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Previously Reported Material Weaknesses in Internal Control Over Financial Reporting
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(5) The Company did not achieve full remediation of material weakness with clean internal controls opinion.
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• We may fail to remediate material weaknesses in our internal control over financial reporting and other material weaknesses may be identified in the future, which could adversely affect the accuracy and timing of our financial reporting;
Read in the filing ↗ Also in 10-K of Aug 31, 2026
We have identified the following unremediated material weaknesses in internal control over financial reporting as of June 30, 2025:
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However, as noted above, we will be implementing changes to our internal control over financial reporting to address the material weakness described above.
Read in the filing ↗ Also in 10-K of Aug 28, 2025
However, as noted above, we will continue implementing changes to our internal control over financial reporting to address the material weaknesses described above.
Read in the filing ↗ Also in 10-Q of Feb 6, 2026, 10-Q of May 11, 2026, 10-K of Aug 31, 2026, 10-Q of Nov 6, 2026
• We previously identified material weaknesses in our internal control over financial reporting, which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner. We are implementing measures to remediate these material weaknesses.
Read in the filing ↗ Also in 10-K of Aug 31, 2026
* This KPI is “single weighted,” meaning that such full remediation of material weakness with clean internal controls opinion is then used in the calculation of the aggregate Multiple as described above.
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• Material Weakness Remediation, which is measured on an all-or-nothing basis. A KPI multiple of 1.0 is achieved upon achievement of the specified remediation objective; otherwise, no KPI multiple is earned.
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As previously reported in our Annual Report on Form 10-K, we identified the following material weaknesses in internal control over financial reporting as of June 30, 2024, which are unremdiated as of March 31, 2025:
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• We have identified material weaknesses in our internal control over financial reporting, which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner.
Read in the filing ↗ Also in 10-K of Aug 28, 2025
To address the above noted three material weaknesses, during the fiscal year ended June 30, 2026, we successfully implemented new controls and processes, and enhanced and redesigned certain controls and procedures, across various areas. These changes included:
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This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2026 consolidated financial statements, and this report does not affect our report dated August 31, 2026 on those consolidated financial statements.
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◦ For Mr. Weigand, five KPIs were included in his program with varying weights as follows: Worldwide Revenue Performance (1x weighting), Worldwide Gross Margin (1x weighting), EPS (2x weighting), Inventory Reserves as Percentage of Revenue (2x weighting) and Material Weakness Remediation (1x weighting).
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A material weakness is a deficiency, or a 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 in a timely basis.
Read in the filing ↗ Also in 10-K of Aug 28, 2025, 10-Q of Nov 7, 2025, 10-Q of Feb 6, 2026, 10-Q of May 11, 2026, 10-Q of Nov 6, 2026, 10-K of Aug 31, 2026, 10-K of Aug 31, 2026, 10-K of Aug 28, 2025
We believe these actions included above, in addition to any other technology upgrades and enhancements we plan to make in the next fiscal year, will likely allow us to remediate this material weakness, subject to the completion of operating effectiveness testing during fiscal year 2027.
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Except for the changes in the internal controls to remediate a material weakness over the review and approval of manual journal entries and other changes as part of our plans to remediate the above mentioned material weaknesses as discussed above, there was no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Notwithstanding the material weaknesses in internal control over financial reporting described above, management believes and has concluded that the condensed consolidated financial statements 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 GAAP.
Read in the filing ↗ Also in 10-K of Aug 28, 2025, 10-Q of Nov 7, 2025, 10-Q of Feb 6, 2026, 10-Q of May 11, 2026
Notwithstanding the material weakness in internal control over financial reporting described above, management believes and has concluded that the consolidated financial statements included in this Annual Report fairly present, in all material respects, our financial condition, results of operations, and cash flows for the periods presented in conformity with U.S. GAAP.
Read in the filing ↗ Also in 10-Q of Nov 6, 2026
We have identified and implemented specific actions intended to improve the effectiveness of our internal control over financial reporting and will continue to do so until the remediation of the material weakness identified above is complete, and we are able to conclude that our internal control over financial reporting are effective. These actions include:
Read in the filing ↗ Also in 10-Q of Nov 7, 2025, 10-Q of Nov 6, 2026, 10-Q of Feb 6, 2026, 10-Q of May 11, 2026
• Continued to successfully monitor and make enhancements as appropriate to the design and effectiveness of our Enterprise Resource Planning (“ERP”) system security role structure and segregation of duties (“SOD”) rulesets, to eliminate or minimize SOD conflicts related issues that collectively contributed to the material weakness. Our security ruleset redesign has significantly simplified our security design, and we believe a combination of the reset and our continuous detective and monitoring procedures will likely successfully remediate the SOD-related material weakness subject to the completion of operating effectiveness testing during fiscal year 2026;
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We have identified and are implementing actions intended to improve the effectiveness of our internal control over financial reporting and disclosure controls and procedures and will continue to do so until the remediation of the material weaknesses identified above is complete, and we are able to conclude that both our internal control over financial reporting and our disclosure controls and procedures are effective. During the year ended June 30, 2025, we began to implement changes designed to improve our internal controls over financial reporting and to remediate the material weaknesses, including, but not limited to:
Read in the filing ↗ Also in 10-Q of May 12, 2025
As previously reported in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, the following material weaknesses in internal control over financial reporting first identified in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 filed on February 25, 2025, remain unremediated as of December 31, 2025:
Read in the filing ↗ Also in 10-Q of May 11, 2026, 10-Q of Nov 7, 2025
The above material weaknesses could have increased the risk of unauthorized access to certain information technology systems that support our financial reporting processes, manipulation of data that we use to produce our financial statements, and/or lack of complete and accurate information, which could lead to financial misstatements and affect our ability to report our information on a timely basis.
Read in the filing ↗ Also in 10-Q of Nov 7, 2025, 10-Q of Feb 6, 2026, 10-Q of May 11, 2026
The above material weakness could have increased the risk of unauthorized access to certain information technology systems that support our financial reporting processes, manipulation of data that we use to produce our financial statements, and/or lack of complete and accurate information, which could lead to financial misstatements and affect our ability to report our information on a timely basis.
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Except as described above under “Previously Reported Material Weaknesses in Internal Control Over Financial Reporting”, there were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the quarter ended June 30, 2026, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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• Successfully implemented a full redesign of our Enterprise Resource Planning (“ERP”) system security role structure and segregation of duties (“SOD”) rulesets, to address issues relating to access which were not appropriately aligned with the defined role, including lack of visibility into SOD conflicts related issues that collectively contributed to the material weakness. This redesign has significantly simplified our security design. We believe this redesign will likely successfully remediate the SOD-related material weakness and results in a less complex, sustainable, compliant access model that reduces high-risk SOD conflicts across the company, subject to the completion of operating effectiveness testing during fiscal year 2026;
Read in the filing ↗ Also in 10-Q of Feb 6, 2026
While progress has been made to enhance our internal control over financial reporting, we are still in the process of implementing these processes, procedures and controls. Additional time is required to complete the implementation and to assess and ensure the long-term sustainability of these procedures. We believe the above actions will be effective in remediating the material weaknesses described above and we will continue to devote significant time and attention to these remedial efforts. However, the material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded that these controls are operating effectively.
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While we have made progress to enhance our internal control over financial reporting, we are still in the process of implementing these processes, procedures and controls. We will require additional time to complete implementation and to assess and ensure the long-term sustainability of these procedures. We believe the above actions will be effective in remediating the material weaknesses described above, and we will continue to devote significant time and attention to these remedial efforts. However, the material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded that these controls are operating effectively.
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• Began implementing a full redesign of our ERP system security role structure and segregation of duties (“SOD”) rulesets. This redesign is foundational to both remediating the SOD-related material weakness and building a sustainable, compliant access model. As part of this reset, we are adopting a leading practice, template driven approach, that will bring standardization to our ruleset and eliminate SOD conflicts and/or mitigate them as appropriate.
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While we have made significant progress to enhance our internal control over financial reporting, we are still in the process of implementing certain additional processes, procedures and controls. We will require additional time to complete implementation, to complete testing and to assess and ensure the long-term sustainability of these procedures. We believe the above actions will be effective in remediating the material weaknesses described above, and we will continue to devote significant time and attention to these remedial efforts. However, the material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded that these controls are operating effectively.
Read in the filing ↗ Also in 10-Q of Feb 6, 2026, 10-Q of May 11, 2026, 10-Q of Nov 6, 2026, 10-K of Aug 31, 2026
As previously reported in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, there were matters that constituted material weaknesses in our internal control over financial reporting. Specifically, we did not maintain effective internal controls related to (i) segregation of duties conflicts, (ii) controls over the completeness and accuracy of information we produce and (iii) controls over procedures to achieve timely, complete and accurate recording and disclosures across multiple financial statement areas.
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As a result of these efforts, we remediated three material weaknesses in internal control over financial reporting that were previously reported in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025. Additionally, we concluded the one remaining material weakness relating to information technology general controls ("ITGC"), remains unremediated as of June 30, 2026. Specifically, our information technology controls for certain systems that support some of the financial reporting processes did not operate for a sufficient period of time, and we did not perform controls in a consistent and timely manner to monitor user access to certain financial applications, system infrastructure and programs. This material weakness could have increased the risk of unauthorized access to certain information technology systems that support our financial reporting processes, manipulation of data that we use to produce our financial statements, and/or lack of complete and accurate information, which could lead to financial misstatements and affect our ability to report our information on a timely basis.
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As previously reported in our Annual Report on Form 10-K for the fiscal year ended June 30, 2026, the material weakness identified in internal control over financial reporting related to our information technology general controls ("ITGC") for certain systems that support some of the financial reporting processes did not operate for a sufficient period of time, and we did not perform controls in a consistent and timely manner to monitor user access to certain financial applications, system infrastructure and programs, remains unremediated as of September 30, 2026.
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• Successfully completed a transition to a best in class Information Technology Service Management (“ITSM”) tool thereby enhancing change management practices across all our IT applications, including our infrastructure and security thereby ensuring standardization of processes, applying a risk based approval workflow model, and establishing stronger governance protocols as it relates to our overall change management processes. We believe these actions will assist with the successful remediation of the material weakness we previously identified relating to the deficiencies noted in the design and implementation of ITGC controls for systems that support our financial reporting processes; and
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Performance Measure Achievement Weighting Factor Final Weighted Score ─────────────────────────────────────────────────────────────────────────────────────────────────────────────────── Worldwide Revenue Performance 80%(1) 1X 0.80 Worldwide Gross Margin 190%(2) 1X 1.90 EPS 212%(3) 2X 4.24 Inventory Reserve as Percentage of Revenue 216%(4) 2X 4.32 Material Weakness Remediation 0%(5) 1X 0.00 Compensation Adjustment Factor 5.00(6) 1X 5.00 Total Multiple 16.26 Base Incentive Unit $59,734 Final Earned Performance Incentive Award Value $971,275 Performance Cash Payout Value (20%) $194,255 RSUs Payout Value (80%) $777,020 Number of RSUs to be Granted 24,093
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• Established and implemented a standard policy for manual journal entry creation and posting, including clear documentation criteria, review and approval requirements based on the risk profile of the financial statement line item impacted, with automated workflow mapping that more extensively utilizes the functionality and automation solutions available in our ERP system. This includes more rigorous enforcement of user roles and access controls to ensure oversight and prevent unauthorized entries. We believe these actions have remediated the material weakness we previously identified relating to the review and approval of manual journal entries and the prevention of any unauthorized access to post journal entries;
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We have concluded that our internal control over financial reporting was not effective as of June 30, 2026 due to the existence of a material weakness in such controls, and we have also concluded that our disclosure controls and procedures were not effective as of June 30, 2026 due to material weakness in our internal control over financial reporting, as …
Read in the filing ↗ Also in 10-K of Aug 28, 2025
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Read in the filing ↗ Also in 10-K of Aug 31, 2026
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, is responsible for evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2025. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of June 30, 2025 due to the material weaknesses in our internal control over financial reporting described below. Notwithstanding the identified material weaknesses, management believes and has concluded that the consolidated financial statements included in this Annual Report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.
Read in the filing ↗ Also in 10-K of Aug 31, 2026, 10-Q of Nov 7, 2025, 10-Q of Feb 6, 2026, 10-Q of May 11, 2026, 10-Q of Nov 6, 2026, 10-Q of May 12, 2025
• Over the last few months, we have completed a comprehensive risk-based review of our overall IT architecture, including the composition of our IT organization and applications, to ensure that all systems that support our financial reporting processes were appropriately identified to be part of the population over which we design and maintain ITGCs. During the quarter ended September 2025, we implemented improvements with an increased emphasis on more robust access provisioning and an enhanced change management thereby strengthening operating effectiveness of our overall information technology control framework. We have also taken numerous steps towards standardization of processes across our IT architecture, infrastructure and security, including but not limited to the implementation of various new applications company-wide and establishing stronger governance protocols as it relates to our overall IT change management processes. We believe these actions will likely allow us to successfully remediate the material weakness we previously identified relating to the deficiencies noted in the design and implementation of ITGC controls for systems that support our financial reporting processes; and
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• Over the last few months starting in the quarter ended September 30, 2025 and in particular in the quarter ended March 31, 2026, we have continued to evaluate and review our overall IT architecture, including the composition, appropriateness and upgrades required to our IT organization and applications, to ensure that all applications and systems that are key to the completeness and accuracy of our financial reporting processes were appropriately identified to be part of the population over which we design and maintain ITGCs. During the quarter ended March 2026, we have continued to implement steps towards optimizing our overall IT framework, standardization of processes across infrastructure and security, including establishing stronger governance policies and protocols, user access and change management restrictions. We also continue to make targeted improvements to our Information Technology Service Management (“ITSM”) tool thereby enhancing change management practices, which incorporate more preventative controls, to be supplemented by a continuous monitoring review. We believe these actions will likely allow us to successfully remediate the material weakness we previously identified relating to the deficiencies noted in the design and implementation of ITGC controls for systems that support our financial reporting processes, subject to the completion of operating effectiveness testing during fiscal year 2026; and
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… Liaw resigned from all his positions with our company, including from the Board, during a period when we were not current in our filings with the Securities and Exchange Commission, and, following completion of an Audit Committee investigation, in connection with a restructuring of our sales organization as part of our remediation of material weaknesses in our internal control over …
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