Business Context and Reporting Period
This Form 8-K is filed by NantKwest, Inc. (not Immunitybio, Inc.) on March 10, 2016. The report addresses a material weakness in internal controls and the necessity to restate interim financial statements for the quarters ended June 30, 2015, and September 30, 2015.
Key Financial Metrics
The filing does not provide specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. It explicitly states that the previously issued financial statements for the interim periods ended June 30, 2015, and September 30, 2015, should no longer be relied upon due to accounting errors.
Material Changes and Accounting Errors
The Audit Committee identified errors primarily attributable to two areas:
- Stock-Based Compensation: Errors resulted from the modification of performance-based vesting criteria to a combination of performance-based and service-based criteria for a warrant granted to the CEO and Executive Chairman. This affected the value of non-cash stock-based compensation expense recorded.
- Build-to-Suit Lease Accounting: Errors occurred regarding the accounting treatment of a research and development and GMP facility. The Company was deemed the owner of the construction project due to its involvement in structural improvements, resulting in a non-cash impact that was previously misstated.
Management determined these errors resulted from a material weakness in internal controls over financial reporting, specifically citing inadequate staffing levels that led to insufficient review and approval of financial information.
Outlook, Risks, and Management Commentary
Restatement Plan: The Company intends to file restated interim financial statements for the affected 2015 quarters within its Annual Report on Form 10-K for the year ended December 31, 2015. It does not intend to file amendments to the original 10-Q reports at this time.
Timeline: The Company expects to file the 2015 Form 10-K by its deadline of March 30, 2016, though there is no assurance that the process will be completed by then or that no additional adjustments will be identified.
Risks: Forward-looking statements indicate risks that the filing process may take longer than anticipated and that additional accounting errors may be discovered prior to the final filing. The final impact of the restatement may differ materially from current expectations.
Investor Verification Checklist
- Verify the specific dollar amounts of the restatement adjustments once the 2015 Form 10-K is filed.
- Confirm the revised impact on net loss and cash burn rates for the second and third quarters of 2015.
- Monitor the Company's progress in remediating the material weakness related to staffing and internal controls.
- Check for any additional amendments or disclosures regarding the build-to-suit lease accounting treatment.