Co-Diagnostics, Inc. 10-Q/A

Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. At the time our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 was filed on August 14, 2020, our Chief Executive Officer and Chief Financial Officer concluded that, as a result of material weaknesses in our internal control over financial reporting as disclosed in our annual report on Form 10-K for the year ended December 31, 2019 and discussed below, our disclosure controls and procedures were not effective as of June 30, 2020. Subsequent to that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that an additional material weakness, as described below, existed. 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 on a timely basis. The material weakness previously identified during management’s assessment was the lack of sufficient technical expertise on certain accounting and tax requirements for new and unusual transactions. These control deficiencies could result in a material misstatement of accounts or disclosures that would result in a material misstatement to our interim or annual financial statements that would not be prevented or detected. In connection with the identification of an error that resulted in the restatement described in Note 3 of our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q/A, we also identified that we did not design and maintain effective controls over the purchasing and receiving of inventory. Specifically, there was a lack of formalized purchasing and receiving processes and controls and the functions were decentralized. This material weakness resulted in the restatement of our condensed consolidated financial statements for the quarterly period ended June 30, 2020. To address the previously identified material weakness, we have involved and plan to further increase the involvement of consultants with the required expertise and have hired one employee and plan to further increase the accounting staff to remediate the material weakness. We believe that these actions will help remediate the previously identified material weakness. The weakness, however, will not be considered remediated until the applicable controls operate for a sufficient period of time and management is able to conclude that these controls are operating effectively. To address the newly identified material weakness, we have centralized the purchasing and receiving functions and have added new processes and controls to ensure purchasing and receiving are recorded completely and accurately. Additionally, the Company is implementing a new enterprise resource planning (“ERP”) system, which will enable us to further enhance the processes and controls related to inventory, including purchasing and receiving. Changes in Internal Control over Financial Reporting Other than the efforts noted above to remediate the previously reported material weaknesses, there have been no changes in our internal control over financial reporting during the quarter ended June 30, 2020 that has materially affected or, are reasonably likely to materially affect, our internal control over financial reporting. PART II – OTHER INFORMATION