8-K: Bioxytran Restates Financials After Auditor Issues, Shares Revalued

Bioxytran, Inc. restated its financial statements for 2022 and 2023 due to errors in share valuation and other accounting inconsistencies, following the disqualification of its previous auditor.

Summary

• Bioxytran, Inc. has restated its financial statements for the years ended December 31, 2022, and 2023.
• This restatement was necessary due to the disqualification of their previous auditor, BF Borgers CPA PC, by the Securities and Exchange Commission (SEC).
• The company engaged Fruci & Associates II, PLLC as their new auditor.
• The restatement primarily addresses errors in the valuation of shares issued under Exchange Exemptions in Rule 3(a)(9) and Rule 701.
• Previously, these shares were valued using approximations based on capital raise prices or weighted average market prices, which were deemed insufficiently precise.
• The company now values these shares at a 25% discount to the market price at the date of issuance for Rule 3(a)(9) shares, and at the market price of the day closest to the date of the awarded grant for Rule 701 shares.
• Other adjustments include timing issues with accruals, reclassification of R&D expenses, and corrections to stock subscriptions and share counts.
• The restatement had no net impact on net cash flows from operating, investing, or financing activities.
• The restatement resulted in a $212,458 increase to the Loss of issuance line item on December 31, 2023, and offsetting to the Additional Paid in Capital (APIC).
• The restatement resulted in a $19,935 reduction to the Compensation Expense line item on December 31, 2023, and offsetting to the Additional Paid in Capital (APIC).
• In 2022 the amount of $300,000 R&D expense was reclassified to other income.
• A private placement of $30,000 was incorrectly booked as stock subscription on December 31, 2022, rather than issued shares the adjustment increasing the stock count at December 31, 2022, with 93,750 shares.
• At December 31, 2023, the stock count was reduced with 1,000,000 shares for shares that was to be returned to treasury.
• The Weighted average number of Common shares out-standing, basic and diluted was on December 31, 2022, reduced with 251,473 shares and on December 31, 2023, reduced with 2,427,075 shares.
• Other inconsistencies were insufficient accruals for IP and offset against liabilities for an amount of $1,744 for the year ended December 31, 2023, and a timing issue with paid salaries and payroll taxes, as well as insufficient allocation to accruals for legal services reduced the result with ($4,429) for the year ended December 31, 2022, and with ($5,262) for the year ended on December 31, 2023.

Sentiment

Score: 3

Explanation: The document reveals significant accounting errors and the disqualification of the company's auditor, which are major negative factors. While the company has taken corrective action, the need for a restatement and the underlying issues raise concerns about the company's financial health and internal controls.

Positives

• The company has taken corrective action by engaging a new auditor and restating its financials.
• The restatement provides more accurate valuations of shares issued under Exchange Exemptions.
• The restatement had no impact on net cash flows.

Negatives

• The restatement was necessary due to significant errors in previous financial statements.
• The company's previous auditor was disqualified by the SEC.
• The company had to revalue shares issued under Exchange Exemptions, indicating previous accounting inaccuracies.
• There were timing issues with accruals and other accounting inconsistencies.

Risks

• The need for a restatement may raise concerns about the company's internal controls and accounting practices.
• The disqualification of the previous auditor could lead to increased scrutiny from regulators and investors.
• The revaluation of shares could impact investor confidence.
• The company's elevated volatility and illiquidity of shares were factors in determining the discount rate for share valuation.

Industry Context

The disqualification of BF Borgers CPA PC highlights the importance of auditor independence and the potential impact on companies that rely on their services. This event may lead to increased scrutiny of other companies that have used BF Borgers as their auditor.

Comparison to Industry Standards

• The restatement of financial statements due to auditor issues is not uncommon, but it does raise concerns about the company's internal controls.
• The revaluation of shares based on market price and discounts for illiquidity is consistent with accounting standards (ASC 820) but highlights the complexity of valuing shares issued under exemptions.
• Other companies in the biotech sector may face similar challenges in valuing shares, especially those with high volatility and illiquidity.

Stakeholder Impact

• Shareholders may be concerned about the accuracy of previous financial statements and the impact of the restatement on the company's valuation.
• Employees may be affected by the uncertainty surrounding the company's financial health.
• Creditors may reassess their risk exposure to the company.

Key Dates

Keywords

restatement, financial statements, auditor, share valuation, accounting errors, BF Borgers, Fruci & Associates, SEC, Rule 3(a)(9), Rule 701, APIC