2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Jul. 31, 2014

Accounting Policies [Abstract]

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company has prepared the accompanying interim consolidated financial statements in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, these consolidated financial statements and accompanying notes do not include all of the information and disclosures required by GAAP for complete consolidated financial statements. The consolidated financial statements include all adjustments (consisting of normal recurring adjustments) that management believes are necessary for the fair statement of the balances and results for the periods presented. These interim consolidated financial statements results are not necessarily indicative of the results to be expected for the full fiscal year or any future interim period.

Use of Estimates

In preparing the unaudited consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of the unaudited consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates and the operating results for the interim periods presented are not necessarily indicative of the results expected for the full year.

On an ongoing basis, management reviews its estimates to ensure that these estimates appropriately reflect changes in the Company’s business and new information as it becomes available. If historical experience and other factors used by management to make these estimates do not reasonably reflect future activity, the Company’s results of operations and financial position could be materially impacted.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts and transactions of Oxygen Biotherapeutics, Inc. and Life Newco, Inc. All material intercompany transactions and balances have been eliminated in consolidation.

Goodwill

Acquired businesses are accounted for using the acquisition method of accounting, which requires that assets acquired, including identifiable intangible assets, and liabilities assumed be recorded at fair value, with limited exceptions. Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill. If the acquired net assets do not constitute a business, the transaction is accounted for as an asset acquisition and no goodwill is recognized.

Goodwill is reviewed for impairment on an annual basis or more frequently if events or circumstances indicate potential impairment. The Company’s goodwill evaluation is based on both qualitative and quantitative assessments regarding the fair value of goodwill relative to its carrying value. The Company assesses qualitative factors to determine if its sole reporting unit’s fair value is more likely than not to exceed its carrying value, including goodwill. In the event the Company determines that it is more likely than not that its reporting unit’s fair value is less than its carrying amount, quantitative testing is performed comparing recorded values to estimated fair values. If the fair value exceeds the carrying value, goodwill is not impaired. If the carrying value exceeds the fair value, an impairment charge is recognized through a charge to operations based upon the excess of the carrying value of goodwill over the implied fair value.  There was no impairment to goodwill recognized during the three months ended July 31, 2014.

Liquidity and Capital Resources

The Company has financed our operations since September 1990 through the issuance of debt and equity securities and loans from stockholders. It had $26,655,937 and $58,966,033 total current assets and working capital of $24,760,514 and $56,394,986 as of July 31, 2014 and April 30, 2014, respectively. Its practice is to invest excess cash, where available, in short-term money market investment instruments.

Cash resources including the fair value of our available for sale marketable securities as of July 31, 2014 were approximately $56.4 million, compared to approximately $58.3 million as of April 30, 2014. Based on its resources at July 31, 2014, and the current plan of expenditure on continuing development of the Company’s current product candidates, the Company believes that it has sufficient capital to fund its operations through the fiscal year ending April 30, 2017. However, the Company will need substantial additional financing in order to fund its operations beyond such period and thereafter until it can achieve profitability, if ever. The Company depends on its ability to raise additional funds through various potential sources, such as equity and debt financing, or to license its product candidates to another pharmaceutical company. The Company will continue to fund operations from cash on hand and through sources of capital similar to those previously described. The Company cannot assure that it will be able to secure such additional financing, or if available, that it will be sufficient to meet its needs.

To the extent that the Company raises additional funds by issuing shares of its common stock or other securities convertible or exchangeable for shares of common stock, stockholders will experience dilution, which may be significant. In the event the Company raises additional capital through debt financings, the Company may incur significant interest expense and become subject to covenants in the related transaction documentation that may affect the manner in which the Company conducts its business. To the extent that the Company raises additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to its technologies or product candidates, or grant licenses on terms that may not be favorable to the Company. Any or all of the foregoing may have a material adverse effect on the Company’s business and financial performance

Net Loss per Share

Basic loss per share, which excludes antidilutive securities, is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding for that particular period. In contrast, diluted loss per share considers the potential dilution that could occur from other equity instruments that would increase the total number of outstanding shares of common stock. Such amounts include shares potentially issuable under outstanding options, warrants, preferred stock and convertible notes. A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share follows.

	Three months ended July 31,
	2014			2013
Historical net loss per share:
Numerator
Net loss attributable to common stockholders	$	(2,171,412	)	$	(4,339,823	)
Less: Effect of amortization of interest expense on convertible notes		-			(3,080,177	)
Net loss attributable to common stockholders (diluted)		(2,171,412	)		(7,420,000	)
Denominator
Weighted-average common shares outstanding		27,661,499			2,102,771
Effect of dilutive securities		-			107,480
Denominator for diluted net loss per share		27,661,499			2,210,251
Basic net loss per share	$	(0.08	)	$	(2.06	)
Diluted net loss per share	$	(0.08	)	$	(3.36	)

The following outstanding options, warrants, convertible preferred stock and convertible note shares were excluded from the computation of basic and diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect.

	Three months ended July 31,
	2014		2013
Options to purchase common stock		3,694,282		51,103
Warrants to purchase common stock		2,553,236		3,564,636
Restricted stock grants		12,384		13,975
Convertible preferred shares outstanding		-		2,417,101

Recent Accounting Pronouncements

In June 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-12 – Compensation – Stock Compensation: Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period, which provides explicit guidance for the accounting treatment for these types of awards. The ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. This update is effective for annual periods and interim periods within those annual periods beginning after December 15, 2014. Early adoption is permitted. The Company does not expect the adoption of this ASU will have a material impact on its consolidated financial statements.