PRECISION OPTICS CORPORATION, INC. 10-Q

Item 4. Controls and Procedures. Management’s Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer and our Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2023, because of a material weakness in our internal controls over financial reporting described below. 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 the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Material Weakness Identified; Remedial Steps Being Taken During our review of the results for the fiscal quarter ended March 31, 2023, errors were identified in the Company’s accruals of costs associated with services provided by third-party contractors on certain development projects. Those errors caused an understatement of costs of goods sold for the quarters ended September 30, 2022 and December 31, 2022, for which we have concluded such error is not material to those previously reported financial statements. However, because of the significance of these items, and to facilitate comparisons among periods, the Company decided to revise the previously issued first and second quarter unaudited condensed consolidated financial information by increasing accounts payable and cost of goods sold by $85,213 and $125,752 in the quarters ended September 30, 2022 and December 31, 2022, respectively. Such quarterly and year to date financial statements will be revised in subsequent filings with the Securities and Exchange Commission that include such statements. To address and remediate the material weakness in internal control over financial reporting described above, we have implemented processes to improve our accounts payable controls and documentation for the recognition of costs incurred for services performed by outside contractors and matching those costs, when applicable, to fiscal periods in which those services are billed to our customers. Specifically, we have implemented procedures to document the receipt of non-physical work product by our outside contractors, accrue for services performed by outside contractors when vendor invoices for such services have not yet been received, and to review billings to customers to ensure related contractor billings are expensed in the same period. Our Chief Executive Officer and our Chief Financial Officer will monitor such accruals in future quarters to confirm that these steps have properly remediated the material weakness in the timing of third-party expense accruals. We believe that the steps outlined above strengthen our internal control over financial reporting and mitigate the material weakness described above. Changes in Internal Control over Financial Reporting Except for the material weakness disclosed above, there has been no change in our internal control over financial reporting that occurred during the quarter of our fiscal year covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 20 PART II. OTHER INFORMATION