Item 9A. Controls and Procedures
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Management, with the participation of its Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020. The term “disclosure controls and procedures,” as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, or the Exchange Act, means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2020, our CEO and CFO have concluded that, as of December 31, 2020, our disclosure controls and procedures were effective at the reasonable assurance level.
Management's Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our CEO and CFO, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance (a) transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, (b) our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (c) regarding the prevention or timely detection of the unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of December 31, 2020, our management conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013). Based on this evaluation, our management concluded that, as of December 31, 2020, our internal control over financial reporting was effective.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter ended December 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
151
Inherent Limitations on Effectiveness of Controls
Management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Item 9B. Other Information.
None.
152
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this item will be contained in our definitive proxy statement to be filed with the Securities and Exchange Commission on Schedule 14A in connection with our 2021 Annual Meeting of Stockholders, or the Proxy Statement, which is expected to be filed not later than 120 days after the end of our fiscal year ended December 31, 2020, and is incorporated herein by reference.
Item 11. Executive Compensation.
The information required by this item will be contained in the Proxy Statement under the headings “Executive Compensation” and “Board of Directors and Corporate Governance – Director Compensation,” and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item will be contained in the Proxy Statement under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation – Equity Compensation Plan Information,” and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item will be contained in the Proxy Statement under the headings “Certain Relationships and Related Party Transactions” and “Board of Directors and Corporate Governance,” and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
The information required by this item will be contained in the Proxy Statement under the heading “Ratification of Appointment of Independent Registered Public Accounting Firm – Fees Paid to the Independent Registered Public Accounting Firm” and is incorporated herein by reference.
153
PART IV
Item 15. Exhibits, Financial Statement Schedules.
The consolidated financial statements schedules and exhibits filed as part of this Annual Report on Form 10‑K, or Annual Report, are as follows:
(1) Consolidated financial statements
Reference is made to the consolidated financial statements identified in the “Index to Financial Statements” under Part II, Item 8 of this Annual Report.
(2) Financial Statement Schedules
All other schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is otherwise on the consolidated financial statements or notes thereto.
(3) Exhibits
The documents listed in the Exhibit Index of this Annual Report are incorporated by reference or are filed with this Annual Report, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
Exhibit Index
Exhibit
Number
Incorporated by Reference Herein
Description
Form
File No.
Exhibit
Filing Date
2.1
Agreement and Plan of Merger, dated December 21, 2020, by and among NantKwest, Inc., ImmunityBio, Inc. and Nectarine Merger Sub, Inc.
8-K
001-37507
2.1
December 22, 2020
3.1
Amended and Restated Certificate of Incorporation of NantKwest, Inc .
8-K
001-37507
3.1
August 4, 2015
3.2
Amended and Restated Bylaws of NantKwest, Inc., effective as of June 18, 2020 .
8-K
001-37507
3.1
June 19, 2020
4.1
Nominating Agreement by and between the Registrant and Cambridge Equities, LP, dated June 18, 2015 .
S-1
333-205124
4.1
June 19, 2015
4.2
Form of Registration Rights Agreement by and between the Company and the Purchasers of Common Stock, dated June 2015 .
S-1
333-205124
4.2
June 19, 2015
4.3
Registration Rights Agreement by and between the Company and Cambridge Equities LP, dated December 23, 2014 .
S-1
333-205124
4.3
June 19, 2015
4.4
Form of Subscription and Securities Purchase Agreement among the Company and the Subscribers of Series C Preferred Stock, dated as of April 1, 2014 .
S-1
333-205124
4.5
June 19, 2015
4.5
Registration Rights Agreement, among the Company and the purchasers of Series B Preferred Stock, dated as of June 20, 2013 .
S-1
333-205124
4.6
June 19, 2015
4.6
Specimen common stock certificate .
S-1/A
333-205124
4.7
July 15, 2015
4.7
Description of the Registrant’s Securities .
10-K
001-37507
10.26
March 25, 2020
10.1
Form of Indemnification Agreement between the Company and each of its directors and executive officers .
S-1
333-205124
10.1
June 19, 2015
10.2+
2014 Equity Incentive Plan and forms of agreements thereunder .
S-1
333-205124
10.2
June 19, 2015
10.3+
2015 Equity Incentive Plan (as Amended and Restated June 10, 2020) and all forms and agreements thereunder .
10-Q
001-37507
10.1
August 7, 2020
10.4+
Executive Incentive Compensation Plan .
S-1/A
333-205124
10.4
July 15, 2015
10.5+
Amended and Restated Executive Employment Agreement between the Company and Patrick Soon-Shiong, effective March 24, 2015 .
S-1/A
333-205124
10.5
July 15, 2015
154
Exhibit
Number
Incorporated by Reference Herein
Description
Form
File No.
Exhibit
Filing Date
10.6+
Executive Employment Agreement between the Company and Barry J. Simon, M.D., dated January 1, 2015 .
S-1
333-205124
10.6
June 19, 2015
10.7
License Agreement between the Company and Brink Biologics, Inc., dated June 9, 2015 .
S-1
333-205124
10.7
June 19, 2015
10.8
License Agreement between the Company and Coneksis, Inc., dated June 9, 2015 .
S-1
333-205124
10.8
June 19, 2015
10.9
License Agreement between the Company and Intrexon Corporation, dated February 23, 2010 .
S-1
333-205124
10.10
June 19, 2015
10.10
UHN-ZelleRx License Agreement between University Health Network and the Company, dated May 9, 2005 .
S-1
333-205124
10.11
June 19, 2015
10.11
License Agreement, as amended, between Fox Chase Cancer Center and the Company, dated as of July 10, 2004 .
S-1
333-205124
10.12
June 19, 2015
10.12
Rush-ZelleRx License Agreement, between Rush University Medical Center and the Registrant, dated as of March 24, 2004 .
S-1
333-205124
10.13
June 19, 2015
10.13
License Agreement, as amended, between Hans G. Klingemann and the Company, dated February 10, 2003 .
S-1/A
333-205124
10.14
July 27, 2015
10.14
Genomic and Proteomic Services Agreement by and between the Company and NantOmics, LLC, dated June 18, 2015 .
S-1
333-205124
10.18
June 19, 2015
10.15
Lease Agreement by and between ARE - John Hopkins Court, LLC and the Company, dated June 19, 2015 .
S-1/A
333-205124
10.19
July 27, 2015
10.16
Shared Services Agreement by and between the Company and NantWorks, LLC, dated November 10, 2015 .
10-K
001-37507
10.22
March 30, 2016
10.17
Facility License Agreement by and between the Company and NantWorks, LLC, dated November 10, 2015 .
10-K
001-37507
10.23
March 30, 2016
10.18+
Offer Letter between Sonja Nelson and the Company, dated April 7, 2016 .
10-Q
001-37507
10.1
May 16, 2016
10.19
Amended and Restated Shared Services Agreement by and between the Company and NantWorks LLC, dated June 28, 2016 .
10-Q
001-37507
10.1
August 15, 2016
10.20
Lease agreement by and between the Company and 605 Doug Street, LLC, dated June 28, 2016 .
10-Q
001-37507
10.1
November 10, 2016
10.21+
Letter Agreement with Barry Simon dated May 3, 2018 .
10-Q
001-37507
10.1
August 06, 2018
10.22+
Offer of Employment Letter with Sonja Nelson dated June 11, 2018 .
10-Q
001-37507
10.2
August 06, 2018
10.23
Notice of Pendency of Proposed Settlement of Stockholder Derivative Action dated May 31, 2019.
8-K
001-37507
99.1
June 10, 2019
10.24
Stipulation and Agreement of Settlement dated April 10, 2019.
8-K
001-37507
99.2
June 10, 2019
10.25
Letter Agreement between the Company and Immuno-Oncology Clinic, Inc., dated July 5, 2019.
10-Q
001-37507
10.4
August 6, 2019
10.26
Cost Allocation Agreement between the Company and ImmunityBio, Inc. and its subsidiaries, dated January 29, 2020 .
10-K
001-37507
10.26
March 25, 2020
10.27
First Amendment to the July 1, 2019 Letter Agreement between the Company and Immuno-Oncology Clinic, Inc., dated March 31, 2020 .
10-Q
001-37507
10.1
May 5, 2020
10.28
COVID Joint Development, Manufacturing, and Marketing Agreement between NantKwest, Inc. and ImmunityBio, Inc. Binding Term Sheet, dated May 22, 2020 .
10-Q
001-37507
10.2
August 7, 2020
155
Exhibit
Number
Incorporated by Reference Herein
Description
Form
File No.
Exhibit
Filing Date
10.29
COVID Joint Development, Manufacturing, and Marketing Agreement between NantKwest, Inc. and ImmunityBio, Inc., dated August 21, 2020 .
10-Q
001-37507
10.1
November 9, 2020
10.30
First Amendment to Facility License Agreement by and between NantWorks, LLC and NantKwest, Inc., dated September 14, 2020 .
10-Q
001-37507
10.2
November 9, 2020
10.31
Sublease Agreement between Altor Bioscience Manufacturing Company, LLC and NantKwest, Inc., dated September 14, 2020 .
10-Q
001-37507
10.3
November 9, 2020
10.32+
Offer Letter between the Company and Richard Adcock, dated October 26, 2020 .
10-Q
001-37507
10.4
November 9, 2020
10.33
Voting Agreement, dated December 21, 2020, by and among ImmunityBio, Inc., NantKwest, Inc., and the NantKwest, Inc. stockholders party thereto.
8-K
001-37507
10.1
December 22, 2020
10.34
Voting Agreement, dated December 21, 2020, by and among NantKwest, Inc., ImmunityBio, Inc. and the ImmunityBio, Inc. stockholders party thereto .
8-K
001-37507
10.2
December 22, 2020
10.35*
Lease Agreement between 605 Nash, LLC and NantKwest, Inc., dated February 11, 2021 .
21.1*
Subsidiaries.
23.1*
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
24.1*
Power of Attorney (Contained on Signature Page to this Annual Report on Form 10-K).
31.1*
Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer.
31.2*
Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer.
32.1**
Section 1350 Certification of Chief Executive Officer.
32.2**
Section 1350 Certification of Chief Financial Officer.
101.INS
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*
Filed herewith.
**
The certifications attached as Exhibits 32.1 and 32.2 that accompany this Annual Report, are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of NantKwest, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report, irrespective of any general incorporation language contained in such filing.
+
Indicates a management contract or compensatory plan.
156
Item 16. Form 10-K Summary.
None.
157
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
NantKwest, Inc.
Date: March 4, 2021
By:
/s/ Richard Adcock
Richard Adcock
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Richard Adcock and Sonja Nelson, and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Patrick Soon-Shiong
Executive Chairman of the Board of Directors
March 4, 2021
Patrick Soon-Shiong
/s/ Richard Adcock
Chief Executive Officer
(Principal Executive Officer)
March 4, 2021
Richard Adcock
/s/ Barry J. Simon
President, Chief Administrative Officer and Director
March 4, 2021
Barry J. Simon
/s/ Sonja Nelson
Chief Financial Officer
(Principal Financial and Accounting Officer)
March 4, 2021
Sonja Nelson
/s/ Michael D. Blaszyk
Director
March 4, 2021
Michael D. Blaszyk
/s/ Frederick W. Driscoll
Director
March 4, 2021
Frederick W. Driscoll
/s/ John C. Thomas, Jr.
Director
March 4, 2021
John C. Thomas, Jr.
/s/ Cheryl L. Cohen
Director
March 4, 2021
Cheryl L. Cohen
158