Business Context and Reporting Period
This Form 8-K Current Report was filed by Cocrystal Pharma, Inc. on April 12, 2019. The filing addresses a change in the company's independent registered public accounting firm.
Key Financial Metrics
The filing text does not provide specific values for revenue, profit, cash flow, margins, debt, or liquidity. The report focuses exclusively on the dismissal of the prior auditor and the engagement of a new one.
Material Changes
- Dismissal of Auditor: On April 12, 2019, the Audit Committee decided not to renew the engagement of BDO USA, LLP. The firm was notified of its dismissal on April 17, 2019, effective immediately.
- Engagement of New Auditor: On April 12, 2019, the Audit Committee approved the appointment of Weinberg & Company, P.A. as the new independent registered public accounting firm.
- Audit Opinions: BDO's reports for fiscal years 2017 and 2018 included an explanatory paragraph regarding the company's ability to continue as a going concern and expressed an adverse opinion on the effectiveness of internal control over financial reporting.
Guidance, Risks, and Contingencies
Internal Control Weaknesses: The filing discloses material weaknesses in internal control over financial reporting identified during the 2017 and 2018 fiscal years. These include:
- Failure to maintain an effective financial reporting process for timely and documented reviews of completeness and accuracy.
- Failure to design and maintain controls over management's review of technical accounting matters and account reconciliations.
- Failure to design and maintain controls over the preparation and review of account reconciliations, including manual calculations of stock-based compensation and warrant liabilities.
- Failure to prepare and review a comprehensive financial statement disclosure checklist.
Disagreements: The company reported no disagreements with BDO on accounting principles, practices, or auditing scope. No "reportable events" occurred other than the aforementioned material weaknesses.
Investor Verification Checklist
- Verify the letter from BDO USA, LLP (Exhibit 16.1) to confirm their agreement with the disclosures regarding the dismissal.
- Review the Annual Report on Form 10-K filed on April 1, 2019, for detailed descriptions of the material weaknesses in internal controls.
- Monitor future filings for the new auditor's (Weinberg & Company, P.A.) initial assessment of the company's financial reporting and internal controls.
- Assess the company's plan to remediate the identified material weaknesses and the going concern uncertainty.