UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-KSB
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2004
COMMISSION
FILE NO. 000-50133
Grant
Life Sciences, Inc.
(Name of
Small Business Issuer in Its Charter)
Nevada |
|
82-0490737 |
(State
or Other Jurisdiction of Incorporation or Organization) |
|
(I.R.S.
Employer Identification No.) |
64
East Winchester, Suite 205, Murray, Utah |
|
84107 |
(Address
of Principal Executive Offices) |
|
(Zip
Code) |
|
(801)
261-8736 |
|
|
(Issuer's
Telephone Number, Including Area Code) |
|
SECURITIES
REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE
SECURITIES
REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
Common
Stock, $.001 Par Value Per Share
Check
whether the Issuer: (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act 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 o
Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and no disclosure will 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-KSB or any amendment to
this Form 10-KSB. o
State
issuer’s revenues for the most recent fiscal year: $0.
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
sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. As of March 30, 2005: $9,723,727.50
(19,447,455 shares at $.50/share).
State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: 56,243,491 shares of
common stock, $.001 par value per share, as of March 30, 2005.
TABLE
OF CONTENTS
|
|
Page |
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PART
I |
|
|
|
Item
1. |
DESCRIPTION
OF BUSINESS |
1 |
Item
2. |
DESCRIPTION
OF PROPERTY |
10 |
Item
3. |
LEGAL
PROCEEDINGS |
10 |
Item
4. |
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS |
10 |
|
|
|
|
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PART
II |
|
|
|
Item
5. |
MARKET
FOR COMMON EQUITY,AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER REPURCHASES OF EQUITY SECURITIES |
10 |
Item
6. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION |
11 |
Item
7. |
FINANCIAL
STATEMENTS |
20 |
Item
8. |
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE |
20 |
Item
8A. |
CONTROLS
AND PROCEDURES |
20 |
|
|
|
PART
III |
|
|
|
Item
9. |
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
16(b) OF THE EXCHANGE ACT |
.21 |
Item
10. |
EXECUTIVE
COMPENSATION |
23 |
Item
11. |
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS |
25 |
Item
12. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS |
27 |
Item
13. |
EXHIBITS |
28 |
Item
14. |
PRINCIPAL
ACCOUNTANT FEES AND SERVICES |
30 |
|
|
|
SIGNATURES |
|
31 |
Item
1. Description of Business
Overview
of Our Business
We are
developing protein-based screening tests to screen woman for cervical cancer and
pre-cancerous conditions that become cervical cancer. Our tests detect the
presence of certain antibodies that appear only when cervical cancer or certain
pre-cancerous conditions are present in the body. Our tests are performed
by analyzing a small amount of the patient’s blood. In one version of our
test, the blood sample is analyzed in a clinical setting using standard
laboratory equipment and analytic software, which generally can produce
completed results in about 2 hours. Our rapid test provides easy-to-read
results in approximately 15 minutes and is designed to be administered by a
health professional in a doctor’s office, hospital, and clinic or even at home.
Our
planned cervical cancer test uses proprietary technology to detect the presence
of specific antibodies associated with cervical pre-cancers and cancer. We
believe that in the future we may be able to use that technology to develop
rapid tests for other diseases and cancers.
History
of Grant Life Sciences
We were
incorporated in Idaho in 1983 as Grant Silver Inc. In 2000, we
reincorporated in Nevada. On July 30, 2004, we acquired Impact Diagnostics,
Inc., a Utah corporation, through the merger of our wholly owned subsidiary into
Impact Diagnostics. We sometimes refer to that transaction as the
“Merger”. As a result of the Merger, Impact Diagnostics became our wholly
owned subsidiary. Impact Diagnostics was formed in 1998 and has been
developing a cervical cancer test. For several years prior to our
acquisition of Impact Diagnostics, we engaged in no business.
Impact
Diagnostics was formed in 1999 to license and develop certain technologies as
owned by Dr. Yao Xiong Hu. Initial funding provided by the founders, and
supplemented by two additional rounds of private funding, was used to fund the
collection of patient samples and validation study costs of the technology. Once
the technology was verified, Dr. Mark Rosenfeld drafted and applied for patents.
In early 2004, Impact Diagnostics received its first patent.
Pursuant
to the merger, each issued and outstanding share of common stock of Impact
Diagnostic was converted into the right to receive one share of our common
stock. In addition, each option to purchase one (1) share of common stock
of Impact Diagnostics was converted into the right to receive an option to
purchase one (1) share of our common stock. Upon completion of the merger, our
then standing board of directors resigned and the nominees of Impact Diagnostics
were appointed to our board of directors.
Cervical
Cancer
Invasive
cervical cancer affects over 500,000 women worldwide annually, and approximately
300,000 women die each year from this disease. Cervical cancer is the
second highest cause of cancer death among women. In the United States,
Western Europe and other countries where there is widespread screening and a
well developed testing or diagnostic infrastructure, invasive cervical cancer is
less prevalent. In China, India and many other countries, there is a much
higher incidence of invasive cervical cancer because of the lack of testing and
limited or diagnostic testing infrastructure.
Pap Tests have been the most prevalent cervical cancer screening method for more
than 50 years. In recent years, gene- or DNA-based HPV tests has been
introduced as an adjunct to the Pap Test. Today, approximately 60 million
Pap Tests are performed annually in the United States, and an additional 60
million Pap Tests are performed annually in the rest of the world, mainly in
Canada, Western Europe and Japan. Outside the United States, approximately
1.7 billion women do not undergo regular cervical cancer testing. In many
cases, this scarcity of testing is the result of a lack of economic resources,
as well as social, cultural and/or religious factors which may contribute to
women not undergoing cervical cancer screening.
Cervical
cancer is predominantly caused by humanpapilloma virus or HPV. However, of
the more than 100 specific types of HPV, the scientific community believes only
7 to 15 are positively correlated with most cervical cancers. There are two
types of cervical cancer. Squamous cell carcinoma, a cancer of the flat,
scale-like cells that coat the cervix, is the most prevalent type.
Adenocarcinoma is a more virulent cancer that stems from cervical cells with
glandular or secretory properties that is increasing in incidence and often is
undetectable by Pap Tests. Missing adenocarcinomas is largely caused by problems
in collecting the correct cervical cells.
Traditional
Testing for Cervical Cancer
Pap
Tests
The most
common means of screening for cervical cancer is the Pap Test, which has been
used as the primary screen for over 50 years. The Pap Test is performed by
swabbing the cervical surface to collect cells that are then placed on a
microscopic slide for examination. A specially- trained licensed
cytotechnologist, usually in a hospital or pathology laboratory, observes the
cells using a microscope and other specialized equipment to determine whether
abnormal cells are present. When a cytotechnologist identifies a potential
abnormality, a cytopathologist verifies the interpretation. A second
generation Pap Test, known as a “Liquid Pap Test”, involves as special procedure
that puts cells onto a microscopic slide in a manner that is intended to allow
for more clear-cut scrutiny by the cytotechnologist.
Women
whose Pap test results are normal do not undergo further inspection, but instead
characteristically return for routine Pap screening on an annual basis.
However, women with abnormal Pap test results may be subjected to follow-up Pap
tests, colposcopy (a visual examination of the cervix with the aid of a
distinctive microscope) and biopsy to clearly identify cancerous
conditions. Advanced lesions may then be removed with a cauterizing device
or scalpel, and in some cases women undergo a hysterectomy, or removal of the
entire cervix. If a
patient’s Pap Test cannot specifically be classified as normal or abnormal, the
result is classified as “equivocal”, or Atypical Squamous Cells of Undetermined
Significance (ASC-US). This occurs in approximately 5-7% of cases in the
United States (Modern Pathology, 12:335). Patients with equivocal Pap Test
results typically will undergo multiple repeat Pap Tests. Many of these
patients will also undergo a colposcopy and a biopsy. However, 80% of
women with ASC-US who undergo an expensive colposcopy do not have cervical
disease or develop cervical cancer (Journal of Medical Screening, 3:29).
While Pap
Tests have been an important screening tool for many years and have helped
reduce deaths caused by cervical cancer, they still have some significant
shortcomings, including:
·
limited predictive value — in the
United States, each year several million colposcopies are performed on patients
with abnormal Pap Test results, but only 20% of the colposcopies reveal cervical
cancer or pre-cancerous lesions (Journal of the American Medical Association,
287:2382).
·
false
negative results — in the United States,
Pap Tests
fail to diagnose cervical cancer or pre-cancerous conditions that often lead to
cervical cancer in approximately 30% to 60% (depending on whether a Liquid Pap
Test or a regular Pap Test is used) of the cases where cervical cancer or
pre-cancerous conditions are present (Archives of Pathology & Laboratory
Medicine, 122:139).
·
false
positive results — Distinguishing between cervical cancer or pre-cancerous
states and benign conditions mimicking them can be difficult via Pap Tests.
(Diagnostic Cytopathology, 28:23).
·
inability
to detect adenocarcinomas — Pap Tests are unable to detect the presence of the
more virulent adenocarcinoma (Clinical Laboratory Medicine, 20:140).
·
invasive
procedure — Pap Tests require healthcare professional to extract cells from the
cervix by inserting a colleting device into the cervix. In some
non-Western countries, women may be inhibited from undergoing this procedure for
social, cultural or religious reasons.
·
high
costs — highly trained physicians and other specialists are required to collect,
examine and interpret the Pap Test specimen, which contributes to a higher cost
structure for the Pap Test. Following a positive test result, colposcopies and
biopsies are required, raising the overall potential cost of screening.
Some of
these deficiencies may be due primarily to visual limitations associated with
microscopic examination, the inadequate or inappropriate sampling of cells or
other technical problems and to the subjective nature of cytology
interpretation.
HPV
Tests
In the
past few years, HPV testing has been introduced as another element of the
cervical cancer screening process. The HPV Test is a gene-based test that
detects the presence or absence of certain cancer-causing HPV. Like the
Pap Test, it is performed by swabbing the cervix to extract cells. The
specimen is then analyzed using expensive specialized equipment and software
programs in a laboratory.
In the
United States, women with ASC-US results from an initial Pap Test often undergo
an HPV Test to determine if HPV is present. That test can be performed
using the same sample taken for a Liquid Pap Test or a stand-alone one.
HPV testing has also been introduced in conjunction with Pap Tests as an
optional screening protocol for women 30 years of age and older, even in the
absence of ASC-US or worse results.
While HPV
Tests are helpful in detecting the presence of HPV, which is a precursor for
virtually all cervical cancer, they too suffer from some significant
shortcomings:
·
limited
predictive value — HPV tests
actually detect virus infection and not cervical cancer and/or associated
pre-cancerous lesions. Although HPV is an obligate cause of cervical
cancer, only 2% of patients testing positive for HPV will eventually progress to
the disease (Journal
of Clinical Microbiology, 42:2470).
·
invasive
procedure — Like Pap
smear cytology, the HPV test requires that the attending healthcare professional
get cells by inserting a collection device into the cervix. As earlier stated,
women in certain non-Western cultures may be prohibited from undergoing such a
procedure for social, cultural or religious reasons
·
high cost
and complex — The HPV
test specimen must be processed by special and dedicated, expensive laboratory
equipment and interpretational computer software by highly trained technicians,
thus the higher costs associated with HPV tests. Following a positive test
result, colposcopy and biopsies are required, thus further elevating diagnostic
costs.
Our
Planned Cervical Cancer Test
We are developing cervical cancer tests that will detect the presence or absence
of specific antibodies that are produced only if cancer-causing HPV is present
in the body, and consequent oncogenic, or cancer-promoting, changes have
occurred. Cancer-causing HPV have unique proteins that trigger the
disease. Upon disease onset, the body makes large numbers of antibodies to
these unique proteins. By detecting specific antibodies to cancer-causing
HPVs, we believe that our tests will be able to more reliably determine whether
a patient has cervical cancer or pre-cancerous lesions than can Pap smear
cytology or HPV testing.
Our tests
involve the analysis of a small amount of blood taken from the patient. The
collection of small volumes of blood is widely accepted as being of “minimal
risk”. It
is not necessary to probe the cervix to get results. Given the previously
discussed socio-religious hesitance or prohibitions as to getting cells from the
cervix, we believe our tests will have greater acceptability and/or desirability
than tests that involve obtaining cells from the cervix. Our tests involve the
following, readily completed steps:
·
The
sample is placed into a receptacle coated with proprietary detection proteins of
a specific nature.
·
Only
certain antibodies to cancer-causing HPVs can adhere to these
proteins.
·
The
container is then rinsed, thus removing everything but antibodies that have
adhered to the proteins.
·
A special
solution is added to the container. This solution includes “detector”
antibodies that attach to those specific antibodies to cancer-causing HPVs
adhered to the special detector proteins. The solution changes color with
attachment of the “detector” antibodies, an indicator of a positive result
(i.e., cervical cancer or a pre-cancerous condition present).
We are
developing two tests. One, known as the Enzyme Linked Immunosorbent Assay
Test (ELISA), is designed to be run in a laboratory. The blood specimen is
sent to the laboratory, where a laboratory technician runs the test using
standard, readily available laboratory equipment. No unique analytic or
diagnostic software is required, while such software is essential for HPV
testing. While test results typically are available in about two hours, we
anticipate that the typical turnaround time from the laboratory to the doctor
will be approximately one day. We believe that a doctor will be able to
order this test as one of a battery of tests that is run on a patient’s blood
sample after a typical office visit.
Our
second generation rapid test is designed to be a point-of-care test that will be
able to be administered in the hospital, physician’s office, clinic or even at
home or in outdoor settings. The test kit will contain the required
container and reagents, with a color change will indicate the presence of
cancer-causing proteins. We anticipate that the test will be able to
produce results within 10 to 15 minutes after administration of the test.
We have
not yet completed the development of our cervical cancer tests. We are
continuing to refine the existing proteins and processes currently used in our
tests and are testing other proteins and processes, which may be included in our
tests in the future.
We
believe that, when completed, our tests will be a more accurate and efficient
way to diagnose cervical cancer for the following reasons:
·
greater
accuracy — Our
cervical cancer tests will detect specific antibodies present only if
cancer-causing HPV is present and cancer-related cellular changes have
occurred. As a result, we believe our tests will be able to more
accurately diagnose cancer or pre-cancerous conditions than do Pap and HPV
tests, thus making for fewer false positive or false negative
results.
·
ability
to detect adenocarcinomas - Our antibody detection approach is well suited for
finding adenocarcinomas as well as squamous cell carcinomas since cell samples
are not required.
·
non-invasive
— Our tests
require a small amount of blood, which may be quickly and safely taken via a
finger prick or from a vein in the arm. We believe that in countries where
women are reluctant to allow a healthcare professional to sample their cervix
there will be greater willingness to allow blood sampling to ascertain cervical
disease.
·
reduced
costs — We
believe that because our tests will be run by laboratory technicians using
standard, readily available equipment or by a healthcare professional using a
point-of-care test, overall costs for our screening tests will be less than
experienced with Pap or HPV tests. In addition, by providing more accurate
results, we believe that our tests may reduce the number of repeated cervical
cancer tests of any sort along with expensive colposcopies, biopsies and related
medical procedures.
Initial
Validation Studies
We have
conducted initial studies to validate our planned cervical cancer tests.
In the
United States, the Institutional Review Board (IRB) governs collection and use
of patient specimens for research and testing purposes. The IRB Committee at
Intermountain Health Care, the largest hospital facility in the intermountain
western United States, and at St. Mark’s Hospital in Salt Lake City, Utah,
approved the evaluation of our technology for screening blood serum from
patients, some of whom had negative Pap Tests and some of whom had previously
been diagnosed with cervical cancer or intraepithelial lesions, the immediate
precursor to cervical cancer. These initial non-blind studies were performed in
May 2003 by Ameripath, Inc. on a total of 65 American patient samples from
these IRB approved sources. Our tests detected cervical cancer or pre-cancerous
conditions 94% of the time such conditions existed, and were able to rule out
cervical cancer or pre-cancerous conditions 82% of the time the patient did not
have these conditions.
Similar
testing was done in April 2003, under a Chinese IRB equivalent, at the
China Cancer Institute, China Academy of Medical Sciences on 70 samples, of
which over half were from cervical cancer patients. Our tests detected cervical
cancer or pre-cancerous conditions 97% of the time such conditions existed and
were able to rule out cervical cancer or pre-cancerous conditions 85% of the
time the patient did not have these conditions.
The
initial studies conduced by Ameripath and in China used a “cut off” value or
measurement standard to differentiate benign from cancerous or pre-cancerous
conditions that is higher than would typically be used in a commercially
available test. We currently are refining our technology in order to enable our
tests to achieve similar results using a measurement standard appropriate for a
commercial cervical cancer diagnostic test.
We plan
to conduct validation studies on a refined version of our cervical cancer test
in the next few months. Allogen Laboratories, a wholly owned subsidiary of the
Cleveland Clinic Foundation, has agreed to conduct these studies for us.
Although it is possible that these later studies may not support the results of
the initial validation studies, preliminary indications have been positive.
Allogen Laboratories will also assist us in developing a proposed protocol of
clinical trials and other studies that will be used to support the submissions
we intend to make to the FDA and other foreign regulatory authorities.
Regulatory
Approval
In the
United States, our planned cervical cancer tests will be subject to regulation
by the U.S. Food and Drug Administration (FDA) under the Federal Food, Drug and
Cosmetic Act. Governmental agencies in other countries also regulate
medical devices. These domestic and foreign regulations govern the
majority of the commercial activities we plan to perform, including the purposes
for which our proposed tests can be used, the development, testing, labeling,
storage and use of our proposed tests with other products and the manufacturing,
advertising, promotion, sales and distribution of our proposed test for the
approved purposes. Compliance with these regulations could prove expensive
and time-consuming.
Products
that are used to diagnose diseases in people are considered medical devices,
which are regulated in the United States by the FDA. To obtain FDA
authorization for a new medical device, a company may have to submit data
relating to safety and efficiency based upon extensive testing. This
testing, and the preparation and processing of necessary applications, are
expensive and may take up to a few years to complete. Whether a medical
device requires FDA authorization and the data that must be submitted to the FDA
varies depending on the nature of the medical device.
Medical
devices fall into one of three classes (Class I, II, or III), in accordance with
the FDA’s determination of controls necessary to ensure the safety and
effectiveness of the device or diagnostic. As with most diagnostic products, we
anticipate that our planned cervical cancer tests will be classified by the FDA
either as a Class II device. By definition, his means that there could be a
potential for harm to the consumer if the device is not designed properly and/or
otherwise does not meet strict standards. To market and sell a class II medical
device, a company must first submit a 510(k) premarket notification, also known
as a 510(k). The 510(k) application is intended to demonstrate substantial
equivalency to a Class II device already on the market. The FDA will still
require that clinical studies of device safety and effectiveness be completed.
In the
United States, prior to approval by the FDA, under certain conditions, companies
can sell investigational or research kits to laboratories under the Clinical
Laboratory Improvement Amendment (CLIA) of 1988. Under CLIA, companies can sell
diagnostic assays or tests to "high complexity" laboratories for validation as
an "analyte specific reagent". An analyte specific reagent is the active
ingredient of an "in-house" diagnostic test.
We intend
to sell the ELISA version of our cervical cancer test to high complexity
laboratories for validation as an analyte specific reagent or for use by such
laboratories in their own homebrew (or in-house) diagnostic assays. Such sales
would not require FDA approval, but we are aware that the FDA might deny
approval under CLIA for sales of our product as an analyte specific
reagent.
We have
not yet submitted an application for approval to the FDA or regulatory agencies
in any other countries of the cervical cancer tests we are developing. It
is highly likely that we will have to conduct clinical trials and other studies
to generate data that the FDA and other regulatory authorities will require in
support of our application. We have not yet designed or initiated any of
these trials. We anticipate it will take a minimum oft one to two years to
complete the review and approval process.
In
addition to any government requirements as to authorizing the marketing and
sales of medical devices, there are other FDA requirements. The manufacturer
must be registered with the FDA. The FDA will inspect what is being done on a
routine basis to ascertain compliance with those regulations prescribing
standards for medical device quality and consistency. Such standards refer to
but are not limited to manufacturing, testing, distribution, storage, design
control and service activities. The FDA also prohibits promoting a device for
unauthorized uses and routinely reviews labeling accuracy. If the FDA finds
failures in compliance, it can institute a range of enforcement actions, from a
public warning letter to more severe sanctions like withdrawal of approval;
denial of requests for future approval; fines, injunctions and civil penalties;
recall or seizure of the product; operating restrictions, partial suspension or
total shutdown of production; and criminal prosecution.
The FDA's
medical device reporting regulation also will require the reporting of
information on deaths or serious injuries associated with the use of our tests,
as well as product malfunctions that are likely to cause or contribute to death
or serious injury if the malfunction were to recur.
Regardless
of FDA approval status in the U.S, we will need to obtain certification of our
tests from regulatory authorities in other countries prior to marketing and
selling in such countries. The amount of time needed to achieve foreign approval
varies from country to country and regulatory, approval by regulatory
authorities of one country cannot by itself determine acceptance by another
country's regulatory body. Additionally, implementation of more stringent
requirements or the adoption of new requirements or policies could adversely
affect our ability to sell our proposed tests in other countries in the world.
We may be required to incur significant costs to comply with these laws and
regulations.
In
addition to the rules and regulations of the FDA and similar foreign agencies,
we may also have to comply with other federal, state, provincial and local laws,
rules and regulations. Our tests could be subject to rules pertaining to the
disposal of hazardous or toxic chemicals or potentially hazardous substances,
infectious disease agents and other materials, and laboratory and manufacturing
practices used in connection with our research and development activities. If we
fail to comply with these regulations, we could be fined, may not be allowed to
operate certain portions of our business, or otherwise suffer consequences that
could materially harm our business.
Competition
We are
not aware of other companies that are developing a protein-based screening test
that detects antibodies to cervical cancer. However, when completed, we
expect that our cervical cancer tests will compete with the Pap Tests, which
have been widely accepted by the medical community for over 50 years.
Approximately 60 million Pap Tests are performed annually in the United States,
and an additional 60 million Pap Tests are performed annually in the rest of the
world. Manufacturers of Pap Tests include Cyctc Corporation, TriPath
Imaging, Inc. and several other companies.
Our
cervical cancer test also will compete with HPV Tests, which are becoming
increasingly accepted in the medical community. Manufacturers of HPV Tests
include Digene Corporation, Ventana Medical Systems, Roche Diagnostics, Abbott
Laboratories, and Bayer Corporation.
All of
the companies who make Pap Tests and HPV Tests have far greater financial,
technical, research and development, sales and marketing, administrative and
other resources than we do.
For our
proposed tests to become accepted in the medical community, we will need to
convince those who use established tests that our proposed tests are more
reliable for the screening of cervical cancer, either as stand-alone tests or in
conjunction with the Pap Test and/or HPV Tests.
In
addition, we will need to obtain reimbursement coverage for our proposed
cervical cancer tests. In the United States, the American Medical
Association assigns specific Current Procedural Terminology, or CPT, codes
necessary for reimbursement. Third-party payors and managed care entities
that provide health insurance coverage to approximately 225 million people in
the United States currently authorize almost universal reimbursement for the Pap
Test, and the Pap Test is nearly fully reimbursed in other markets where we will
sell our proposed tests. The HPV Test now has full reimbursement for certain
uses. We will attempt to obtain reimbursement for our planned cervical cancer
tests to the same degree as the Pap Test, but it is possible that we will be
unable to obtain third-party reimbursement for these tests.
Sales
and Marketing
When we have completed the development of our cervical cancer tests and received
any required regulatory approval, we plan to market and sell our ELISA test to
laboratories in the United States, Canada, Western Europe, Japan and other
countries with established cervical cancer screening programs for use as a
screening test. Initially, we do not plan to sell our test in these
countries directly to primary healthcare providers.
In developing nations and other markets where cervical cancer screening is not
widespread and where there are few laboratories or other testing facilities, we
plan to market and sell our rapid test to primary healthcare providers as a
stand alone point-of-care test. In some of these countries, we plan to
sell our proposed test directly to the governments or to other national
healthcare distributors who distribute tests to national healthcare providers.
We do not currently have a marketing or sales force or a distribution
arrangement in place. We will need to expend resources to develop our own
marketing and sales force or enter into third party distribution arrangements.
Intellectual
Property
We rely on patents, licenses from third parties, trade secrets, trademarks,
copyright registrations and non-disclosure agreements to establish and protect
our proprietary rights in our technologies and products.
We entered into an exclusive license with Dr. Yao Xiong Hu on July 20, 2004 for
certain processes that we currently include in our cervical cancer tests.
Some of the technology owned by Dr. Hu is covered by a United States patent that
has been issued, and some of the technology is covered by a United States patent
application that has been filed and is pending. The agreement with Dr. Hu also
covers technology included in foreign applications presently pending as PCT
applications in China and India. We entered into the license agreement with Dr.
Hu on July 20, 2004. The initial term of this license is 17 years, and it
automatically renews for successive one-year periods unless voluntarily
terminated by us or by Dr. Hu in the event of our insolvency. Under the
license agreement, we are required to pay Dr. Hu a minimum licensing fee of
$48,000 per year, which is paid on a monthly basis of $4,000 per month. If the
annual royalty exceeds, $48,000, we will also be required to pay to Dr. Hu
royalties on a quarterly basis ranging from 1% to 3% depending on the net sales
of our product. We have the option to purchase the licensed technology for
$250,000 within two years from the date of the agreement. As of the date of this
report we have made $24,000 in license fee payments to Dr. Hu.
We plan to file patent applications for any additional technology that we create
in the future.
We anticipate that we may need to license additional technology for use in our
planned cervical cancer tests from other third parties. We may be unable to
obtain these licenses on acceptable terms or at all.
Our technology is also dependent upon unpatented trade secrets. However,
trade secrets are difficult to protect. In an effort to protect our trade
secrets, we have a policy of requiring our employees, consultants and advisors
to execute non-disclosure agreements. These agreements provide that
confidential information developed or made known to an individual during the
course of their relationship with us must be kept confidential, and may not be
used, except in specified circumstances. In addition, our employees are
parties to agreements that require them to assign to us all inventions and other
technology that they create while employed by us.
HIV
and Dengue Fever Tests
In
conjunction with our primary diagnostic cervical cancer blood test that we are
developing, we have also recently acquired exclusive worldwide rights to
diagnostic devices for HIV-1, HIV-2 and dengue fever and proprietary colloidal
gold reagent, a key ingredient commonly used by leading manufacturers of rapid
tests as a detectable label. We acquired these rights from AccuDx. An estimated
40 million people are now living with HIV/AIDS of which nearly 18 million are
women and 2 million children. Over 5 million new infections were reported in
2004.
As access
to antiretroviral treatment is scaled up in low income countries, there is a
critical opportunity to expand access to HIV prevention. Among the interventions
which play a critical role both in treatment and prevention, HIV testing and
counseling stands out as paramount. An estimated 40 million people are now
living with HIV/AIDS of which nearly 18 million are women and 2 million
children. Just in year 2004 over 5 million new infections were reported.
Serological determination of the specific anti-HIV antibodies still forms the
primary screening/diagnostic procedure for HIV infection.
The
AccuDx AIDS test device consists of a sample addition pad containing HIV-antigen
gold conjugate, a capillary membrane with three capture lines with HIV-1, HIV-2
and a control line and a fluid absorption pad. When test strips are placed in
the tube containing test serum or plasma, the liquid migrates upwardly by
capillary action. Colloidal gold conjugates of HIV antigen react with anti-HIV-1
and anti-HIV-2 antibodies in the sample which then are captured on specific
antigen lines as they migrate up the membrane and into the fluid absorption pad.
The results are visual and easy to interpret. For example, a single pink line
corresponding to control is a negative, two lines corresponding to control and
HIV-1 is an HIV-1 positive sample. In the cases where all two lines
corresponding to HIV-2 and control would be an HIV-2 infection. Recombinant
fusion proteins consisting of envelope proteins (gp120 and gp41), a recombinant
protein covering the antigenic epitopes of HIV-1 envelope gp36 and a recombinant
O-subtype are used for signal as well as capture Ligands in a “double antigen
immuno-chromatographic assay” format. The test is simple to use and performance
characteristics are comparable to Laboratory based assays. The Company believes
that extensive utilization of HIV antibody point-of-care tests should aid combat
the current HIV/AIDS pandemic world-wide.
Another
global illness, dengue fever, which is transmitted by mosquitoes has increased
dramatically in recent decades. Dengue fever, dengue haemorrhagic fever (DHF)
and dengue shock syndrome (DDS) occur in over 100 countries and territories and
threaten the health of more than 2.5 billion people in urban, peri-urban and
rural areas of the tropics and subtropics. The disease is endemic in Africa, the
Americas, the Eastern Mediterranean, South-East Asia and the Western Pacific.
Although the major disease burden is in South-East Asia and the Western Pacific,
rising trends are also reflected in increased reporting of dengue fever and DHF
cases in the Americas. In 1998, a total of 1.2 million cases of dengue and DHF
were reported to WHO including 15,000 deaths. Globally, the annual number of
infections is much higher than is indicated by the number of reported cases.
Based on statistical modeling methods there are an estimated 51 million
infections each year.
Dengue is
a Flavivirus that is transmitted by mosquito, principally Aedes aegypti. There
are four known serotypes and serology is a useful aid in the diagnosis of dengue
infections. Rapid and reliable tests for primary and secondary infections of
dengue are essential for patient management. Primary Dengue infection is
associated with mild to high fever, headache, muscle pain and skin rash. Immune
response includes antibodies denoted as IgM which are produced by 5th day of
symptoms and persists for 30-60 days and antibodies denoted as IgG which appear
by the 14th day and persist for life. Secondary infections often result in high
fever and in many cases with haemorrhagic events and circulatory failure.
Secondary infections induce IgM response after 20 days of infection and IgGs
rise within 1-2 days after the onset of symptoms. A reliable and sensitive rapid
test that can simultaneously detect the presence of anti-dengue IgG and IgM is
of great clinical utility. The Immunochromatographic format provides an
excellent immune capture method for specific detection of anti-dengue IgG and
IgM. The presence of high titers of IgGs does not interfere with the IgM
detection in the AccuDx format. A mixture of highly purified recombinant
proteins corresponding to dengue virus e-proteins from type 2 and 3 and covering
antigenic epitopes of all 4 serotypes is conjugated to colloidal gold. The
Immunochromatographic device is sensitized with goat anti-human IgG
(corresponding to a band just below the mark “G”), goat anti-human IgM
(corresponding to a band just below the mark “M”) and anti-dengue E protein
monoclonal antibodies (corresponding to the band just below the mark
“C”).
The
AccuDx test utilizes a specimen sample consisting of serum or plasma which is
added to a test tube with the buffer solution provided. IgGs and IgMs in the
specimen sample react with colloidal gold conjugates of recombinant dengue
envelope proteins that detect Dengue Types 1, 2, 3 and 4 as they travel up the
test strip and are captured by the relevant IgG and or IgM test bands. If there
are anti-dengue IgGs or IgMs present within the specimen sample, signal
conjugates will bind to them and produce a pale or dark pink band at either the
“G” for IgGs or “M” for IgMs. In all cases the conjugate in the specimen sample
conjugate mixture in the test tube will bind with the anti-dengue monoclonal
antibody band, and serves as a positive control. The intensity of the bands will
vary depending upon the antibody titer (IgM and IgG). In the cases of very high
titer IgG and IgM, the control band may appear fainter in its intensity.
Extensive utilization of point-of-care testing of Dengue IgM/IgG tests could in
the Company’s view save millions of lives worldwide.
The
agreement with AccuDx grants us the right to manufacture the AccuDx Tests in
AccuDx’s ‘maquiladora’-modeled contract manufacturing facility in Tijuana,
Mexico which facility is registered with the FDA and is ISO 9002-certified. We
will seek recertification approval in Southeastern countries where the AccuDx
Tests had previously received certificates of resale and we will seek
governmental approval in other countries including China, Brazil and India. We
plan on generating revenues from the sale of AccuDx Tests in the last quarter of
2005, provided that we receive such recertifications in a timely
manner.
We have
also acquired exclusive rights to AccuDx’s proprietary colloidal gold reagent, a
key ingredient commonly used by leading manufacturers of rapid tests as a
detectable label. The need for uniform size colloidal conjugates in diagnosis
and nanotechnology cannot be over emphasized. AccuDx has developed and perfected
technologies to particles of colloidal manufacture large quantities of uniform
size colloidal gold. Colloidal gold conjugates are currently used in various
applications including in in vitro diagnostic devices, electron microscopy and
various nanotechnology applications. Conjugates of various specific Ligands will
be made available as research reagents and OEM products.
Research
and Development
Our research and development program is focused on completing development of our
cervical cancer tests. We continue to refine existing technology and
develop further improvements to our tests.
We believe that in the future we may be able to apply our technology to develop
rapid tests for other diseases and certain other cancers. We plan to
pursue development of these other tests.
For the fiscal years ended December 31, 2004 and 2003, we spent
approximately $430,540 and $51,100, respectively, on research and development.
Manufacturing
We plan to outsource the manufacturing and assembly of our planned cervical
cancer tests to third parties. We do not currently have arrangements in
place with any such third parties.
Suppliers
We develop the processes including proteins and other technology that we use in
our proposed tests, and license certain other technology from third
parties. We believe that the reagents and other supplies we will use to
manufacture our test may be readily obtained from multiple suppliers.
Employees
As of
March 30, 2005, we had seven employees and retained four consultants on a
part-time basis. Our employees consist of our three executive officers, a
Medical Director, one laboratory development manager, one controller and one
administrative assistant. During the next 12 months, we anticipate that we
will add employees, including scientists and other professionals in the research
and development, product development, business development, regulatory,
manufacturing, marketing and clinical studies areas.
Item
2. Properties
We
currently lease our principal executive offices in Murray, Utah, office space in
Raleigh, NC and our clinical laboratory in Sandy, Utah. Part of our
Raleigh office space is subleased for $800 per month for the period beginning
March 1, 2005 through the term of the lease. We believe that our existing
facilities will be adequate for our current needs and that additional space will
be available as needed. The material terms of our property leases are set
forth in the table below.
Location
|
|
Use
|
|
Square
Feet |
|
Rent
Payments |
|
Term
|
|
Leased
From |
64
East Winchester Suite 205 Murray, Utah 84107 |
|
Principal
Executive Offices |
|
Approximately
1330 square feet |
|
$1,663
per month |
|
September
1, 2004 — August 31, 2005 |
|
Plaza
6400, LLC |
5511
Capital Center Drive Suite 224 Raleigh, NC 27606 |
|
Executive
Offices |
|
Approximately
1,438 square feet |
|
$1,600
per month |
|
October
1, 2004 — September 30, 2004 |
|
HD
Capital Center, LLC |
10011
Centennial Parkway Suite 300 Sandy, Utah 84070 |
|
Clinical
Laboratory |
|
Approximately
800 square feet |
|
$600
per month |
|
April
1, 2004 — March 31, 2005 |
|
Rocky
Mountain Pathology, LLC |
Item
3. Legal Proceedings
We are
not currently a party to any litigation.
Item
4. Submission of Matters to a Vote of Security Holders
There
were no matters submitted to a vote of our security holders during the fourth
quarter of the year ended December 31, 2005.
Items
5. Market for Registrant’s Common Equity and Related Security Holder
Matters
Our common stock is quoted on the OTC Bulletin Board under the symbol
“GLIF.OB.” The following table sets forth, for the calendar periods
indicated, the range of the high and low last reported bid prices of our common
stock from January 1, 2002 through December 31, 2004, as reported by the OTC
Bulletin Board. The stock was not actively traded in 2003 or the first ½
of 2004. The quotations represent inter-dealer prices without retail mark-ups,
mark-downs or commissions, and may not necessarily represent actual
transactions. The quotations may be rounded for presentation.
Period
|
|
High
|
|
Low
|
|
First
Quarter 2003 |
|
$ |
0.04 |
|
$ |
0.04 |
|
Second
Quarter 2003 |
|
$ |
0.04 |
|
$ |
0.04 |
|
Third
Quarter 2003 |
|
$ |
0.04 |
|
$ |
0.04 |
|
Fourth
Quarter 2003 |
|
$ |
0.04 |
|
$ |
0.04 |
|
First
Quarter 2004 |
|
$ |
0.04 |
|
$ |
0.04 |
|
Second
Quarter 2004 |
|
$ |
0.04 |
|
$ |
0.04 |
|
Third
Quarter 2004 |
|
$ |
0.80 |
|
$ |
$0.04 |
|
Fourth
Quarter 2004 |
|
$ |
1.40 |
|
$ |
0.64 |
|
On March 30, 2005, the last reported bid price of our common stock as reported
on the OTC Bulletin Board was $.50 per share. As of March 15, 2005,
we had approximately 140 shareholders of record.
We have
never declared nor paid cash dividends and do not expect to pay dividends in the
foreseeable future.
Equity
Compensation Plan Information
The
following table gives information about the Company’s common stock that may be
issued upon the exercise of options, granted to employees, directors and
consultants, under its 2004 Stock Incentive Plan as of December 31, 2004. The
Plan was approved by a majority of shareholders on September 30, 2004. Prior to
the Merger in July 2004, one consultant received a warrant for services
performed for the Company, which is shown below.
|
|
Number
of Securities to be Issued Upon Exercise of Outstanding Options, Warrants
and Rights |
|
Weighted
Average Exercise Price of Outstanding Options, Warrants and
Rights |
|
Number
of Securities Remaining Available for Future Issuance Under Equity
Compensation Plan |
|
2004
Stock Incentive Plan |
|
|
5,243,254 |
|
$ |
0.18 |
|
|
19,756,746 |
|
Equity
Compensation not approved by Security Holders |
|
|
250,000 |
|
$ |
0.18 |
|
|
N/A |
|
TOTAL |
|
|
5,493,254 |
|
$ |
0.18 |
|
|
|
|
(1) |
Includes
250,000 warrants to purchase shares at $0.18 issued to a consultant for
performing research services for performed on our behalf, prior to the
Merger in July 2004. |
Item
6. Management’s Discussion and Analysis or Plan of
Operation
The
information in this registration statement contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. This
Act provides a "safe harbor" for forward-looking statements to encourage
companies to provide prospective information about themselves so long as they
identify these statements as forward looking and provide meaningful cautionary
statements identifying important factors that could cause actual results to
differ from the projected results. All statements other than statements of
historical fact made in this registration statement are forward looking. In
particular, the statements herein regarding industry prospects and future
results of operations or financial position are forward-looking statements.
Forward-looking statements reflect management's current expectations and are
inherently uncertain. The Company's actual results may differ significantly from
management's expectations. Notwithstanding these forward-looking statements, the
Private Securities Litigation Reform Act of 1995 and Section 27A of the
Securities Act of 1933 do not protect any statements we make in connection with
this offering.
Overview
On July
30, 2004, we acquired Impact Diagnostics through the merger of our wholly owned
subsidiary, Impact Acquisition Corporation, into Impact Diagnostics. As a result
of the Merger, each issued and outstanding share of common stock of Impact
Diagnostics was converted into one share of our common stock, and Impact
Diagnostics became a wholly owned subsidiary of our company. We now own,
indirectly though Impact Diagnostics, all of the assets of Impact Diagnostics.
We are
considered a development stage company. In 2003 and 2004, we had no revenues and
incurred net losses of $253,881 and $1,910,350, respectively. Since
inception in July 1998, we have incurred cumulative losses of $3,381,339.
Application
of Critical Accounting Policies
Our
consolidated financial statements and accompanying notes are prepared in
accordance with generally accepted accounting principles in the United States.
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses. These estimates and assumptions are affected by management's
application of accounting policies. We believe that understanding the basis and
nature of the estimates and assumptions involved with the following aspects of
our consolidated financial statements is critical to an understanding of our
financials.
Stock-Based
Compensation
On
December 16, 2004, the Financial Accounting Standards Board published Statement
of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment
(“SFAS 123R”). SFAS 123R requires that compensation cost related to share-based
payment transactions be recognized in the financial statements. Share-based
payment transactions within the scope of SFAS 123R include stock options,
restricted stock plans, performance-based equity awards, stock appreciation
rights, and employee share purchase plans. The provisions of SFAS 123R are
effective as of the first interim period that begins after December 15, 2005.
The Company is adopting this Statement early, for the year 2004. The company
incurred expense of $426,081 in 2004 for the stock options granted under its
2004 Stock Incentive Plan. The Company anticipates continuing to incur such
costs in order to conserve its limited financial resources. The determination of
the volatility, expected term and other assumptions used to determine the fair
value of equity based compensation issued to non-employees under SFAS 123
involves subjective judgment and the consideration of a variety of factors,
including our historical stock price, option exercise activity to date and the
review of assumptions used by comparable enterprises.
Plan
of Operations
During
the next year, we expect to acquire laboratory assets to augment our clinical
research and development efforts. As part of this effort, we plan to develop a
laboratory facility through relocating its offices to California where our Chief
Executive Officer and Chief Financial Officer reside. We currently anticipate
leasing an office in the Los Angeles area and will seek to secure the necessary
mixed-use permits to operate a laboratory facility as part of such office. In
conjunction with this relocation, we are terminating our lease of our office in
Raleigh, North Carolina. This address is the address where Mr. John Wilson, its
soon to be former Chief Financial Officer maintains an office. As previously
announced, effective March 31, 2005, Mr. Wilson will resign as Chief Financial
Officer, with Donald Rutherford, a Los Angeles based, experienced financial
executive, becoming our Chief Financial Officer. In addition to the termination
of our North Carolina office, we also plan to relocate our clinical laboratory
presently located in Sandy, Utah to the Los Angeles area.
During
the next 12 months, we plan to complete the development of our cervical
cancer screening tests. We intend to continue to validate the
effectiveness of the processes that we currently use in the tests we are
developing through trials which will be conducted for us by Allogen
Laboratories, a subsidiary of the Cleveland Clinic. In the near term, we plan to
meet with regulatory agencies in the United States and in other countries to
determine the clinical trials and studies we will have to undertake and the data
and other information we will be required to submit to them to support our
future applications for authority to market and sell our planned cervical cancer
tests in those countries. We also plan to begin studies and clinical
trials in the United States and other countries that will be required in
connection with our regulatory applications.
During
the next 12 months, we anticipate that we will add employees, including
scientists and other professionals in the research and development, product
development, business development, regulatory, manufacturing, marketing and
clinical studies areas.
Liquidity
and Capital Resources
We do not
have sufficient capital to satisfy our cash requirements through the next twelve
months. As of December 31, 2004, we had total current assets of $377,768 and
total current liabilities of $275,505. These current liabilities include notes
payable of $122,500 which converted to shares of common stock in March 2005. Our
cash flow deficit from operations was $1,484,935 during the year ended December
31, 2004. Additionally we used $16,873 to acquire new property and equipment
during the period. We met our cash requirements through a private placement in
connection with the Merger.
In
connection with the Merger, between July 30, 2004 and August 19, 2004, we sold
1,912,125 units in a private placement, at a purchase price of $0.9175 per unit
($0.1835 per share), resulting in gross proceeds to our company of $1,754,375,
or $1,494,937 net after deduction of offering costs. Net proceeds after
legal, accounting, printing and other fees was approximately $1,437,000. Each
unit was comprised of five (5) shares (or 9,560,625 shares) of our common stock
and a warrant to purchase one (1) share of our common stock at an exercise price
of $0.1835 per share.
Our
continuation as a going concern is dependent on our ability to generate
sufficient cash flows to meet our obligations on a timely basis and to obtain
additional financing as may be required. We plan to raise additional capital in
the next three months through the sale of equity and/or debt securities to
support our development plan in the medical diagnostics industry. However,
we currently do not have any committed sources of financing. We may not be
able to raise additional financing on acceptable terms when we need to, or we
may be unable to raise additional financing as all. We plan to invest any excess
cash we have in investment grade interest bearing securities.
Recent
Developments
On March
7, 2005, we entered into an Exclusive License Agreement with AccuDx Corporation
(“Licensor”) for a period of ten years, pursuant to which we were granted the
exclusive right to Licensor’s rapid tests for HIV-1, HIV-2 and Dengue Fever and
its colloidal gold reagent. The Agreement also granted us the right to
manufacture these products at the Licensor’s FDA/GMP-compliant contract
manufacturing maquiladora facility in Tijuana, Mexico. In consideration for the
License, we agreed to pay Licensor $15,000 in cash and deliver a promissory note
in the principal amount of $35,000 payable in equal quarterly installments for a
two-year period and bearing 6% interest on the unpaid principal. We also agreed
to pay the Licensor a 3% royalty on net sales of the products under the License.
We also entered into a Consulting Agreement with Ravi Pottahil and Indira
Pottahil in support of the License in exchange for 310,000 shares of our common
stock, which will be issued as follows: one-third on September 7, 2005,
one-third on March 7, 2006 and one-third on September 7, 2006.
On March
15, 2005, we issued an 8% Senior Secured Note due June 15, 2005, in the
aggregate principal amount of $200,000 (the “Note”) and a warrant to purchase up
to an aggregate of 250,000 shares of the our common stock (the “Warrant”) to
DCOFI Master LDC, for net proceeds of $165,000. The Note and Warrant were issued
in a private placement pursuant to Section 4(2) of the Exchange Act of 1933 and
Rule 506. Proceeds from the sale will be used for working capital and general
corporate purposes.
The Note
bears interest at a rate of 8% per annum, is due and payable on June 15, 2005
and is secured by the assets of the Company. Interest is payable in cash
monthly. Upon the occurrence of an event of default, as defined in the Note, the
full principal amount of the Note will become due and payable and the Company
will be required to issue to the Holder warrants to purchase an aggregate of
250,000 shares of common stock. The Note may be prepaid by the Company at a
price equal to 100% of the outstanding principal balance, if within 60 days of
the issue date and at a price equal to 106% of the outstanding principal balance
if prepaid after 60 days after the issue date.
The
Warrant is exercisable until five years from the date of issuance at a purchase
price of $0.40 per share, subject to adjustment. The Holder may exercise the
Warrant on a cashless basis if, one year after the issue date, the shares of
common stock underlying the Warrant are not then registered pursuant to an
effective registration statement. In the event the investors exercise the
Warrant on a cashless basis, then the Company will not receive any proceeds. In
addition, the exercise price of the Warrant will be adjusted in the event the
Company issues common stock at a price below the exercise price of the Warrant.
Upon an issuance of shares of common stock at a price below the exercise price,
the exercise price of the Warrant will be reduced to the price such shares of
common stock were issued. The exercise price of the Warrant will also be
adjusted in certain circumstances such as if the Company pays a stock dividend,
subdivides or combines outstanding shares of common stock into a greater or
lesser number of shares, or takes such other actions as would otherwise result
in dilution of the Holder’s ownership.
The
Holder has agreed to restrict its ability to exercise the Warrant and receive
shares of the Company’s common stock such that the number of shares of common
stock held by it and its affiliates in the aggregate after such exercise does
not exceed 9.99% of the then issued and outstanding shares of common stock.
Risk
Factors
Risks
Related to our Business
We
are a development stage company and we have no meaningful operating history on
which to evaluate our business or prospects.
We
acquired Impact Diagnostics on July 30, 2004. For several years prior to
that acquisition, we did not engage in any business. Impact Diagnostics
was formed in 1998 and has been developing a cervical cancer screening
test. This is now our only business. Impact Diagnostics has only a
limited operating history and has generated no revenue. The limited
operating history of Impact Diagnostics makes it difficult to evaluate our
business prospects and future performance. Our business prospects must be
considered in light of the risks, uncertainties, expenses and difficulties
frequently encountered by companies in their early stages of development,
particularly companies in new and rapidly evolving markets, such as the
biotechnology market.
We
have not completed the development of our planned cervical cancer tests and we
are not currently developing any other products. We may not successfully
develop our cervical cancer tests or any other products.
The
cervical cancer tests are the only products we are developing. We have no
other products. We may never successfully complete the development of our
cervical cancer tests. If we do not complete the development of our
cervical cancer tests or develop other products, we will not be able to generate
any revenues or become profitable and you may lose your entire investment in us.
We
will need to raise substantial additional capital to fund our operations, and if
we are unable to obtain funding when needed, we may need to delay completing the
development of our planned cervical cancer tests, scale back our operations or
close our business.
Based on
our current plan, we will need to raise at least $2,000,000 to fund our
operations until the end of 2005. We plan to raise additional capital
through the sale of equity and/or debt securities. We do not currently
have any committed sources of financing and we may be unable to obtain financing
on acceptable terms or at all. If we are unable to raise sufficient funds,
we may have to delay, scale-back or eliminate aspects of our operations or close
our business. If we sell additional equity securities, we will dilute our
current stockholders’ equity interest in us.
Our
auditors have qualified their opinion to our financial statements because of
concerns about our ability to continue as a going concern. These concerns
arise from the fact that we have not yet established an ongoing source of
revenues sufficient to cover our operating costs and that we must raise
additional capital in order to continue to operate our business. If we are
unable to continue as a going concern, you could lose your entire investment in
us.
We
will not be able to sell our planned cervical cancer tests and generate revenues
if laboratories and physicians do not accept them.
If we
successfully complete development of our cervical cancer tests and obtain
required regulatory approval, we plan to market and sell our tests initially to
clinical testing laboratories in the United States, Western Europe and other
countries in which there is widespread cervical cancer screening and a
sophisticated testing infrastructure. We plan to market and sell the rapid
test to physicians, hospitals, clinics and other healthcare providers in some
developing countries where cervical cancer screening is not widespread and where
there is limited or non-standardized testing infrastructure. In order to
successfully commercialize our tests, we will have to convince both laboratories
and healthcare providers that our proposed tests are an effective method of
screening for cervical cancer, whether as an independent test, used in
conjunction with Pap Tests and/or HPV Tests or as a follow-up screening method
for women with equivocal Pap Tests. Pap Tests have been the principal
means of cervical cancer screening for over 50 years and, in recent years, HPV
Tests have been introduced primarily as an adjunct to Pap Tests. Failure to
achieve any of these goals, could have an adverse material effect on our
business, financial condition or results of operation.
Our
planned cervical cancer tests rely on an approach that is different from the
underlying technology of the Pap Tests and the HPV Tests and of healthcare
professionals, women’s advocacy groups and other key constituencies may not view
our planned tests as an accurate means of detecting cervical cancer or
pre-cancerous conditions. In addition, some parties may view using our
proposed test along with the Pap Tests and/or HPV Tests for primary screening as
adding unnecessary expense to the already accepted cervical cancer screening
protocol, which could cause our product revenue to be negatively
affected.
If
third-party health insurance payors do not adequately reimburse healthcare
providers or patients for our proposed cervical cancer tests, we believe it will
be more difficult for us to sell our tests.
We
anticipate that if government insurance plans (including Medicare and Medicaid
in the United States), managed care organizations and private insurers do not
adequately reimburse users for use of our tests, it will be more difficult for
us to sell our tests to laboratories and healthcare providers. Third-party
payors and managed care entities that provide health insurance coverage to
approximately 225 million people in the United States currently authorize almost
universal reimbursement for the Pap Tests, and Pap Tests are nearly fully
reimbursed in other markets where we plan to market and sell our proposed
tests. HPV Tests also are almost fully reimbursed for certain uses.
We will attempt to obtain reimbursement coverage in all markets in which we plan
to sell our proposed cervical cancer tests to the same degree as the Pap Test.
Our
management will be required to expend significant time, effort and expense to
provide information about the effectiveness of our planned cervical cancer tests
to health insurance payors who are willing to consider reimbursement for our
tests. However, reimbursement has become increasingly limited for medical
diagnostic products. Health insurance payors may not reimburse laboratories,
healthcare providers or patients in the United States or elsewhere for the use
of our planned tests, either as a stand-alone test or as an adjunct to Pap Tests
or HPV Tests, which would make it difficult for us to sell our tests, which
could make our business less profitable and cause our business to fail.
We
currently have no sales force or distribution arrangement in any market where we
intend to market and sell our tests.
We
currently have no sales or marketing organization. When we complete the
development of our cervical cancer tests and receive the required regulatory
approvals, we will attempt to market and sell our tests to laboratories and
directly to physicians, hospitals, clinics and other healthcare providers.
We plan to market and sell our tests to laboratories in the United States and
globally through third party distributors. We do not currently have any
arrangements with any distributors and we may not be able to enter into
arrangements with qualified distributors on acceptable terms or at all. If
we are unable to enter into distribution agreements with qualified distributors
on acceptable terms, we may be unable to successfully commercialize our tests.
Our
competitors are much larger and more experienced than we are and, even if we
complete the development of our tests, we may not be able to successfully
compete with them.
The
diagnostic testing industry is highly competitive. When completed, we
expect that our cervical cancer tests will compete with the Pap Tests, which
have been widely accepted by the medical community for many years.
Approximately 60 million Pap Tests are performed annually in the United States,
and an additional 60 million Pap Tests are performed annually in the rest of the
world. Manufacturers of Pap Tests include Cyctc Corporation and several
other companies. Future improvements to the Pap Test could hinder our
efforts to introduce our tests into the market.
Our
cervical cancer tests also will compete with HPV Tests, which are becoming
increasingly accepted in the medical community. Manufacturers of HPV Tests
include Digene Corporation, Ventana Medical Systems, Roche Diagnostics, Abbott
Laboratories, and Bayer Corporation. If market acceptance of HPV Tests
becomes greater, it may be more difficult for us to introduce our tests into the
market.
All of
the companies who manufacture Pap Tests and HPV Tests are more established than
we are and have far greater financial, technical, research and development,
sales and marketing, administrative and other resources than we do. Even
if we successfully complete the development of our tests, we may not be able to
compete effectively with these much larger companies and their more established
products.
We
will need to obtain regulatory approval before we can market and sell our
planned tests in the United States and in many other countries.
In the
United States, our planned cervical cancer tests will be subject to regulation
by the U.S. Food and Drug Administration (FDA) under the Federal Food, Drug and
Cosmetic Act. Governmental agencies in other countries also regulate
medical devices. These domestic and foreign regulations govern the
majority of the commercial activities we plan to perform, including the purposes
for which our proposed tests can be used, the development, testing, labeling,
storage and use of our proposed tests with other products and the manufacturing,
advertising, promotion, sales and distribution of our proposed test for the
approved purposes. Compliance with these regulations could prove expensive
and time-consuming.
Products
that are used to diagnose diseases in people are considered medical devices,
which are regulated in the United States by the FDA. To obtain FDA
authorization for a new medical device, a company may have to submit data
relating to safety and efficiency based upon extensive testing. This
testing, and the preparation and processing of necessary applications, are
expensive and may take up to a few years to complete. Whether a medical
device requires FDA authorization and the data that must be submitted to the FDA
varies depending on the nature of the medical device.
Medical
devices fall into one of three classes (Class I, II, or III), in accordance with
the FDA’s determination of controls necessary to ensure the safety and
effectiveness of the device or diagnostic. As with most diagnostic products, we
anticipate that our planned cervical cancer tests will be classified by the FDA
as a Class II device. By definition, this means that there could be a potential
for harm to the consumer if the device is not designed properly and/or otherwise
does not meet strict standards. To market and sell a class II medical device, a
company must first submit a 510(k) premarket notification, also known as a
510(k). The 510(k) application is intended to demonstrate substantial
equivalency to a Class II device already on the market. The FDA will still
require that clinical studies of device safety and effectiveness be completed.
In the
United States, prior to approval by the FDA, under certain conditions, companies
can sell investigational or research kits to laboratories under the Clinical
Laboratory Improvement Amendment (CLIA) of 1988. Under CLIA, companies can sell
diagnostic assays or tests to "high complexity" laboratories for validation as
an "analyte specific reagent". An analyte specific reagent is the active
ingredient of an "in-house" diagnostic test.
In
addition to any government requirements as to authorizing the marketing and
sales of medical devices, there are other FDA requirements. The manufacturer
must be registered with the FDA. The FDA will inspect what is being done on a
routine basis to ascertain compliance with those regulations prescribing
standards for medical device quality and consistency. Such standards refer to
but are not limited to manufacturing, testing, distribution, storage, design
control and service activities. The FDA also prohibits promoting a device for
unauthorized uses and routinely reviews labeling accuracy. If the FDA finds
failures in compliance, it can institute a range of enforcement actions, from a
public warning letter to more severe sanctions like withdrawal of approval;
denial of requests for future approval; fines, injunctions and civil penalties;
recall or seizure of the product; operating restrictions, partial suspension or
total shutdown of production; and criminal prosecution.
The FDA's
medical device reporting regulation also will require the reporting of
information on deaths or serious injuries associated with the use of our tests,
as well as product malfunctions that are likely to cause or contribute to death
or serious injury if the malfunction were to recur.
Regardless
of FDA approval status, certification of our tests will be needed from
regulatory authorities in other countries prior to marketing and selling there.
The amount of time needed to achieve foreign approval varies by nation, and
although our tests may be approved in one jurisdiction, the tests may not be
approved in other jurisdictions. After all, approval by the regulatory authority
of one nation cannot by itself determine acceptance by another country's
regulatory body. Additionally, implementation of more stringent requirements or
the adoption of new requirements or policies could adversely affect our ability
to sell our proposed tests in other countries in the world. We may be required
to incur significant costs to comply with these laws and regulations.
In
addition to the rules and regulations of the FDA and similar foreign agencies,
we may also have to comply with other federal, state, provincial and local laws,
rules and regulations. Out tests could be subject to rules pertaining to the
disposal of hazardous or toxic chemicals or potentially hazardous substances,
infectious disease agents and other materials, and laboratory and manufacturing
practices used in connection with our research and development activities. If we
fail to comply with these regulations, we could be fined, may not be allowed to
operate certain portions of our business, or otherwise suffer consequences that
could materially harm our business.
If
we are unable to successfully protect our intellectual property or our licensor
is unsuccessful in defending the patents on our licensed technology against
infringement, our ability to develop, market and sell our tests and any other
product we may develop in the future will be harmed.
Our
success will partly depend on our ability to obtain patents and licenses from
third parties and protect our trade secrets.
We have
an exclusive license from Dr. Yao Xiong Hu for certain processes that we
currently include in our cervical cancer tests. Some of Dr. Hu’s
technology is covered by a United States patent that has been issued, and some
of the technology is covered by a United States patent application that has been
filed and is pending. The agreement with Dr. Hu also covers technology
included in foreign applications presently pending as PCT applications in China
and India. In the event a competitor uses our licensed technology, our licensor
may be unable to successfully assert patent infringement claims. In that event,
we may encounter direct competition using the same technology on which our
products are based and we may be unable to compete. If we cannot compete with
competitive products, our business will fail. In
addition, if any third party claims that our licensed products are infringing
their intellectual property rights, any resulting litigation could be costly and
time consuming and would divert the attention of management and key personnel
from other business issues. We also may be subject to significant damages or
injunctions preventing us from selling or using some aspect of our products in
the event of a successful patent or other intellectual property infringement
claim. In addition, from time
to time, we may be required to obtain licenses from third parties for some of
the technology or components used or included in our tests. If we are
unable to obtain a required license on acceptable terms or at all, our ability
to develop or sell our tests may be impaired and our revenue will be negatively
affected.
We plan
to file patent applications for any additional technology that we create in the
future. We cannot assure you that our patent applications will result in
patents being issued in the United States or foreign countries. In
addition, the U.S. Patent and Trademark Office may reverse its decision or delay
the issuance of any patents that may be allowed. We also cannot assure you
that any technologies or tests that we may develop in the future will be
patentable. In addition, competitors may develop products similar to ours
that do not conflict with patents we may receive from AccuDx Corp. If our
patents are issued, others may challenge these patents and, as a result, our
patents could be narrowed or invalidated, which could have a direct adverse
effect on our earnings and profitability.
Our
confidentiality agreements may not adequately protect our proprietary
information, the disclosure of which could decrease our competitive
edge.
Our
technology and tests may be dependent on unpatented trade secrets.
However, trade secrets are difficult to protect. In an effort to protect
our trade secrets, we generally require our employees, consultants and advisors
to sign confidentiality agreements. In addition, our employees are parties
to agreements that require them to assign to us all inventions and other
technology that they create while employed by us. However, we cannot
guarantee that these agreements will provide us with adequate protection if
confidential information is used or disclosed improperly. In addition, in
some situations, these agreements may conflict with, or be limited by, the
rights of third parties with whom our employees, consultants or advisors have
prior employment or consulting relationships. Further, others may
independently develop similar proprietary information and techniques, or
otherwise gain access to our trade secrets. Any of these adverse consequences
could negatively impact our results of operations.
Our
products may infringe on the intellectual property rights of others and may
result in costly and time-consuming litigation.
Our
success will depend partly on our ability to operate without infringing upon the
proprietary rights of others, as well as our ability to prevent others from
infringing on our proprietary rights. We may be required at times to take
legal action in order to protect our proprietary rights. Although we
attempt to avoid infringing upon known proprietary rights of third parties, and
are not aware of any current or threatened claims of infringement, we may be
subject to legal proceedings and claims for alleged infringement by us or our
licensees of third-party proprietary rights, such as patents, trade secrets,
trademarks or copyrights, from time to time in the ordinary course of business.
Any claims relating to the infringement of third-party proprietary rights, even
if not successful or meritorious, could result in costly litigation, divert
resources and management's attention or require us to enter into royalty or
license agreements which are not advantageous to us. In addition, parties making
these claims may be able to obtain injunctions, which could prevent us from
selling our products. Any of these results could lead to liability, substantial
costs and reduced growth prospects.
If
we are able to market and sell our cervical cancer tests, we may be subject to
product liability claims or face product recalls for which our insurance may be
inadequate.
If we
complete development of our cervical cancer tests and begin to sell them we will
be exposed to the risk of product liability claims and product recalls. We
currently do not market any products and therefore have obtained only general
liability insurance coverage. Any failure to obtain product liability
insurance in the future that is not continually available to us on acceptable
terms, or at all, and that is sufficient to protect us against product liability
claims or recalls, could cause our business to fail.
If
we are unable to manage our anticipated future growth, we may not be able to
implement our business plan.
We
currently have seven employees and retain consultants on a part-time
basis. In order to complete development of our tests, obtain FDA and other
regulatory approval, seek insurance reimbursement, begin to market and sell our
tests, begin the production of our tests and continue and expand our research
and development programs, we will need to hire significant additional qualified
personnel and expand or implement our operating, administrative, information and
other systems. We cannot guarantee that we will be able to do so or that,
if we do so, we will be able to effectively integrate them into our existing
staff and systems. We will also have to compete with other biotechnology
companies to recruit, hire and train qualified personnel. If we are unable
to manage our growth, we may not be able to implement our business plan.
Risks
Related to our Common Stock
There
is only a limited market for our common stock and the price of our common stock
may be affected by factors that are unrelated to the performance of our
business.
Our
common stock has not actively traded during the past few years. If any of
the risks described in these risk factors or other unseen risks are realized,
the market price of our common stock could be materially adversely
affected. Additionally, market prices for securities of biotechnology and
diagnostic companies have historically been very volatile. The market for
these securities has from time to time experienced significant price and volume
fluctuations for reasons that are unrelated to the operating performance of any
one company. In particular, and in addition to the other risks described
elsewhere in these Risk Factors, the following factors can adversely affect the
market price of our common stock:
·
announcements
of technological innovation or improved or new diagnostic products by others;
·
general
market conditions;
·
changes
in government regulation or patent decisions;
·
changes
in insurance reimbursement practices or policies for diagnostic products.
Our
common shares have traded on the Over the Counter Bulletin Board at prices below
$5.00 for several years. As a result, our shares are characterized as
“penny stocks” which could adversely affect the market liquidity of our common
stock.
The
Securities Enforcement and Penny Stock Reform Act of 1990 requires additional
disclosure relating to the market for penny stocks in connection with trades in
any stock defined as a penny stock. Securities and Exchange Commission
regulations generally define a penny stock to be an equity security that has a
market price of less than $5.00 per share, subject to certain exceptions.
Such exceptions include any equity security listed on Nasdaq or a national
securities exchange and any equity security issued by an issuer that has:
·
net
tangible assets in excess of $2,000,000, if such issuer has been in continuous
operation for three years;
·
net
tangible assets in excess of $5,000,000, if such issuer has been in continuous
operation for less than three years; or
·
average
revenue of at least $6,000,000, for the last three years.
Unless an
exception is available, the regulations require, prior to any transaction
involving a penny stock, that a disclosure schedule explaining the penny stock
market and the risks associated therewith is delivered to a prospective
purchaser of the penny stock. We currently do not qualify for an
exception, and, therefore, our common stock is considered to be penny stock and
is subject to these requirements. The penny stock regulations adversely
affect the market liquidity of our common shares by limiting the ability of
broker/dealers to trade the shares and the ability of purchasers of our common
shares to sell in the secondary market. In addition, certain institutions
and investors will not invest in penny stocks.
Nevada
law provides certain anti-takeover provisions for Nevada companies that may
prevent or frustrate any attempt to replace or remove our current management by
the stockholders or discourage bids for our common stock. These provisions may
also affect the market price of our common stock. We have chosen not to
opt out of these provisions.
We are
subject to provisions of Nevada corporate law that limit the voting rights of a
person who, individually or in association with others, acquires or offers to
acquire at least 20% of our outstanding voting power unless a majority of our
disinterested stockholders elects to grant voting rights to such person.
We are also subject to provisions of Nevada corporate law that prohibit us from
engaging in any business combination with an interested stockholder, which is a
person who, directly or indirectly, is the beneficial owner of 10% or more of
our common stock, for a period of three years following the date that such
person becomes an interested stockholder, unless the business combination is
approved by our board of directors in a prescribed manner. These
provisions of Nevada law may make business combinations more time consuming or
expensive and have the impact of requiring our board of directors to agree with
a proposal before it is accepted and presented to stockholders for
consideration. Although we have the ability to opt out of these provisions, we
have not chosen not to do so. These anti-takeover provisions might
discourage bids for our common stock.
Our board
of directors has the authority, without further action by the stockholders, to
issue, from time to time, up to 20,000,000 shares of preferred stock in one or
more classes or series and to fix the rights and preferences of such preferred
stock. The board of directors could use this authority to issue preferred stock
to discourage an unwanted bidder from making a proposal to acquire us.
Future
sales of a significant number of shares of our common stock by existing
stockholders may lower the price of our common stock, which could result in
losses to our stockholders.
As of
December 31, 2004, we had outstanding 56,243,791 voting shares. Some of
our outstanding voting shares are eligible for sale under Rule 144, are
otherwise freely tradable or will become freely tradable under Rule 144. Sales
of substantial amounts of shares of our common stock into the public market
could lower the market price of our common shares.
In
general, under Rule 144 as currently in effect, a person (or persons whose
shares are required to be aggregated) who has owned shares for at least one year
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of (i) 1% of the number of our common shares
then outstanding (which equals approximately 562,438 shares of common
stock) or (ii) the average weekly trading volume of our common shares
during the four calendar weeks preceding the filing of a Form 144 with
respect to such sale. Sales under Rule 144 are public information
about us. Under Rule 144(k), a person who is not deemed to have been
our affiliate at any time during the three months preceding a sale, and who has
owned the shares proposed to be sold for at least two years, is entitled to sell
his shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements as of December 31, 2004 or as of the
date of this report.
Item
7. Financial Statements
The
reports of the independent auditors and financial statements are set forth in
this report beginning on page F-1.
Item
8. Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure.
Not
applicable
Item
8A. Controls and Procedures.
Our
management, with the participation of our principal executive officer and
principal financial officer, has evaluated the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this report.
Based on such evaluation, our principal executive officer and principal
financial officer have concluded, as of the end of such period, that our
disclosure controls and procedures are effective in recording, processing,
summarizing and reporting, on a timely basis, information required to be
disclosed by us in our reports that we file or submit under the Securities
Exchange Act of 1934.
During
the last quarter of 2004, there were no changes to our internal control over
financial reporting that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.
PART
III
Item
9. Directors and Executive Officers
Set forth below is certain information regarding our directors and executive
officers. Our Board of Directors is comprised of six directors.
There are no family relationships between any of our directors or executive
officers. Each of our directors is elected to serve until our next annual
meeting of our stockholders and until his successor is elected and qualified or
until such director’s earlier death, removal or termination.
Name
|
|
Age
|
|
Position
|
|
Stan
Yakatan |
|
62
|
|
President,
Chief Executive Officer and Chairman of the Board of Directors
|
|
Michael
Ahlin |
|
56
|
|
Vice
President and Director |
|
John
C. Wilson |
|
55
|
|
Chief
Financial Officer (retiring March 31, 2005) |
|
Don
Rutherford |
|
65 |
|
Chief
Financial Officer (as of April 1, 2005) |
|
Jack
Levine |
|
54
|
|
Director
- Head of Audit Committee, member of Compensation
Committee |
|
Eric
Wilkinson |
|
46
|
|
Director
- member of Compensation Committee and Audit Committee |
|
Kevin
Crow |
|
43
|
|
Director
- Head of Compensation Committee, member of Audit
Committee |
|
Carmen
Medina |
|
48 |
|
Director |
|
Stan
Yakatan.
Mr. Yakatan has been the Chief Executive Officer and the Chairman of the Board
of Directors since July 2004. From May 2004 to the present, Mr. Yakatan has been
the Chief Executive Officer and the Chairman of the Board of Directors of Impact
Diagnostics and a consultant to Impact Diagnostics. From September 1984 to
the present, Mr. Yakatan has been the Chairman, President and Chief Executive
Officer of Katan Associates, a life sciences advisory business. Mr.
Yakatan is also a director of Lifepoint, Inc., a manufacturer of drug and
alcohol testing systems, and is a strategic advisor to the state government of
Victoria, Australia. Between 1968 and 1989, Mr. Yakatan held various
senior executive positions with New England Nuclear Corporation (a division of
E.I. DuPont), ICN Pharmaceuticals, Inc., New Brunswick Scientific Co., Inc. and
Biosearch.
Michael
Ahlin.
Mr. Ahlin has been a Vice President and a director since July 2004. From
May 2004 to the present, Mr. Ahlin has been the Vice President and a member of
the Board of Directors of Impact Diagnostics. From July 1998 to May 2004,
Mr. Ahlin was the Chairman of the Board, President and Chief Executive Officer
of Impact Diagnostics. Mr. Ahlin has been President of WetCor, Inc., a
land development company, since 1983.
John
C. Wilson.
Mr. Wilson has been the Chief Financial Officer since July 2004. He is retiring
from this position on March 31, 2005. Since January 1, 1997, Mr. Wilson
has been the Managing Principal of Wentworth Advisors, LLC, a financial
consulting company. From August 1996 to January 2002, Mr. Wilson was an
investment banker with Credit Suisse First Boston Corporation and held the
positions of Director, from August 1996 through December 1998, and Managing
Director, Senior Advisor from December 1998 to January 2002, when he retired.
Don
Rutherford. Mr.
Rutherford, becomes the Chief Financial Officer on April 1, 2005. He is a
limited partner with Tatum CFO Partners, LLP in Orange County, California, which
he joined in January 2000. Tatum CFO Partners provides supplemental, interim,
project, or employed executives for clients that range from emerging growth to
large multinational public companies. Pursuant to such employment, Mr.
Rutherford has been contracted out as an executive officer for various
corporations. Since January 2004, he has been a board member and chairman of the
audit committee of Performance Capital Management LLC, a public financial
services company. Mr. Rutherford started his career with Coopers and Lybrand in
its Toronto audit practice and is a Chartered Accountant. He holds a BASc in
Industrial Engineering from the University of Toronto.
Jack
Levine.
Mr. Levine has been a director since July 2004. Since 1984, Mr. Levine has
been the President of Jack Levine, PA, a certified public accounting firm.
Since 1999, Mr. Levine has served as a director and the chairman of the audit
committee of SFBC International Inc., a clinical research organization.
Mr. Levine is also a director, Chairman of the Audit and Asset Liability
Committees and a member of the Executive Committee of Beach Bank, a director and
Chairman of the Audit Committee of The Prairie Fund, a mutual fund, and a
director of RealCast Corporation, an internet streaming company. Mr.
Levine is a certified public accountant licensed by the State of Florida.
Eric
Wilkinson.
Mr. Wilkinson has been a director since July 2004. Since June 2003, Mr.
Wilkinson has been the Vice President of Life Sciences for XL TechGroup, a
biotechnology company. From September 2001 to May 2003, Mr. Wilkinson
worked as a consultant for Tyrgen Technologies, a biotechnology-consulting
firm. From December 1999 to August 2001, Mr. Wilkinson was the President
of Genetic Vectors, Inc., a biotechnology company. Mr. Wilkinson served as
a consultant for the Cleveland Clinic Medical Foundation from November 1998 to
November 1999.
Kevin
Crow.
Mr. Crow has been a director since July 2004. Since April 2004, Mr. Crow
has been the Chief Executive Officer of Diversified Corporation Solutions, LLC,
a business advisory company. From September 2000 to December 2003, Mr.
Crow was the Chief Operating Officer of the Women’s United Soccer Association, a
professional athletic league. Mr. Crow was President of
ZipDirect,
LLC, a full service printing, mailing and shipping company, from February 1994
to September 2000. Mr. Crow is the brother of Michael Crow, who serves as
the Chairman and Chief Executive Officer of Duncan Capital Group LLC, which is
our financial advisor. Mr. Michael Crow beneficially owns 7.5% of our
outstanding capital stock.
Carmen
Medina. Ms.
Medina was appointed to the board of directors on February 21, 2005. Ms. Medina,
is Founder and President of Precision Consultants, Inc., headquartered in
Coronado, CA. Prior to founding Precision Consultants in January 1992, Ms.
Medina served as Director of Regulatory Affairs & Product Development for
Ivax Corporation. From 1986 to 1992, she served as an FDA Field Investigator and
Commissioned Officer in the United States Public Health Service. Ms. Medina
earned a master’s degree in public health at Columbia University’s School of
Public Health in 1987, and a BS at City College of NY in 1978. She has published
numerous journal articles and is a frequent presenter at national and
international conferences.
The Board
of Directors has a standing Audit Committee and Compensation Committee. The
Board is composed of 4 independent directors and 2 directors, who are also
Officers of the Company. The Committees are made up of only independent
directors. The Chairman of the Audit Committee is Mr. Jack Levine. The Board of
Directors has determined that Mr. Levine, an independent director, is an “audit
committee financial expert” as that term is defined by Item 401(e) of Regulation
S-B.
Code
of Ethics
On
December 15, 2004, we adopted a written code of ethics that governs all of our
officers, directors and finance and accounting employees. The code of ethics is
filed herewith as Exhibit 14.1 and is posted on our website at www.grantlifesciences.com.
Section
16 Beneficial Ownership Compliance
Section
16(a) of the Securities and Exchange Act of 1934, as amended, requires our
executive officers and directors, and persons who beneficially own more than 10%
of the company’s common stock, to file initial reports of ownership and reports
of changes in ownership of our common stock with the SEC.
Based
solely on the reports received by the company and on written representations
from certain reporting persons, the Company believes that the directors,
executive officers and greater than ten percent beneficial owners have complied
with all applicable filing requirements, except for the following: Kevin Crow,
Eric Wilkinson and Jack Levine each reported one transaction late and filed one
Form 4 late and Carmen Medina reported one transaction late and filed a Form 3
late.
Item
10. Executive Compensation
The
following table sets forth information concerning the total compensation that we
have paid or that has accrued on behalf of our Chief Executive Officer and other
executive officers with annual compensation exceeding $100,000 during fiscal
2004, 2003 and 2002.With the exception of the compensation paid to Pete Wells,
all compensation information for the years 2002 and 2003 shown in the table was
paid by Impact Diagnostics prior to the Merger.
Name
and Principal Position |
Year |
Salary |
Bonus |
Other
Compensation |
Long
term compensation awards - # of securities underlying Stock
Options |
Stan
Yakatan,
Chief
Executive Officer (1) |
2004
2003
2002 |
$60,000
0
0 |
0
0
0 |
0
0
0 |
2,868,254
0
0 |
Michael
Ahlin, Vice President (2) |
2004
2003
2002 |
$144,000
$58,050
0 |
0 |
0 |
0 |
John
C. Wilson, Chief Financial Officer (3) |
2004
2003
2002 |
$36,000
0
0 |
0
0
0 |
0
0
0 |
750,000
0
0 |
Dr.
Mark Rosenfeld, former
Vice
President (4) |
2004
2003
2002 |
$111,429
$58,050
$92,000 |
$18,106
0
0 |
0
0
0 |
0
0
0 |
Pete
Wells
former
President (5) |
2004
2003
2002 |
0
0
0 |
0
0
0 |
0
0
0 |
0
0
0 |
(1)
|
Between
May and June 2004, Impact Diagnostics paid Mr. Yakatan $5,500 per month
for consulting services to Impact Diagnostics in connection with the
Merger. Beginning in July 2004, Mr. Yakatan receives $10,000 per
month for acting as our Chief Executive Officer. As of the end of 2004,
$15,000 of his gross salary had not been paid to Mr. Yakatan. Mr. Yakatan
does not have an employment contract with the company. As an incentive to
join the company, Mr. Yakatan was granted 2,868,254 stock options, with an
exercise price of $0.18, under the Company’s Stock Incentive Plan. These
options vest as follows: 573,650 on July 6, 2004; 1,147,302 on July 6,
2005 and 1,147,302 on July 6, 2006. |
(2)
|
Mr.
Ahlin had an employment contract with the company which sets his monthly
salary at $12,000. The employment contract can be terminated by the
Company at any time. |
(3)
|
Mr.
Wilson became the Chief Financial Officer on July 1, 2004 and is retiring
from his position on March 31, 2005. Mr. Wilson receives $6,000 per month
for acting as our Chief Financial Officer. Prior to July 1, 2004, his
company, Wentworth Advisors LLC had received consulting fees in the form
of stock for services provided to Impact Diagnostic, Inc. As an incentive
to join the company, Mr. Wilson was granted 750,000 stock options with an
exercise price of $0.18, half of which vested July 6, 2005 and half on
July 6, 2006, under the Company’s stock incentive plan. Mr. Wilson does
not have an employment agreement with the company. Mr. Wilson is retiring
as CFO effective March 31, 2005. The Board has fully vested his 750,000
options effective on his retirement date. |
(4)
|
Dr.
Mark Rosenfeld resigned on Oct 11, 2004. He had an employment contract
with the company which set his monthly salary for 2004 at $12,000 per
month. After his resignation, he continued to work as a consultant to the
company through December 31, 2004. He was paid $5,000 per month for his
consulting work. |
(5)
|
Mr.
Wells was President of the inactive public company prior to the
merger. |
(6)
|
Mr.
Williams was Secretary of the inactive public company prior to the merger.
In February 2002, he was granted 1,691,951 shares of our common Stock for
services rendered to us valued at $33,839. At the time the shares were
issued, Mr. Williams served as our Secretary and a
director. |
We did
not pay any salaries or other compensation to our officers, directors or
employees for the years ended December 31, 2004, 2003 or 2002, except as set
forth on the table above. We do not have any benefit plans, except the
Stock Incentive Plan which was approved on September 30, 2004 by a majority of
the shareholders.
The
following table sets forth information concerning individual grants of stock
options made during the last fiscal year to the Company’s named executive
officers, under the Company’s Stock Incentive Plan. No stock appreciation rights
were issued during the fiscal year.
Options
Granted in the Last Fiscal Year
(Individual
Grants)
Name |
|
Number
of shares of common stock underlying options granted |
|
Percent
of Total Options granted to Employees in 2004 |
|
Exercise
Price ($ per share) |
|
Expiration
Date |
|
Stan
Yakatan, CEO (1) |
|
|
2,868,254 |
|
|
63 |
% |
$ |
0.18 |
|
|
July
2014 |
|
John
C. Wilson, CFO (2) |
|
|
750,000 |
|
|
16 |
% |
$ |
0.18 |
|
|
July
2014 |
|
(1)
573,650 of the options vested immediately; 1,147,302 options vest July 2005;
1,147,302 options vest July 2006.
(2)
750,000 of the options vest March 31, 2004 at Mr. Wilson’s retirement
date.
Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
Name |
|
Shares
acquired on exercise
(#) |
|
Value
Realized
($) |
|
Number
of Unexercised Options at yr-end 2004
Exercisable/Unexercisable
|
|
Value
of Unexercised In-the-Money Options at yr-end 2004
Exercisable/Unexercisable
($) (1) |
|
Stan
Yakatan, CEO |
|
|
0 |
|
|
0 |
|
|
573,650/2,294,604 |
|
$ |
326,981/
$1,307,924 |
|
John
C. Wilson, CFO |
|
|
0 |
|
|
0 |
|
|
0/750,000 |
|
$ |
0/
$427,500 |
|
(1) the
closing price of the Company’s common stock as of December 31, 2004 was $0.75
per share.
Compensation
of Non-Employee Directors
We pay our directors who are not employees of Grant Life Sciences a director’s
fee of $4,000 per year. Each non-employee director also is paid $300 per
hour for attending any meeting of the Board of Director and each Board committee
meeting, up to a maximum of $1,200 per meeting. We have granted to each
non-employee director options to purchase 100,000 shares of our common stock ,
when they joined the board. Mr. Crow, Mr. Levine and Mr. Wilkinson received
these options when they joined the board, at an exercise price of $0.18,
50,000 of which will first be exercisable in July 2005. The remaining 50,000
will be exercisable in July 2006. Ms. Medina, who joined the Board in February
2005 received this initial grant of options to purchase 100,000 shares of our
common stock at an exercise price of $0.40, the current market
price.
Non-employee directors will receive additional options to purchase 50,000 shares
of our common stock at the start of each year that they serve as
directors. These options will have an exercise price equal to the market
value at the time they are granted. One third of the options will become
exercisable on each of the first, second and third anniversaries of the date of
their grant. Jack Levine, Kevin Crow and Eric Wilkinson are non-employee
directors and received these options at an $0.18 exercise price in July 2004
when they were appointed to the Board effective after the Merger. The next grant
of annual options will occur at the date of the annual meeting.
In addition to the fees and options which they receive for serving as
non-employee directors, the chairmen of each of our Audit Committee and
Compensation Committees each receives an annual fee of $2,500 and $1,500,
respectively, for each year that he or she serves as chair of their respective
committees. The chairman of each of these committees also receives options
to purchase an additional 25,000 shares of our common stock for each year that
he or she serves as chairman of the committee. One third of these
options becomes exercisable on the first, second, and third anniversary of the
date of the grant. Jack Levine is the chairman of the Audit Committee and
Kevin Crow is the chairman of the Compensation Committee. Initial options were
granted in July 2004, at an exercise price of $0.18, when these Chairmen were
appointed.
Employment
contracts and termination of employment and change-in-control
arrangements
The
Company has an employment agreement with Mr. Ahlin. Under the terms of the
agreement he is to receive as compensation a monthly salary of $12,000. The
Board of Directors has the discretion to grant an annual bonus to Mr. Ahlin. Mr.
Ahlin is entitled to participate in all employee benefit plans or programs that
are available to management employees of the Company. The Company currently has
no benefit plans. The employment agreement provides that either we or
Mr. Ahlin may terminate the agreement at any time.
Item
11. Security Ownership of Certain Beneficial Owners and Management
The following table lists stock ownership of our common stock as of March 15,
2005. The information includes beneficial ownership by (i) holders of more
than 5% of our common stock, (ii) each of our current directors and executive
officers and (iii) all of our directors and executive officers as a group.
The information is determined in accordance with Rule 13d-3 promulgated under
the Exchange Act based upon information furnished by the persons listed or
contained in filings made by them with the Commission. Except as noted
below, to our knowledge, each person named in the table has sole voting and
investment power with respect to all shares of our common stock beneficially
owned by them.
Name
and Address of
Beneficial
Owner |
|
Director/Officer
|
|
Amount
and Nature of
Beneficial
Ownership (1) |
|
Percentage
of
Class (1) |
|
Dr.
Mark Rosenfeld
1075
Skyler Drive
Draper,
UT 84020 |
|
|
— |
|
|
6,077,050 |
|
|
10.8 |
% |
Blaine
Taylor
634
Hidden Circle
North
Salt Lake City, UT 84054 |
|
|
—
|
|
|
3,600,718
|
(2) |
|
6.4 |
% |
Mitchell
T. Godfrey
P.O.
Box 10206
Bozeman,
MT 59719 |
|
|
—
|
|
|
3,730,607
|
|
|
6.6 |
% |
Richard
Smithline
830
Third Avenue
New
York, NY 10022 |
|
|
— |
|
|
3,727,152 |
(3) |
|
6.6 |
% |
Begona
LLC
2325-A
Renaissance Drive
Las
Vegas, NV 89119 |
|
|
—
|
|
|
3,256,905
|
|
|
5.8 |
% |
Bridges
& Pipes LLC
830
Third Avenue
New
York, NY 10022 |
|
|
—
|
|
|
3,103,625
|
(4) |
|
5.5 |
% |
David
Fuchs
830
Third Avenue
New
York, NY 10022 |
|
|
— |
|
|
3,248,305 |
(5) |
|
5.7 |
% |
DCOFI
Master LDC
803
Third Avenue
New
York, NY 10022 |
|
|
—
|
|
|
3,258,400
|
|
|
5.8 |
% |
Stan
Yakatan
155
Lyndon — First Court
Hermosa
Beach, CA 90254 |
|
|
President,
Chief Executive Officer and Chairman of the Board of Directors
|
|
|
573,650
|
(6) |
|
1.0 |
% |
Michael
Ahlin
3125
Creek Road
Park
City, UT 84098 |
|
|
Vice
President and Director |
|
|
6,640,900
|
(7) |
|
11.8 |
% |
John
C. Wilson
P.O.
Box 1883
1650
Youngs Road
Southern
Pines, NC 28388 |
|
|
Chief
Financial Officer |
|
|
1,000,000
|
(8) |
|
1.8 |
% |
Jack
Levine
16855
N.E. 2nd
Avenue,
Suite 303
N.
Miami Beach, FL 33162 |
|
|
Director |
|
|
588,555 |
(9) |
|
1.0 |
% |
Eric
Wilkinson
1845
Charlesmonte Drive
Indialantic,
FL 32903 |
|
|
Director |
|
|
0
|
(10) |
|
* |
|
Kevin
Crow
5120
Park Brooke Walk Way
Alpharetta,
GA 30022 |
|
|
Director |
|
|
985,080 |
(11) |
|
1.8 |
% |
Carmen
Medina
46
The Point
Coronado,
CA 92118 |
|
|
Director |
|
|
0
|
(12) |
|
* |
|
All
directors and officers as a group (7) |
|
|
|
|
|
9,788,185
|
(13) |
|
17.0 |
% |
______________________
* Less
than one percent
(1) Applicable
percentage ownership is based on 56,243,791 shares of common stock outstanding
as of March 15, 2005, together with securities exercisable or convertible into
shares of common stock within 60 days of March 15, 2005 for each stockholder.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock that are currently
exercisable or exercisable within 60 days of March 15, 2005 are deemed to be
beneficially owned by the person holding such securities for the purpose of
computing the percentage of ownership of such person, but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person.
(2)
Includes 1,253,000 shares of our common stock held by Six Way, Inc. Mr.
Taylor is the President, a director and principal shareholder of Six Way, Inc.
(3)
Includes 3,008,400 shares and warrants to purchase 250,000 shares of our common
stock held by DCOFI Master LDC, 420,525 held by Mr. Smithline and 48,227
warrants held by Mr. Smithline. Mr. Smithline is a director of
DCOFI.
(4)
Includes 2,999,131 shares of our common stock and warrants to purchase 104,495
shares of our common stock exercisable within 60 days.
(5)
Includes the 2,999,131 shares and warrants to purchase 104,495 shares of our
common stock held by Bridges and Pipes LLC, warrants to purchase 130,900 shares
held by Duncan Capital LLC and warrants to purchase 13,779 shares held by Mr.
Fuchs. Mr. Fuchs is a manager of Bridges and Pipes, LLC and president of Duncan
Capital LLC.
(6)
Represents options to purchase 573,651 shares of our common stock exercisable
within 60 days. Does not include options to purchase 2,294,604 shares of
our common stock held by Mr. Yakatan that are not exercisable within 60 days.
(7)
Includes
1,253,000 shares of our common stock held by Princess Investments. Mr.
Ahlin has voting power over securities held by Princess Investments.
(8)
Includes 250,000 shares of our common stock held by Wentworth Advisors, LLC
and options to purchase 750,000 shares held by Mr. Wilson that are
exercisable after March 31, 2005. Mr. Wilson is the managing principal and 100%
owner of Wentworth Advisors.
(9)
Includes warrants to purchase 98,092 shares of our common stock beneficially
owned by Mr. Levine that are exercisable within 60 days. Does not include
options to purchase 175,000 shares of our common stock that are not exercisable
within 60 days.
(10)
Does not include options to purchase 150,000 shares of our common stock that are
not exercisable within 60 days.
(11)
Includes shares of 4 trusts, each with 246,270 shares, of which Mr. Crow is the
trustee. Does not include options to purchase 175,000 shares of our common stock
that are not exercisable within 60 days.
(12) Does
not include options to purchase 100,000 shares of our common stock that are not
exercisable within 60 days.
(13)
Includes options to purchase 1,323,650 shares of our common stock and warrants
to purchase a total of 98,092 shares of our common stock exercisable within 60
days. Does not include options to purchase a total of 2,894,603 shares of
our common stock not exercisable within 60 days.
Item
12. Certain Relationships and Related Transactions
Except as
set forth below, there have been no material transactions during the past two
years between us and any officer, director or any stockholder owning greater
than 5% of our outstanding shares, or any of their immediate family members.
In August
2004, we paid $100,000 and issued warrants to purchase 2,670,000 shares, at an
exercise price of $0.01 per share, of our common stock to Duncan Capital Group
LLC as compensation for acting as our financial advisor in connection with the
Merger. In August 2004, we paid $77,000 and issued warrants to purchase
411,104 shares of our common stock to Duncan Capital LLC as compensation for
acting as our placement agent in connection with the sale of our units in a
private financing. The warrants have an exercise price of $0.1835 per
share. Both Duncan Capital LLC and Duncan Capital Group LLC are affiliates of
Bridges & Pipes LLC, which is one of our stockholders. Michael Crow,
the brother of Kevin Crow, one of our directors, is Chairman and Chief Executive
Officer of Duncan Capital Group LLC, which is our financial advisor, and a
manager of Bridges &Pipes LLC. In November 2004, 2,403,000 warrants were
exercised by Duncan Capital Group.
In 2003,
Impact Diagnostics advanced $3,000, to Michael Ahlin, a director and Vice
President of Grant Life Sciences, and $6,500, respectively, to Dr. Mark
Rosenfeld, a former director and Vice President. At year-end 2003, Mr.
Ahlin owed the Company $9,000 and Dr. Rosenfeld owed the Company $21,032. At the
time of the advances, Mr. Ahlin was Chairman of the Board, President and
Chief Executive Officer of Impact Diagnostics, and Dr. Rosenfeld was
Secretary and Chief Technical Officer of Impact Diagnostics. The cumulative
total advances were repaid in full on June 30, 2004 by Mr. Ahlin and Dr.
Rosenfeld.
In 2003,
Impact Diagnostics advanced $6,229, respectively, to Seroctin Research &
Technology. Michael Ahlin, a director and Vice President, owns 20%, and
Dr. Mark Rosenfeld, a former director and former Vice President, owns 18.4%
of Seroctin Research & Technology. Seroctin advanced funds to Impact
Diagnostics during 2004, such that the receivable became a small payable. In
December 2004, Impact made a payment of $1,220 to Seroctin, so that at year-end
2004 neither company owed the other.
From time
to time since 1999, Seroctin Research & Technology has leased office
facilities from Impact Diagnostics, pursuant to a verbal agreement.
Seroctin Research & Technology has made payments to Impact Diagnostics of
between $1,500 and $2,764 each month (approximately $55,000 in the aggregate
since 1999) it has leased such facilities. In September 2004, Impact Diagnostics
moved into its own office space.
In 2003,
Impact Diagnostics advanced $7,820 to WetCor, Inc. Michael Ahlin, a director and
Vice President, is the President of WetCor, Inc The $7,820 of advances
receivable on the balance sheet as of December 31, 2003 was written off by
Impact Diagnostics in January 2004. After June 2004, there were no further
transactions between the two companies and neither company owed the other.
In 2003,
Impact Diagnostics received advances of $20,000 from Blaine Taylor, pursuant to
a non-interest bearing demand note, which brought the totaled advanced by Mr.
Taylor to $21,500 at year-end 2003. Mr. Taylor beneficially currently owns
6.4% of our outstanding capital stock. As of July 30, 2004, the amount
outstanding under the note was approximately $16,500. Effective
July 30, 2004, this note was converted to 89,918 shares of our common
stock.
In 2001,
Mitchell Godfrey loaned Impact Diagnostics $50,000, pursuant to a 5% unsecured
promissory note. Mr. Godfrey beneficially owns 6.6% of our
outstanding capital stock. As of December 31, 2003, the amount
outstanding under the note was $29,279. Effective July 30, 2004, this
note, excluding accrued interest which was forgiven by Mr. Godfrey, was
converted into 159,557 shares of our common stock, such that the balance due to
Mr. Godfrey was zero at year-end 2004.
Messrs.
Seth Yakatan and Clifford Mintz have been contracted as consultants to us in the
business development area since November 1, 2004 and August 1, 2004,
respectively. They are paid each $5,000 each month for their services. Mr.
Yakatan is the son of Stan Yakatan, our President, CEO and Board Chairman. Mr.
Mintz is an affiliate of Katan Associates, of which Stan Yakatan is the
Chairman.
With the
exception of the advances to officers, on which no interest was due, we believe
that these transactions were on terms as favorable as could have been obtained
from unaffiliated third parties. Any future transactions we enter into with our
directors, executive officers and other affiliated persons will be on terms no
less favorable to us than can be obtained from an unaffiliated party and will be
approved by a majority of the independent, disinterested members of our board of
directors, and who had access, at our expense, to our or independent legal
counsel.
Item
13. Exhibits
Exhibit
Number |
Description |
2.1
|
Agreement
and Plan of Merger, dated as of July 6, 2004, by and among Grant
Ventures, Inc., Impact Acquisition Corporation and Impact Diagnostics,
Inc. (incorporated by reference to the Registration Statement on Form SB-2
dated September 30, 2004). |
3.1
|
Articles
of Incorporation of North Ridge Corporation, filed with the Secretary of
State of Nevada on January 31, 2000. (incorporated by reference to the
Registration Statement on Form SB-2 dated September 30,
2004). |
3.2
|
Certificate
of Amendment to Articles of Incorporation of North Ridge Corporation,
changing its name to Grant Ventures, Inc. and changing its authorized
capital to 50,000,000 shares, par value $0.001 per share, filed with the
Secretary of State of Nevada on May 30, 2001. (incorporated by reference
to the Registration Statement on Form SB-2 dated September 30,
2004). |
3.3
|
Form
of Amended and Restated Articles of Incorporation of Grant Ventures, Inc.
(incorporated by reference to the Registration Statement on Form SB-2
dated September 30, 2004). |
3.4
|
Articles
of Merger for the merger of Impact Diagnostics, Inc. (Utah) and Impact
Acquisitions Corporation (Utah), filed with the Secretary of State of Utah
on July 30, 2004 (incorporated by reference to the Registration Statement
on Form SB-2 dated September 30, 2004). |
3.5
|
Bylaws
of Grant Life Sciences, Inc. (incorporated by reference to the
Registration Statement on Form SB-2/A dated February 11,
2005). |
4.1
|
Securities
Purchase Agreement between Grant Ventures, Inc. and the purchasers party
thereto (incorporated by reference to the Registration Statement on Form
SB-2 dated September 30, 2004). |
4.2
|
Registration
Rights Agreement between Grant Ventures, Inc. and the purchasers party
thereto. (incorporated by reference to the Registration Statement on Form
SB-2 dated September 30, 2004). |
4.3
|
Form
of Common Stock Purchase Warrant. (incorporated by reference to the
Registration Statement on Form SB-2 dated September 30,
2004). |
10.1
|
6%
Convertible Promissory Note in the amount of $350,000, dated as of July
23, 2004, between Impact Diagnostics, Inc. and James H. Donell, as
receiver of Citadel Capital Management, Inc. (incorporated by reference to
the Registration Statement on Form SB-2 dated September 30,
2004). |
10.2
|
Warrant,
dated July 23, 2004, of James H. Donell, as receiver of Citadel Capital
Management, Inc., to purchase 89,500 shares of common stock of Impact
Diagnostics, Inc. (incorporated by reference to the Registration Statement
on Form SB-2 dated September 30, 2004). |
10.3
|
Letter
Agreement, dated July 1, 2004, between Impact Diagnostics, Inc. and Duncan
Capital LLC. (incorporated by reference to the Registration Statement on
Form SB-2 dated September 30, 2004). |
10.4
|
Letter
Agreement, dated July 1, 2004, between Impact Diagnostics, Inc. and
Michael Ahlin (incorporated by reference to the Registration Statement on
Form SB-2 dated September 30, 2004). |
10.5
|
Letter
Agreement, dated July 1, 2004, between Impact Diagnostics, Inc. and Dr.
Mark Rosenfeld. (incorporated by reference to the Registration Statement
on Form SB-2 dated September 30, 2004). |
10.6
|
2004
Stock Incentive Plan of Grant Ventures, Inc. (incorporated by reference to
the Registration Statement on Form SB-2 dated September 30,
2004). |
10.7
|
Incentive
Stock Option Agreement, dated as of July 6, 2004, between Impact
Diagnostics, Inc. and Stan Yakatan (incorporated by reference to the
Registration Statement on Form SB-2 dated September 30,
2004).. |
10.8
|
Incentive
Stock Option Agreement, dated as of July 6, 2004, between Impact
Diagnostics, Inc. and John C. Wilson |
10.9
|
Employment
Agreement between Michael L. Ahlin and Impact Diagnostics, Inc., dated
January 1, 2004, as amended by the Amendment of Employment Agreement,
dated July 1, 2004. |
10.10
|
Employment
Agreement between Mark J. Rosenfeld and Impact Diagnostics, Inc., dated
January 1, 2004, as amended by the Amendment of Employment Agreement,
dated July 1, 2004 |
10.11
|
Exclusive
License Agreement between Impact Diagnostics Incorporation and Dr. Yao
Xiong Hu, M.D., dated July 20, 2004 (incorporated by reference to Form
10-QSB filed with SEC on November 19, 2004). |
10.12 |
Exclusive
License Agreement dated March 7, 2005 by and between Grant Life Sciences,
Inc. and AccuDx Corporation (incorporated by reference herein to the
Current Report on Form 8-K filed on March 11, 2005). |
10.13 |
Consulting
Agreement dated March 7, 2005 by and between Grant Life Sciences, Inc. and
Ravi and Dr. Indira Pottahil (incorporated by reference herein to the
Current Report on Form 8-K filed on March 11,
2005). |
10.14 |
Promissory
Note in the name of AccuDx Corporation dated March 7, 2005 (incorporated
by reference herein to the Current Report on Form 8-K filed on March 11,
2005). |
10.15 |
Securities
Purchase Agreement dated as of March 15, 2005 among Grant Life Sciences,
Inc. and the purchasers signatory thereto (incorporated by reference
herein to the Current Report on Form 8-K filed on March 21,
2005). |
10.16 |
Security
Agreement dated as of March 15, 2005 among Grant Life Sciences, Inc. and
the holders of the Notes (incorporated by reference herein to the Current
Report on Form 8-K filed on March 21, 2005). |
10.17 |
Registration
Rights Agreement dated as of March 15, 2005 among Grant Life Sciences,
Inc. and the purchasers signatory thereto (incorporated by reference
herein to the Current Report on Form 8-K filed on March 21,
2005). |
10.18 |
8%
Senior Secured Note dated March 15, 2005 in the name of DCOFI Master LDC
(incorporated by reference herein to the Current Report on Form 8-K filed
on March 21, 2005). |
10.19 |
Common
Stock Purchase Warrant dated March 15, 2005 (incorporated by reference
herein to the Current Report on Form 8-K filed on March 21,
2005). |
14.1 |
Code
of Ethics. |
21.1 |
Subsidiaries
of the Registrant. |
31.1 |
Certification
by Chief Executive Officer pursuant to Sarbanes Oxley Section
302. |
31.2 |
Certification
by Chief Financial Officer pursuant to Sarbanes Oxley Section
302. |
32.1 |
Certification
by Chief Executive Officer pursuant to 18 U.S. C. Section
1350. |
32.2 |
Certification
by Chief Financial Officer pursuant to 18 U.S. C. Section
1350. |
Item
14. Principal Accountant Fees and Services
Audit
Fees
The
aggregate fees billed for professional services rendered by Russell Bedford
Stefanou Mirchandani LLP for the audit of the company’s 2004 annual financial
statements and review of the 2004 10-KSB was $25,000. The aggregrate fees billed
for professional services rendered by Tanner+Co for review of financial
statements and services in connection with statutory and regulatory filings or
engagements for 2004 was $32,420.
The
aggregate fees billed for professional services rendered by Tanner+Co for the
2003 audit of the financial statements of Impact Diagnostics, Inc. was $17,600.
Audit-Related
Fees
We
incurred $0 fees for the years ended 2004 and 2003 for professional services
rendered by our independent auditors that are reasonably related to the
performance of the audit or review of our financial statements and not included
in “Audit Fees”.
Tax
Fees
Russell
Bedford Stefanou Mirchandani LLP has been engaged to perform tax services for
the 2004 tax returns at a cost of $5,000.
All Other
Fees
We did
not incur any fees for other professional services rendered by our independent
auditors during the years ended December 31, 2004 and September 30,
2004.
The
charter of the Company’s Audit Committee, which was established by the Board of
Directors in July 2004, includes a written policy regarding the pre-approval of
audit and permitted non-audit services to be performed by our independent
auditors, Russell Bedford Stefanou Mirchandani LLP. All services provided by
Russell Bedford Stefanou Mirchandani LLP, both audit and non-audit must be
pre-approved by the Audit Committee. The Audit Committee’s charter specifies
that the Committee is directly responsible for the appointment, compensation and
oversight of the work of the independent auditor (including resolution of
disagreements between management and the independent auditor regarding financial
reporting) for the purpose of preparing its audit report or any related work.
The charter specifies that the Committee meet at least quarterly with the
independent auditor in separate executive sessions. All services provided by our
principal accountant since July 2004 have been pre-authorized by the Audit
Committee. The Directors and Officers of Impact Diagnostics, Inc. were
responsible for engaging auditors for the audit of the 2003 Impact financial
statements, as this entity was a private company prior to the merger on July 30,
2004.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
|
|
GRANT LIFE
SCIENCES, INC. |
|
|
|
Date: March 31,
2005 |
By: |
/s/ Stan Yakatan
|
|
Stan Yakatan |
|
President and Chief Executive
Officer |
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Name |
|
Title |
|
Date |
|
|
|
|
|
/s/
Stan Yakatan
Stan
Yakatan |
|
President,
Chief Executive Officer and Chairman of the Board of
Directors |
|
March
31, 2005 |
|
|
|
|
|
/s/
John C. Wilson
John
C. Wilson |
|
Chief
Financial Officer |
|
March
31, 2005 |
|
|
|
|
|
/s/
Michael Ahlin
Michael
Ahlin |
|
Vice
President and Director |
|
March
31, 2005 |
|
|
|
|
|
/s/
Jack Levine
Jack
Levine |
|
Director |
|
March
31, 2005 |
|
|
|
|
|
/s/
Kevin Crow
Kevin
Crow |
|
Director |
|
March
31, 2005 |
|
|
|
|
|
/s/
Eric Wilkinson
Erik
Wilkinson |
|
Director |
|
March
31, 2005 |
|
|
|
|
|
/s/
Carmen Medina
Carmen
Medina |
|
Director |
|
March
31, 2005 |