Business Context and Reporting Period
This Form 8-K is filed by NantKwest, Inc. (not Immunitybio, Inc.) on August 24, 2016. The report addresses a change in the company's certifying accountant and discloses material weaknesses in internal controls over financial reporting.
Key Financial Metrics
The filing text does not provide specific values for revenue, profit, cash flow, margins, debt, or liquidity. The document focuses exclusively on governance and accounting firm transitions.
Material Changes
- Dismissal of Auditor: Mayer Hoffman McCann, P.C. was dismissed as the independent registered public accounting firm effective August 24, 2016.
- Engagement of New Auditor: Ernst & Young LLP (EY) was engaged as the new independent registered public accounting firm effective August 24, 2016.
- Historical Disagreements: There were no disagreements with the former auditor regarding accounting principles or practices during the two most recent fiscal years or the interim period preceding dismissal.
Outlook, Risks, and Contingencies
The filing highlights significant risks related to internal controls:
- Material Weaknesses: The company confirmed material weaknesses in internal control over financial reporting as of December 31, 2015, which persisted through the reporting date.
- Reliability of Past Reports: Quarterly reports for the quarters ended June 30, 2015, and September 30, 2015, should no longer be relied upon due to financial statement errors.
- Root Causes: Weaknesses stem from the CFO having almost complete responsibility for financial processing, inadequate staffing for complex transactions (including stock-based awards and build-to-suit leases), and insufficient review time.
- Future Impact: If material weaknesses persist, the company's ability to accurately report financial results could be adversely affected.
Investor Verification Checklist
- Verify the transition timeline and scope of work between Mayer Hoffman McCann, P.C. and Ernst & Young LLP.
- Review the specific nature of the financial statement errors affecting the 2015 quarterly reports.
- Assess the remediation plan for the identified material weaknesses in internal controls.
- Confirm the status of the letter from Mayer Hoffman McCann, P.C. (Exhibit 16.1) regarding the dismissal.