UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended April 30, 2009
OXYGEN BIOTHERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-34600 | 56-2101930 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
2530 Meridian Parkway, Suite 3078
Durham, North Carolina 27713
(Address of principal executive offices)
(919) 806-4414
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.0001 par value per share
(Title of class)
The NASDAQ Stock Market LLC
(Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):
| Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
| Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | x | |||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $63,105,747.
As of August 5, 2009 there were 293,692,570 shares outstanding of the registrant’s common stock, $0.0001 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated | Where | |
| None |
Explanatory Note
Oxygen Biotherapeutics, Inc. (“OBI” or “Oxygen Biotherapeutics”) is filing this Amendment No. 1 (the “Amendment”) to its Annual Report on Form 10-K for the fiscal year ended April 30, 2009 (the “Original Annual Report”), as filed with the Securities and Exchange Commission (the “SEC”) on August 12, 2009. OBI is filing this Amendment in response to certain comments made by the staff of the SEC with respect to the Original Annual Report. The purpose of this Amendment is to amend and restate Item 9A(T) to report on management’s conclusion regarding the effectiveness of OBI’s disclosure controls and procedures and Item 15 to add exhibit 10.28, which was inadvertently omitted in the original exhibit listing and filing, and to fix incorrect cross references in the exhibit listing. OBI is filing herewith currently dated certifications in Exhibits 31.3 and 31.4. The remainder of OBI’s Annual Report on Form 10-K remains unchanged and is not reproduced in this Amendment No. 1.
This report speaks as of the original filing date of the Original Annual Report and has not been updated to reflect events occurring subsequent to August 12, 2009. Accordingly, in conjunction with reading this Form 10-K/A, you should also read all other filings that OBI has made with the SEC since the date of the original filing.
Part II
ITEM 9A(T)—CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the SEC, and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.
Management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-K. Based on such evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of April 30, 2009, our disclosure controls and procedures were not effective. Our disclosure controls and procedures were not effective because of the “material weaknesses” described below under “Management’s annual report on internal control over financial reporting,” which are in the process of being remediated as described below under “Management Plan to Remediate Material Weaknesses.”
Changes in Internal Controls
In April 2009, OBI created the position of Accounting Manager and staffed this position with an experienced Certified Public Accountant. The addition of this additional accounting professional allowed OBI to segregate duties in the accounting department and this enabled OBI to enhance the control environment. Also during the fourth quarter of fiscal year ended April 30, 2009 we increased the size of our board and added a board member that meets the definition of “independent” as defined in Rule 5605(a)(2) of the Nasdaq Listing Rules, and added a non-director consultant to our audit committee that meets the definition of a “finance expert” as outlined under item 407(d) of Regulation S-K.
Management Plan to Remediate Material Weaknesses
In the first six months of fiscal year 2010, management is pursuing the implementation of corrective measures to address the material weaknesses described below. These measures, outlined below, are intended both to address the identified material weaknesses and to enhance our overall financial control environment.
| • | Implement a process for internal control testing as prescribed by the Sarbanes-Oxley Act of 2002. As a result of this internal control testing we will identify the remediation actions needed to allow us to implement an effective system of internal controls over financial reporting. Currently we are working on reviewing and revamping the policies and procedures. |
| • | Implement remediation actions to allow for good entity level controls. In particular, we are working on a detailed entity level control matrix, and engaged the overall participation of the board of directors. |
| • | We will evaluate the need for us to create a Chief Audit Executive function. |
| • | We will move all accounting function to one centralized location. |
We believe the remediation measures described above will remediate the material weaknesses we have identified and strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control processes and will continue to diligently and vigorously review our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above.
Management’s annual report on internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in rules promulgated under the Exchange Act, is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and affected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that:
| • | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
| • | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our Board of Directors; and |
| • | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Our management assessed the effectiveness of our internal control over financial reporting as of April 30, 2009. In making its assessment, management used the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on its assessment, management has concluded that we had certain control deficiencies described below that constituted material weaknesses in our internal controls over financial reporting. As a result, our internal control over financial reporting was not effective as of April 30, 2009.
A “material weakness” is defined under SEC rules as 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 by the company’s internal controls. As a result of management’s review of the investigation issues and results, and other internal reviews and evaluations that were completed after the end of fiscal year 2009 related to the preparation of management’s report on internal controls over financial reporting required for this annual report on Form 10-K, management concluded that we had material weaknesses in our control environment and financial reporting process consisting of the following:
| • | We have not always consistently maintained final, complete and executed copies of significant contracts, including financing agreements, warrant and option agreements, and note agreements. We rely on a very small staff, and have been a party to numerous complex financing transactions that required significant changes to terms, which were not clearly and effectively processed and recorded as they occurred. |
| • | Because of turnover in the accounting function during the fiscal year , we did not maintain a sufficient amount of knowledge of US Generally Accepted Accounting Principles, did not measure board committee performance against established charters, have not implemented an anonymous whistle-blower process, did not strengthen entity level controls, and did not utilize a formal financial reporting close process that ensured sufficient levels of review of all key financial statement reconciliations, significant judgment estimates and period end financial statements. |
We do not believe the material weaknesses described above caused any meaningful or significant misreporting of our financial condition and results of operations for the fiscal year ended April 30, 2009. We note, however, that the material weaknesses are in our control environment and financial reporting process and could
negatively impact our operating controls and procedures in future periods if they remain unaddressed by management. To address the material weakness described above, we have made significant changes to our control environment and financial reporting process. The changes are outlined below:
| • | We now process all transactions from a centralized location |
| • | We now have two experienced Certified Public Accountants on staff |
| • | We now require approval of all accounts payable invoices by a “C” level executive |
| • | We now store all significant contracts, including financial agreements, warrants and option agreements, and note agreements in a centralized location |
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 temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
PART IV
ITEM 15—EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS
| (a) | Reports of Independent Registered Public Accounting Firm. |
| (b) | Balance Sheets as of April 30, 2009 and 2008. |
| (c) | Statements of Operations for each of the two years ended April 30, 2009 and April 30, 2008 and for the period May 26, 1967 (Date of Inception) to April 30, 2009. |
| (d) | Statements of Stockholders’ Equity (Deficit) for each of the two years ended April 30, 2009 and April 30, 2008 and for the period May 26, 1967 (Date of Inception) to April 30, 2009. |
| (e) | Statements of Cash Flows for each of the two years ended April 30, 2009 and April 30, 2008 and for the period May 26, 1967 (Date of Inception) to April 30, 2009. |
| (f) | Notes to the Financial Statements. |
INDEX TO EXHIBIT
Exhibit No. | Exhibits Required by Item 601 of Regulation S-K | |
| 2.1 | Agreement and Plan of Merger dated April 28, 2008 (1) | |
3.1 | Certificate of Incorporation (1) | |
3.2 | Bylaws (1) | |
10.1 | Agreement with Leland C. Clark, Jr., Ph.D. dated November 20, 1992 with amendments, Assignment of Intellectual Property/ Employment (2) | |
10.2 | Agreement between the Registrant and Keith R. Watson, Ph.D. Assignment of Invention (2) | |
10.3 | Children’s Hospital Research Foundation License Agreement dated February 28, 2001 (2) | |
10.4 | Form of Option issued to Executive Officers and Directors (2) | |
10.5 | Form of Option issued to Employees (2) | |
10.6 | Form of Warrant issued to Unsecured Note Holders 2006-2007 (3) | |
10.7 | Form of Convertible Note – 2008 (4) | |
10.8 | Form of Warrant issued to Convertible Note Holders (4) | |
10.9 | Form of Purchase Agreement – US Purchase (without exhibits, which are included as exhibits 10.7 and 10.8, above) (4) | |
10.10 | Form of Purchase Agreement – Non-US Purchase (without exhibits, which are included as exhibits 10.7 and 10.8, above) (4) | |
10.11 | Form of Purchase Agreement – US Note Exchange (without exhibits, which are included as exhibits 10.7 and 10.8, above) (4) | |
10.12 | Form of Purchase Agreement – Non-US Note Exchange (without exhibits, which are included as exhibits 10.7 and 10.8, above) (4) | |
10.13 | Form of Warrant issued to Financing Consultants (5) | |
10.14 | 1999 Amended Stock Plan (amended 2008) (5) | |
10.15 | Engagement Letter with Chris J. Stern dated November 19, 2007, as amended March 26, 2008 (5) | |
10.16 | Business Consultant Agreement with Institute for Efficient Management, Inc., as amended March 26, 2008 (5) | |
| 10.17 | Employment Agreement with Richard Kiral, as amended March 26, 2008 (5) | |
10.18 | Engagement and Consulting Agreement with Bruce Spiess (5) | |
10.19 | Engagement and Consulting Agreement with Gerald L. Klein (5) | |
10.20 | Business Consultant Agreement with Edward Sitnik (8) | |
10.21 | Agreement with Hospira to manufacture Oxycyte (8) | |
10.22 | Business Consultant Agreement with J. Melville Engle (8) | |
10.23 | Employment Agreement with Kirk Harrington (8) | |
10.24 | Employment Agreement with Charles H. Seeman, CPA (8) | |
10.25 | Employment Agreement with Richard Kiral, restated February 1, 2009 (8) | |
10.26 | Securities Purchase Agreement (including exhibits) between OBI and Vatea Fund, Segregated Portfolio dated June 8, 2009 (6) | |
10.27 | Form of Exchange Agreement dated July 20, 2009 (7) | |
10.28 | License Agreement with Virginia Commonwealth University dated May 22, 2008 (10) | |
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (8) | |
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (8) | |
31.3 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.4 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 (9) | |
32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 (9) | |
| (1) | These documents were filed as exhibits to the current report on Form 8-K filed by Oxygen Biotherapeutics with the SEC on June 30, 2008, and are incorporated herein by this reference. |
| (2) | These documents were filed as exhibits to the annual report on Form 10-K filed by Oxygen Biotherapeutics with the SEC on August 13, 2004, and are incorporated herein by this reference. |
| (3) | These documents were filed as exhibits to the current report on Form 8-K filed by Oxygen Biotherapeutics with the SEC on September 6, 2006, and are incorporated herein by this reference. |
| (4) | These documents were filed as exhibits to the quarterly report on Form 10-Q filed by Oxygen Biotherapeutics with the SEC on March 21, 2008, and are incorporated herein by this reference. |
| (5) | These documents were filed as exhibits to the annual report on Form 10-K filed by Oxygen Biotherapeutics with the SEC on August 13, 2008, and are incorporated herein by this reference. |
| (6) | This document was filed as an exhibit to the current report on Form 8-K filed by Oxygen Biotherapeutics with the SEC on June 8, 2009. |
| (7) | This document was filed as an exhibit to the current report on Form 8-K filed by Oxygen Biotherapeutics with the SEC on July 21, 2009. |
| (8) | These documents were previously filed as exhibits to the Company’s Annual Report on Form 10-K filed with the SEC on August 12, 2009. |
| (9) | These documents were previously furnished as an exhibit to the Company’s Annual Report on Form 10-K filed with the SEC on August 12, 2009. |
| (10) | This document was previously filed as an exhibit to the quarterly report on Form 10-Q filed by Oxygen Biotherapeutics with the SEC on September 22, 2008. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Durham, North Carolina, on the 25th day of March 2010.
| OXYGEN BIOTHERAPEUTICS, INC. | ||
| By: | /s/Chris J. Stern | |
| Chris J. Stern | ||
| Chief Executive Officer | ||
