IPIX Corporation 8-K 07/26/06
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
_________
FORM
8-K
CURRENT
REPORT PURSUANT
TO
SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of
Report (Date of earliest event reported): July
20, 2006
IPIX
CORPORATION
(Exact
name of registrant as specified in its charter)
|
DELAWARE
|
000-26363
|
52-2213841
|
|
(State
or other
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(Commission
|
(IRS
Employer
|
|
Jurisdiction
of incorporation)
|
File
Number)
|
Identification
Number)
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12120
SUNSET HILLS ROAD, SUITE 410 RESTON, VIRGINIA 20910
(Address
of principal executive offices) (Zip
Code)
Registrant's
telephone number, including area code: (703)
674-4100
N/A
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
[
]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[
]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
[
]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
ITEM
3.02. NOTICE
OF DELISTING OR FAILURE TO SATISFY A CONTINUED LISTING RULE OR STANDARD;
TRANSFER OF LISTING.
On
July
21, 2006, Michael Easterly resigned as a director and a member of the audit
committee of our board of directors. Mr. Easterly’s resignation caused IPIX to
become non-compliant with Nasdaq Rule 4350(c) regarding board of directors’
composition and independence. On July 24, 2006, the Company notified Nasdaq
of
its non-compliance with Rules 4350(d)(2)(A) and 4350(c) and its plans to fill
Mr. Easterly’s vacancy on the board of directors and audit committee within the
applicable cure period provided by the Nasdaq Rules.
ITEM
4.01. CHANGES
IN REGISTRANT’S CERTIFYING ACCOUNTANT.
On
July
21, 2006, IPIX received a notice of resignation dated July 20, 2006 from the
Company’s independent registered public accounting firm, Armanino McKenna, LLP
(“Armanino McKenna”).
Armanino
McKenna performed the audit of the Company's financial statements for the years
ended December 31, 2004 and December 31, 2005. During this period and through
the date of resignation of Armanino McKenna, there were no disagreements with
Armanino McKenna on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreements if
not
resolved to Armanino McKenna’s satisfaction would have caused Armanino McKenna
to make reference to the subject matter of the disagreements in connection
with
Armanino McKenna’s report, nor were there any "reportable events" (as outlined
in Item 304(a)(1)(v) of Regulation S-K, other than as follows. In Item 9A of
its
Annual Report on Form 10-K/A for the year ended December 31, 2004 (the “2004
Annual Report”), the Company previously reported that it did not maintain
effective internal control over financial reporting because of material
weaknesses identified therein. The following descriptions are qualified in
their
entirety by the complete description of these matters set forth in Item 9A
of
the 2004 Annual Report, all of which is incorporated herein by reference as
if
set forth in full herein.
As
of
December 31, 2004, the Company did not maintain effective internal control
over
its period-end close process. The material weaknesses identified by management
were primarily due to inadequate resources and expertise in accounting necessary
to complete an orderly and accurate year-end close process as a result of the
substantial reorganization of the Company being effected at year-end and the
resignation of the chief financial officer on January 21, 2005. Specific control
deficiencies related to the preparation of the Company's financial statements
were identified and individually or in combination result in more that a remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected. The identified control
deficiencies resulted in certain audit adjustments to, and additional
disclosures made in, the Company's 2004 financial statements.
As
of
December 31, 2004, the Company did not maintain effective internal control
over
its purchases and payables. Specific control deficiencies related to purchases
and accounts payable were identified and individually or in combination result
in more that a remote likelihood that a material misstatement of the annual
or
interim financial statements will not be prevented or detected. The identified
control deficiencies did not result in audit adjustments to the 2004 financial
statements or restatements of previously issued financial statements. However,
these control deficiencies could result in unauthorized or erroneous cash
disbursements that are not prevented or detected. Additionally, the control
deficiencies could result in the Company not completely and accurately recording
expenses in the proper period.
As
of
December 31, 2004, the Company did not maintain effective internal control
over
inventory. The Company remediated identified inventory related control
deficiencies through December 2004. These deficiencies were considered to be
material weaknesses. The remediated controls, however, had not been in operation
for a sufficient period of time to enable management to obtain sufficient
evidence about their operating effectiveness. Specific control deficiencies
related to inventory were identified and individually or in combination result
in more that a remote likelihood that a material misstatement of the annual
or
interim financial statements will not be prevented or detected. The identified
control deficiencies did not result in audit adjustments to the 2004 financial
statements or restatements of previously issued financial statements. However,
these control deficiencies could result in the failure to adequately identify,
document and analyze the conditions that should have been considered relative
to
the existence and expected recoverability of inventory.
As
of
December 31, 2004, the Company did not maintain effective internal control
over
receivables and revenue. The Company remediated identified receivables and
revenue related control deficiencies through December 2004. These deficiencies
were considered to be material weaknesses. The remediated controls, however,
had
not been in operation for a sufficient period of time to enable management
to
obtain sufficient evidence about their operating effectiveness. Specific control
deficiencies related to receivables and revenue were identified and individually
or in combination result in more that a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. The identified control deficiencies did not result in audit
adjustments to the 2004 financial statements or restatements of previously
issued financial statements. However, these control deficiencies could result
in
the failure to accurately record revenue in the proper period.
As
of
December 31, 2004, the Company did not maintain effective control related to
its
computer data backup and restore practices. The Company did not perform data
backups onto removable media (e.g., tape or portable disk) which are then stored
offsite. The Company did not perform and retain month-end or year-end data
backups of any of its computer systems including the accounting and financial
systems. This deficiency could result in the Company not being able to
successfully restore critical databases to a recent point in time, thereby
causing serious delays or even incorrect data in the financial reporting system.
As
of
December 31, 2004, the Company did not maintain effective controls relating
to
security of its accounting and financial systems. The Company's practices did
not meet the control objective of a comprehensive assessment of security.
Regular monitoring of security devices, logging of security activity and
reporting of security incidents or breaches to management are not performed.
Additionally, the Company does not require regular password changes for the
key
financial reporting systems. Unauthorized access could lead to compromised
data
and business functionality or loss of information assets. Additionally,
unauthorized activity could impact data integrity and financial reporting.
Armanino
McKenna’s report on internal control over financial reporting included in
Item 9A of the Form 10-K/A for the year ended December 31, 2004
contained an adverse opinion on the effectiveness of internal control as of
December 31, 2004.
During
2005, the Company remediated the foregoing material weaknesses and in Item
9A of
its Annual Report on Form 10-K for the year ended December 31, 2005, the Company
reported that it maintained effective internal control over financial
reporting.
In
addition, the audit reports of Armanino McKenna for the years ended December
31,
2004 and December 31, 2005 did not contain an adverse opinion, or a disclaimer
of opinion and were not qualified or modified in audit scope or accounting
principles, except that the reports on the consolidated financial statements
for
each of the years ended December 31, 2004 and 2005 expressed substantial doubt
regarding IPIX Corporation’s ability to continue as a going
concern.
The
Company requested Armanino McKenna to furnish it with a letter addressed to
the
Securities and Exchange Commission stating whether it agrees with the statements
made above by the Company. A copy of such letter is filed as exhibit 16.1 to
this Form 8-K.
ITEM
5.02. DEPARTURE
OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF
PRINCIPAL.
Effective
July 21,
2006,
Michael Easterly resigned as director of IPIX Corporation.
Item
9.01. FINANCIAL
STATEMENTS AND EXHIBITS.
(d)
Exhibits.
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Exhibit
Number
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Description
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16
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Letter
from Armanino McKenna, LLP to the Securities and Exchange
Commission
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
IPIX
CORPORATION
Dated:
July 26, 2006 /s/
Clara M. Conti
Clara
M. Conti
Chief
Executive Officer and
President