UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment No. 2
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 2015
TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
Commission File Number: 333-178082
XENETIC BIOSCIENCES, INC.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of
incorporation or organization)
99 Hayden Ave, Suite 230
Lexington, Massachusetts 02421
(Address of principal executive offices and zip code)
(Registrant’s telephone number, including area code)
Title of Each Class
Name of Each Exchange
on Which Registered
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files): Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) 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 to this Form 10-K: Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the 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||¨||Smaller reporting company||x|
|(Do not check if a smaller reporting company)|
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2): Yes ¨ No x
The approximate aggregate market value of voting common stock held by non-affiliates of the registrant, based upon the last sale price of the registrant’s common stock on the last business day of the registrant’s most recently completed second fiscal quarter June 30, 2015 (based upon the shares of common stock at the closing sale price of the registrant’s common stock listed as reported on the OTC Bulletin Board), was approximately $9,500,000.
As of April 29, 2016 the number of outstanding shares of the registrant’s common stock was 297,790,240.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant is filing this Amendment No. 2 on Form 10-K/A (“Form 10-K/A #2”) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (“Form 10-K”) in order to:
Amend and replace in its entirety the REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, Ernst & Young LLP, Reading, United Kingdom, dated April 15, 2015. This 10-K/A #2 is required in order to clarify that Ernst & Young LLP, as predecessor auditor, was not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the change in par value described in Note 11. Those adjustments were audited by the successor auditor; and
Amend and replace in their entirety the following disclosures included in ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS of Form 10-K under the heading RESULTS OF OPERATIONS: 1) the table that sets forth the R&D costs incurred by the Company, by category of expense, for the year ended December 31, 2014 under the caption “Research and Development”, 2) the narrative descriptions of period over period changes in results of operations under the captions “Research and Development by Category of Expense” under Outside Services and Contract Research Organization Costs and Share-based Expense; and 3) the cash flows narrative under the caption “Cash Flows Used in Operating Activities”. The changes are being made in order to reclassify an $811,196 expense representing the fair value of common stock issued in exchange for an intellectual property assignment to the Company made during 2014 and to amend Cash flows used in operating activities for the year ended December 31, 2014 from approximately $12.3 million to approximately $12.7 million.
Except as described above and as previously filed with Amendment No. 1 on Form 10-K/A filed on April 29, 2016, there have been no other changes to the Annual Report filed on Form 10-K filed with the SEC on March 30, 2016. This Form 10-K/A #2 does not purport to reflect any information or events subsequent to the filing thereof. As such, this Form 10-K/A #2 speaks only as of the date the Form 10-K was filed, and the Registrant has not undertaken herein to amend, supplement or update any information contained in the Form 10-K to give effect to any subsequent events. Accordingly, this Form 10-K/A #2 should be read in conjunction with the Form 10-K.
ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Research and Development
The Company engages in independent research and development (“R&D”) in connection with its various technologies. Overall, corporate R&D expenses for the year ended December 31, 2015 decreased by approximately $2.89 million, or 45.7% to $3.43 million from $6.32 million in 2014. The table below sets forth the R&D costs incurred by the Company, by category of expense, for the years ended December 31, 2015 and 2014:
|Year ended December 31,|
|Category of Expense||2015||2014|
|Outside services and Contract Research Organizations||$||1,794,523||$||4,296,795|
|Salaries and wages||491,623||729,082|
|Total research and development expense||$||3,434,016||$||6,323,896|
Research and Development by Category of Expense
Outside Services and Contract Research Organization Costs
The significant decrease in outside services and contract research organization costs of $2,502,272, or 58.2% for the year ended December 31, 2015 is primarily due to the planned deferral of IND-enabling preclinical work conducted in connection with the OncoHist™ program due to working capital constraints. The costs of conducting the ongoing ErepoXen™ human clinical trials were relatively unchanged as the trials proceeded as planned, with costs of approximately $1.07 million and $1.12 million in 2015 and 2014, respectively.
Share-based expense decreased $66,024 or 6.9% to $886,805 for the year ended December 31, 2015 from $952,829 for the prior year. The fluctuation is primarily due to the normal expensing of the fair value of stock option awards and warrants granted to R&D personnel in September 2015 and December 2014. The December 2014 warrant grants did not have a significant impact on the 2014 shared-based payments expense but resulted in a $706,500 expense for the year ended December 31, 2015. The 2014 share-based expense includes $811,196 for the fair value of common stock issued in exchange for an intellectual property assignment to the company made during 2014 compared to $0 for the comparable period in 2015.
Cash Flows Used in Operating Activities
Cash flows used in operating activities for the year ended December 31, 2015 totaled approximately $5.3 million. The $5.3 million includes net operating cash uses of approximately $1.78 million in consulting, legal and other professional service fees, approximately $1.54 million in salaries and wages, including scientific staff, approximately $1.25 million in program-specific clinical development costs and approximately $232,000 in rent and utilities expenses.
Cash flows used in operating activities for the year ended December 31, 2014 totaled approximately $12.7 million. The $12.7 million includes net operating cash uses of approximately $7.00 million in consulting, legal and other professional service fees, approximately $3.01 million in salaries and wages, including scientific staff, and approximately $1.80 million in program-specific clinical development costs.
ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Xenetic Biosciences, Inc.
We have audited, before the effects of the adjustments to retrospectively apply the change in par value described in Note 11, the consolidated balance sheet of Xenetic Biosciences, Inc. (the “Company”) as of December 31, 2014, and the related consolidated statements of comprehensive loss, changes in stockholders’ equity, and cash flows for the year then ended (the 2014 financial statements before the effects of the adjustments discussed in Note 11 are not presented herein). Our audit also includes the financial statement schedule. The 2014 financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the 2014 financial statements, before the effects of the adjustments to retrospectively apply the change in par value described in Note 11, present fairly, in all material respects, the consolidated financial position of Xenetic Biosciences, Inc. as of December 31, 2014, and the consolidated results of its operations and its cash flows for the year then ended in conformity with US generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As disclosed in Note 1 to the Financial Statements, the Company’s recurring losses from operations and its requirement to raise funds to continue operations beyond April 2015, raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The 2014 consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the change in par value described in Note 11 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by the successor auditor.
/s/ Ernst & Young LLP
Reading, United Kingdom
April 15, 2015
ITEM 15 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|(b)||Exhibits: The attached list of exhibits in the “Exhibit Index” immediately preceding the exhibits to this Form 10-K/A is incorporated herein by reference in response to this item.|
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.
|XENETIC BIOSCIENCES, INC.|
|May 6, 2016||By:||/S/ MICHAEL SCOTT MAGUIRE|
|Michael Scott Maguire|
|Chief Executive Officer and President|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated below on the 6th day of May, 2016.
/S/ MICHAEL SCOTT MAGUIRE
Michael Scott Maguire
President, Chief Executive Officer
(Principal Executive Officer)
Firdaus Jal Dastoor FCS
Dr. Roger Kornberg
*By: /S/ MICHAEL SCOTT MAGUIRE
Michael Scott Maguire
|31.1*||Certification of Michael Scott Maguire, Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.|
|31.2*||Certification of Michael Scott Maguire, Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002|
|32.1**||Certifications of Michael Scott Maguire, Chief Executive Officer and Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002|
|(1)||Incorporated by reference to Amendment No. 1 to the Annual Report on Form 10-K filed April 30, 2015|