Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 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 June 30, 2007
|
|
|
o
|
Transition
report under Section 13 or 15(d) of the Exchange
Act
|
|
|
For
the transition period
from _________ to ___________
|
|
|
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
o
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 August 7, 2007, there were
236,823,332 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
|
|
|
|
|
|
|
|
Item
1
|
|
Condensed
Financial Statements (unaudited)
|
|
|
|
|
|
|
|
|
|
Condensed
Balance Sheets (unaudited) - As of June 30, 2007 and December 31,
2006
|
|
3
|
|
|
|
|
|
|
|
Condensed
Statements of Operations (unaudited) - For the three months and six
months
ended June 30, 2007 and 2006, and for the period from July 9, 1998
(date
of inception) through June 30, 2007
|
|
4
|
|
|
|
|
|
|
|
Condensed
Statements of Deficiency in Stockholders’ Equity (unaudited) - For the
period from July 9, 1998 (date of inception) through June 30,
2007
|
|
5
|
|
|
|
|
|
|
|
Condensed
Statements of Cash Flows (unaudited) - For the six months ended June
30,
2007 and 2006, and for the period from July 9, 1998 (date of inception)
through June 30, 2007
|
|
8
|
|
|
|
|
|
|
|
Notes
to Condensed Financial Statements (unaudited)
|
|
10
|
|
|
|
|
|
Item
2
|
|
Management’s
Discussion and Analysis of Financial Condition or Plan of
Operation
|
|
15
|
|
|
|
|
|
Item
3
|
|
Controls
and Procedures
|
|
16
|
|
|
|
|
|
PART
II OTHER INFORMATION
|
|
|
|
|
|
|
|
Item
1
|
|
Legal
Proceedings
|
|
17
|
|
|
|
|
|
Item
2
|
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
|
17
|
|
|
|
|
|
Item
3
|
|
Defaults
upon Senior Securities
|
|
17
|
|
|
|
|
|
Item
4
|
|
Submission
of Matters to a Vote of Security Holders
|
|
17
|
|
|
|
|
|
Item
5
|
|
Other
Information
|
|
17
|
|
|
|
|
|
Item
6
|
|
Exhibits
|
|
17
|
|
|
|
|
|
Signatures
|
|
18
|
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
CONDENSED
BALANCE SHEETS
(Unaudited)
|
|
June
30,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
|
|
$
|
301,301
|
|
$
|
287,992
|
|
Accounts
receivable
|
|
|
2,550
|
|
|
1,338
|
|
Prepaid
expenses
|
|
|
21,667
|
|
|
1,875
|
|
Deposits
and other
|
|
|
34,869
|
|
|
4,375
|
|
Total
current assets
|
|
|
360,387
|
|
|
295,580
|
|
|
|
|
|
|
|
|
|
Furniture
and equiment, net of accumulated depreciation of $16,650 and $19,922
as of
June 30, 2007 and December 31, 2006, respectively
|
|
|
4,983
|
|
|
10,772
|
|
|
|
|
|
|
|
|
|
Patents,
net of accumulated amortization of $2,333 and $1,555 as of June 30,
2007
and December 31, 2006, respectively
|
|
|
21,001
|
|
|
21,779
|
|
|
|
|
|
|
|
|
|
Deferred
financing fees, net of accumulated amortization of $71,644 and $38,542
as
of June 30, 2007 and December 31, 2006, respectively
|
|
|
55,806
|
|
|
48,908
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
442,177
|
|
$
|
377,039
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND DEFICIENCY IN STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
101,724
|
|
$
|
276,715
|
|
Accrued
liabilities
|
|
|
147,071
|
|
|
50,000
|
|
Accrued
interest payable
|
|
|
220,484
|
|
|
153,559
|
|
Notes
payable
|
|
|
363,125
|
|
|
365,523
|
|
Total
current liabilities
|
|
|
832,404
|
|
|
845,797
|
|
|
|
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
|
|
|
Convertible
notes payable, net of discount of $1,326,830 and $1,201,765 as of
June 30,
2007 and December 31, 2006, respectively
|
|
|
475,708
|
|
|
683,015
|
|
Derivative
liability related to convertible notes
|
|
|
3,788,934
|
|
|
4,233,656
|
|
Derivative
liability related to warrants
|
|
|
819,923
|
|
|
1,274,600
|
|
Total
long-term liabilities
|
|
|
5,084,565
|
|
|
6,191,271
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
5,916,969
|
|
|
7,037,068
|
|
|
|
|
|
|
|
|
|
Contingencies
(Note A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficiency
in stockholders' equity:
|
|
|
|
|
|
|
|
Common
stock, par value $.001; authorized 750,000,000 shares; 181,125,552
and
136,420,423 shares issued and outstanding as of June 30, 2007 and
December
31, 2006, respectively
|
|
|
181,126
|
|
|
136,420
|
|
Additional
paid-in capital
|
|
|
11,026,324
|
|
|
7,614,681
|
|
Deficit
accumulated during the development stage
|
|
|
(16,682,242
|
)
|
|
(14,411,130
|
)
|
Total
deficiency in stockholders' equity
|
|
|
(5,474,792
|
)
|
|
(6,660,029
|
)
|
|
|
|
|
|
|
|
|
Total
liabilities and deficiency in stockholders' equity
|
|
$
|
442,177
|
|
$
|
377,039
|
|
See
accompanying notes to condensed financial statements.
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
CONDENSED
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
For
the
|
|
|
|
|
|
|
|
|
|
|
|
Period
from
|
|
|
|
|
|
|
|
|
|
|
|
July
9, 1998
|
|
|
|
For
the Three Months
|
|
For
the Six Months
|
|
(Inception)
|
|
|
|
Ended
June 30
|
|
Ended
June 30
|
|
through
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
June
30, 2007
|
|
|
|
|
|
(Restated)
|
|
|
|
(Restated)
|
|
|
|
Sales
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
72,675
|
|
Cost
of sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,805
|
|
Gross
margin
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
9,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
567,933
|
|
|
380,599
|
|
|
881,269
|
|
|
658,086
|
|
|
6,809,491
|
|
Research
and development
|
|
|
9,000
|
|
|
41,295
|
|
|
21,057
|
|
|
127,610
|
|
|
1,733,752
|
|
Total
|
|
|
576,933
|
|
|
421,894
|
|
|
902,326
|
|
|
785,696
|
|
|
8,543,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(576,933
|
)
|
|
(421,894
|
)
|
|
(902,326
|
)
|
|
(785,696
|
)
|
|
(8,533,373
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value of derivative liability related to convertible notes
and
warrants
|
|
|
(477,703
|
)
|
|
751,718
|
|
|
(565,070
|
)
|
|
1,031,319
|
|
|
(5,757,006
|
)
|
Interest
expense and financing costs
|
|
|
(294,923
|
)
|
|
(171,939
|
)
|
|
(803,716
|
)
|
|
(296,268
|
)
|
|
(2,835,856
|
)
|
Gain
on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
510,105
|
|
Acquisition
costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(65,812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes
|
|
|
(1,349,559
|
)
|
|
157,885
|
|
|
(2,271,112
|
)
|
|
(50,645
|
)
|
|
(16,681,942
|
)
|
Provision
for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(300
|
)
|
Net
(loss) income
|
|
$
|
(1,349,559
|
)
|
$
|
157,885
|
|
$
|
(2,271,112
|
)
|
$
|
(50,645
|
)
|
$
|
(16,682,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.01
|
)
|
$
|
0.00
|
|
$
|
(0.01
|
)
|
$
|
(0.00
|
)
|
|
n/a
|
|
Diluted
|
|
$
|
(0.01
|
)
|
$
|
0.00
|
|
$
|
(0.01
|
)
|
$
|
(0.00
|
)
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
165,933,810
|
|
|
126,486,518
|
|
|
152,760,644
|
|
|
126,486,518
|
|
|
n/a
|
|
Diluted
|
|
|
165,933,810
|
|
|
368,700,442
|
|
|
152,760,644
|
|
|
126,486,518
|
|
|
n/a
|
|
See
accompanying notes to condensed financial statements.
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
CONDENSED
STATEMENTS OF DEFICIENCY IN STOCKHOLDERS’ EQUITY
FOR
THE PERIOD JULY 9, 1998 (Date of Inception) THROUGH
June
30, 2007
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
Deficiency
|
|
|
|
Number
of
|
|
|
|
|
|
|
|
Additional
|
|
During
the
|
|
in
|
|
|
|
Common
|
|
Common
|
|
Subscription
|
|
Deferred
|
|
Paid-in
|
|
Development
|
|
Stockholders'
|
|
|
|
Shares
|
|
Stock
|
|
Receivable
|
|
Compensation
|
|
Capital
|
|
Stage
|
|
Equity
|
|
Balance,
July 9, 1998 (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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
(Continued
on Next Page)
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
CONDENSED
STATEMENTS OF DEFICIENCY IN STOCKHOLDERS’ EQUITY
FOR
THE PERIOD JULY 9, 1998 (Date of Inception) THROUGH
June
30, 2007
(Unaudited)
(Continued
from Preceding Page)
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
Deficiency
|
|
|
|
Number
of
|
|
|
|
|
|
|
|
Additional
|
|
During
the
|
|
in
|
|
|
|
Common
|
|
Common
|
|
Subscription
|
|
Deferred
|
|
Paid-in
|
|
Development
|
|
Stockholders'
|
|
|
|
Shares
|
|
Stock
|
|
Receivable
|
|
Compensation
|
|
Capital
|
|
Stage
|
|
Equity
|
|
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
|
|
Conversion
of convertible notes payable at conversion rates ranging from $0.00423
to
$0.0105 per share, including applicable derivative value
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,644,857
|
)
|
|
(7,644,857
|
)
|
Balance,
December 31, 2005
|
|
|
126,486,518
|
|
|
126,487
|
|
|
-
|
|
|
(285,307
|
)
|
|
7,050,165
|
|
|
(11,026,197
|
)
|
|
(4,134,852
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting
of deferred compensation
|
|
|
|
|
|
|
|
|
|
|
|
84,972
|
|
|
|
|
|
|
|
|
84,972
|
|
Adjust
presentation of deferred compensation
|
|
|
|
|
|
|
|
|
|
|
|
200,335
|
|
|
(200,335
|
)
|
|
|
|
|
-
|
|
Vesting
of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153,577
|
|
|
|
|
|
153,577
|
|
Conversion
of convertible notes at conversion rates ranging from $0.00633 to
$0.0278
per share, including applicable derivative value
|
|
|
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
|
|
|
812,100
|
|
|
812
|
|
|
|
|
|
|
|
|
114,593
|
|
|
|
|
|
115,405
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,384,933
|
)
|
|
(3,384,933
|
)
|
Balance,
December 31, 2006
|
|
|
136,420,423
|
|
$
|
136,420
|
|
$
|
-
|
|
$
|
-
|
|
$
|
7,614,681
|
|
$
|
(14,411,130
|
)
|
$
|
(6,660,029
|
)
|
(Continued
on Next Page)
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
CONDENSED
STATEMENTS OF DEFICIENCY IN STOCKHOLDERS’ EQUITY
FOR
THE PERIOD JULY 9, 1998 (Date of Inception) THROUGH
June
30, 2007
(Unaudited)
(Continued
from Preceding Page)
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
Deficiency
|
|
|
|
Number
of
|
|
|
|
|
|
|
|
Additional
|
|
During
the
|
|
in
|
|
|
|
Common
|
|
Common
|
|
Subscription
|
|
Deferred
|
|
Paid-in
|
|
Development
|
|
Stockholders'
|
|
|
|
Shares
|
|
Stock
|
|
Receivable
|
|
Compensation
|
|
Capital
|
|
Stage
|
|
Equity
|
|
Balance,
December 31, 2006
|
|
|
136,420,423
|
|
$
|
136,420
|
|
$
|
-
|
|
$
|
-
|
|
$
|
7,614,681
|
|
$
|
(14,411,130
|
)
|
$
|
(6,660,029
|
)
|
Conversion
of convertible notes payable at conversion rates ranging from $0.0096
to
$0.0387 per share, including applicable derivative value
|
|
|
42,000,000
|
|
|
42,000
|
|
|
|
|
|
|
|
|
3,102,179
|
|
|
|
|
|
3,144,179
|
|
Issued
stock at $0.0782 per share for services rendered
|
|
|
95,000
|
|
|
95
|
|
|
|
|
|
|
|
|
7,331
|
|
|
|
|
|
7,426
|
|
Issued
stock at $0.01333 per share in settlement of liability
|
|
|
470,250
|
|
|
471
|
|
|
|
|
|
|
|
|
5,799
|
|
|
|
|
|
6,270
|
|
Issued
stock at $0.0217 per share for legal fees
|
|
|
2,075,000
|
|
|
2,075
|
|
|
|
|
|
|
|
|
42,925
|
|
|
|
|
|
45,000
|
|
Cashless
exercise of $0.01 warrants, including applicable derivative
value
|
|
|
64,879
|
|
|
65
|
|
|
|
|
|
|
|
|
2,465
|
|
|
|
|
|
2,530
|
|
Vesting
of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,944
|
|
|
|
|
|
250,944
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,271,112
|
)
|
|
(2,271,112
|
)
|
Balance,
June 30, 2007
|
|
|
181,125,552
|
|
$
|
181,126
|
|
$
|
-
|
|
$
|
-
|
|
$
|
11,026,324
|
|
$
|
(16,682,242
|
)
|
$
|
(5,474,792
|
)
|
See
accompanying notes to condensed financial statements.
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
CONDENSED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For
the Six Months Ended June 30,
|
|
For
the Period From July 19, 1998 (inception) through
|
|
|
|
2007
|
|
2006
|
|
June
30, 2007
|
|
|
|
|
|
(Restated)
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,271,112
|
)
|
$
|
(50,645
|
)
|
$
|
(16,682,242
|
)
|
Adjustments
to reconcile net loss to cash operating activities
|
|
|
|
|
|
|
|
|
|
|
used
in operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
3,229
|
|
|
23,303
|
|
|
100,757
|
|
Change
in fair value of derivative liabilities related to convertible notes
and
warrants
|
|
|
565,070
|
|
|
(1,031,319
|
)
|
|
5,757,006
|
|
Loss
on abandonment of assets
|
|
|
4,304
|
|
|
|
|
|
8,094
|
|
Vesting
of stock options
|
|
|
250,944
|
|
|
176,384
|
|
|
1,892,560
|
|
Common
stock or warrants issued in exchange for services
|
|
|
58,696
|
|
|
|
|
|
523,486
|
|
Cancellation
of stock options
|
|
|
|
|
|
|
|
|
193,275
|
|
Accreted
interest on convertible notes payable
|
|
|
708,035
|
|
|
207,556
|
|
|
1,786,999
|
|
Beneficial
conversion feature discount
|
|
|
|
|
|
|
|
|
298,507
|
|
Gain
on extinguishment of debt
|
|
|
|
|
|
|
|
|
(510,105
|
)
|
Acquisition
costs
|
|
|
|
|
|
|
|
|
65,812
|
|
Change
in working capital components:
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(1,212
|
)
|
|
33,000
|
|
|
(2,550
|
)
|
Prepaid
expenses
|
|
|
(19,792
|
)
|
|
19,637
|
|
|
(21,667
|
)
|
Deposits
and other assets
|
|
|
(30,494
|
)
|
|
|
|
|
(86,829
|
)
|
Accounts
payable
|
|
|
(174,991
|
)
|
|
10,873
|
|
|
55,231
|
|
Short-term
notes payable
|
|
|
(2,398
|
)
|
|
(6,482
|
)
|
|
13,125
|
|
Accrued
liabilities
|
|
|
97,071
|
|
|
8,553
|
|
|
173,901
|
|
Accrued
interest payable
|
|
|
66,925
|
|
|
34,328
|
|
|
463,211
|
|
Net
cash used in operating activities
|
|
|
(745,725
|
)
|
|
(574,812
|
)
|
|
(5,971,429
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchases
of furniture and equipment
|
|
|
(966
|
)
|
|
(3,854
|
)
|
|
(42,334
|
)
|
Net
cash used in investing activities
|
|
|
(966
|
)
|
|
(3,854
|
)
|
|
(42,334
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from sale of common stock, net
|
|
|
|
|
|
|
|
|
2,079,058
|
|
Proceeds
from issuance of notes payable, net of origination fees
|
|
|
760,000
|
|
|
|
|
|
4,252,805
|
|
Proceeds
from repricing of warrants
|
|
|
|
|
|
|
|
|
17,422
|
|
Payment
of note payable
|
|
|
|
|
|
|
|
|
(34,221
|
)
|
Net
cash provided by financing activities
|
|
|
760,000
|
|
|
-
|
|
|
6,315,064
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
13,309
|
|
|
(578,666
|
)
|
|
301,301
|
|
Cash
at beginning of the period
|
|
|
287,992
|
|
|
800,472
|
|
|
-
|
|
Cash
at end of the period
|
|
$
|
301,301
|
|
$
|
221,806
|
|
$
|
301,301
|
|
(Continued
on Next Page)
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
CONDENSED
STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued
from Preceding Page)
Supplemental
disclosure of non-cash investing and financing activities:
During
the six months ended June 30, 2007, the Company issued 42,000,000 shares of
common stock upon conversion of $882,240 of secured convertible notes payable.
The value of the related derivative at the time of conversion was $2,261,939,
which was credited to additional paid-in capital.
During
the six months ended June 30, 2007, the Company issued 64,879 shares of stock
upon the cashless exercise of a warrant. The value of the related derivative
at
the time of conversion was $2,530.
See
accompanying notes to condensed financial statements.
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
NOTES
TO CONDENSED FINANCIAL STATEMENTS
June
30, 2007 and 2006
(Unaudited)
NOTE
A - ORGANIZATION AND BASIS OF PRESENTATION
Organization
and Business
On
July
30, 2004, Grant Ventures, Inc., a Nevada corporation, acquired Impact
Diagnostics, Inc., a Utah corporation organized on July 9, 1998, through the
merger of Grant Ventures, Inc.’s wholly owned subsidiary, Impact Acquisition
Corporation, with Impact Diagnostics, 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. Grant
Ventures, Inc. changed its name to Grant Life Sciences, Inc. (the Company)
in
November 2004. Impact Acquisition Corporation and Impact Diagnostics, Inc.
were
subsequently dissolved.
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.
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 have consisted primarily 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. There can be no
assurance of either obtaining additional funding or achieving profitable
operations. No adjustments have been made to the accompanying condensed
financial statements that might result from the outcome of this
uncertainty.
Interim
Financial Information
The
interim financial information as of June 30, 2007, and for the three and
six-month periods ended June 30, 2007 and 2006, is unaudited. The condensed
balance sheet as of December 31, 2006 is derived from audited financial
statements, the report on which included an explanatory paragraph that there
is
substantial doubt as to the Company’s ability to continue as a going concern.
The accompanying financial statements have been prepared in accordance with
U.S.
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and notes required
by
U.S. generally accepted accounting principles for complete financial statements.
The accompanying condensed financial statements and notes should be read in
conjunction with the 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 and six-month periods ended June 30, 2007 are not
necessarily indicative of the results that can be expected for the entire year
ending December 31, 2007.
Certain
reclassifications have been made to prior period financial statements to conform
with the current presentation.
NOTE
B - SIGNIFICANT ACCOUNTING POLICIES
Cash
Equivalents
The
Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
Concentration
of Credit Risk
Financial
instruments and related items that 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 from the accounts 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 from the accounts 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.
Convertible
Notes and Related Discount
The
convertible notes give the holder the right to convert such notes to common
stock at a specified discount from the market price of the Company’s common
stock at the time of conversion. The size of the discount provides the holder
with substantial incentive to convert the notes to common stock, such that
it is
expected that the notes will be converted to common stock rather than repaid.
Thus, when a convertible note is issued, a note discount equivalent to the
face
amount of the note is established. The note discount is subsequently accreted
to
interest expense over the life of the note.
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.
Revenue
Recognition
Revenues
are recognized in the period that the following four 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 asset and 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 income 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 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. During periods of 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 U.S. generally accepted
accounting principles 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 U.S.
generally accepted accounting principles, 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 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 restated its 2006 and 2005 financial statements (as reported 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 reported net income (loss) for
the
three and six-month periods ended June 30, 2006, were changed from that
initially reported in the Form 10-QSB for the second quarter of 2006, as
follows:
Net
Income (Loss)
|
|
Previously
Reported
|
|
Change
|
|
As
Restated
|
|
For
the three months ended June 30, 2006
|
|
$
|
142,312
|
|
$
|
15,573
|
|
$
|
157,885
|
|
For
the six months ended June 30, 2006
|
|
|
(64,730
|
)
|
|
14,085
|
|
|
(50,645
|
)
|
NOTE
D - CONVERTIBLE NOTES PAYABLE AND WARRANTS
During
the first six months of 2007, the Company issued 42,000,000 common shares upon
the conversion of $882,240 of convertible notes payable in several separate
transactions. The fair values of the related derivative liabilities at the
dates
of the respective conversions totaled $2,261,939, which amounts were credited
to
additional paid-in capital.
Also
during the first six months of 2007, the Company issued an additional $800,000
of convertible notes plus warrants to purchase an additional 12,000,000 shares
of the Company’s common stock.
As
of
June 30, 2007, the convertible notes were convertible into 120,044,241 shares
of
the Company’s common stock based on the market price of the common
stock.
The
following table summarizes changes in outstanding warrants during the six months
ended June 30, 2007, plus the related weighted average exercise price and the
related remaining term of such warrants:
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Number
of
|
|
Exercise
|
|
|
|
|
|
Shares
|
|
Price
|
|
Expiration
Date
|
|
Balances,
December 21, 2006
|
|
|
13,549,432
|
|
$
|
0.310
|
|
|
July
2009 to December 2013
|
|
Issued
|
|
|
12,000,000
|
|
$
|
0.065
|
|
|
February
2014 to June 2014
|
|
Exercised
|
|
|
(71,798
|
)
|
$
|
0.010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
June 30, 2007
|
|
|
25,477,634
|
|
$
|
0.194
|
|
|
July
2009 to June 2014
|
|
NOTE
E - STOCK OPTIONS
On
June
27, 2007, the Company’s board of directors approved establishment of the 2007
Incentive Stock Plan (the 2007 Plan) under which options to purchase 30,000,000
shares of the Company’s common stock can be granted. Terms of the 2007 Plan are
essentially equivalent to the 2004 Incentive Stock Plan (the 2004 Plan)
previously approved by the Company’s shareholders. After consideration of the
grants described in the following paragraph, options to purchase an aggregate
of
1,325,000 and 8,924,915 shares of the Company’s common stock can be granted
under the 2004 Plan and 2007 Plan, respectively.
During
the second quarter of 2007, the Company granted directors, officers, employees
and a consultant options to purchase an aggregate of 24,900,000 shares of the
Company’s common stock. The exercise price of such options is $0.03 per share,
which was the closing price of the Company’s common stock on the grant date. The
options vest over a period of two years; however, vesting is accelerated,
subject to certain restrictions, in the event of a merger, the acquisition
of
the Company by another entity or other similar transaction. The options have
a
contractual life of ten years.
The
fair
value of the stock options issued, as described in the preceding paragraph,
was
determined using the Black-Scholes pricing model, an expected term of five
years, a volatility rate of 201%, a quarterly dividend rate of 0.00%, and a
risk
free interest rate of 4.47%.
The
Company recorded $245,697 and $250,944 of compensation expense related to these
option grants plus previously issued option grants existing as of December
31,
2006, for the three and six-month periods ended June 30, 2007, respectively.
Compensation expense during the corresponding periods of 2006 was $97,854 and
$182,826, respectively.
The
following table summarizes changes in outstanding stock options during the
six
months ended June 30, 2007, and the related weighted average exercise
price:
|
|
Total
Options
|
|
Vested
Options
|
|
Unvested
Options
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
Number
of
|
|
Exercise
|
|
Number
of
|
|
Exercise
|
|
Number
of
|
|
Exercise
|
|
|
|
Shares
|
|
Price
|
|
Shares
|
|
Price
|
|
Shares
|
|
Price
|
|
Balances,
December 21, 2006
|
|
|
4,620,952
|
|
$
|
0.170
|
|
|
4,037,618
|
|
$
|
0.170
|
|
|
583,334
|
|
$
|
0.170
|
|
Grants
|
|
|
24,900,000
|
|
$
|
0.030
|
|
|
8,300,006
|
|
$
|
0.030
|
|
|
16,599,994
|
|
$
|
0.030
|
|
Forfeitures
|
|
|
(1,325,000
|
)
|
$
|
0.180
|
|
|
(1,066,666
|
)
|
$
|
0.180
|
|
|
(258,334
|
)
|
$
|
0.180
|
|
Vesting
|
|
|
|
|
|
|
|
|
166,667
|
|
$
|
0.115
|
|
|
(166,667
|
)
|
$
|
0.115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
June 30, 2007
|
|
|
28,195,952
|
|
$
|
0.045
|
|
|
11,437,625
|
|
$
|
0.065
|
|
|
16,758,327
|
|
$
|
0.030
|
|
Unrecognized
compensation expense applicable to unvested options as of June 30, 2007, was
$489,514.
NOTE
F - INCOME TAXES
The
Company incurred a net loss of $2,271,112 and $50,645 for the six months ended
June 30, 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 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
June 30, 2007, the Company has net operating loss carryforwards of approximately
$7,875,000, which begin expiring in 2019.
NOTE
G - SUBSEQUENT EVENTS
Subsequent
to June 30, 2007 and through August 7, 2007, the Company issued 55,697,780
shares of common stock upon the conversion of $543,583 of convertible notes
in
various transactions.
Item
2. Management’s Discussion and Analysis of Financial Condition 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 June
30,
2007, it has not generated significant revenues. All audit reports issued to
date have included an explanatory paragraph that there is substantial doubt
as
to 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 June 30, 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
June
30, 2007, the Company had a working capital deficiency of $472,017. The
Company’s cash balance at June 30, 2007 was $301,301. 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 September 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
its
existence.
Results
of Operations
The
Company has never been profitable. Since inception, aggregate losses approximate
$16,682,000. Since June 2005, the Company has incurred non-cash charges of
nearly $8,593,000 related to interest expense on the Company’s convertible notes
and charges arising from the change in fair value of the derivative liabilities
related to the convertible notes and warrants to purchase common stock of the
Company.
Aggregate
results of operations for the three and six-month periods ended June 30, 2007
and 2006, are reasonably comparable except for the impact of the non-cash items
described in the preceding paragraph and compensation expense arising from
stock
options.
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
June
30, 2007. Based on such evaluation, they have concluded, as of the end of such
period, that our disclosure controls and procedures as of that date were
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.
Earlier
this year, the Company’s chief financial officer, who joined the Company April
9, 2007, determined that the derivative liabilities related to the Company’s
convertible notes and warrants had not been accounted for in accordance with
U.S. generally accepted accounting principles. This is explained more fully
in
Note C to the condensed 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 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, which existed
at
March 31, 2007, has been substantially mitigated by the addition of the current
chief financial officer. Upon further review by the Company’s principal
executive officer and principal financial officer, and given the limited size
of
the Company’s accounting staff and the Company’s limited resources, it has been
determined that it is not practical to make further changes with respect to
the
disclosure controls and procedures of the Company.
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: August
13, 2007
|
|
/s/
Hun-Chi Lin
|
|
Hun-Chi
Lin
|
|
President
and Chief Scientist
|
|
|
|
Date: August
13, 2007
|
|
/s/
Doyle Judd
|
|
Doyle
Judd
|
|
Chief
Financial Officer
|