Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or
Standard; Transfer of Listing.
On May 9, 2022, MEI Pharma, Inc. (the "Company") received a deficiency letter
from the Listing Qualifications Department (the "Staff") of the Nasdaq Stock
Market ("Nasdaq") notifying the Company that, for the preceding 30 consecutive
business days, the closing bid price for the Company's common stock was below
the minimum $1.00 per share requirement for continued inclusion on The Nasdaq
Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the "Bid Price
Requirement").
The notification received has no immediate effect on the Company's Nasdaq
listing. In accordance with Nasdaq rules, the Company has been provided an
initial period of 180 calendar days, or until November 7, 2022 (the "Compliance
Date"), to regain compliance with the Bid Price Requirement. If, at any time
before the Compliance Date, the closing bid price for the Company's common stock
is at least $1.00 for a minimum of 10 consecutive business days, the Staff will
provide the Company written confirmation of compliance with the Bid Price
Requirement.
If the Company does not regain compliance with the Bid Price Requirement by the
Compliance Date, the Company may be eligible for an additional 180 calendar day
compliance period. To qualify, the Company will be required to meet the
continued listing requirement for market value of publicly held shares and all
other initial listing standards for The Nasdaq Capital Market, with the
exception of the Bid Price Requirement, and will need to provide written notice
of its intention to cure the deficiency during the second 180 calendar day
compliance period, by effecting a reverse stock split, if necessary.
If the Company does not regain compliance with the Bid Price Requirement by the
Compliance Date and is not eligible for an additional compliance period at that
time, the Staff will provide written notification to the Company that its common
stock will be subject to delisting. At that time, the Company may appeal the
Staff's delisting determination to a Nasdaq Hearings Panel. There can be no
assurance that the Company will regain compliance or otherwise maintain
compliance with any of the other listing requirements.
The Company intends to monitor the closing bid price of its common stock and
may, if appropriate, consider available options to regain compliance with the
Bid Price Requirement.
Item 4.02 - Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review
The Company has determined that it made certain errors in the manner in which it
recognized revenue from its License, Development, and Commercialization
Agreement with Kyowa Kirin Co., Ltd. (the "KKC Commercialization Agreement"),
with the result that revenue was overstated in some quarters and understated in
other quarters in the Company's financial statements during 2020 and 2021. The
Company will therefore restate its previously filed annual and quarterly
financial statements for periods from June 30, 2020 forward, as described
further below. The Company currently estimates that the errors were material on
a cumulative basis and is analyzing materiality with respect to each of the
affected reporting periods and will complete that analysis as part of completing
its restatement. The errors relate to the appropriate timing and amounts of
revenue recognized over time under the cost-to-cost method associated with the
KKC Commercialization Agreement. The Company expects these errors and the
required restatement will have no effect on the Company's previously reported
operating expenses, cash flows or cash and short-term investments.
Specifically, on May 10, 2022, the Audit Committee (the "Audit Committee") of
the Board of Directors of the Company concluded, after discussion with the
Company's management, that the Company's financial statements inaccurately
applied the cost-to-cost method in recognizing revenue and, as of and for the
quarterly and annual periods ended from June 30, 2020 through December 31, 2021
(collectively, the "Non-Reliance Periods") included in the associated 10-K for
the fiscal year ended June 30, 2021, Form 10-Qs for the periods ended
September 30, 2021 and December 31, 2021, including the comparative periods,
filed with the Securities Exchange Commission (the "SEC"), (1) should no longer
be relied upon due to errors in the calculation of revenue and deferred revenue,
and (2) will require restatement. As a result, the Company will file amendments
to its Form 10-K for the fiscal year ended June 30, 2021 and to its Form 10-Qs
for the periods ended September 30, 2021 and December 31, 2021 to restate the
previously issued financial statements including the comparative periods.
Similarly, any previously issued or filed reports, press releases, earnings
releases, and investor presentations or other communications describing the
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Company's financial statements and other related financial information covering
the Non-Reliance Periods should no longer be relied upon. The Company expects to
file an extension on Form 12b-25 for its Quarterly Report for the period ended
March 31, 2022.
The Company is currently determining the exact amounts and full effect of the
errors in the financial statements covering the Non-Reliance Periods. The
Company estimates that in some periods revenue was overstated and in other
periods revenue was understated. The Company's preliminary estimate is that, as
of December 31, 2021, the cumulative effect of these errors is a misstatement of
deferred revenue and accumulated deficit of less than $10 million; however such
amount is subject to revision as the Company finalizes its analysis. The Company
is working to complete the restatement of its financial statements for
the Non-Reliance Periods. The Company intends to restate the financial
statements for the Non-Reliance Periods as soon as practicable, and will include
therein the correction of any other, immaterial errors. Accordingly, investors
and others should rely only on financial information and other disclosures
regarding the Non-Reliance Periods once the Company restates its financial
statements for the Non-Reliance Periods and not rely on any previously issued or
filed earnings press releases, investor presentations or other communications
related thereto covering the Non-Reliance Periods.
Management is assessing the effect of these restatements on the Company's
internal control over financial reporting and its disclosure controls and
procedures. The Company expects to report at least one material weakness
following completion of its analysis of the cause of these restatements. A
material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of a company's annual or interim financial
statements will not be prevented or detected on a timely basis. The existence of
one or more material weaknesses precludes a conclusion by management that the
Company's disclosure controls and procedures and internal control over financial
reporting are effective. As a result of the material weakness or material
weaknesses, the Company believes that its internal control over financial
reporting was not effective and its disclosure controls and procedures were not
effective for the Non-Reliance Periods.
The Company's management and the Audit Committee have discussed the matters
disclosed in this Item 4.02 with the Company's independent registered accounting
firm, BDO USA, LLP.
Forward-Looking Statements: This Current Report on Form 8-K contains
"forward-looking" statements. All statements other than statements of historical
fact are statements that could be deemed forward-looking statements. The Company
advises caution in reliance on forward-looking statements. Forward-looking
statements include, without limitation, the Company's plans related to
restatement of the financial statements as of and for the quarterly and annual
periods ended June 30, 2020 through December 31, 2021, the Company's estimates
related to the errors included in the financial statements covering
the Non-Reliance Periods. These statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to differ
materially from those implied by forward-looking statements, including the
outcome of the Company's completion of the quantification and evaluation of the
specific impact of the errors related to revenue recognition in the Company's
financial results and previously issued financial statements, including the
possibility of material adjustments thereto; the discovery of additional and
unanticipated information during the procedures required to be completed before
the Company is able to file its required reports; and the application of
accounting or tax principles in an unanticipated manner. See also additional
risk factors set forth in the Company's periodic filings with the SEC,
including, but not limited to, those risks and uncertainties listed in the
section entitled "Risk Factors," in the Company's Annual Report on
Form 10-K filed with the SEC on September 2, 2021. All forward-looking
statements in this Current Report on Form 8-K are based on information available
to the Company as of the date of this filing. The Company expressly disclaims
any obligation to update or alter its forward-looking statements, whether as a
result of new information, future events or otherwise, except as required by
applicable law.
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