Unassociated Document
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): May 7, 2010
CHINA
SKY ONE MEDICAL, INC.
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(Exact
Name of Registrant as Specified in
Charter)
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(State
or Other Jurisdiction
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(Commission
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(IRS
Employer
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of
Incorporation)
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File
Number)
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Identification
No.)
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No.
2158, North Xiang An Road, Song Bei District,
Harbin,
People’s Republic of China 150028
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(Address
of Principal Executive Offices)
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Registrant's
telephone number, including area code: 86-451-87032617
(China)
_________________________________________________________________
(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:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
3.02.
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Non-Reliance
on Previously Issued Financial Statements or a Related Audit Report or
Completed Interim Review.
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On May 7,
2010, management of China Sky One Medical, Inc. (the “Company”) determined that
the Company’s financial statements for the year ended December 31, 2009,
included in its Annual Report on Form 10-K filed with the Securities and
Exchange Commission (“SEC”) on March 16, 2010, as amended on March 17, 2010 (the
“2009 10-K”), should no longer be relied upon due to an error in such financial
statements with respect to the accounting for certain derivative instruments
(warrants it issued in 2008 discussed below), which were previously recorded as
equity instruments in accordance with generally accepted accounting principles
in effect through December 31, 2008.
The
Company received comments from the staff of the SEC, which led to the Company’s
conclusion that the historical financial statements in the 2009 10-K require
restatement to properly record 750,000 common stock purchase warrants, issued in
connection with its January 31, 2008 private placement (the “Warrants”), as a
derivative liability.
The
Company has performed a complete assessment of the Warrants and has concluded
that the Warrants are within the scope of Accounting Standards Codification
815-40, “Derivatives and
Hedging – Contracts in Entity’s Own Equity” (“ASC 815-40”), formerly
Emerging Issues Task Force Issue No. 07-05, “Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF
07-05”), due to the inclusion in the Warrants of a provision requiring a
weighted average adjustment to the exercise price of the Warrants in the event
the Company issues common stock, or securities convertible into or exercisable
for common stock, at a price per share lower than such exercise
price. Accordingly, ASC 815-40, formerly EITF 07-05, which was
effective as of January 1, 2009, should have been applied resulting in a
reclassification of the warrants as a liability, measured at fair value, with
changes in fair value recognized as part of other income or expense for each
reporting period thereafter.
After
discussions with the Audit Committee of its Board of Directors and the Company’s
independent registered public accounting firm, management has determined to file
an amended Annual Report on Form 10-K for the year ended December 31, 2009 as
soon as practicable, which will contain restated financial statements reflecting
the corrections made in response to these accounting errors.
The
Company has retained an independent third party to calculate the fair value of
the Warrants at the date of adoption of ASC 815-40, as well as at each of March
31, 2009, June 30, 2009, September 30, 2009, December 31, 2009 and March 31,
2010. The Company has not yet received the results of these
calculations. However, based upon preliminary information, which has
not been reviewed by its independent registered public accounting firm, the
Company expects:
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to
record a derivative liability of between $11.1 million and $12.1 million
as of December 31, 2009;
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to
reflect a change in fair value of derivatives as of December 31, 2009 of
between $4.0 million and $5.0 million, which will be partially offset by
the elimination of a previously recorded liability, in the amount of
approximately $1.3 million, in connection with a registration rights
obligation related to the Warrants;
and
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·
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to
record a gain in the first quarter of 2010 of between $4.5 million and
$5.5 million resulting from a reduction in the fair value of the Warrants
as of March 31, 2010.
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These
corrections will have no impact on the Company’s income from operations or cash
flows.
Based on
the Company’s assessment of materiality, the Company believes its previously
filed Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
2009, June 30, 2009 and September 30, 2009 will not require
restatement.
Item
9.01.
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Financial
Statements and Exhibits
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The
exhibits listed in the following Exhibit Index are filed as part of this Form
8-K.
Exhibit
No.
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Description
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99.1
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Press
Release, dated May 10, 2010
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SIGNATURE
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.
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CHINA
SKY ONE MEDICAL, INC.
(Registrant)
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Date:
May 10,
2010
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By:
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/s/ Liu Yan-qing |
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Liu
Yan-qing |
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Chairman,
Chief Executive Officer and President |
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