KEY TRONIC CORP 10-Q

Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures It is the responsibility of our management to establish, maintain, and monitor disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. Additionally, these disclosure controls include controls and procedures that are designed to accumulate and communicate the information required to be disclosed to our Chief Executive Officer and Chief Financial Officer, allowing for timely decisions regarding required disclosures. As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based on their evaluation as of September 28, 2024, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses in control over financial reporting previously disclosed in Part II, Item 9A of our Annual Report on Form 10-K. Notwithstanding the identified material weaknesses, management, including our Chief Executive Officer and Chief Financial Officer, believes the consolidated financial statements included in this Quarterly Report on Form 10-Q fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with GAAP. Remediation Update In Part II, Item 9A of our Annual Report on Form 10-K, we identified steps management has taken, and is in the process of taking, to remediate the material weaknesses noted above. Those steps include; • Training related to the proper accounting for material price variances • Enhancing closing process documentation related to material price variances • Hiring of technical accounting finance staff with US GAAP knowledge and experience; and • Enhance closing process documentation related to adoption of new accounting standards We have made progress towards designing and implementing the above steps. Specifically, we have educated those individuals responsible for recording and approving material price variances regarding the appropriate accounting treatment as revenue. We have added new required monitoring procedures to our month-end closing process aimed to timely detect any further errors related to accounting for material price variances. Further, we intend to hire an additional qualified accounting and financial reporting person with multiple years of US GAAP and Sarbanes-Oxley Act experience. Finally, we have designed a control related to the adoption of new accounting pronouncements and are in the process of implementing this control. We will continue to review, revise, and improve the design and implementation of our internal controls as appropriate. Although we have made enhancements to our control procedures, the material weaknesses noted above are not yet remediated. Changes in Internal Control over Financial Reporting Except as disclosed above, and in Part II, Item 9A of our Annual Report on Form 10-K, there have been no significant changes in our internal controls over financial reporting during the three months ended September 28, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). PART II. OTHER INFORMATION: