Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-QSB
(Mark
One)
x
|
Quarterly
report under Section 13 or 15(d) of the Securities Exchange Act of
1934.
|
|
|
|
For
the quarterly period ended March 31, 2007
|
|
|
o
|
Transition
report under Section 13 or 15(d) of the Exchange
Act
|
|
|
|
For
the transition period
from _________ to ___________
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|
|
Commission
File Number: 000-50133
|
GRANT
LIFE SCIENCES, INC.
(Exact
Name of Small Business Issuer as Specified in its Charter)
Nevada
|
|
82-0490737
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(I.R.S.
Employer Identification
Number)
|
1787
E. Fort Union Blvd., Suite 202, Salt Lake City, UT
84121
(Address
of Principal Executive Offices)
(801)
733-0878
(Issuer’s
Telephone Number, Including Area Code)
Not
Applicable
(Former
Address, if Changed Since Last Report)
Check
whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
ྑ No x
State
the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the last practicable date: As of June 20, 2007, there were
173,125,552 shares of Common Stock, par value $0.001 per share, issued and
outstanding.
Transitional
Small Business Disclosure Format (check one): Yes o
No x
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
FORM
10-QSB
INDEX
PART
I FINANCIAL INFORMATION
|
|
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Item
1
|
Condensed
Consolidated Financial Statements (unaudited)
|
|
|
|
|
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|
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Condensed
Consolidated Balance Sheets (unaudited) - As of March 31, 2007 and
December 31, 2006
|
|
3
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations (unaudited) - For the three
months
Ended March 31, 2007 and 2006, and the period from July 9, 1998 (date
of
inception) through March 31, 2007
|
|
4
|
|
|
|
|
|
Condensed
Consolidated Statements of Deficiency in Stockholders’ Equity (unaudited)
- For the period from July 9, 1998 (date of inception) through March
31,
2007
|
|
5
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows (unaudited) - For the three
months
ended March 31, 2007 and 2006, and the period from July 9, 1998 (date
of
inception) through March 31, 2007
|
|
8
|
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements (unaudited)
|
|
9
|
|
|
|
|
Item
2
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
|
13
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|
|
|
|
Item
3
|
Controls
and Procedures
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|
14
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|
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|
PART
II OTHER INFORMATION
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|
|
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|
|
Item
1
|
Legal
Proceedings
|
|
15
|
|
|
|
|
Item
2
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
|
|
|
|
|
|
Item
3
|
Defaults
upon Senior Securities
|
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Item
4
|
Submission
of Matters to a Vote of Security Holders
|
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|
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Item
5
|
Other
Information
|
|
|
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|
Item
6
|
Exhibits
|
|
|
|
|
|
|
Signatures
|
|
|
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
March
31,
|
|
December
31,
|
|
ASSETS
|
|
2007
|
|
2006
|
|
Current
assets:
|
|
|
|
|
|
Cash
|
|
$
|
87,623
|
|
$
|
287,992
|
|
Accounts
receivable
|
|
|
1,338
|
|
|
1,338
|
|
Prepaid
expenses
|
|
|
31,666
|
|
|
1,875
|
|
Deposits
and other assets
|
|
|
30,000
|
|
|
4,375
|
|
Total
current assets
|
|
|
150,627
|
|
|
295,580
|
|
|
|
|
|
|
|
|
|
Furniture
and equipment, net of accumulated depreciation of $15,780 and $19,922
as
of March 31, 2007 and December 31, 2006, respectively
|
|
|
4,888
|
|
|
10,772
|
|
Patents,
net of accumulated amortization of $1,944 and $1,555 as of March
31, 2007
and December 31, 2006, respectively
|
|
|
21,390
|
|
|
21,779
|
|
Deferred
financing fees, net of accumulated amortization of $32,734 and $25,000
as
of March 31, 2007 and December 31, 2006, respectively
|
|
|
56,174
|
|
|
48,908
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
233,079
|
|
$
|
377,039
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND DEFICIENCY IN STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
160,492
|
|
$
|
276,715
|
|
Accrued
liabilities
|
|
|
52,247
|
|
|
50,000
|
|
Accrued
interest payable
|
|
|
173,918
|
|
|
153,559
|
|
Notes
payable
|
|
|
363,125
|
|
|
365,523
|
|
Total
current liabilities
|
|
|
749,782
|
|
|
845,797
|
|
|
|
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
|
|
|
Convertible
notes payable
|
|
|
486,920
|
|
|
683,015
|
|
Derivative
liability related to convertible notes
|
|
|
3,708,706
|
|
|
4,233,656
|
|
Derivative
liability related to warrants
|
|
|
726,186
|
|
|
1,274,600
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
5,671,594
|
|
|
7,037,068
|
|
|
|
|
|
|
|
|
|
Contingencies
(Note A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficiency
in stockholders' equity:
|
|
|
|
|
|
|
|
Preferred
stock, par value $.001; authorized 20,000,000 shares; no shares issued
and
outstanding as of March 31, 2007 and December 31, 2006
|
|
|
-
|
|
|
-
|
|
Common
stock, par value $.001; authorized 750,000,000 shares; 158,515,423
and
136,420,423 shares issued and outstanding as of March 31, 2007 and
December 31, 2006, respectively
|
|
|
158,515
|
|
|
136,420
|
|
Additional
paid-in capital
|
|
|
9,735,654
|
|
|
7,614,681
|
|
Deficit
accumulated during the development stage
|
|
|
(15,332,684
|
)
|
|
(14,411,130
|
)
|
Total
deficiency in stockholders' equity
|
|
|
(5,438,515
|
)
|
|
(6,660,029
|
)
|
|
|
|
|
|
|
|
|
Total
liabilities and deficiency in stockholders' equity
|
|
$
|
233,079
|
|
$
|
377,039
|
|
See
accompanying notes to condensed consolidated financial statements.
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
For
The Three Months Ended
|
|
|
For
the Period from July 9, 1998 (Date of
Inception) through
|
|
|
|
|
March
31,
2007
|
|
|
March
31,
2006
(Restated)
|
|
|
March
31,
2007
(Restated)
|
|
Sales
|
|
|
|
|
|
|
|
$
|
72,675
|
|
Cost
of sales
|
|
|
|
|
|
|
|
|
62,805
|
|
Gross
margin
|
|
|
|
|
|
|
|
|
9,870
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
$
|
319,520
|
|
$
|
275,639
|
|
|
6,220,936
|
|
Research
and development
|
|
|
12,058
|
|
|
86,315
|
|
|
1,724,753
|
|
Depreciation
|
|
|
1,580
|
|
|
1,851
|
|
|
28,386
|
|
Acquisition
costs
|
|
|
-
|
|
|
-
|
|
|
65,812
|
|
Total operating expenses
|
|
|
333,158
|
|
|
363,805
|
|
|
8,039,887
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(333,158
|
)
|
|
(363,805
|
)
|
|
(8,030,017
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
Gain
on extinguishment of debt
|
|
|
-
|
|
|
-
|
|
|
510,105
|
|
Change
in fair value of derivative liability related to convertible notes
and
warrants
|
|
|
(87,368
|
)
|
|
279,601
|
|
|
(5,279,303
|
)
|
Interest
expense
|
|
|
(501,028
|
)
|
|
(124,328
|
)
|
|
(2,533,169
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes
|
|
|
(921,554
|
)
|
|
(208,532
|
)
|
|
(15,332,384
|
)
|
Provision
for income taxes
|
|
|
-
|
|
|
-
|
|
|
(300
|
)
|
Net
loss
|
|
$
|
(921,554
|
)
|
$
|
(208,532
|
)
|
$
|
(15,332,684
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per common share - basic
and diluted
|
|
$
|
(0.01
|
)
|
$
|
(0.00
|
)
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding - basic
and diluted
|
|
|
146,941,923
|
|
|
126,486,518
|
|
|
n/a
|
|
See
accompanying notes to condensed consolidated financial statements.
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
CONDENSED
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS’
EQUITY
FOR
THE PERIOD JULY 9, 1998 (Date of Inception) THROUGH
MARCH
31, 2007
(Unaudited)
|
|
Number
of Common Shares
|
|
Common
Stock
|
|
Subscription
Receivable
|
|
Deferred
Compensation
|
|
Additional
Paid-in
Capital
|
|
Deficit
Accumulated During the Development Stage
|
|
Total
Deficiency
In
Stockholders’
Equity
|
|
Balance,
July 9, 1998 (date of inception)
|
|
|
9,272,200
|
|
$
|
9,272
|
|
$
|
-
|
|
$ |
- |
|
$
|
(9,272
|
)
|
$ |
- |
|
$
|
-
|
|
Issued
stock for subscription receivable at $0.005 per share
|
|
|
18,795,000
|
|
|
18,795
|
|
|
(100,000
|
)
|
|
-
|
|
|
81,205
|
|
|
-
|
|
|
-
|
|
Balance,
December 31, 1998
|
|
|
28,067,200
|
|
|
28,067
|
|
|
(100,000
|
)
|
|
-
|
|
|
71,933
|
|
|
-
|
|
|
-
|
|
Issued
stock for cash at $0.004 per share
|
|
|
1,253,000
|
|
|
1,253
|
|
|
-
|
|
|
-
|
|
|
3,747
|
|
|
-
|
|
|
5,000
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(5,053
|
)
|
|
(5,053
|
)
|
Balance,
December 31, 1999
|
|
|
29,320,200
|
|
|
29,320
|
|
|
(100,000
|
)
|
|
-
|
|
|
75,680
|
|
|
(5,053
|
)
|
|
(53
|
)
|
Payment
of subscription receivable
|
|
|
-
|
|
|
-
|
|
|
100,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
100,000
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(43,641
|
)
|
|
(43,641
|
)
|
Balance,
December 31, 2000
|
|
|
29,320,200
|
|
|
29,320
|
|
|
-
|
|
|
-
|
|
|
75,680
|
|
|
(48,694
|
)
|
|
56,306
|
|
Issued
stock for cash at $0.004 per share
|
|
|
250,600
|
|
|
251
|
|
|
-
|
|
|
-
|
|
|
749
|
|
|
-
|
|
|
1,000
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(522,213
|
)
|
|
(522,213
|
)
|
Balance,
December 31, 2001
|
|
|
29,570,800
|
|
|
29,571
|
|
|
-
|
|
|
-
|
|
|
76,429
|
|
|
(570,907
|
)
|
|
(464,907
|
)
|
Beneficial
conversion feature on issuance of debt
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
98,507
|
|
|
-
|
|
|
98,507
|
|
Gain
on extinguishment of debt
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(98,507
|
)
|
|
-
|
|
|
(98,507
|
)
|
Issued
stock for cash at $0.13 per share
|
|
|
689,150
|
|
|
689
|
|
|
-
|
|
|
-
|
|
|
91,811
|
|
|
-
|
|
|
92,500
|
|
Issued
stock for services at $0.06 per share
|
|
|
1,591,310
|
|
|
1,591
|
|
|
-
|
|
|
-
|
|
|
101,659
|
|
|
-
|
|
|
103,250
|
|
Issued
stock in satisfaction of debt at $0.14 per share
|
|
|
1,790,000
|
|
|
1,790
|
|
|
-
|
|
|
-
|
|
|
248,210
|
|
|
-
|
|
|
250,000
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(646,201
|
)
|
|
(646,201
|
)
|
Balance,
December 31, 2002
|
|
|
33,641,260
|
|
|
33,641
|
|
|
-
|
|
|
-
|
|
|
518,109
|
|
|
(1,217,108
|
)
|
|
(665,358
|
)
|
Issued
stock for cash at $0.13 per share
|
|
|
930,800
|
|
|
931
|
|
|
-
|
|
|
-
|
|
|
119,069
|
|
|
-
|
|
|
120,000
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(253,881
|
)
|
|
(253,881
|
)
|
Balance,
December 31, 2003
|
|
|
34,572,060
|
|
|
34,572
|
|
|
-
|
|
|
-
|
|
|
637,178
|
|
|
(1,470,989
|
)
|
|
(799,239
|
)
|
Issued
stock for cash at $0.0838 per share
|
|
|
238,660
|
|
|
239
|
|
|
-
|
|
|
-
|
|
|
19,761
|
|
|
-
|
|
|
20,000
|
|
Issued
stock for services at $0.08 per share
|
|
|
500,000
|
|
|
500
|
|
|
-
|
|
|
-
|
|
|
39,500
|
|
|
-
|
|
|
40,000
|
|
Issued
stock for cash at $0.1835 per share
|
|
|
9,560,596
|
|
|
9,561
|
|
|
-
|
|
|
-
|
|
|
1,485,376
|
|
|
-
|
|
|
1,494,937
|
|
Reverse
merger with Grant Ventures, Inc.
|
|
|
6,000,000
|
|
|
6,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
6,000
|
|
Warrants
issued as part of restructuring of debt (89,500 valued at $0.03779)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,382
|
|
|
-
|
|
|
3,382
|
|
Recognition
of beneficial conversion feature on issuance of note payable
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
200,000
|
|
|
-
|
|
|
200,000
|
|
Conversion
of note payable and accrued interest at $0.07569 per share
|
|
|
2,720,000
|
|
|
2,720
|
|
|
-
|
|
|
-
|
|
|
203,165
|
|
|
-
|
|
|
205,885
|
|
Issued
stock in satisfaction of debt at $0.1835 per share
|
|
|
249,475
|
|
|
249
|
|
|
-
|
|
|
-
|
|
|
45,530
|
|
|
-
|
|
|
45,779
|
|
Exercise
of $0.01 warrants
|
|
|
2,403,000
|
|
|
2,403
|
|
|
-
|
|
|
-
|
|
|
21,627
|
|
|
-
|
|
|
24,030
|
|
Issued
250,000 warrants for services
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
11,000
|
|
|
-
|
|
|
11,000
|
|
Stock
options issued to employees, directors, consultants
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,523,966
|
)
|
|
1,523,966
|
|
|
-
|
|
|
-
|
|
Vesting
of deferred compensation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
426,081
|
|
|
-
|
|
|
-
|
|
|
426,081
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,910,351
|
)
|
|
(1,910,351
|
)
|
Balance,
December 31, 2004
|
|
|
56,243,791
|
|
|
56,244
|
|
|
-
|
|
|
(1,097,885
|
)
|
|
4,190,485
|
|
|
(3,381,340
|
)
|
|
(232,496
|
)
|
Conversion
of notes payable and accrued interest at $0.092178 per
share
|
|
|
1,395,322
|
|
|
1,395
|
|
|
-
|
|
|
-
|
|
|
127,225
|
|
|
-
|
|
|
128,620
|
|
Stock
options issued to new director
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(26,725
|
)
|
|
26,725
|
|
|
-
|
|
|
-
|
|
Value
of 250,000 warrants issued as part of bridge loan
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
65,540
|
|
|
-
|
|
|
65,540
|
|
Shares
issued for services at $0.40 per share
|
|
|
500,000
|
|
|
500
|
|
|
-
|
|
|
-
|
|
|
199,500
|
|
|
|
|
|
200,000
|
|
Stock
options granted to employee
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(327,197
|
)
|
|
327,197
|
|
|
-
|
|
|
-
|
|
Stock
options exercised
|
|
|
50,000
|
|
|
50
|
|
|
-
|
|
|
-
|
|
|
8,950
|
|
|
-
|
|
|
9,000
|
|
Reclassify
warrants to liability (restated)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(656,607
|
)
|
|
-
|
|
|
(656,607
|
)
|
Shares
issued for legal services at $0.22 per share
|
|
|
200,000
|
|
|
200
|
|
|
-
|
|
|
-
|
|
|
43,800
|
|
|
|
|
|
44,000
|
|
Partial
conversion of convertible notes payable at conversion rates ranging
from
$0.00423 to $0.0105 per share, including applicable derivative value
(restated)
|
|
|
67,580,405
|
|
|
67,581
|
|
|
-
|
|
|
-
|
|
|
2,708,685
|
|
|
-
|
|
|
2,776,266
|
|
Stock
options issued to interim CEO
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,762
|
)
|
|
3,762
|
|
|
-
|
|
|
-
|
|
Shares
issued on exercise of warrant
|
|
|
250,000
|
|
|
250
|
|
|
-
|
|
|
-
|
|
|
2,500
|
|
|
-
|
|
|
2,750
|
|
Shares
issued at $0.09 on exercise of warrant
|
|
|
267,000
|
|
|
267
|
|
|
-
|
|
|
-
|
|
|
2,403
|
|
|
-
|
|
|
2,670
|
|
Vesting
of deferred compensation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
976,987
|
|
|
-
|
|
|
-
|
|
|
976,987
|
|
Cancellation
of stock options
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
193,275
|
|
|
-
|
|
|
-
|
|
|
193,275
|
|
Net
loss (restated)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(7,644,857
|
)
|
|
(7,644,857
|
)
|
Balance,
December 31, 2005 (restated)
|
|
|
126,486,518
|
|
|
126,487
|
|
|
-
|
|
|
(285,307
|
)
|
|
7,050,165
|
|
|
(11,026,197
|
)
|
|
(4,134,852
|
)
|
Vesting
of deferred compensation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
84,972
|
|
|
-
|
|
|
-
|
|
|
84,972
|
|
Adjustment
of presentation of deferred compensation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
200,335
|
|
|
(200,335
|
)
|
|
-
|
|
|
-
|
|
Vesting
of stock options
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
153,577
|
|
|
-
|
|
|
153,577
|
|
Partial
conversion of convertible notes at conversion rates ranging from
$0.00633
to $0.0278 per share, including applicable derivative value
(restated)
|
|
|
2,594,644
|
|
|
2,595
|
|
|
-
|
|
|
-
|
|
|
241,973
|
|
|
-
|
|
|
244,568
|
|
Issued
stock in satisfaction of
debt
|
|
|
5,226,534
|
|
|
5,226
|
|
|
-
|
|
|
-
|
|
|
47,039
|
|
|
-
|
|
|
52,265
|
|
Issued
stock at $0.038 per share for services rendered
|
|
|
1,150,627
|
|
|
1,150
|
|
|
-
|
|
|
-
|
|
|
163,397
|
|
|
-
|
|
|
164,547
|
|
Issued
stock on exercise of options at $0.18 per share
|
|
|
150,000
|
|
|
150
|
|
|
-
|
|
|
-
|
|
|
26,850
|
|
|
-
|
|
|
27,000
|
|
Repricing
of warrants
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
17,422
|
|
|
-
|
|
|
17,422
|
|
Issued
stock on exercise of warrants (restated)
|
|
|
812,100
|
|
|
812
|
|
|
-
|
|
|
-
|
|
|
114,593
|
|
|
-
|
|
|
115,405
|
|
Net
loss (restated)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,384,933
|
)
|
|
(3,384,933
|
)
|
Balance,
December 31, 2006 (restated)
|
|
|
136,420,423
|
|
|
136,420
|
|
|
-
|
|
|
-
|
|
|
7,614,681
|
|
|
(14,411,130
|
)
|
|
(6,660,029
|
)
|
Partial
conversion of convertible notes payable at conversion rates ranging
from
$0.0172 to $0.0387 per share, including applicable derivative
value
|
|
|
22,000,000
|
|
|
22,000
|
|
|
-
|
|
|
-
|
|
|
2,086,772
|
|
|
-
|
|
|
2,108,772
|
|
Issued
stock at $0.0782 per share for services rendered
|
|
|
95,000
|
|
|
95
|
|
|
-
|
|
|
-
|
|
|
7,331
|
|
|
-
|
|
|
7,426
|
|
Vesting
of stock options
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
26,870
|
|
|
-
|
|
|
26,870
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(921,554
|
)
|
|
(921,554
|
)
|
Balance,
March 31, 2007
|
|
|
158,515,423
|
|
$
|
158,515
|
|
|
-
|
|
|
-
|
|
$
|
9,735,654
|
|
$
|
(15,332,684
|
)
|
$
|
(5,438,515
|
)
|
See
accompanying
notes to condensed consolidated financial statements.
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For
the Three Months Ended
March
31,
|
|
For
the Period from July 9, 1998 (Date of Inception)
through
|
|
|
|
2007
|
|
2006
(Restated)
|
|
March
31, 2007
(Restated)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(921,554
|
)
|
$
|
(208,532
|
)
|
$
|
(15,332,684
|
)
|
Adjustments
to reconcile net loss to cash
|
|
|
|
|
|
|
|
|
|
|
used
in operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,580
|
|
|
1,851
|
|
|
28,386
|
|
Amortization
|
|
|
8,123
|
|
|
9,531
|
|
|
78,845
|
|
Change
in fair value of derivative liability related to convertible notes
and
warrants
|
|
|
87,368
|
|
|
(279,601
|
)
|
|
5,279,304
|
|
Increase
in debt discount upon issuance of convertible notes
|
|
|
300,000
|
|
|
-
|
|
|
300,000
|
|
Loss
on abandonment of assets
|
|
|
4,304
|
|
|
-
|
|
|
8,094
|
|
Vesting
of stock options
|
|
|
26,870
|
|
|
84,971
|
|
|
1,668,486
|
|
Common
stock issued in exchange for services rendered
|
|
|
7,426
|
|
|
-
|
|
|
395,676
|
|
Cancellation
of stock options
|
|
|
-
|
|
|
-
|
|
|
193,275
|
|
Accreted
interest on convertible notes payable
|
|
|
151,945
|
|
|
95,285
|
|
|
1,230,909
|
|
Warrants
issued in exchange for services rendered
|
|
|
-
|
|
|
-
|
|
|
76,540
|
|
Beneficial
conversion feature discount
|
|
|
-
|
|
|
-
|
|
|
298,507
|
|
Gain
on extinguishment of debt
|
|
|
-
|
|
|
-
|
|
|
(510,105
|
)
|
Forgiveness
of accounts payable due to stockholders
|
|
|
-
|
|
|
-
|
|
|
(2,108
|
)
|
Acquisition
costs
|
|
|
-
|
|
|
-
|
|
|
65,812
|
|
Decrease
(increase) in:
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
-
|
|
|
28,000
|
|
|
(1,338
|
) |
Prepaid
expenses
|
|
|
(29,791
|
)
|
|
(5,083
|
)
|
|
(31,666
|
)
|
Deferred
financing fees
|
|
|
(15,000
|
)
|
|
-
|
|
|
(27,450
|
)
|
Deposits
and other assets
|
|
|
(25,625
|
)
|
|
-
|
|
|
(81,960
|
)
|
(Decrease)
increase in:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
(116,223
|
)
|
|
(65,665
|
)
|
|
172,513
|
|
Short-term
notes payable
|
|
|
(2,398
|
)
|
|
(19,229
|
)
|
|
13,125
|
|
Accounts
payable - assumed liabilities
|
|
|
-
|
|
|
-
|
|
|
(17,506
|
)
|
Accounts
payable - stockholders
|
|
|
-
|
|
|
-
|
|
|
(38,900
|
)
|
Accrued
liabilities
|
|
|
2,247
|
|
|
24,667
|
|
|
79,077
|
|
Accrued
payroll liabilities
|
|
|
-
|
|
|
(36,780
|
)
|
|
-
|
|
Accrued
interest payable
|
|
|
20,359
|
|
|
5,250
|
|
|
416,645
|
|
Net
cash used in operating activities
|
|
|
(500,369
|
)
|
|
(365,335
|
)
|
|
(5,738,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchases
of furniture and equipment
|
|
|
-
|
|
|
(3,854
|
)
|
|
(41,368
|
)
|
Net
cash used in investing activities
|
|
|
-
|
|
|
(3,854
|
)
|
|
(41,368
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from sale of common stock, net of costs and fees
|
|
|
-
|
|
|
-
|
|
|
1,919,058
|
|
Proceeds
from notes payable
|
|
|
300,000
|
|
|
-
|
|
|
3,805,255
|
|
Proceeds
from repricing of warrants
|
|
|
-
|
|
|
-
|
|
|
17,422
|
|
Proceeds
from related party notes payable
|
|
|
-
|
|
|
-
|
|
|
60,000
|
|
Payments
for related party notes payable
|
|
|
-
|
|
|
|
|
|
(34,221
|
)
|
Proceeds
from stock subscription receivable
|
|
|
-
|
|
|
-
|
|
|
100,000
|
|
Net
cash provided by financing activities
|
|
|
300,000
|
|
|
-
|
|
|
5,867,514
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
(200,369
|
)
|
|
(369,189
|
)
|
|
87,623
|
|
Cash
at beginning of the period
|
|
|
287,992
|
|
|
800,472
|
|
|
-
|
|
Cash
at end of the period
|
|
$
|
87,623
|
|
$
|
431,283
|
|
$
|
87,623
|
|
Supplemental
disclosure of non-cash investing and financing activities:
During
the three months ended March 31, 2007, the Company issued 22,000,000 shares
of
common stock upon conversion of $648,040 of secured convertible notes payable.
The
value
of the related derivative at the time of conversion was $1,460,732,
which was credited to additional paid-in capital.
See
accompanying notes to condensed consolidated financial statements.
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2007 and 2006
(Unaudited)
NOTE
A - ORGANIZATION AND BASIS OF PRESENTATION
Organization
and Business
Grant
Life Sciences, Inc. (formerly Impact Diagnostics, Inc.) (the “Company”) was
organized under the laws of the State of Utah on July 9, 1998. The
Company’s purpose is to research, develop, market and sell diagnostic kits for
detecting disease with emphasis on the detection of low-grade cervical cancer.
On
July
30, 2004, the Company became a wholly owned subsidiary of Grant Ventures, Inc.,
a Nevada Corporation, by merging with Impact Acquisition Corporation, a Utah
corporation and wholly owned subsidiary of Grant Ventures, Inc. Grant Ventures,
Inc. was an inactive publicly registered shell corporation with no significant
assets or operations. For accounting purposes, the merger was treated as a
recapitalization of the Company. Grant Ventures, Inc. changed its name to Grant
Life Sciences, Inc. in November 2004.
The
condensed consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Impact Diagnostics, Inc. All intercompany
transactions and balances have been eliminated in consolidation.
Development
Stage Company
Since
July 9, 1998 (date of inception), the Company has operated as a development
stage company as defined in Statement of Financial Accounting Standards No.
7,
“Accounting and Reporting by Development Stage Companies”. The Company’s
development stage activities consist of the development of medical diagnostic
kits. Sources of financing for these development stage activities have been
primarily debt and equity financing. The Company has not yet established a
significant source of revenue.
Going
Concern
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. Continuing as a going concern is dependent upon
successfully obtaining additional working capital through debt or equity
financing and, eventually achieving profitable operations. No adjustments have
been made to the accompanying condensed consolidated financial statements that
might result from the outcome of this uncertainty.
Interim
Financial Information
The
interim financial information as of March 31, 2007 and for the periods ended
March 31, 2007 and 2006 is unaudited. The condensed consolidated balance sheet
as of December 31, 2006 is derived from audited financial statements, the report
on which included an explanatory paragraph as to there being substantial
doubt about the Company’s ability to continue as a going concern. The
accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the United
States for complete financial statements. The accompanying condensed
consolidated financial statements and notes should be read in conjunction with
the consolidated financial statements and notes included in the Company's Annual
Report on Form 10-KSB/A for the year ended December 31, 2006.
In
the
opinion of management, all adjustments that are necessary for a fair
presentation of the financial information for the interim periods reported
have
been made, which consist only of normal recurring adjustments. The results
of
operations for the three-month period ended March 31, 2007 is not necessarily
indicative of the results that can be expected for the entire year ending
December 31, 2007.
NOTE
B - SIGNIFICANT ACCOUNTING POLICIES
Cash
Equivalents
The
Company considers all highly liquid investments with a original maturities
of
three months or less to be cash equivalents.
Concentration
of Credit Risk
Financial
instruments and related items, which potentially subject the Company to
concentrations of credit risk, consist primarily of cash. The Company places
its
cash and temporary cash investments with credit quality institutions. At times,
such investments may be in excess of the FDIC insurance limit.
Furniture
and Equipment
Furniture
and equipment are stated at cost less accumulated depreciation. Depreciation
is
computed using the straight-line method based on the estimated useful lives
of
the assets. Furniture is depreciated over seven years and equipment over three
to five years. When assets are retired or otherwise disposed of, the cost and
related accumulated depreciation are removed and any resulting gain or loss
is
recognized.
Patents
Patents
are stated at cost less accumulated amortization. Amortization is computed
using
the straight-line method based on an estimated useful life of fifteen years.
When patents are retired or otherwise disposed of, the cost and related
accumulated amortization are removed and any resulting gain or loss is
recognized.
Long-Lived
Assets
Long-lived
tangible and intangible assets held and used by the Company are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Events relating to
recoverability may include significant unfavorable changes in business
conditions, recurring losses, or a forecasted inability to achieve break-even
operating results over an extended period. The Company evaluates the
recoverability of long-lived assets based upon forecasted undiscounted cash
flows. Should impairment in value be indicated, the carrying value of intangible
assets is adjusted, based on estimates of future discounted cash flows resulting
from the use and ultimate disposition of the asset.
Derivative
Liability Related to Convertible Notes and Warrants
The
derivative liability related to convertible notes and warrants arises because
the conversion price of the Company’s convertible notes is solely a function of
the market price of the Company’s common stock. Thus, the number of shares that
may be issued upon conversion of such notes is indeterminate, which gives rise
to the possibility that the Company may not be able to fully settle its
convertible note and warrant obligations by the issuance of common stock.
The
derivative liability related to convertible notes and warrants is adjusted
to
fair value as of each date that a note is converted or a warrant is exercised,
as well as at each reporting date, using the Black-Scholes pricing model. Any
change in fair value between reporting dates that arises because of changes
in
market conditions is recognized as a gain or loss. To the extent the derivative
liability is reduced as a consequence of the conversion of notes or the exercise
of warrants, such reduction is recognized as additional paid-in capital as
of
the conversion or exercise date.
When
a
convertible note is initially issued, a note discount is established in an
amount equal to the lesser of the face amount of the note or the amount of
the
related derivative liability. The note discount is accreted to interest expense
over the term of the note.
Revenue
Recognition
Revenues
are recognized in the period that the four following criteria are met: (1)
persuasive evidence of an arrangement exists; (2) delivery has occurred; (3)
the
selling price is fixed or determinable; and (4) collectibility is reasonably
assured. Determination of criteria (3) and (4) are based on management's
judgments regarding the fixed nature of the selling prices of the products
delivered and the collectibility of those amounts. Provisions for discounts
and
rebates to customers, estimated returns and allowances, and other adjustments
are provided for in the same period the related sales are recorded. The Company
defers any revenue for which the product has not been delivered or is subject
to
refund until such time that the Company and the customer jointly determine
that
the product has been delivered or no refund will be required.
Stock-Based
Compensation
The
cost
of employee and board member services received in exchange for an award of
an
equity instrument is based on the grant-date fair value of the award, determined
by using the Black-Scholes pricing model. This cost is recognized over the
period during which the award recipient is required to provide service in
exchange for the award, which generally corresponds to the vesting
period.
Research
and Development Costs
Research
and development costs are expensed as incurred. These costs include direct
expenditures for goods and services, as well as some indirect expenditures
such
as consultant fees.
Deferred
Income Taxes
Deferred
income taxes are provided based on the liability method for financial reporting
purposes. Under this method, deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities
and
are measured using enacted tax rates expected to apply to taxable income in
the
years in which those temporary differences are expected to be removed or
settled. The effect on deferred income tax assets and liabilities of a change
in
tax rates is recognized in the statements of operations in the period that
includes the enactment date. Valuation allowances are provided when it is more
likely than not that some or all of the net deferred income tax assets may
not
be realized.
Net
Loss Per Common Share
The
computation of basic net loss per common share is based on the weighted average
number of shares outstanding during each period. The computation of diluted
earnings per common share, if any, is based on the weighted average number
of
common shares outstanding during the period plus common stock equivalents,
unless the effect of their inclusion is anti-dilutive. As a result of the
Company’s continuing net losses, basic and diluted net loss per common share are
equivalent.
Use
of
Estimates in the Preparation of Financial Statements
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and
disclosure of contingent assets and liabilities as of reporting dates and the
reported amounts of revenue and expenses during the reporting periods. Actual
results could differ from those estimates.
New
Accounting Pronouncements Applicable to the Company
In
June
2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. 48, Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement
No. 109 (“FIN
48”),
which
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with Statement of Financial
Accounting Standards (“SFAS”) No. 109, Accounting
for Income Taxes. The
interpretation prescribes a recognition threshold and measurement attribute
for
the financial statement recognition and measurement of a tax position taken
or
expected to be taken in a tax return. FIN 48 requires recognition of tax
benefits that satisfy a greater than 50% probability threshold. FIN 48 also
provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition. FIN 48 became
effective for the Company beginning January 1, 2007. The adoption of FIN 48
had no impact on the Company’s financial statements.
In
September 2006, the FASB issued SFAS No. 157, Fair
Value Measurements, which
defines fair value, establishes a framework for measuring fair value in
accounting principles generally accepted in the United States, and expands
disclosures about fair value measurements. SFAS No. 157 does not require
any new fair value measurements, but provides guidance on how to measure fair
value by providing a fair value hierarchy used to classify the source of the
information. This statement is effective for the Company beginning
January 1, 2008. The Company is currently assessing the potential impact
that adoption of SFAS No. 157 will have on its financial statements.
In
February 2007, the FASB issued SFAS No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities-Including
an
Amendment of SFAS No. 115.
SFAS
No. 159 permits entities to choose to measure many financial instruments and
certain other items at fair value. Most of the provisions of this statement
apply only to entities that elect the fair value option. This statement is
effective for the Company beginning January 1, 2008. The Company is
currently assessing the potential impact that adoption of SFAS No. 159 will
have on its financial statements.
NOTE
C - RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
In
June
2005, the Company issued $2,000,000 of convertible notes and, subsequently,
has
issued additional convertible notes. At the holder’s option these notes are
convertible into common stock of the Company at a specified discount from the
market price of the Company’s common stock. As a consequence of this provision,
an indeterminate number of shares are issuable upon conversion. While
convertible notes are normally exempt from derivative accounting and are viewed
as an equity instrument with the expectation that they will be settled by
issuing stock, pursuant to the provisions of Emerging Issues Task Force Issue
00-19 (“EITF 00-19”), the conversion feature of the Company’s convertible notes
results in the requirement to use derivative accounting since the possibility
exists that the Company will not be able to settle its convertible notes by
issuing stock.
In
addition to its applicability to the Company’s convertible notes, EITF 00-19
also applies to other contracts, except those pertaining to employee
compensation, normally settled by issuing stock. Thus, warrants issued by the
Company to non-employees which entitle the holder to purchase common stock
of
the Company at a specified price also become subject to derivative accounting
as
a consequence of the conversion feature of the Company’s convertible
notes.
When
the
Company initially applied derivative accounting as a consequence of the
foregoing in 2005, it inadvertently excluded warrants already issued as of
June
2005 from its derivative calculations and only applied derivative accounting
to
warrants issued on a prospective basis. Further, the intrinsic value method,
which is not generally considered to be a measure of fair value as defined
in
SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities,
was used
to value the derivative liability arising from the convertible notes. Finally,
on reporting dates subsequent to June 2005, when the Company revalued the
derivative liability applicable to its convertible notes and warrants, it failed
to segregate the change in value arising from note conversions and the exercise
of warrants from the change in value arising from changes in market conditions.
Thus, the accounting process used by the Company, in essence, recognized gains
from the conversion of notes and the exercise of warrants rather than treating
such changes as additions to additional paid-in capital.
The
Company has restated its 2006 and 2005 financial statements (as contained in
its
Annual Report on Form 10-KSB/A) to (1) recognize the derivative liability
arising from all of its warrants, regardless of when issued; (2) value the
derivative liability arising from its convertible notes using the Black-Scholes
pricing model, which is widely accepted as a measurement of fair value; and
(3)
recognize the fair value of converted notes and exercised warrants as additional
paid-in capital, rather than as a gain, at the point of conversion or
exercise.
As
a
consequence of the foregoing restatement, the following line items of the
Company’s balance sheet as of December 31, 2006, as included in this Form
10-QSB, differ from those included in the Company’s balance sheet as of December
31, 2006, as initially filed on Form 10-KSB:
December
31, 2006 Line Item Caption
|
|
Previously
Reported
|
|
Increase
or (Decrease)
|
|
As
Restated
|
|
Derivative
liability related to convertible notes
|
|
$
|
2,692,600
|
|
$
|
1,541,056
|
|
$
|
4,233,656
|
|
Derivative
liability related to warrants
|
|
|
1,103,918
|
|
|
170,682
|
|
|
1,274,600
|
|
Additional
paid-in capital
|
|
|
5,650,271
|
|
|
1,964,410
|
|
|
7,614,681
|
|
Deficit
accumulated during the development stage
|
|
|
(10,734,982
|
)
|
|
(3,676,148
|
)
|
|
(14,411,130
|
)
|
:
As
a
consequence of the foregoing restatement, the net loss for the first quarter
of
2006 was increased by $1,488 from that initially reported in the Form 10-QSB
for
the first quarter of 2006.
NOTE
D - CONVERTIBLE NOTES PAYABLE AND WARRANTS
During
the first quarter of 2007, the Company issued 22,000,000 common shares upon
the
conversion of $648,040 of convertible notes payable. The value of the related
derivative at the time of conversion was $1,460,732,
which was credited to additional paid-in capital.
Also
during the first quarter of 2007, the Company issued an additional $300,000
of
convertible notes plus additional warrants to purchase 2,000,000 shares of
the
Company’s common stock.
NOTE
E - INCOME TAXES
The
Company incurred a net loss of $921,554 and $208,532 for the three months
ended
March 31, 2007 and 2006, respectively. The Company has established a valuation
allowance to fully reserve against all of its net deferred income tax assets,
as
management has determined that it is more likely than not that those assets
will
not be realized based on the Company’s operating history. As a result, there are
no net deferred income tax assets presented in the Company’s condensed
consolidated balance sheets.
Section
382 of the Internal Revenue Code places limitations on the amount of taxable
income which can be offset by net operating loss carryforwards and other
tax
attributes after a change in control of a loss corporation. As a result,
there
can be no assurance that some or all of the Company’s net operating loss
carryforwards and other tax attributes will be available to offset future
taxable income and associated tax, if any.
As
of
March 31, 2007, the Company has net operating loss carryforwards of
approximately $7,350,000.
NOTE F
- SUBSEQUENT EVENTS
On
April
6, 2007, the Company granted its new chief financial officer options to purchase
2,400,000 shares of the Company’s stock at $0.04 per share, which was the
closing price on the date of grant.
On
June
20, 2007, the Company issued an additional $500,000 of convertible notes. These
notes were issued on essentially the same terms and conditions as previously
issued convertible notes.
Subsequent
to March 31, 2007 through June 20, 2007, the Company issued 12,000,000 shares
of
common stock upon the conversion of $156,600 of convertible notes. In addition,
on May 11, 2007, the Company issued 2,075,000 shares of common stock in
settlement of an account payable of $45,000. Subsequent to March 31, 2007,
an
additional 470,250 shares of commons stock were issued in settlement of other
obligations totaling $6,270, and 64,879 common shares were issued upon exercise
of warrants.
Item
2. Management’s Discussion and Analysis or Plan of
Operation
Forward-Looking
and Cautionary Statements
This
report contains certain forward-looking statements. These statements
relate to future events or the Company’s future performance and involve known
and unknown risks and uncertainties. Actual results may differ
substantially from such forward-looking statements, including, but not limited
to, the following:
•
The Company’s ability to fund its cash and working capital needs;
•
The Company’s ability to maintain its corporate existence as a viable entity;
and
•
Other risks detailed in the Company’s periodic report filings with the
SEC.
In
some
cases, you can identify forward-looking statements by terminology such as “may”,
“will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”,
“estimates”, “predicts”, “potential”, “continue”, or the negative of these terms
or other comparable terminology. These statements are only
predictions. Although the Company believes that the expectations reflected
in the forward-looking statements are reasonable, it cannot guarantee future
results, levels of activity, performance or achievements.
Overview
The
Company is a development stage company. From inception in 1998 through March
31,
2007, it has not generated significant revenues. All audit reports issued to
date have included an explanatory paragraph as to the fact that there is
substantial doubt about the Company’s ability to continue as a going
concern.
Plan
of Operations
The
Company is focused on developing technologies that will be useful in
commercializing rapid test products that can screen women for cervical cancer
or
pre-cancerous conditions. The majority of cervical cancer is generally believed
to be caused by different strains of the human papilloma virus (“HPV”). Most of
the Company’s effort in prior years has centered on HPV antibody detection
tests. In 2006, the Company signed a memorandum of understanding to in-license
technology pertaining to HPV antigen detection tests and, in June 2007, signed
another memorandum of understanding to in-license technology based on a
molecular diagnostic test for HPV.
The
Company’s ability to conduct further research on the technologies described in
the preceding paragraph is directly related to the Company’s ability to raise
capital to fund such research. In addition to continued funding by debt and
equity transactions, which has been the Company’s primary source of funding to
date, the Company will investigate out-licensing of the technologies presently
under its control, the feasibility of merging with a cash-flow positive
operating company, and the feasibility of collaborating with other research
and
development companies that are better funded than the Company. The Company
may
also investigate the feasibility of producing and distributing rapid test
products for diseases other than cancer, such as it did in 2005 on a limited
basis.
Liquidity
and Capital Resources
From
inception in 1998 through March 31, 2007, the Company has relied on loans and
equity infusions to fund its operations. The Company has never generated
positive cash flows from operating activities. In the near term, and perhaps
longer, the Company will continue to be dependent on its ability to raise debt
and/or equity capital. There is no assurance that the Company will be able
to
continue to do so. Over a longer term, the Company’s continuation as a going
concern is dependent on its ability to generate sufficient cash flows from
operating activities to meet its obligations on a timely basis and to obtain
additional financing as may be required. Since June 2005, the Company’s primary
source of funding has been from the sale of convertible notes.
At
March
31, 2007, the Company had a working capital deficiency of $599,155. The
Company’s cash balance at March 31, 2007 was $87,623. In June 2007, the Company
received $500,000 in conjunction with the placement of additional convertible
notes. In recent months, the Company’s cash “burn rate” has ranged from $100,000
to $150,000 per month. Absent any cash inflows from revenues or other sources,
the current cash position is expected to fund the Company until August or
September of 2007. There can be no assurance that the Company will be successful
in obtaining adequate debt or equity financing and, as a result, the Company
may
not be able to continue existence.
Results
of Operations
The
Company has never been profitable. Since inception, aggregate losses approximate
$15,300,000. Since June 2005, the Company has incurred non-cash charges of
nearly $7,800,000 related to interest expense on the Company’s convertible notes
and charges arising from the change in fair value of the derivative liability
related to the convertible notes and warrants to purchase common stock of the
Company.
Aggregate
results of operations for the three months ended March 31, 2007 and 2006 are
reasonably comparable except for the impact of the non-cash items described
in
the preceding paragraph.
Item
3. Controls and Procedures
The
Company’s principal executive officer and principal financial officer have
evaluated the effectiveness of our disclosure controls and procedures as of
March 31, 2007. Based on such evaluation, they have concluded, as of the end
of
such period, that our disclosure controls and procedures were not 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.
This
Form
10-QSB was not timely filed because the Company’s chief financial officer, who
joined the Company April 9, 2007, determined that the derivative liability
related to the Company’s convertible notes and warrants had not been accounted
for in accordance with generally accepted accounting principles. This is
explained more fully in Note C to the consolidated financial statements in
Part
I, Item 1 of this report. Upon further investigation, and after discussions
with
its prior and current independent registered public accounting firms, the
Company filed Form 10-KSB/A to amend its 2006 Annual Report filed with the
SEC.
This restatement, of necessity, delayed the filing of this Form 10-QSB. This
error in accounting and disclosure represented a material weakness in the
Company’s internal control at March 31, 2007.
The
Company believes that the material weakness arising from the Company’s inability
to appropriately interpret complex accounting pronouncements has
been at least partially mitigated by the addition of the current chief
financial officer. The Company is in the process of implementing processes
and
procedures to eliminate this material weakness.
PART
II
OTHER
INFORMATION
Item
1. Legal Proceedings
None
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
None
Item
3. Defaults upon Senior Securities
None
Item
4. Submission of Matters to a Vote of Security Holders
None.
Item
5. Other Information
None.
Item
6. Exhibits
Exhibit
Number
|
|
Description
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1
|
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
32.2
|
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
Signatures
In
accordance with the requirements 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: June
21, 2007
|
/s/
Hun-Chi Lin
|
|
Hun-Chi
Lin
|
|
President
and Chief Scientist
|
|
|
Date: June
21, 2007
|
/s/
Doyle Judd
|
|
Doyle
Judd
|
|
Chief
Financial Officer
|