Xencor Inc 10-Q

Item 4. Controls and Procedures Disclosure Controls and Procedures As required by Rule 13a-15(b) and Rule 15d-15(b) of the Exchange Act, our management, with the supervision of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(b) and 15d-15(e)) as of June 30, 2024. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in this Quarterly Report on Form 10-Q has been appropriately recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure. Notwithstanding the material weakness described in "Item 4. Controls and Procedures" of our Form 10-Q for the quarter ended March 31, 2024 and completion of additional procedures, our management, including our chief executive officer and chief financial officer, has concluded that our financial statements represent fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America. The material weakness did not result in any restatements of consolidated financial statements previously reported by us, nor were there any changes to previously released financial results. Material Weakness Remediation Efforts We continue to make further progress in implementing changes to our internal control over financial reporting to remediate the material weakness described in "Item 4. Controls and Procedures" of our Form 10-Q for the quarter ended March 31, 2024. Our plan to address the material weakness includes (1) expand management’s oversight of the impairment analysis of its equity investments in securities without readily determinable fair value, (2) continue to implement improved processes and controls for documenting the impairment valuation process of securities without a readily determinable fair value, (3) engage external resources when required to assist with the assessment of valuation methodologies for securities without a readily determinable fair value and (4) continue to formalize and communicate policies related to the evaluation of early indicators of impairment of securities without a readily determinable fair value. We have made necessary improvements in the design of our internal controls and implemented additional controls around the impairment analysis. We have engaged an external resource to assist with the valuation of securities without a readily determinable fair value and we have formalized our policies related to the evaluation of early indicators of impairment by documenting our impairment analysis and having a formal communications framework regarding the Company's knowledge of any indicators of impairment. Management is committed to maintaining an effective internal control environment and remediating the identified material weakness in a timely manner, with appropriate oversight from our Audit Committee. The elements of our remediation plan can only be accomplished over time. This material weakness will not be considered remediated until the applicable remediated controls operate for a sufficient period of time and management has concluded, through testing, that 37 Table of Contents these controls are operating effectively. Management will monitor the effectiveness of its remediation plan and will refine it appropriately. Changes in Internal Control Other than the remediation actions described above, there were no changes in our internal control over financial reporting that occurred during the six months ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 38 Table of Contents PART II — OTHER INFORMATION Item 1. Legal Proceedings The disclosure in Note 8, Commitments and Contingencies , of the Notes to Financial Statements included in this Quarterly Report on Form 10-Q includes a discussion of our legal proceedings and is incorporated herein by reference.