Item 4. Controls and Procedures
ITEM
4. CONTROLS AND PROCEDURES
(a)Evaluation
of Disclosure Controls and Procedures. As of the end of the period covered by this report, we conducted an evaluation, under
the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer
and chief financial officer concluded that our disclosure controls and procedures are not effective to ensure that information required
to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the Commission’s rules and forms and is accumulated and communicated to the Company’s management,
including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
In
connection with the filing of our Form 10-K for the year ended March 31, 2021, we identified a material weakness primarily related to
the consolidated financial statements close process that failed to detect errors which could have been material in the accounting for
inventory cutoff and the inventory valuation of estimated returns. Specifically, the Company currently has a deficient process to close
the consolidated financial statements and prepare comprehensive and timely account analysis, due in part to a new accounting software
system, which resulted in certain adjusting journal entries.
Plan
for material Weakness in Internal Control over Financial Reporting
The
Company’s management has begun to design and implement certain remediation measures to address the above-described material weakness
and enhance the Company’s internal control in order to remediate this material weakness. As part of our remediation measures, the
Company has identified and will implement plans to enhance the Company’s process and controls including the following measures:
●
The
Company implemented a new Enterprise Resource Planning (“ERP”) system in Fiscal 2021 that contributed to the material
weaknesses. Management has identified system processing errors specifically related to when returned goods are recognized in inventory
and how they are costed. Management is currently working with our third-party systems support group to correct these system errors.
●
Management
plans on strengthening the ERP system training for both finance and warehouse personnel with regards to inventory cutoff and valuation
procedures to insure personnel working with inventory are thoroughly familiar with procedures for processing returns.
●
Management
will also assess whether current resources are adequate to maintain proper inventory controls once the system errors have been remediated
and additional training is completed and will explore the possibility of additional third-party assistance if necessary.
(c)
Changes in Internal Controls
There
were no changes in the Company’s internal controls over financial reporting during the quarter ended June 30, 2021, that materially
affected, or were reasonably likely to materially affect the Company’s internal control over financial reporting.
23
PART
II - OTHER INFORMATION
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.