony F. Holler
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Director
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Dated: October 4, 2012
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By:
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/s/ * | |
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Dr. Joseph D. Keegan
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Director
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Dated: October 4, 2012
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By:
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/s/ * | |
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Clinton H. Severson
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Director
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Dated: October 4, 2012
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By:
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/s/ * | |
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Lewis J. Shuster
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Director
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Dated: October 4, 2012
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By:
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/s/ * | |
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Dr. David Wang
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Director
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Dated: October 4, 2012
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By:
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/s/ * | |
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Director
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/s/ Dr. Peter A. Thompson
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Dr. Peter A. Thompson
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Attorney-in-Fact
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Exhibits and Financial Statement Schedules.
(a) (1) and (2) The financial statements or required financial statement schedules are included in the Original Filing.
(b) Exhibits: The following exhibits are filed as a part of this report:
All other financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the financial statements or the notes thereto.
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Exhibit
Number
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Exhibit Description
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Incorporated by Reference
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31.1
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CEO's Certification required by Rule 13A-14(a) of the Securities Exchange Act of 1934
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31.2
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CFO's Certification required by Rule 13A-14(a) of the Securities Exchange Act of 1934
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