PRO DEX INC 10-Q

ITEM 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer and principal accounting officer) have concluded based on their evaluation as of September 30, 2021, that our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) were not effective because of the identification of a material weakness. A material weakness is a deficiency 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 manner. The material weakness we discovered relates to a lack of controls surrounding analysis of appropriate accounting pronouncements, in this case ASU 2016-01 Accounting for Financial Instruments – Classification and Measurement. We have since put in place a system to monitor and evaluate any new financial statement line item above a certain threshold to ensure that a thorough review of the accounting treatment and disclosure is documented. While this planned action is intended to assist management with identifying financial accounting standards that may pertain to our business and our operations, we remain committed to the continuous improvement of our internal control over financial reporting and may implement further changes intended to enhance our internal control over financial reporting. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports 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 also 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 officer and principal financial officer and principal accounting officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. 23 Internal Control over Financial Reporting During the three months ended September 30, 2021, in addition to the material weakness described above, our human resources director began a leave of absence and since that time the accounting department has been performing the human resources job functions. Additionally, three months ended September 30, 2021, our Director of Operations retired and that position’s responsibilities are primarily being assumed by our Chief Executive Officer. As a small company, these changes in personnel and reallocation of duties can have an impact on our internal controls. There were no other changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. Inherent Limitations on the Effectiveness of Controls In designing and evaluating our disclosure controls and procedures, our management recognized that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. 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. 24 PART II — OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Note 13 of Notes to condensed financial statements contained elsewhere in this report.