Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-KSB
(Mark
One)
x
ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF 1934
For
the Fiscal Year Ended December 31, 2007
o
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the transition period from _________ to __________
Commission
file number: 000-50133
GRANT
LIFE SCIENCES, INC.
(Exact
name of registrant as specified in its charter)
Nevada
|
82-0490737
|
(State
or other jurisdiction of
incorporation
or organization)
|
(IRS
Employer
Identification
No.)
|
1787
East Ft. Union Blvd., Suite 202,
Salt
Lake City, Utah 84121
(Address
of principal executive offices)
(801)
733-0878
(Registrant's
telephone number, including area code)
N/A
(Former
name, former address and former fiscal year, if changed since last
report)
Securities
registered under Section 12(b) of the Exchange Act: None.
Securities
registered pursuant to Section 12(g) of the Exchange Act: Common
Stock, par value $.001.
Indicate
by check mark whether the Registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 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
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained,
to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. o
State
Registrant's revenues for fiscal year ended December 31, 2007: None.
State
the
aggregate market value of the common stock held by non-affiliates of the
Registrant: $5,078,496
as of February
22, 2008 based
on
the average bid and asked price of $0.0165
per
share as of February
22, 2008.
State
the
number of shares outstanding of each of the registrant's classes of common
equity, as of the latest practicable date: 312, 875,613
shares issued and outstanding as of February
22, 2008.
TABLE
OF CONTENTS
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Page
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PART
I
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Item
1.
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DESCRIPTION
OF BUSINESS
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3
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Item
2.
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DESCRIPTION
OF PROPERTY
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12
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Item
3.
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LEGAL
PROCEEDINGS
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13
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Item
4.
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
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13
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PART
II
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Item
5.
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MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES
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14
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Item
6.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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16
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Item
7.
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FINANCIAL
STATEMENTS
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F-1
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Item
8.
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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17
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Item
8A.
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CONTROLS
AND PROCEDURES
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18
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Item
8B.
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OTHER
INFORMATION
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18
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PART
III
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Item
9.
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DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION
16(b) OF THE EXCHANGE ACT
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19
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Item
10.
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EXECUTIVE
COMPENSATION
|
20
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Item
11.
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
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22
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Item
12.
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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24
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Item
13.
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EXHIBITS
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25
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Item
14.
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PRINCIPAL
ACCOUNTANT FEES AND SERVICES
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26
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SIGNATURES
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27
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FORWARD- LOOKING
STATEMENTS
In
this
annual report, references to “Grant Life Sciences,” “GLIF,” “the Company,” “we,”
“us,” and “our” refer to Grant Life Sciences, Inc.
This
Annual Report on Form 10-KSB (including the section regarding Management's
Discussion and Analysis or
Plan
of Operation )
contains forward-looking statements regarding our business, financial condition,
results of operations and prospects. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates" and similar expressions
or
variations of such words are intended to identify forward-looking statements,
but are not deemed to represent an all-inclusive means of identifying
forward-looking statements as denoted in this Annual Report on Form 10-KSB.
Additionally, statements concerning future matters are forward-looking
statements.
Although
forward-looking statements in this Annual Report on Form 10-KSB reflect the
good
faith judgment of our management,
such statements can only be based on facts and factors currently known by us.
Consequently, forward-looking statements are inherently subject to risks and
uncertainties and actual results and outcomes may differ materially from the
results and outcomes discussed in or anticipated by the forward-looking
statements. Factors that could cause or contribute to such differences in
results and outcomes include, without limitation, those specifically addressed
under the heading "Risks Related to Our Business" below, as well as those
discussed elsewhere in this Annual Report on Form 10-KSB
Readers
are urged not to place undue reliance on these forward-looking statements,
which
speak only as of the date of this Annual Report on Form 10-KSB .
We file
reports with the Securities and Exchange Commission ("SEC"). We make available
on our website under "Investor Relations/SEC Filings," free of charge, our
annual reports on Form 10-KSB, quarterly reports on Form 10-QSB, current reports
on Form 8-K and amendments to those reports as soon as reasonably practicable
after we electronically file such materials with or furnish them to the SEC.
Our
website address is www. grantlifesciences.com.
You can also read and copy any materials we file with the SEC at the SEC's
Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. You can
obtain additional information about the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet
site (www.sec.gov) that contains reports, proxy and information statements,
and
other information regarding issuers that file electronically with the SEC,
including us.
We
undertake no obligation to revise or update any forward-looking statements
in
order to reflect any event or circumstance that may arise after the date of
this
Annual Report on Form 10-KSB, except as required by law .
Readers
are urged to carefully review and consider the various disclosures made
throughout the entirety of this A nnual
Report, which are
designed to advise interested parties of the risks and factors that may affect
our business, financial condition, results of operations and
prospects.
PART
I
ITEM
1. - BUSINESS
Origin
of Grant Life Sciences, Inc.
On
July
30, 2004, Grant Ventures, Inc., a Nevada corporation (“Grant Ventures”),
acquired Impact Diagnostics, Inc., a Utah corporation organized on July 9,
1998
(“Impact Diagnostics”), through the merger of Grant Ventures’ wholly owned
subsidiary, Impact Acquisition Corporation, with Impact Diagnostics. Grant
Ventures was an inactive publicly registered shell corporation with no
significant assets or operations. Impact Diagnostics had been organized to
develop certain technologies owned by Dr. Yao Ziong Hu and was initially funded
by its founders, supplemented by two additional rounds of private funding.
Grant
Ventures changed its name to Grant Life Sciences, Inc. in November 2004. Impact
Acquisition Corporation and Impact Diagnostics were subsequently
dissolved.
Overview
of Our Business
We
are
developing protein-based screening tests to screen wome n
for
cervical cancer and pre-cancerous conditions that may become cervical
cancer. Our tests detect the presence of certain antibodies that appear
only when cervical cancer or certain pre-cancerous conditions are present in
the
body. Our tests are performed by analyzing a small amount of the patient’s
blood.
In
one
version of our test, the blood sample is analyzed in a clinical setting using
standard laboratory equipment and analytic software,
which
generally can produce completed results in about 2 hours. Our rapid test
will provide easy-to-read results in approximately 15 minutes and is designed
to
be administered by a health professional in a doctor’s office, hospital, and
clinic or even at home. This planned cervical cancer test uses proprietary
technology to detect the presence of specific antibodies associated with
cervical pre-cancers and cancer. We continue to test the validity of the
results and believe
that if
they prove valid, we
may be
able to use that technology to develop rapid tests for other diseases and
cancers.
In
November 2007, we announced the signing of a final agreement with Alphagenics
Diaco Biotechnologies S.r.l. (Italy) to in-license
the manufacturing and marketing rights to Alphagenics’ molecular diagnostic test
for human papilloma viruses (“HPVs”) exclusively in China and the United States
and non-exclusively in Europe, India, Australia and Japan.
The
Alphagenics HPV test in-licensed by the Company is a DNA-based diagnostic that
uses standard molecular diagnostic equipment found in most commercial
laboratories. Alphagenics’ HPV DNA test complements the HPV blood test that the
Company has been developing to detect the presence of antibodies produced only
by cancer-causing HPV types. There are some 100 types of HPV; however, only
about 7 to 15 HPV types cause most cervical cancers.
The
introduction of the Alphagenics HPV test not only allows commercial laboratories
to provide molecular testing but also complements the current introduction
of
vaccines against HPVs. The currently approved vaccine in the United States
provides for inoculation against four types of HPV for use in girls and women
9
to
26 years
of age, who presumably have not been exposed to the viruses. However, women
who
have reached sexual maturity and have not been exposed to one of the four
HPV-types may benefit from the vaccination, according to the Advisory Committee
on Immunization Practices. Consequently, the Alphagenics test can be used by
the
balance of the female population to determine exposure and the possible use
of
the vaccine if found negative.
In
addition, the Alphagenics test can be used in the current gynecological regimen
to help qualify Pap test results in the case of ambiguous readings, at a cost
less than the currently approved molecular test.
In
October 2007, we announced the signing of the final agreement with Drs.
Sveshnikov and Kiselev of the Russian Republic for the in-licensing of certain
of their technologies that are highly complementary to our antibody-based test
for detecting cervical cancer. Their technologies
are
used in
the form of a test to detect specific cervical cancer-causing proteins. The
test
utilizes antibodies against these cancer-causing proteins for detection. Thus
far, the test is designed to detect specific cancer-causing proteins and, once
fully validated and expanded, would be a synergistic and complementary test
to
existing Pap technology. It would provide for very low-cost HPV testing as
currently performed in Western countries, without the need for additional
cervical specimens beyond what is now taken. In addition, large capital outlays
would not be required, since most laboratories can readily do the necessary
testing.
Drs.
Sveshnikov and Kiselev have already tested their technology in Russia and we
will be further validating their tests with more specimens from Russia and
the
United States in controlled clinical settings.
In
September 2007, we received notice from the U.S. Patent and Trademark Office
that Patent No. 7,267,961—‘PEPTIDES FROM THE E7 PROTEIN OF HUMAN PAPILLOMA
VIRUSES 16 AND 18 FOR DETECTING AND/OR DIAGNOSING CERVICAL AND OTHER HUMAN
PAPILLOMA VIRUS ASSOCIATED CANCERS’ had been granted.
This
patent further strengthens our intellectual property portfolio focusing on
HPV
detection and diagnostic technologies, including domestic patents, international
patents and patent applications that Grant Life Sciences is overseeing. This
patent would protect our investment to date in the development of our
serum-based test for cervical cancer.
In
January 2007, we announced the signing of a memorandum of understanding (“MOU”)
with Union Clinical Laboratory (“UCL”) in Taiwan, the top laboratory serving the
clinical diagnostics market in Taiwan. UCL will play a critical role to validate
our assays with its professional clinical trial laboratory services; meanwhile,
the diagnostics products are to be manufactured in Taiwan, which in turn offers
lower cost and high quality for making them available and affordable to
global
medical specialists.
We
also
have the exclusive worldwide rights to diagnostic devices for HIV-1, HIV-2
and
dengue fever testing, and a proprietary diagnostic reagent, which is a key
ingredient commonly used by leading manufacturers of rapid tests. We acquired
these rights from AccuDx Corporation in March 2005 for a period of ten
years.
Cervical
Cancer
Invasive
cervical cancer affects over 500,000 women worldwide annually, and approximately
300,000 women die each year from this disease (National Institutes of Health
Notices, Federal Press Release Library Acc ession
Number A00295; Cleveland Clinic Journal of Medicine, 70:641). Cervical
cancer is second only to breast cancer as the leading cause of cancer death
among women (Cancer Journal, 9:348). In the United States, Western Europe
and other countries where there is widespread screening and a well developed
testing or diagnostic infrastructure, invasive cervical cancer is less
prevalent. In Latin America, China, India and many other countries, there
is a much higher incidence of invasive cervical cancer because of the lack
of
testing and limited diagnostic testing infrastructure.
Pap
tests, a microscopic examination of cells scraped from the cervix, have been
the
most prevalent cervical cancer screening method for more than 50 years. In
recent years, gene- or DNA-based HPV tests have been introduced as an adjunct
to
the Pap test. In the United States, more than 82% of women 25 years or
older have received
Pap tests over the last three years (Cancer, 97:1528), equated to a total of
more than 50 million Pap tests performed each year (CDC Morbidity and Mortality
Weekly Report, 49:1001). An equivalent number of Pap tests are performed
annually across the rest of the world, mainly in Canada, Western Europe and
Japan. Outside the United States, approximately 1.7 billion women do not
undergo regular cervical cancer testing (United States Census Bureau
International Data Base statistics). In many cases, this scarcity of
testing is the result of a lack of economic resources, as well as social,
cultural and/or religious factors which may contribute to women not undergoing
cervical cancer screening. Under these circumstances, in some nations, the
mortality rate of cervical cancer is not unlike that for incidence of cervical
cancer (Journal of American Medical Association, 285:3107; Annals of Oncology,
16:489). In other words, the mortality rate for those with cervical cancer
may
approach 100% in some places.
Virtually
all-cervical cancer is caused by HPV. However, of the more than 100 specific
types of HPV, the scientific community believes only 7 to 15 are positively
correlated with most cervical cancers. There are two types of cervical
cancer. Squamous cell carcinoma, a cancer of the flat, scale-like cells
that coat the cervix, is the most prevalent type. Adenocarcinoma is a more
virulent cancer that stems from cervical cells with glandular or secretory
properties that are increasing in incidence (Canadian Medical Association
Journal, 164:1151) but often goes undetected by Pap tests. The non-detection
of
adenocarcinomas is largely due to problems in collecting and interpreting the
correct cervical cells (Cancer [Cancer Cytopathology], 99:324 and
102:280).
Traditional
Testing for Cervical Cancer
Pap
Tests
The
most
common means of screening for cervical cancer is the Pap test, which has been
used as the primary screen for over 50 years. The Pap test is performed by
swabbing the cervical surface to collect cells that are then placed on a
microscopic slide for examination. A specially-trained, licensed
cytotechnologist, usually in a hospital or pathology laboratory, observes the
cells using a microscope and other specialized equipment to determine whether
abnormal cells are present. When a cytotechnologist identifies a potential
abnormality, a cytopathologist verifies the interpretation. A second
generation Pap test, known as a “liquid Pap test”, involves a special procedure
that puts cells onto a microscopic slide in a manner that is intended to allow
for more clear-cut scrutiny by the cytotechnologist.
Women
whose Pap test results are normal do not undergo further inspection, but instead
characteristically return for routine Pap screening on an annual basis.
However, women with abnormal Pap test results may be subjected to follow-up
Pap
tests, colposcopy (a visual examination of the cervix with the aid of a
distinctive microscope) and biopsy to clearly identify cancerous
conditions. Advanced lesions may then be removed with a cauterizing device
or scalpel, and in some cases women undergo a hysterectomy, or removal of the
entire cervix. If a patient’s Pap test cannot specifically be classified
as normal or abnormal, the result is classified as “equivocal”, or Atypical
Squamous Cells of Undetermined Significance (ASC-US). This occurs in
approximately 5
to 7% of
cases in the United States (Modern Pathology, 12:335). Patients with
equivocal Pap test results typically will undergo multiple repeat Pap
tests. Many of these patients will also undergo a colposcopy and a
biopsy. However, 80% of women with ASC-US who undergo an expensive
colposcopy do not have cervical disease or develop cervical cancer (Journal
of
Medical Screening, 3:29).
While
Pap
tests have been an important screening tool for many years and have helped
reduce deaths caused by cervical cancer, they still have some significant
shortcomings, including:
·
limited predictive value — In the
United States, each year several million colposcopies are performed on patients
with abnormal Pap test results, but only 20% of the colposcopies reveal cervical
cancer or pre-cancerous lesions (Journal of the American Medical Association,
287:2382).
·
false negative results — In the
United States,
Pap
tests
fail to diagnose cervical cancer or pre-cancerous conditions that often lead
to
cervical cancer in approximately 30% to 60% (depending on whether a liquid
Pap
test or a regular Pap test is used) of the cases where cervical cancer or
pre-cancerous conditions are present (Archives of Pathology & Laboratory
Medicine, 122:139).
·
false positive results —
Distinguishing between cervical cancer or pre-cancerous states and benign
conditions mimicking them can be difficult via Pap tests. (Diagnostic
Cytopathology, 28:23).
·
inability to detect adenocarcinomas —
Pap tests are unable to detect the presence of the more virulent adenocarcinoma
(Clinical Laboratory Medicine, 20:140).
·
invasive procedure — Pap tests
require healthcare professionals to extract cells from the cervix by inserting
a
collecting device into the cervix. In some non-Western countries, women
may be inhibited from undergoing this procedure for social, cultural or
religious reasons.
·
high costs — Highly trained
physicians and other specialists are required to collect, examine and interpret
the Pap test specimen, which contributes to a higher cost structure for the
Pap
test. Following a positive test result, colposcopies and biopsies are required,
raising the overall potential cost of screening.
Some
of
these deficiencies may be due primarily to visual limitations associated with
microscopic examination, the inadequate or inappropriate sampling of cells,
other technical problems, and the subjective nature of cytology
interpretation.
HPV
Tests
In
the
past few years, HPV testing has been introduced as another element of the
cervical cancer screening process. The HPV test is a gene-based test that
detects the presence or absence of certain cancer-causing HPV. Like the
Pap test, it is performed by swabbing the cervix to extract cells. The
specimen is then analyzed using expensive specialized equipment and software
programs in a laboratory.
In
the
United States, women with ASC-US results from an initial Pap test often undergo
an HPV test to determine if HPV is present. That test can be performed
using the same sample taken for a liquid Pap test or a stand-alone one.
HPV testing has also been introduced in conjunction with Pap tests as an
optional screening protocol for women 30 years of age and older, even in the
absence of ASC-US or worse results.
While
HPV
tests are helpful in detecting the presence of HPV, which is a precursor for
virtually all cervical cancer, they too suffer from some significant
shortcomings:
·
limited predictive value — HPV tests
actually detect virus infection and not cervical cancer and/or associated
pre-cancerous lesions. Although HPV is an obligate cause of cervical
cancer, only 2% of patients testing positive for HPV will eventually progress
to
the disease (Journal of Clinical Microbiology, 42:2470).
·
invasive procedure — Like Pap smear
cytology, the HPV test requires that the attending healthcare professional
get
cells by inserting a collection device into the cervix. As earlier stated,
women
in certain non-Western cultures may be prohibited from undergoing such a
procedure for social, cultural or religious reasons.
·
high cost and complexity — The HPV
test specimen must be processed by special and dedicated, expensive laboratory
equipment and interpretational computer software by highly trained technicians,
thus the higher costs associated with HPV tests. Following a positive test
result, colposcopies
and
biopsies are required, thus further elevating diagnostic costs.
Our
Planned Cervical Cancer Test
We
are
developing cervical cancer tests that, if proven, will detect the presence
or
absence of specific antibodies and proteins that are produced only if
cancer-causing HPV is present in the body, and consequent oncogenic, or
cancer-promoting, changes have occurred. Cancer-causing HPV have unique
proteins that trigger the disease. Upon disease onset, the body makes
large numbers of antibodies to these unique proteins. By detecting
specific antibodies to cancer-causing HPVs, we believe that our tests will
be
able to more reliably determine whether a patient has cervical cancer or
pre-cancerous lesions than can Pap smear cytology or HPV testing.
Our
tests
involve the analysis of a small amount of blood taken from the patient. The
collection of small volumes of blood is widely accepted as being of “minimal
risk.”
It
is not necessary to probe the cervix to get results. Given the previously
discussed socio-religious hesitance or prohibitions as to obtaining cells from
the cervix, we believe our tests will have greater acceptability and/or
desirability than tests that involve obtaining cells from the cervix. Our tests
involve the following, readily completed steps:
·
The sample is placed into a receptacle
coated with proprietary detection proteins of a specific
nature.
·
Only certain antibodies to cancer-causing
HPVs can adhere to these proteins.
·
The container is then rinsed, thus
removing everything but antibodies that have adhered to the
proteins.
·
A special solution is added to the
container. This solution includes “detector” antibodies that attach to
those specific antibodies to cancer-causing HPVs adhered to the special detector
proteins. The solution changes color with attachment of the “detector”
antibodies, an indicator of a positive result (i.e., cervical cancer or a
pre-cancerous condition present).
We
are
developing two tests. One, known as the Enzyme Linked Immunosorbent Assay
Test (“ELISA”), is designed to be run in a laboratory. The blood specimen
is sent to the laboratory, where a laboratory technician runs the test using
standard, readily available laboratory equipment. No unique analytic or
diagnostic software is required, while such software is essential for HPV
testing. While test results typically are available in about two hours, we
anticipate that the typical turnaround time from the laboratory to the doctor
will be approximately one day. We believe that a doctor will be able to
order this test as one of a battery of tests that is run on a patient’s blood
sample after a typical office visit.
Our
second generation rapid test is designed to be a point-of-care test that will
be
able to be administered in the hospital, physician’s office, clinic or even at
home or in outdoor settings. The test kit will contain the required
container and reagents, with a color change indicating the presence of
cancer-causing proteins. We anticipate that the test will be able to
produce results within 10 to 15 minutes after administration of the test.
We
have
not yet completed the development of our cervical cancer tests. We are
continuing to refine the existing proteins and processes currently used in
our
tests and are testing other proteins and processes, which may be included in
our
tests in the future.
We
believe that, when completed, our tests will be a more accurate and efficient
way to diagnose cervical cancer for the following reasons:
·
greater accuracy — Our cervical
cancer tests will detect specific antibodies present only if cancer-causing
HPV
is present and cancer-related cellular changes have occurred. As a result,
we believe our tests will be able to more accurately diagnose cancer or
pre-cancerous conditions than do Pap and HPV tests, thus making for fewer false
positive or false negative results.
·
ability to detect adenocarcinomas -
Our antibody detection approach is well suited for finding adenocarcinomas
as
well as squamous cell carcinomas since cell samples are not
required.
·
less-invasive — Our tests require a
small amount of blood, which may be quickly and safely taken via a finger prick
or from a vein in the arm. We believe that in countries where women are
reluctant to allow a healthcare professional to sample their cervix, there
will
be greater willingness to allow blood sampling to ascertain cervical
disease.
·
reduced costs — We believe that
because our tests will be run by laboratory technicians using standard, readily
available equipment or by a healthcare professional using a point-of-care test,
overall costs for our screening tests will be less than experienced with Pap
or
HPV tests. In addition, by providing more accurate results, we believe
that our tests will reduce the number of repeated cervical cancer tests of
any
sort, along with expensive colposcopies, biopsies and related medical
procedures.
Initial
Cervical Cancer-Associated HPV Antibody Validation Studies
We
have
conducted initial studies to validate our planned cervical cancer tests.
In
the
United States, the Institutional Review Board (“IRB”) governs collection and use
of patient specimens for research and testing purposes. The IRB Committee at
Intermountain Health Care, the largest hospital facility in the intermountain
western United States, and at St. Mark’s Hospital in Salt Lake City, Utah,
approved the evaluation of our technology for screening blood serum from
patients, some of whom had negative Pap tests and some of whom had previously
been diagnosed with cervical cancer or intraepithelial lesions, the immediate
precursor to cervical cancer. These initial non-blind studies were performed
in
May 2003 by Ameripath, Inc. on a total of 65 American patient samples from
these IRB approved sources. Our tests detected cervical cancer or pre-cancerous
conditions 94% of the time such conditions existed and were able to rule out
cervical cancer or pre-cancerous conditions 82% of the time the patient did
not
have these conditions.
Similar
testing was done in April 2003, under a Chinese IRB equivalent, at the
China Cancer Institute, China Academy of Medical Sciences, on 70 samples, of
which over half were from cervical cancer patients. Our tests detected cervical
cancer or pre-cancerous conditions 97% of the time such conditions existed
and
were able to rule out cervical cancer or pre-cancerous conditions 85% of the
time the patient did not have these conditions.
The
initial studies conducted by Ameripath and in China used a “cut off” value or
measurement standard to differentiate benign from cancerous or pre-cancerous
conditions that is higher than would typically be used in a commercially
available test. We currently are refining our technology in order to enable
our
tests to achieve similar results using a measurement standard appropriate for
a
commercial cervical cancer diagnostic test.
We
are
reformatting the assay platform and will conduct validation studies on the
refined version of our cervical cancer test in the next few months. Once the
test is validated we will develop a proposed protocol of clinical trials and
other studies that will be used to support the submissions we intend to make
to
the FDA and other foreign regulatory authorities.
Cervical
Cancer-Associated HPV Antigen Detection Immunoassay Program
We
have
signed a final licensing agreement with Drs. Peter Sveshnikov and Vsevolod
Kiselev of the Russian Republic, for the in-licensing of technologies highly
complementary to our antibody-based test for detecting cervical cancer. The
Sveshnikov/Kiselev technology comes to us from the U.S. State Department through
its Bio-Industry Initiative (“BII”) program. The BII is designed to foster
medical and other biological research and development in the former Soviet
Union
and to convert former biowarfare scientists to productive peacetime
activities.
Sveshnikov
and Kiselev have developed an ELISA test to detect specific cancer-causing
proteins from HPV, the obligate cause of cervical cancer, in cervical mucous
and
cells (which make up liquid-based Pap samples). The test utilizes certain
monoclonal antibodies against these cancer-causing HPV proteins for detection.
So far, the test is designed to detect cancer-causing proteins from HPV types
16
and 18, which collectively are responsible for most cervical disease. This
type-specific antigen test, once fully validated, and expanded to include
additional types of HPV associated with cervical dysplasia and cancer, would
be
a very synergistic complement test to existing Pap technology. It will provide
for very low cost HPV testing as currently performed in Western countries,
without the need for additional cervical specimens beyond what is now taken.
In
addition, large capital outlays would not be required since most laboratories
can readily do ELISA testing.
Sveshnikov
and Kiselev have already looked at their technology with 1,000 Russian samples
to confirm the potential of this technology. Grant Life Sciences will be further
validating with more specimens from Russia and with the many cervical specimens
obtained in the United States under IRB approval in controlled clinical
settings.
Together,
when validated, Grant Life Sciences will have two complementary cervical
dysplasia or cancer diagnostic tests that will work on blood serum or cervical
mucous and cells. A blood-based test is eminently suitable for the 1.7 billion
women worldwide who currently are not tested by Pap smear cytology.
Cervical
Cancer-Associated HPV DNA Detection Program
We
have
signed a final licensing agreement with Alphagenics Diaco Biotechnologies S.r.l.
(Italy) to in-license
the manufacturing and marketing rights to Alphagenics’ molecular diagnostic test
for HPVs exclusively in China and the United States and non-exclusively in
Europe, India, Australia and Japan.
The
Alphagenics HPV test in-licensed by Grant Life Sciences is a DNA-based
diagnostic that uses standard molecular diagnostic equipment found in most
commercial laboratories. Alphagenics’ HPV DNA test complements the HPV blood
test that we have been developing to detect the presence of antibodies produced
only by cancer-causing HPV types. There are some 100 types of HPV; however,
only
about 7 to 15 HPV-types cause most cervical cancers. While a blood-based test
to
detect precancerous evidence and cancer of the cervix is still viewed by Grant
Life Sciences as the preferred test-methodology to address the needs of the
developing world, DNA testing is currently the approved test protocol in both
the U.S. and Europe to identify the presence of different subtypes of HPV in
the
cervix.
The
introduction of the Alphagenics HPV test not only allows commercial laboratories
to provide molecular testing but also complements the current introduction
of
vaccines against HPVs. The currently approved vaccine in the U.S. provides
for
inoculation against four types of HPV for use in girls and women 9
to
26 years
of age, who presumably have not been exposed to the viruses. However, women
who
have reached sexual maturity and have not been exposed to one of the four
HPV-types may benefit from the vaccination, according to the Advisory Committee
on Immunization Practices. Consequently, the Alphagenics test can be used by
the
balance of the female population to determine exposure and the possible use
of
the vaccine if found negative. Further, both vaccines on the market (GSK’s
vaccine is approved in Australia for ages 10
to
45 and
Merck’s vaccine is approved in the U.S. for ages 9
to
26) only
confer protection against HPV oncogenic types 16 and 18. While these types
are
predominant (approximately 60+%) in the Caucasian market, there are other types
that play significant roles in the Asian, African, Indian, and Hispanic
populations. Fortunately, the Alphagenics test is designed to test for all
the
serotypes of oncogenic HPV.
In
addition, the Alphagenics test can be used in the current gynecological regimen
to help qualify Pap test results in the case of equivocal
readings, at a cost less than the current approved molecular test. We expect
to
launch the Alphagenics HPV DNA-based test in the Asian and Indian markets during
2008 as
an
Analyte Specific Reagent (“ASR”) to reference laboratories.
Regulatory
Approval
In
the
United States, our planned cervical cancer tests will be subject to regulation
by the U.S. Food and Drug Administration (“FDA”) under the Federal Food, Drug
and Cosmetic Act. Governmental agencies in other countries also regulate
medical devices. These domestic and foreign regulations govern the
majority of the commercial activities we plan to perform, including the purposes
for which our proposed tests can be used, the development, testing, labeling,
storage and use of our proposed tests with other products and the manufacturing,
advertising, promotion, sales and distribution of our proposed test for the
approved purposes. Compliance with these regulations could prove expensive
and time-consuming.
Products
that are used to diagnose diseases in people are considered medical devices,
which are regulated in the United States by the FDA. To obtain FDA
authorization for a new medical device, a company may have to submit data
relating to safety and effectiveness based upon extensive testing. This
testing, and the preparation and processing of necessary applications, are
expensive and may take up to a few years to complete. Whether a medical
device requires FDA authorization and the data that must be submitted to the
FDA
varies depending on the nature of the medical device.
Medical
devices fall into one of three classes (Class I, II, or III) in accordance
with
the FDA’s determination of controls necessary to ensure the safety and
effectiveness of the device or diagnostic. As with most diagnostic products,
we
anticipate that our planned cervical cancer tests will be classified by the
FDA
as a Class II device. By definition, this means that there could be a potential
for harm to the consumer if the device is not designed properly and/or otherwise
does not meet strict standards. To market and sell a class II medical device,
a
company must first submit a 510(k) pre-market notification, also known as a
510(k). The 510(k) application is intended to demonstrate substantial
equivalency to a Class II device already on the market. The FDA will still
require that clinical studies of device safety and effectiveness be completed.
In
the
United States, prior to approval by the FDA, under certain conditions, companies
can sell investigational or research kits to laboratories under the Clinical
Laboratory Improvement Amendment (“CLIA”) of 1988. Under CLIA, companies can
sell diagnostic assays or tests to "high complexity" laboratories for validation
as an ASR. An ASR is the active ingredient of an "in-house" diagnostic
test.
We
intend
to sell the Alphagenics’s DNA test and the ELISA version of our cervical cancer
test to high complexity laboratories for validation as an ASR or for use by
such
laboratories in their own in-house diagnostic assays. Such sales would not
require FDA approval, but we are aware that the FDA might deny approval under
CLIA for sales of our product as an ASR.
We
have
not yet submitted an application for approval to the FDA or regulatory agencies
in any other countries of the cervical cancer tests we are developing. It is
highly likely that we will have to conduct clinical trials and other studies
to
generate data that the FDA and other regulatory authorities will require in
support of our application. We have not yet designed or initiated any of
these trials. We anticipate it will take a minimum of one to two years to
complete the review and approval process.
In
addition to any government requirements as to authorizing the marketing and
sales of medical devices, there are other FDA requirements. The manufacturer
must be registered with the FDA. The FDA will inspect what is being done on
a
routine basis to ascertain compliance with those regulations prescribing
standards for medical device quality and consistency. Such standards refer
to,
but are not limited to, manufacturing, testing, distribution, storage, design,
control and service activities. The FDA also prohibits promoting a device for
unauthorized uses and routinely reviews labeling accuracy. If the FDA finds
failures in compliance, it can institute a range of enforcement actions, from
a
public warning letter to more severe sanctions like withdrawal of approval;
denial of requests for future approval; fines, injunctions and civil penalties;
recall or seizure of the product; operating restrictions, partial suspension
or
total shutdown of production; and criminal prosecution.
The
FDA's
medical device reporting regulation also will require the reporting of
information on deaths or serious injuries associated with the use of our tests,
as well as product malfunctions that are likely to cause or contribute to death
or serious injury if the malfunction were to recur.
Regardless
of FDA approval status in the U.S, we will need to obtain certification of
our
tests from regulatory authorities in other countries prior to marketing and
selling in such countries. The amount of time needed to achieve foreign approval
varies from country to country, and regulatory approval by regulatory
authorities of one country cannot by itself determine acceptance by another
country's regulatory body. Additionally, implementation of more stringent
requirements or the adoption of new requirements or policies could adversely
affect our ability to sell our proposed tests in other countries in the world.
We may be required to incur significant costs to comply with these laws and
regulations.
In
addition to the rules and regulations of the FDA and similar foreign agencies,
we may also have to comply with other federal, state, provincial and local
laws,
rules and regulations. Our tests could be subject to rules pertaining to the
disposal of hazardous or toxic chemicals or potentially hazardous substances,
infectious disease agents and other materials, and laboratory and manufacturing
practices used in connection with our research and development activities.
If we
fail to comply with these regulations, we could be fined, may not be allowed
to
operate certain portions of our business, or otherwise suffer consequences
that
could materially harm our business.
Competition
We
are
not aware of other companies that are developing a protein-based screening
test
that detects antibodies to cervical cancer. However, when completed, we
expect that our cervical cancer tests will compete with the Pap tests, which
have been widely accepted by the medical community for over 50 years.
Approximately 60 million Pap tests are performed annually in the United States,
and an additional 60 million Pap tests are performed annually in the rest of
the
world. Manufacturers of Pap tests include Cyctc Corporation, TriPath
Imaging, Inc. and several other companies.
Our
cervical cancer test also will compete with HPV tests, which are becoming
increasingly accepted in the medical community. Manufacturers of HPV tests
include Digene Corporation, Ventana Medical Systems, Roche Diagnostics, Abbott
Laboratories, and Bayer Corporation.
All
of
the companies who make Pap tests and HPV tests have far greater financial,
technical, research and development, sales and marketing, administrative and
other resources than we do.
For
our
proposed tests to become accepted in the medical community, we will need to
convince those who use established tests that our proposed tests are more
reliable for the screening of cervical cancer, either as stand-alone tests
or in
conjunction with the Pap and/or HPV tests.
In
addition, we will need to obtain reimbursement coverage for our proposed
cervical cancer tests. In the United States, the American Medical
Association assigns specific Current Procedural Terminology, or CPT, codes
necessary for reimbursement. Third-party payors and managed care entities
that provide health insurance coverage to approximately 225 million people
in
the United States currently authorize almost universal reimbursement for the
Pap
test, and the Pap test is nearly fully reimbursed in other markets where we
will
sell our proposed tests. The HPV test now has full reimbursement for certain
uses. We will attempt to obtain reimbursement for our planned cervical cancer
tests to the same degree as the Pap test, but it is possible that we will be
unable to obtain third-party reimbursement for these tests.
Sales
and Marketing
When
we
have completed the development of our cervical cancer tests and received any
required regulatory approval, we plan to market and sell our ELISA test to
laboratories in the United States, Canada, Western Europe, Japan and other
countries with established cervical cancer screening programs for use as a
screening test. Initially, we do not plan to sell our tests in these
countries directly to primary healthcare providers.
In
developing nations and other markets where cervical cancer screening is not
widespread and where there are few laboratories or other testing facilities,
we
plan to market and sell our rapid test to primary healthcare providers as a
stand alone point-of-care test. In some of these countries, we plan to
sell our proposed test directly to the governments or to other national
healthcare distributors who distribute tests to national healthcare providers.
We
do not
currently have a marketing or sales force or a distribution arrangement in
place. We will need to expend resources to develop our own marketing and
sales force or enter into third-party distribution arrangements.
HIV
and Dengue Fever Tests
In
conjunction with the primary diagnostic cervical cancer blood test that we
are
developing, we have also acquired the exclusive worldwide rights to diagnostic
devices for HIV-1, HIV-2 and dengue fever, and a proprietary diagnostic reagent,
which is a key ingredient commonly used by leading manufacturers of rapid tests
as a detectable label. We acquired these rights from AccuDx in 2005.
As
access
to antiretroviral treatment is scaled up in low income countries, there is
a
critical opportunity to expand access to HIV prevention. Among the interventions
which play a critical role both in treatment and prevention, HIV testing and
counseling stands out as paramount. An estimated 40 million people are now
living with HIV/AIDS of which nearly 18 million are women (UNAIDS Report: The
Global Coalition on Women and AIDS, November 2004) and 2 million are children
(WHO, Regional Offices for South-East Asia: HIV/AIDS Facts and Figures). In
2004
alone, over 5 million new infections were reported. (UNAIDS Report, Regional
HIV/AIDS Statistics and Features, end of 2004). Determination of the specific
anti-HIV antibodies still forms the primary screening/diagnostic procedure
for
HIV infection.
The
AccuDx AIDS test device consists of a blood sample pad containing HIV-antigen
gold conjugate, a capillary membrane with three capture lines for HIV-1, HIV-2
and a control line, and a fluid absorption pad. When test strips are placed
in
the tube containing the test serum or plasma, the liquid migrates upwardly
by
capillary action. Colloidal gold conjugates of the HIV antigen react with
anti-HIV-1 and anti-HIV-2 antibodies in the samples which then are captured
on
specific antigen lines as they migrate up the membrane and into the fluid
absorption pad. The results are visual and easy to interpret. For example,
a
single pink line corresponding to the control is a negative, while two lines
corresponding to the control and HIV-1 is an HIV-1 positive sample. The test
is
simple to use and performance characteristics are comparable to laboratory-based
assays. We believe that extensive utilization of HIV antibody point-of-care
tests should help to combat the current HIV/AIDS pandemic
worldwide.
Another
global illness, dengue fever, which is transmitted by mosquitoes, has had a
dramatic increase in incidence in recent decades. Dengue fever, dengue
haemorrhagic fever (“DHF”) and dengue shock syndrome (“DDS”) occur in over 100
countries and territories and threaten the health of more than 2.5 billion
people in urban, peri-urban and rural areas of the tropics and subtropics
(Dengue fever WHO Fact Sheet No. 117, April 2002). The disease is endemic in
Africa, the Americas, the Eastern Mediterranean, Southeast Asia and the Western
Pacific. Although the major disease burden is in Southeast Asia and the Western
Pacific, rising trends are also reflected in increased reporting of dengue
fever
and DHF cases in the Americas. In 1998, a total of 1.2 million cases of dengue
and DHF were reported to WHO including 15,000 deaths (USDA, Agricultural
Research Services, Center for Medical, Agricultural and Veterinary Entomology,
March 2003).
Globally,
the annual number of infections is much higher than is indicated by the number
of reported cases. Based on statistical modeling methods there are an estimated
51 million infections each year (USDA, Agricultural Research Ser vices,
Center for Medical, Agricultural and Veterinary Entomology, March 2003).
Rapid
and
reliable tests for primary and secondary infections of dengue fever are
essential for patient management. Primary dengue infection is associated with
mild to high fever, headache, muscle pain and skin rash. Secondary infections
often result in high fever and in many cases, with haemorrhagic events and
circulatory failure. Secondary infections induce Immunoglobulins of type M
(“IgM”) response after 20 days of infection and Immunoglobulins of G type
(“IgG”) rise within 1-2 days after the onset of symptoms. A reliable and
sensitive rapid test that can simultaneously detect the presence of anti-dengue
IgG and IgM is of great clinical utility.
Intellectual
Property
We
rely
on patents, licenses from third parties, trade secrets, trademarks, copyright
registrations and non-disclosure agreements to establish and protect our
proprietary rights in our technologies and products.
We
entered into an exclusive license with Dr. Yao Xiong Hu on July 20, 2004, for
certain processes that we currently include in our cervical cancer tests based
on antibodies. Some of the technology owned by Dr. Hu is covered by United
States patents that have been issued, and some of the technology is covered
by
United States patent applications that have been filed and are pending. The
agreement with Dr. Hu also covers technology included in foreign applications
presently pending as PCT applications in China and India. The initial term
of
this license is 17 years, and it automatically renews for successive one-year
periods unless voluntarily terminated by us or by Dr. Hu in the event of our
insolvency. Under the license agreement, we are required to pay Dr. Hu a
minimum licensing fee of $48,000 per year, which is paid in monthly installments
of $4,000. If the annual royalty exceeds $48,000, we will also be required
to
pay to Dr. Hu royalties on a quarterly basis ranging from 1% to 3% depending
on
the net sales of our product.
We
plan
to file patent applications for any additional technology that we create in
the
future.
We
anticipate that we may need to license additional technology for use in our
planned cervical cancer tests from other third parties. We may be unable to
obtain these licenses on acceptable terms or at all.
Our
technology is also dependent upon unpatented trade secrets. However, trade
secrets are difficult to protect. In an effort to protect our trade
secrets, we have a policy of requiring our employees, consultants and advisors
to execute non-disclosure agreements. These agreements provide that
confidential information developed or made known to an individual during the
course of their relationship with us must be kept confidential, and may not
be
used, except in specified circumstances. In addition, our employees are
parties to agreements that require them to assign to us all inventions and
other
technology that they create while employed by us.
Research
and Development
Our
research and development program is focused on completing development of our
cervical cancer tests. We continue to refine existing technology and
develop further improvements to our tests.
We
believe that in the future we may be able to apply our technology to develop
rapid tests for other diseases and certain other cancers. We plan to
pursue development of these other tests.
We
have
signed a MOU with Union Clinical Laboratory in Taiwan, the top laboratory
serving the clinical diagnostics market in Taiwan in the Greater China region
to
validate our technologies.
For
the
fiscal years ended December 31, 2007
and
2006,
we
spent $ 33,058
( none
associated with the grant of stock options) and $ 244,189
(including $ 151,204
associated with the grant of stock options), respectively, on research and
development. Our
ability to conduct the research and development necessary to validate our
technology will depend on our ability to raise sufficient capital going forward
to adequately fund the required research and development activities.
Manufacturing
We
plan
to outsource the manufacturing and assembly of our planned cervical cancer
and
other tests to third parties. We do not currently have arrangements in
place with any such third parties.
Suppliers
We
develop the processes, including proteins and other technology that we use in
our proposed tests, and license certain other technology from third
parties. We believe that the reagents and other supplies we will need to
manufacture our tests will be readily obtained from multiple suppliers.
Employees
As
of
February
22,
2008,
we had four part-time employees and retained three consultants. Our
employees consist of three executive officers and one administrative
assistant. If funding is available, during the year
ending December 31, 2008, we may add employees or consultants, including
scientists and other professionals in the research and development, product
development, business development, regulatory, manufacturing, marketing and
clinical studies areas.
Our
electronic filings with the SEC
(including our annual report on Form 10-KSB, quarterly reports on Form 10-QSB
and current reports on Form 8-K, and any amendments to these reports) are
available free of charge on the SEC’s
website at http://www.sec.gov.
ITEM
2 - DESCRIPTION OF PROPERTY
Location
|
|
Use
|
|
Square
Feet
|
|
Rent Payments
|
|
Term
|
|
Leased From
|
|
3550
Wilshire Blvd., Ste 1700, Los Angeles CA 90010
|
|
|
Offices
|
|
|
Approximately 500
square feet
|
|
$
|
979 per month
|
|
|
Month to month
|
|
|
Wilshire Business
Center,
LLC
|
|
1787
E. Ft. Union Blvd., Ste. 202, Salt Lake City, UT 84121
|
|
|
Offices
|
|
|
Approximately 700
square feet
|
|
$
|
875 per month
|
|
|
April
30, 2008
|
|
|
Lowder Properties
|
|
ITEM
3 - LEGAL PROCEEDINGS
We
are
not currently a party to any litigation.
ITEM
4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There
were no matters submitted to a vote of our security holders during the fourth
quarter of the year ended December 31, 2007.
PART
II
ITEM
5 - MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES
Market
Information
Our
common stock is quoted on the OTC Bulletin Board under the symbol
“GLIF.OB.” The following table sets forth, for the calendar periods
indicated, the range of the high and low last reported bid prices of our common
stock from January 1, 2006 through December 31, 2007, as reported by the OTC
Bulletin Board. The quotations represent inter-dealer prices without
retail mark-ups, mark-downs or commissions, and may not necessarily represent
actual transactions. The quotations may be rounded for presentation.
Period
|
|
High
|
|
Low
|
|
First
Quarter 2006
|
|
$
|
0.042
|
|
$
|
0.018
|
|
Second
Quarter 2006
|
|
$
|
0.027
|
|
$
|
0.013
|
|
Third
Quarter 2006
|
|
$
|
0.103
|
|
$
|
0.014
|
|
Fourth
Quarter 2006
|
|
$
|
0.265
|
|
$
|
0.067
|
|
First
Quarter 2007
|
|
$
|
0.135
|
|
$
|
0.045
|
|
Second
Quarter 2007
|
|
$
|
0.081
|
|
$
|
0.025
|
|
Third
Quarter 2007
|
|
$
|
0.042
|
|
$
|
0.014
|
|
Fourth
Quarter 2007
|
|
$
|
0.024
|
|
$
|
0.016
|
|
On
December 31, 2007, the last price of our common stock as reported on the
OTC Bulletin Board was $0.018 per share.
As
of
December 31, 2007, we had approximately 135 shareholders of record.
Certain of the shares of common stock are held in “street” name and may be held
by numerous beneficial owners.
We
have
never declared nor paid cash dividends and do not expect to pay cash dividends
in the foreseeable future.
Recent
Sales of Unregistered Securities
In
October 2007, the Company issued 13,783,727 shares of common stock upon the
conversion of $84,908 of convertible notes.
In
November 2007, the Company entered into a Securities Purchase Agreement with
New
Millennium Capital Partners II, LLC, AJW Master Fund, Ltd. and AJW Partners,
LLC
(collectively, the “Investors”) for the sale of (i) $400,000 in callable secured
convertible notes (the “Notes”) and (ii) stock purchase warrants (the
“Warrants”) to buy 8,000,000 shares of our common stock. As with the previous
convertible notes, the Company will treat the detachable warrants and
the embedded derivative in the conversion feature of the convertible
note as liabilities.
In
December 2007, we issued 4,000,000 shares of our common stock to Sichenzia
Ross
Friedman Ference LLP
in
consideration for legal services provided.
All
of
the above offerings and sales were deemed to be exempt under Rule 506 of
Regulation D and Section 4(2) of the Securities Act of 1933, as amended. No
advertising or general solicitation was employed in offering the securities.
The
offerings and sales were made to a limited number of persons, all of whom were
accredited investors, business associates of Grant Life Sciences or executive
officers of Grant Life Sciences, and transfer was restricted by Grant Life
Sciences in accordance with the requirements of the Securities Act of 1933.
In
addition to representations by the above-referenced persons, we have made
independent determinations that all of the above-referenced persons were
accredited or sophisticated investors, and that they were capable of analyzing
the merits and risks of their investment, and that they understood the
speculative nature of their investment. Furthermore, all of the above-referenced
persons were provided with access to our SEC
filings.
Equity
Compensation Plan Information
The
following table gives information about the Company’s common stock that may be
issued upon the exercise of options
granted
to employees, directors and consultants
under
its 2004 Stock Incentive Plan (the “2004 Plan”) and 2007 Stock Incentive Plan
(the “2007 Plan”) as of December 31, 2007. On June 27, 2007, the Company’s board
of directors approved establishment of the 2007 Plan.
Terms of
the 2007 Plan are essentially equivalent to the 2004 Plan
previously
approved by the Company’s shareholders, except that under the 2007 Plan, options
to purchase up to 30,000,000 shares of the Company’s common stock can be
granted.
Equity
Compensation Plan Information
|
|
Number
of Securities to
be
Issued Upon
Exercise
of
Outstanding
Options,
Warrants
and Rights
|
|
Weighted
Average
Exercise
Price of
Outstanding
Options,
Warrants
and Rights
|
|
Number
of Securities Remaining
Available
for Future Issuance
Under
Equity Compensation Plan
|
|
Equity
Compensation approved by Security Holders (1)
|
|
|
7,120,867
|
|
$
|
0.088
|
|
|
1,325,000
|
|
Equity
Compensation not approved by Security Holders ( 2)
(3)
|
|
|
15,355,351
|
|
$
|
0.032
|
|
|
14,894,649
|
|
TOTAL
|
|
|
22,476,218
|
|
$
|
0.050
|
|
|
16,219,649
|
|
(1)
|
The
2004 Plan was approved by shareholders.
|
(2)
|
The
2007 Plan has not yet been approved by share holders.
|
(3)
|
Includes
250,000 warrants to purchase shares at $0.180 per share issued to
a
consultant for performing research services on our behalf, prior
to the
Merger in July 2004.
|
As
of
February
22, 2008 ,
there
were 22,476,218 compensation-related options
and warrants outstanding to purchase shares of our common stock.
Purchases
of Equity Securities by the Small Business Issuer and Affiliated
Purchasers
None.
ITEM
6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Overview
The
Company is a development stage company. From inception in 1998 through
December
31, 2007, the Company 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 Operation
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. This memorandum of
understanding evolved into a contract in November 2007. In June 2007, the
Company signed another memorandum of understanding to in-license technology
based on a molecular diagnostic test for HPV. This memorandum of understanding
was also converted to a contractual arrangement in November 2007. Due to capital
constraints, the Company has been unable to devote a significant amount of
funds
to research and development, in particular, over the past year.
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 may 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 does not anticipate making capital expenditures or adding employees
in
the foreseeable future.
Liquidity
and Capital Resources
From
inception in 1998 through December 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 the
sale
of convertible notes.
As
of
December 31, 2007, the Company had negative working capital of $580,388, a
deficiency in stockholders’ equity of $3,182,305, and notes payable in default
totaling $363,125. As of February 22, 2008 the Company had minimal
cash.
In
recent months, the Company’s cash “burn rate” has ranged from $100,000 to
$150,000 per month. Absent any cash inflows from debt
or
equity financing or other sources, the
Company will not be able to continue in existence through
March
2008. There can be no assurance that the Company will be successful in obtaining
adequate debt or equity financing.
Results
of Operations
The
Company has never been profitable. Since inception through December 31, 2007,
aggregate losses approximate $ 18,111,000,
which includes, since
June
2005,
non-cash
charges of approximately $9,295,000
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.
Since inception, research related expenses have aggregated approximately
$1,746,000, while general and administrative expenses (including legal and
accounting costs associated with being a public company, legal expenses related
to intellectual property, technology licensing fees, fees of outside
consultants, employee salaries and general office expenses) have aggregated
approximately $7,490,000.
Off-Balance
Sheet Arrangements
We
do not
have any off-balance sheet arrangements as of December
31, 2007.
ITEM
7 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
GRANT
LIFE SCIENCES, INC.
INDEX
TO FINANCIAL STATEMENTS
|
|
Page
|
Reports
of Independent Registered Public Accounting
Firms
|
|
F-2
- F-3
|
Balance
Sheets as of December 31, 2007 and December 31, 2006
|
|
F-4
|
Statements
of Operations for the Years Ended December
31, 2007 and December 31, 2006 and for the Period from July 9, 1998
(Inception) through December 31, 2007
|
|
F-5
|
Statements
of Deficiency in Stockholders' Equity for the Period from July 9,
1998 (Inception) through December 31, 2007
|
|
F-6
- F-8
|
Statements
of Cash Flows for the Years
Ended
December
31, 2007 and December 31, 2006 and for the Period from July 9, 1998
(Inception) through December 31, 2007
|
|
F-9
- F-10
|
Notes
to Financial Statements
|
|
F-11
- F-18
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board
of
Directors and Stockholders of
Grant
Life Sciences, Inc.:
We
have
audited the balance sheet of Grant Life Sciences, Inc. (the Company) as of
December 31, 2007, and the related statements of operations, deficiency in
stockholders’ equity and cash flows for the year then ended and for the period
from July 9, 1998 (inception) through December 31, 2007. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based
on
our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes consideration
of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well
as evaluating the overall financial statement presentation. We believe that
our
audit provides a reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Grant Life Sciences, Inc. as of
December 31, 2007, and the results of its operations and its cash flows for
the
year then ended and for the period from July 9, 1998 (inception) through
December 31, 2007 in conformity with U.S. generally accepted accounting
principles.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note A to the financial
statements, the Company has never been profitable, has negative working capital,
has a deficiency in stockholders’ equity, has negative cash flows from operating
activities, and has certain debt in default. These conditions, among others,
raise substantial doubt about its ability to continue as a going concern.
Management’s plans regarding those matters also are described in Note A. The
financial statements do not include any adjustments that might result from
the
outcome of these uncertainties.
/s/
Tanner LC
TANNER
LC
Salt
Lake
City, Utah
March
5,
2008
REPORT
OF INDEPENDENT REGISTERED PUBLC ACCOUNTING FIRM
To
the
Board of Directors
Grant
Life Sciences, Inc.
Los
Angeles, California
We
have
audited the consolidated balance sheet of Grant Life Sciences, Inc. and
subsidiary (a development stage company) (collectively, the “Company”) as of
December 31, 2006, and the related consolidated statements of losses, deficiency
in stockholders’ equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on
our audits.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In
our
opinion, the consolidated financial statements referred to above present
fairly,
in all material respects, the financial position of Grant Life Sciences,
Inc.
and subsidiary (a development stage company) as of December 31, 2006 and
the
results of their operations and their cash flows for the year then ended
in
conformity with U.S. generally accepted accounting principles.
The
accompanying consolidated financial statements have been prepared assuming
that
the Company will continue as a going concern. As discussed in Note A to the
consolidated financial statements, the Company is in the development stage
and
has not established a significant source of revenues. This raises substantial
doubt about the Company’s ability to continue as a going concern. Management’s
plans in regard to these matters are also described in Note A. The consolidated
financial statements do not include any adjustments that might result from
the
outcome of this uncertainty.
/s/
Singer Lewak Greenbaum & Goldstein LLP
SINGER
LEWAK GREENBAUM & GOLDSTEIN LLP
Los
Angeles, California
March
29,
2007
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
BALANCE
SHEETS
|
|
December
31
|
|
ASSETS
|
|
2007
|
|
2006
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
|
|
$
|
183,386
|
|
$
|
257,992
|
|
Refunds
receivable
|
|
|
2,550
|
|
|
1,338
|
|
Prepaid
expenses
|
|
|
1,667
|
|
|
1,875
|
|
Deposits
and other
|
|
|
18,140
|
|
|
34,375
|
|
Total
current assets
|
|
|
205,743
|
|
|
295,580
|
|
|
|
|
|
|
|
|
|
Furniture
and equipment, net of accumulated depreciation and impairment
reserve of
$21,634 and $19,922 as of December 31, 2007 and 2006,
respectively
|
|
|
-
|
|
|
10,772
|
|
|
|
|
|
|
|
|
|
Patents,
net of accumulated amortization and impairment reserve of $23,334
and
$1,555 as of December 31, 2007 and 2006, respectively
|
|
|
-
|
|
|
21,779
|
|
|
|
|
|
|
|
|
|
Deferred
financing fees, net of accumulated amortization of $99,117 and
$38,542 as
of December 31, 2007 and 2006, respectively
|
|
|
43,333
|
|
|
48,908
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
249,076
|
|
$
|
377,039
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND DEFICIENCY IN STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
34,818
|
|
$
|
276,715
|
|
Accrued
liabilities
|
|
|
138,252
|
|
|
81,122
|
|
Accrued
interest payable
|
|
|
249,936
|
|
|
124,835
|
|
Notes
payable in default
|
|
|
363,125
|
|
|
363,125
|
|
Total
current liabilities
|
|
|
786,131
|
|
|
845,797
|
|
|
|
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
|
|
|
Convertible
notes payable, net of discount of $953,092 and $1,201,765 as
of December
31, 2007 and 2006, respectively
|
|
|
162,000
|
|
|
683,015
|
|
Derivative
liability related to convertible notes
|
|
|
1,941,335
|
|
|
4,233,656
|
|
Derivative
liability related to warrants
|
|
|
541,915
|
|
|
1,274,600
|
|
Total
long-term liabilities
|
|
|
2,645,250
|
|
|
6,191,271
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
3,431,381
|
|
|
7,037,068
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Notes A, F and J)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficiency
in stockholders' equity:
|
|
|
|
|
|
|
|
Preferred
stock, par value $.001; authorized 20,000,000 shares; none issued
and
outstanding
|
|
|
-
|
|
|
-
|
|
Common
stock, par value $.001; authorized 750,000,000 shares; 311,125,613
and
136,420,423 shares issued and outstanding as of December 31,
2007 and
2006, respectively
|
|
|
311,126
|
|
|
136,420
|
|
Additional
paid-in capital
|
|
|
14,617,560
|
|
|
7,614,681
|
|
Deficit
accumulated during the development stage
|
|
|
(18,110,991
|
)
|
|
(14,411,130
|
)
|
Total
deficiency in stockholders' equity
|
|
|
(3,182,305
|
)
|
|
(6,660,029
|
)
|
|
|
|
|
|
|
|
|
Total
liabilities and deficiency in stockholders' equity
|
|
$
|
249,076
|
|
$
|
377,039
|
|
See
accompanying notes to financial statements.
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
STATEMENTS
OF OPERATIONS
|
|
|
|
|
|
For
the
|
|
|
|
|
|
|
|
Period
from
|
|
|
|
|
|
|
|
July
9, 1998
|
|
|
|
|
|
|
|
(Inception)
|
|
|
|
For
the Year
|
|
through
|
|
|
|
Ended
December 31
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
-
|
|
$
|
-
|
|
$
|
72,675
|
|
Cost
of sales
|
|
|
-
|
|
|
-
|
|
|
62,805
|
|
Gross
margin
|
|
|
-
|
|
|
-
|
|
|
9,870
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
1,565,736
|
|
|
1,184,091
|
|
|
7,490,168
|
|
Research
and development
|
|
|
33,058
|
|
|
244,189
|
|
|
1,745,753
|
|
Total
|
|
|
1,598,794
|
|
|
1,428,280
|
|
|
9,235,921
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(1,598,794
|
)
|
|
(1,428,280
|
)
|
|
(9,226,051
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value of derivative liability related to convertible
notes and
warrants
|
|
|
(436,760
|
)
|
|
(1,294,293
|
)
|
|
(5,628,696
|
)
|
Interest
and financing expense
|
|
|
(1,634,349
|
)
|
|
(662,160
|
)
|
|
(3,666,489
|
)
|
Loss
on impaired and abandoned assets
|
|
|
(28,258
|
)
|
|
-
|
|
|
(32,048
|
)
|
Gain
on extinguishment of debt
|
|
|
-
|
|
|
-
|
|
|
510,105
|
|
Acquisition
expense
|
|
|
-
|
|
|
-
|
|
|
(65,812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes
|
|
|
(3,698,161
|
)
|
|
(3,384,733
|
)
|
|
(18,108,991
|
)
|
Provision
for income taxes
|
|
|
1,700
|
|
|
200
|
|
|
2,000
|
|
Net
loss
|
|
$
|
(3,699,861
|
)
|
$
|
(3,384,933
|
)
|
$
|
(18,110,991
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per common share - basic and diluted
|
|
$
|
(0.02
|
)
|
$
|
(0.03
|
)
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - basic and diluted
|
|
|
215,155,385
|
|
|
132,810,185
|
|
|
n/a
|
|
See
accompanying notes to financial statements.
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
STATEMENTS
OF DEFICIENCY IN STOCKHOLDERS’ EQUITY
FOR
THE PERIOD JULY 9, 1998 (Date of Inception) THROUGH
DECEMBER
31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
Deficiency
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
During
the
|
|
in
|
|
|
|
Common
Stock
|
|
Subscription
|
|
Deferred
|
|
Paid-in
|
|
Development
|
|
Stockholders'
|
|
|
|
Shares
|
|
Amount
|
|
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)
STATEMENTS
OF DEFICIENCY IN STOCKHOLDERS’ EQUITY
FOR
THE PERIOD JULY 9, 1998 (Date of Inception) THROUGH
DECEMBER
31, 2007
(Continued
from Preceding Page)
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
Deficiency
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
During
the
|
|
in
|
|
|
|
Common
Stock
|
|
Subscription
|
|
Deferred
|
|
Paid-in
|
|
Development
|
|
Stockholders'
|
|
|
|
Shares
|
|
Amount
|
|
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
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification
of deferred compenstion
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
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 at $0.01 per share 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
|
|
Cashless
exercise of $0.01 warrants, including applicable derivative
value
|
|
|
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)
STATEMENTS
OF DEFICIENCY IN STOCKHOLDERS’ EQUITY
FOR
THE PERIOD JULY 9, 1998 (Date of Inception) THROUGH
DECEMBER
31, 2007
(Continued
from Preceding Page)
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
Deficiency
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
During
the
|
|
in
|
|
|
|
Common
Stock
|
|
Subscription
|
|
Deferred
|
|
Paid-in
|
|
Development
|
|
Stockholders'
|
|
|
|
Shares
|
|
Amount
|
|
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
|
|
|
167,901,969
|
|
|
167,902
|
|
|
-
|
|
|
-
|
|
|
6,459,597
|
|
|
-
|
|
|
6,627,499
|
|
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 services
|
|
|
2,075,000
|
|
|
2,075
|
|
|
-
|
|
|
-
|
|
|
42,925
|
|
|
-
|
|
|
45,000
|
|
Issued
stock at $0.0100 per share for legal services
|
|
|
4,000,000
|
|
|
4,000
|
|
|
-
|
|
|
-
|
|
|
36,000
|
|
|
-
|
|
|
40,000
|
|
Cashless
exercise of $0.01 warrants, including applicable derivative
value
|
|
|
64,879
|
|
|
65
|
|
|
-
|
|
|
-
|
|
|
2,465
|
|
|
-
|
|
|
2,530
|
|
Exercise
of warrant at $0.01 per share, including applicable derivative
value
|
|
|
98,092
|
|
|
98
|
|
|
-
|
|
|
-
|
|
|
2,306
|
|
|
-
|
|
|
2,404
|
|
Vesting
of stock options
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
446,456
|
|
|
-
|
|
|
446,456
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,699,861
|
)
|
|
(3,699,861
|
)
|
Balance,
December 31, 2007
|
|
|
311,125,613
|
|
$
|
311,126
|
|
$
|
-
|
|
$
|
-
|
|
$
|
14,617,560
|
|
$
|
(18,110,991
|
)
|
$
|
(3,182,305
|
)
|
See
accompanying notes to financial statements.
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
STATEMENTS
OF CASH FLOWS
|
|
|
|
|
|
For
the
|
|
|
|
|
|
|
|
Period
from
|
|
|
|
|
|
|
|
July
9, 1998
|
|
|
|
|
|
|
|
(Inception)
|
|
|
|
For
the Year
|
|
through
|
|
|
|
Ended
December 31
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(3,699,861
|
)
|
$
|
(3,384,933
|
)
|
$
|
(18,110,991
|
)
|
Adjustments
to reconcile net loss to cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
5,259
|
|
|
8,958
|
|
|
60,287
|
|
Change
in fair value of derivative liabilities related to convertible
notes
and
warrants
|
|
|
436,760
|
|
|
1,294,293
|
|
|
5,628,696
|
|
Loss
on impaired and abandoned assets
|
|
|
28,258
|
|
|
-
|
|
|
32,048
|
|
Vesting
of stock options
|
|
|
446,456
|
|
|
238,550
|
|
|
2,088,072
|
|
Common
stock or warrants issued in settlement of expenses
|
|
|
98,696
|
|
|
121,170
|
|
|
684,656
|
|
Cancellation
of stock options
|
|
|
-
|
|
|
-
|
|
|
193,275
|
|
Accreted
interest on convertible notes payable
|
|
|
1,509,246
|
|
|
512,430
|
|
|
2,801,814
|
|
Beneficial
conversion feature discount
|
|
|
-
|
|
|
-
|
|
|
298,507
|
|
Gain
on extinguishment of debt
|
|
|
-
|
|
|
-
|
|
|
(510,105
|
)
|
Acquisition
expense
|
|
|
-
|
|
|
-
|
|
|
65,812
|
|
Change
in working capital components:
|
|
|
|
|
|
|
|
|
|
|
Refunds
and accounts receivable
|
|
|
(1,212
|
)
|
|
71,337
|
|
|
(2,550
|
)
|
Prepaid
expenses
|
|
|
208
|
|
|
67,250
|
|
|
(1,667
|
)
|
Deposits
and other assets
|
|
|
16,235
|
|
|
(12,500
|
)
|
|
(18,140
|
)
|
Accounts
payable
|
|
|
(241,897
|
)
|
|
166,417
|
|
|
34,818
|
|
Short-term
notes payable
|
|
|
-
|
|
|
(8,750
|
)
|
|
13,125
|
|
Accrued
liabilities
|
|
|
57,130
|
|
|
(115,284
|
)
|
|
138,252
|
|
Accrued
interest payable
|
|
|
125,101
|
|
|
70,464
|
|
|
249,936
|
|
Net
cash used in operating activities
|
|
|
(1,219,621
|
)
|
|
(970,598
|
)
|
|
(6,354,155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
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 and exercise of warrants or options,
net
|
|
|
981
|
|
|
27,000
|
|
|
1,898,869
|
|
Proceeds
from issuance of notes payable, net of origination fees
|
|
|
1,145,000
|
|
|
387,550
|
|
|
4,697,805
|
|
Repricing
of warrants and other
|
|
|
-
|
|
|
17,422
|
|
|
(16,799
|
)
|
Net
cash provided by financing activities
|
|
|
1,145,981
|
|
|
431,972
|
|
|
6,579,875
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
(74,606
|
)
|
|
(542,480
|
)
|
|
183,386
|
|
Cash
at beginning of the period
|
|
|
257,992
|
|
|
800,472
|
|
|
-
|
|
Cash
at end of the period
|
|
$
|
183,386
|
|
$
|
257,992
|
|
$
|
183,386
|
|
(Continued
on Next Page)
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
STATEMENTS
OF CASH FLOWS
(Continued
from Preceding Page)
Supplemental
disclosure of non-cash investing and financing activities:
During
the year ended December 31, 2007, the Company issued 167,901,969 shares of
common stock upon conversion of $1,969,686 of convertible notes payable.
The
value of the related derivative at the time of conversion was $4,657,813,
which
was credited to additional paid-in capital.
During
the year ended December 31, 2007, the Company issued 64,879 shares of common
stock upon the cashless exercise of a warrant. The value of the related
derivative at the time of conversion was $2,530, which was credited to
additional paid-in capital.
During
the year ended December 31, 2006, the Company issued 2,594,644 shares of
common
stock upon conversion of $44,908 of convertible notes payable. The value
of the
related derivative at the time of conversion was $199,660, which was credited
to
additional paid-in capital.
During
the year ended December 31, 2006, the Company issued 812,100 shares of common
stock upon the cashless exercise of a warrant. The value of the related
derivative at the time of conversion was $115,405, which was credited to
additional paid-in capital.
See
accompanying notes to financial statements.
GRANT
LIFE SCIENCES, INC.
(A
Development Stage Company)
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2007 and 2006
NOTE
A - ORGANIZATION AND BASIS OF PRESENTATION
Organization
and Business
On
July
30, 2004, Grant Ventures, Inc., a Nevada corporation (“Grant Ventures”),
acquired Impact Diagnostics, Inc., a Utah corporation organized on July 9,
1998
(“Impact Diagnostics”), through the merger of Grant Ventures’ wholly owned
subsidiary, Impact Acquisition Corporation, with Impact Diagnostics. Grant
Ventures was an inactive publicly registered shell corporation with no
significant assets or operations. Impact Diagnostics had been organized to
develop certain technologies owned by Dr. Yao Ziong Hu and was initially
funded
by its founders, supplemented by two additional rounds of private funding.
Grant
Ventures changed its name to Grant Life Sciences, Inc. in November 2004.
Impact
Acquisition Corporation and Impact Diagnostics were subsequently
dissolved.
The
Company’s purpose is to research, develop, and market 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 (“SFAS”)
No. 7, Accounting
and Reporting by Development Stage Companies.
The
Company’s development stage activities have consisted primarily of research and
developing medical diagnostic kits. These development stage activities have
been
funded primarily through debt and equity financing. The Company has not yet
established a significant source of revenue.
Going
Concern
The
Company has never been profitable. As of December 31, 2007, the Company had
negative working capital of $580,388, a deficiency in stockholders’ equity of
$3,182,305, and notes payable in default totaling $363,125. As of February
22,
2008 the Company had minimal cash. For the year ended December 31, 2007,
the
Company used $1,219,621 of cash in its operating activities. These factors,
among others, raise substantial doubt about the Company’s ability to continue as
a going concern. The accompanying financial statements have been prepared
assuming the Company will continue as a going concern. Continuation 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 financial statements that might result from the outcome of this
uncertainty.
The
Company plans to seek continued debt and/or equity funding. The Company also
plans to investigate the feasibility of out-licensing the technologies
controlled by the Company, the feasibility of merging with an operating company
generating positive cash flow, and/or the feasibility of collaborating with
other research and development companies that are better funded than the
Company. There can be no assurance, however, that any of these plans will
materialize.
Reclassifications
Certain
reclassifications have been made to the prior period financial statements
to
conform to the current year 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. There were no cash equivalents
as
of December 31, 2007 and 2006.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit
risk consist primarily of cash. The Company places its cash with credit quality
institutions. At times, these deposits may be in excess of the insurance
limit
of the Federal Deposit Insurance Corporation.
Furniture
and Equipment
Furniture
and equipment are stated at cost less accumulated depreciation and an impairment
reserve. 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 and an impairment reserve.
Amortization is computed using the straight-line method based on an estimated
useful life of 15 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 a material 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.
Deferred
Financing Fees
Deferred
financing fees represent debt issuance costs withheld from the proceeds by
the
purchasers of the Company’s convertible notes payable. These fees are amortized
to interest and financing expense over the lives of the related convertible
notes.
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 from the market
price
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 and financing expense over the lives of
the
related convertible notes.
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 and Other Stock-Based Payments
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.
From
time
to time, the Company acquires services from or settles obligations to
non-employees and non-directors by the issuance of common stock. In these
instances, the transaction is recorded at the fair value of the underlying
service or obligation, unless the fair value of the issued equity instrument
is
considered to be a more reliable measure of fair value.
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 consulting fees.
Deferred
Income Taxes
Deferred
income taxes are provided using 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.
The
number of shares from the exercise of all stock options and warrants granted
and
the conversion of all convertible notes payable have been omitted from the
computation of diluted net loss per common share because their inclusion
would
have been anti-dilutive for the years ended December 31, 2007 and 2006. As
of
December 31, 2007 and 2006, the Company had 171,761,177 and 63,944,174
potentially dilutive shares of common stock, respectively, not included in
the
computation of diluted net loss per common share because it would have decreased
the net loss per common share. These options, warrants and convertible notes
could be dilutive in the future.
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
September 2006, the Financial Accounting Standards Board (“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.
In
December 2007, the FASB issued SFAS No. 141R, Business
Combinations, the
purpose of which is to improve the relevance, representational faithfulness,
and
comparability of the information that a reporting entity provides in its
financial reports about a business combination and its effects. SFAS No.
141R
retains the fundamental provisions of SFAS No. 141, which it replaces, but
is
broader in scope than SFAS No. 141. This statement is effective for the Company
beginning January 1, 2009. Earlier application is prohibited. The Company
is currently assessing the potential impact that adoption of SFAS No. 141R
will have on its financial statements.
NOTE
C - FURNITURE AND EQUIPMENT
Furniture
and equipment at December 31, 2007 and 2006 consisted of the
following:
|
|
2007
|
|
2006
|
|
Furniture
and fixtures
|
|
$
|
7,192
|
|
$
|
7,192
|
|
Equipment
|
|
|
14,442
|
|
|
23,502
|
|
Total
cost
|
|
|
21,634
|
|
|
30,694
|
|
Accumulated
depreciation
|
|
|
(17,904
|
)
|
|
(19,922
|
)
|
Impairment
reserve
|
|
|
(3,730
|
)
|
|
|
|
Net
|
|
$
|
-
|
|
$
|
10,772
|
|
Depreciation
expense was $3,704 and $7,403 for the years ended December 31, 2007 and 2006,
respectively.
Absent
any reasonably predictable source of cash flows from which to recover the
undepreciated cost of furniture and equipment, an impairment loss has been
recorded at December 31, 2007 equal to the amount of the undepreciated
cost.
NOTE
D - PATENTS
Patents
at December 31, 2007 and 2006 consisted of the following:
|
|
2007
|
|
2006
|
|
Patents,
at cost
|
|
$
|
23,334
|
|
$
|
23,334
|
|
Accumulated
amortization
|
|
|
(3,110
|
)
|
|
(1,555
|
)
|
Impairment
reserve
|
|
|
(20,224
|
)
|
|
|
|
Net
|
|
$
|
-
|
|
$
|
21,779
|
|
Amortization
expense was $1,555 for each of the years ended December 31, 2007 and
2006..
Absent
any reasonably predictable source of cash flows from which to recover the
unamortized cost of patents, an impairment loss has been recorded at December
31, 2007 equal to the amount of the unamortized cost.
NOTE
E - NOTES PAYABLE IN DEFAULT
Notes
payable in default at December 31, 2007 and 2006 consisted of the
following:
|
|
2007
|
|
2006
|
|
6%
unsecured note payable; restructured from a note initially due
November
30, 2002; convertible to common stock at a conversion price of
$0.84 per
share; interest payable quarterly but unpaid since October 15,
2005;
principal due July 15, 2007 but unpaid
|
|
$
|
350,000
|
|
$
|
350,000
|
|
|
|
|
|
|
|
|
|
6%
unsecured note payable; interest and principal payable quarterly
but
unpaid since June 6, 2006
|
|
|
13,125
|
|
|
13,125
|
|
Total
|
|
$
|
363,125
|
|
$
|
363,125
|
|
The
holders of these notes payable have not contacted the Company for payment
or
exercised any default rights.
NOTE
F - CONVERTIBLE NOTES PAYABLE, WARRANTS AND RELATED DERIVATIVE
LIABILITIES
During
2007, the Company issued 167,901,969 common shares upon the conversion of
$1,969,686 of convertible notes payable in several separate transactions.
The
fair values of the related derivative liabilities at the dates of the respective
conversions totaled $4,657,813, which amounts were credited to additional
paid-in capital.
During
2006, the Company issued 2,594,644 shares of common stock upon conversion
of
$44,908 of convertible notes payable in several separate transactions. The
fair
values of the related derivative liabilities at the time of respective
conversions totaled $199,660, which amounts were credited to additional paid-in
capital.
During
2007 and 2006, the Company issued an additional $1,200,000 and $400,000,
respectively, of convertible notes plus, in conjunction therewith, warrants
to
purchase 20,000,000 shares and 4,000,000 shares, respectively, of the Company’s
common stock.
As
of
December 31, 2007, the remaining convertible notes were convertible into
116,155,417 shares of the Company’s common stock based on the then market price
of the common stock. The conversion price is equivalent to the lower of (a)
$0.15 per share or (b) the average of the three lowest intra-day trading
prices
during the 20 days preceding the conversion date multiplied by 60%.
Convertible
notes outstanding at December 31, 2007 are due three years from date of issuance
to the extent not converted to common stock prior to that date, are secured
by
substantially all of the Company’s assets, and bear interest, payable quarterly,
at rates ranging from 6% to 8%. The securities purchase agreement pursuant
to
which the convertible notes were issued substantially limits the Company’s
ability to raise capital from other sources.
The
following table summarizes changes in outstanding warrants during the years
ended December 31, 2007 and 2006, plus the related weighted average exercise
price and the related remaining term of such warrants:
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Number
of
|
|
Exercise
|
|
|
|
|
|
Shares
|
|
Price
|
|
Expiration
Date
|
|
Balance,
January 1, 2006
|
|
|
10,405,010
|
|
$
|
0.380
|
|
|
July
2009 to August 2010
|
|
Issued
|
|
|
4,000,000
|
|
$
|
0.140
|
|
|
December
2013
|
|
Exercised
|
|
|
(812,100
|
)
|
$
|
0.010
|
|
|
|
|
Utilized
in cashless exercise
|
|
|
(43,478
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2006
|
|
|
13,549,432
|
|
$
|
0.310
|
|
|
July
2009 to December 2013
|
|
Issued
|
|
|
20,000,000
|
|
$
|
0.059
|
|
|
February
2014 to November 2014
|
|
Exercised
|
|
|
(162,971
|
)
|
$
|
0.010
|
|
|
|
|
Utilized
in cashless exercise
|
|
|
(6,919
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2007
|
|
|
33,379,542
|
|
$
|
0.160
|
|
|
July
2009 to November 2014
|
|
Warrants
outstanding at December 31, 2007 consisted of the following:
|
|
Number
of
|
|
Exercise
|
|
|
|
|
|
Shares
|
|
Price
|
|
Expiration
|
|
Issued
in conjunction with 2004 or prior financings
|
|
|
461,104
|
|
$
|
0.18
|
|
|
July
2009
|
|
Issued
in conjunction with 2004 or prior financings
|
|
|
976,132
|
|
$
|
0.01
|
|
|
July
2009
|
|
Issued
for research services
|
|
|
250,000
|
|
$
|
0.18
|
|
|
October
2009
|
|
Issued
in conjunction with convertible notes payable
|
|
|
|
|
|
|
|
|
|
|
June
2005
|
|
|
2,692,307
|
|
$
|
0.45
|
|
|
June
2010
|
|
August
2005
|
|
|
4,999,999
|
|
$
|
0.45
|
|
|
August
2010
|
|
December
2006
|
|
|
4,000,000
|
|
$
|
0.14
|
|
|
December
2013
|
|
February
2007
|
|
|
1,000,000
|
|
$
|
0.14
|
|
|
February
2014
|
|
March
2007
|
|
|
1,000,000
|
|
$
|
0.14
|
|
|
March
2014
|
|
June
2007
|
|
|
10,000,000
|
|
$
|
0.05
|
|
|
June
2014
|
|
November
2007
|
|
|
8,000,000
|
|
$
|
0.05
|
|
|
November
2014
|
|
Total
|
|
|
33,379,542
|
|
|
|
|
|
|
|
The
derivative liabilities related to the Company’s outstanding convertible notes
and warrants were valued as of December 31, 2007 and 2006 using the
Black-Scholes pricing model, the market price of the Company’s common stock as
of each year end, the remaining life of each convertible note or warrant
at each
year end, the conversion or exercise price of each instrument at each year
end,
and the following assumptions:
|
|
2007
|
|
2006
|
|
Expected
stock price volatility (varies depending on remaining life of
instrument)
|
|
|
197%
- 220
|
%
|
|
196%
- 222
|
%
|
Expected
dividend payout
|
|
|
0.0
|
%
|
|
0.0
|
%
|
Risk
free interest rate
|
|
|
2.8
|
%
|
|
4.7
|
%
|
NOTE
G - STOCK OPTIONS
On
June
27, 2007, the Company’s board of directors approved establishment of the 2007
Stock Incentive Plan (“the 2007 Plan”) under which options to purchase
30,000,000 shares of the Company’s common stock may be granted. Terms of the
2007 Plan are essentially equivalent to the 2004 Stock Incentive Plan (“the 2004
Plan”) previously approved by the Company’s stockholders. After consideration of
the grants described in the following paragraph and subsequent forfeitures,
options to purchase an aggregate of 1,325,000 and 14,894,648 shares of the
Company’s common stock may be granted, as of December 31, 2007, under the 2004
Plan and 2007 Plan, respectively.
On
June
27, 2007, the Company granted directors, officers, employees and a consultant
options to purchase an aggregate of 19,080,266 shares of the Company’s common
stock. The exercise price of those 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 up to 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.
On
May
23, 2006, the Company granted an officer, who is also a director, options
to
purchase 600,000 shares of the Company’s common stock. The exercise price on
500,000 of those options is $0.05 per share, while the exercise price on
the
remaining 100,000 shares is $0.018 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 two preceding paragraphs,
was determined using the Black-Scholes pricing model, the market price of
the
Company’s stock as of each respective grant date, the exercise price of each
option grant, and the following assumptions:
|
|
2007
|
|
2006
|
|
Expected
term (management's estimate, absent any meaningful
history)
|
|
|
5
years
|
|
|
3
years
|
|
Expected
stock price volatility
|
|
|
201
|
%
|
|
201
|
%
|
Expected
dividend payout
|
|
|
0.0
|
%
|
|
0.0
|
%
|
Risk
free interest rate
|
|
|
4.5
|
%
|
|
4.9
|
%
|
The
Company recorded $446,456 of compensation expense related to these option
grants
plus previously issued option grants existing as of December 31, 2006, for
the
year ended December 31, 2007. Stock option compensation expense for the year
ended December 31, 2006 was $238,550.
The
following table summarizes changes in outstanding stock options during the
years
ended December 31, 2007 and 2006, the related weighted average exercise price,
and the related weighted average grant date fair value:
|
|
Total
Options
|
|
Vested
Options
|
|
Unvested
Options
|
|
|
|
|
|
Weighted
Average
|
|
|
|
Weighted
Average
|
|
|
|
Weighted
Average
|
|
|
|
|
|
|
|
Grant
|
|
|
|
|
|
Grant
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
Date
|
|
|
|
|
|
Date
|
|
|
|
|
|
Date
|
|
|
|
Number
of
|
|
Exercise
|
|
Fair
|
|
Number
of
|
|
Exercise
|
|
Fair
|
|
Number
of
|
|
Exercise
|
|
Fair
|
|
|
|
Shares
|
|
Price
|
|
Value
|
|
Shares
|
|
Price
|
|
Value
|
|
Shares
|
|
Price
|
|
Value
|
|
As
of January 1, 2006
|
|
|
4,170,952
|
|
$
|
0.180
|
|
$
|
0.334
|
|
|
3,187,618
|
|
$
|
0.180
|
|
$
|
0.232
|
|
|
983,334
|
|
$
|
0.180
|
|
$
|
0.662
|
|
Grants
|
|
|
600,000
|
|
$
|
0.045
|
|
$
|
0.012
|
|
|
33,333
|
|
$
|
0.018
|
|
$
|
0.015
|
|
|
566,667
|
|
$
|
0.046
|
|
$
|
0.012
|
|
Exercised
|
|
|
(150,000
|
)
|
$
|
0.180
|
|
$
|
0.125
|
|
|
(150,000
|
)
|
$
|
0.180
|
|
$
|
0.125
|
|
|
|
|
|
|
|
|
|
|
Vesting
|
|
|
|
|
|
|
|
|
|
|
|
966,667
|
|
$
|
0.135
|
|
$
|
0.382
|
|
|
(966,667
|
)
|
$
|
0.135
|
|
$
|
0.382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2006
|
|
|
4,620,952
|
|
$
|
0.162
|
|
$
|
0.299
|
|
|
4,037,618
|
|
$
|
0.167
|
|
$
|
0.270
|
|
|
583,334
|
|
$
|
0.132
|
|
$
|
0.494
|
|
Grants
|
|
|
19,080,266
|
|
$
|
0.030
|
|
$
|
0.029
|
|
|
8,300,006
|
|
$
|
0.030
|
|
$
|
0.029
|
|
|
10,780,260
|
|
$
|
0.030
|
|
$
|
0.029
|
|
Forfeitures
|
|
|
(1,475,000
|
)
|
$
|
0.165
|
|
$
|
0.520
|
|
|
(1,116,666
|
)
|
$
|
0.173
|
|
$
|
0.478
|
|
|
(358,334
|
)
|
$
|
0.138
|
|
$
|
0.654
|
|
Vesting
|
|
|
|
|
|
|
|
|
|
|
|
291,666
|
|
$
|
0.106
|
|
$
|
0.193
|
|
|
(291,666
|
)
|
$
|
0.106
|
|
$
|
0.193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2007
|
|
|
22,226,218
|
|
$
|
0.049
|
|
$
|
0.053
|
|
|
11,512,624
|
|
$
|
0.066
|
|
$
|
0.075
|
|
|
10,713,594
|
|
$
|
0.030
|
|
$
|
0.029
|
|
The
total
grant date fair value of shares vested during 2007 and 2006 was $296,941
and
$369,178, respectively.
Unrecognized
compensation expense applicable to unvested options as of December 31, 2007
was
$120,324, substantially all of which will be amortized to expense during
the
first two quarters of 2008.
Stock
options outstanding at December 31, 2007, by exercise price, consisted of
the
following:
Exercise
|
|
Number
of Shares
|
|
Weighted
Average Remaining
|
|
Price
|
|
Total
|
|
Vested
|
|
Contractual
Term
|
|
$
0.018
|
|
|
100,000
|
|
|
66,666
|
|
|
8.4
years
|
|
$
0.030
|
|
|
18,930,266
|
|
|
8,250,006
|
|
|
|
|
$
0.050
|
|
|
500,000
|
|
|
500,000
|
|
|
|
|
$
0.180
|
|
|
2,695,952
|
|
|
2,695,952
|
|
|
|
|
|
|
|
22,226,218
|
|
|
11,512,624
|
|
|
|
|
Based
on
the December 31, 2007 closing price of the Company’s stock, the foregoing stock
options have no intrinsic value.
NOTE
H - INCOME TAXES
The
provision for income taxes for the years ended December 31, 2007 and 2006
consisted of the minimum franchise tax due under the laws of the states where
the Company has nexus.
For
income tax reporting purposes, the Company’s net operating loss carryforwards
approximate $13,200,000 and unused federal tax credits approximate $90,000,
which begin expiring in 2019, subject to Section 382 of the Internal Revenue
Code, which 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.
Deferred
income tax assets (all of which are non-current) as of December 31, 2007
and
2006 consisted of the following:
|
|
2007
|
|
2006
|
|
Net
operating loss carryforwards
|
|
$
|
5,022,007
|
|
$
|
2,729,867
|
|
Unrealized
losses on derivatives
|
|
|
946,739
|
|
|
2,024,855
|
|
Stock
option compensation
|
|
|
400,950
|
|
|
556,231
|
|
Research
and development tax credit
|
|
|
90,000
|
|
|
80,342
|
|
Other
|
|
|
42
|
|
|
57,455
|
|
Total
|
|
|
6,459,738
|
|
|
5,448,750
|
|
Valuation
reserve
|
|
|
(6,459,738
|
)
|
|
(5,448,750
|
)
|
Net
deferred income tax assets
|
|
$
|
-
|
|
$
|
-
|
|
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 balance sheets.
The
tax
rate used by the Company differed from the federal statutory rate for 2007
and
2006 due to the following items:
|
|
2007
|
|
2006
|
|
Federal
statutory rate
|
|
|
34.0
|
%
|
|
34.0
|
%
|
State
taxes, net of federal tax benefit
|
|
|
4.1
|
%
|
|
3.3
|
%
|
Adjustment
for cancelled stock options
|
|
|
-8.5
|
%
|
|
0.0
|
%
|
Research
and development tax credit
|
|
|
-0.3
|
%
|
|
0.8
|
%
|
Other
|
|
|
-2.0
|
%
|
|
-1.3
|
%
|
Total
|
|
|
27.3
|
%
|
|
36.8
|
%
|
Change
in valuation reserve
|
|
|
-27.3
|
%
|
|
-36.8
|
%
|
Net
|
|
|
0.0
|
%
|
|
0.0
|
%
|
NOTE
I - RELATED PARTY TRANSACTIONS
The
son
of the Company’s chairman of the board served as a business development
consultant to the Company throughout 2007 and 2006, for which he was paid
a fee
of $5,000 per month. The fee for December 2007 was unpaid at December 31,
2007.
NOTE
J - COMMITMENTS AND CONTINGENCIES
The
Company leases office space using month-to-month or other short-term
arrangements. Rent expense was $15,648 and $25,409 for the years ended December
31, 2007 and 2006, respectively.
The
Company is party to four in-licensed technology agreements which require
royalty
payments ranging from 1% to 3% of net sales should the Company be successful
in
commercializing the respective technologies. One of these agreements requires
a
monthly minimum payment of $4,000 ($48,000 annually) through June 2022. Each
of
these agreements may be terminated on 90 days notice.
NOTE
K - SUBSEQUENT EVENTS
During
January 2008, accrued interest on convertible notes as of December 31, 2007,
in
the amount of $199,501, was exchanged for additional convertible notes with
a
principal balance of equal amount.
Subsequent
to December 31, 2007 and through February 22, 2008, the Company issued 1,750,000
shares of common stock upon the conversion of $17,125 of convertible
notes.
ITEM
8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND
FINANCIAL
DISCLOSURE
On
January 24, 2005, the Audit Committee of Grant Life Sciences, Inc. engaged
Russell Bedford Stefanou Mirchandani LLP (“RBSM”) as our independent registered
public accounting firm to audit the Company’s financial statements for the year
ended December 31, 2004. Prior to engaging RBSM, neither the Company, nor anyone
on our behalf, consulted with RBSM regarding the application of accounting
principles to a specific completed or contemplated transaction, or the type
of
audit opinion that might be rendered on the Company’s consolidated financial
statements, or any other matters.
On
January 24, 2006, Grant Life Sciences, Inc. dismissed RBSM as our independent
registered public accounting firm. Effective January 24, 2006, we engaged
Singer, Lewak, Greenbaum & Goldstein LLP (“SLGG”) as our new independent
registered public accounting firm. Our board of directors approved the dismissal
of RBSM and the appointment of SLGG as our new independent registered public
accounting firm.
From
the
date of RBSM's appointment through the date of its
dismissal on January 24, 2006, there were no disagreements between the
Company
and RBSM
on any matter listed under Item 304 Section (a)(1)(iv) A to E of Regulation
S-B,
including accounting principles or practices, financial statement disclosure
or
auditing scope or procedure which, if not resolved to the satisfaction of RBSM
would have caused RBSM to make reference to the matter in its reports on our
financial statements.. The report on the financial statements prepared by RBSM
for the year ended December 31, 2004 contained a paragraph with respect to
there
being substantial doubt about our ability to continue as a going
concern.
Prior
to
engaging SLGG, we did not consult SLGG regarding either:
|
1.
|
the
application of accounting principles to any specified transaction,
either
completed or proposed, or the type of audit opinion that might be
rendered
on our financial statements, and neither a written report was provided
to
the Company
nor oral advice was provided that SLGG concluded was an important
factor
considered by the Company
in
reaching a decision as to an accounting, auditing or financial
reporting issue; or
|
|
2.
|
any
matter that was either the subject of disagreement, as defined in
Item
304(a)(1)(iv)(A) of Regulation S-B and the related instruction to
Item 304
of Regulation S-B, or a reportable event, as that term is explained
in
Item 304(a)(1)(iv)(A) of Regulation
S-B.
|
Prior
to
engaging SLGG, SLGG did not provide the
Company with either written or oral advice that was an important factor
considered by the
Company in reaching a decision to change our independent registered public
accounting firm from RBSM to SLGG.
On
April
17, 2007, Grant Life Sciences, Inc. dismissed SLGG as its independent registered
public accounting firm. Effective April 17, 2007, we engaged Tanner LC as our
new independent registered public accounting firm. Our board of directors has
approved the dismissal of SLGG and the appointment of Tanner LC as our new
independent registered public accounting firm.
From
the
date of SLGG's appointment through the date of its
dismissal on April 17, 2007, there were no disagreements between the
Company
and SLGG
on any matter listed under Item 304 Section (a)(1)(iv) A to E of Regulation
S-B,
including accounting principles or practices, financial statement disclosure
or
auditing scope or procedure which, if not resolved to the satisfaction of SLGG
would have caused SLGG to make reference to the matter in its reports on our
financial statements. The report prepared by SLGG on the Company’s financial
statements for the years ended December 31, 2006 and 2005, contained neither
an
adverse opinion nor a disclaimer of opinion; however, such report contained
an
explanatory paragraph
setting
forth that there was substantial doubt as to our ability to continue as a going
concern and an explanatory paragraph regarding the restatement of the financial
statements.
Prior
to
engaging Tanner LC, we did not consult Tanner LC regarding either:
1.
|
the
application of accounting principles to any specified transaction,
either
completed or proposed, or the type of audit opinion that might be
rendered
on our financial statements, and neither a written report was provided
to
the
Company nor oral advice was provided by Tanner LC that was an important
factor considered by the
Company in reaching a decision as to an accounting, auditing or
financial reporting issue; or
|
2.
|
any
matter that was either the subject of disagreement, as defined in
Item
304(a)(1)(iv)(A) of Regulation S-B and the related instruction to
Item 304
of Regulation S-B, or a reportable event, as that term is explained
in
Item 304(a)(1)(iv)(A) of Regulation
S-B.
|
Prior
to
engaging Tanner LC, Tanner LC did not provide the
Company with either written or oral advice that was an important factor
considered by the
Company in reaching a decision to change our independent registered public
accounting firm from SLGG to Tanner LC.
ITEM
8A - CONTROLS AND PROCEDURES
Our
management, with the participation of our principal executive officer and
principal financial officer, has evaluated the effectiveness of our disclosure
controls and procedures as of December 31, 2007. Based on this evaluation,
because of the Company’s limited resources and limited number of employees,
our
management concluded that, as of December 31, 2007, our disclosure controls
and procedures are not effective to provide reasonable assurance that
information required to be disclosed by us in the reports that we file or submit
under the 1934 Act is recorded, processed, summarized, and reported within
the
time periods specified in the SEC’s rules and forms and to provide reasonable
assurance that such information is accumulated and communicated to our
management, including our principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required
disclosures.
Evaluation
of and Report on Internal Control over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting of the Company. Management, with the participation of our
principal executive officer and principal financial officer, has evaluated
the
effectiveness of our internal control over financial reporting as of
December 31, 2007 based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on this evaluation, because of the Company’s
limited resources and limited number of employees, management concluded that,
as
of December 31, 2007, our internal control over financial reporting is
not effective in providing reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with U.S. generally accepted accounting
principles.
This
annual report does not include an attestation report of the Company’s
independent registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by the
Company’s independent registered public accounting firm pursuant to temporary
rules of the SEC that permit the Company to provide only management’s report in
this annual report.
Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting during the
quarter ended December 31, 2007 that materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
Limitations
on Controls
Management
does not expect that our disclosure controls and procedures or our internal
control over financial reporting will prevent or detect all error and fraud.
Any
control system, no matter how well designed and operated, is based upon certain
assumptions and can provide only reasonable, not absolute, assurance that its
objectives will be met. Further, no evaluation of controls can provide absolute
assurance that misstatements due to error or fraud will not occur or that all
control issues and instances of fraud, if any, within the Company have been
detected.
ITEM
8B - OTHER INFORMATION
None.
PART
III
ITEM
9 -
DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(b) OF THE EXCHANGE
ACT
Director
and Officer Information
Name
|
|
Age
|
|
Position
|
Stan
Yakatan
|
|
65
|
|
Chairman
of the Board of Directors
|
Dr.
Hun-Chi Lin
|
|
54
|
|
President,
Chief Scientific Officer, Director
|
Doyle
Judd
|
|
63
|
|
Chief
Financial Officer
|
Michael
Ahlin
|
|
59
|
|
Vice
President and Director
|
Jack
Levine
|
|
57
|
|
Director,
Chairman of Audit Committee
|
Stan
Yakatan.
Mr. Yakatan has been the Chairman of the Board of Directors since July 2004,
and
was the Chief Executive Officer from July 2004 until August 2005. From September
1984 to the present, Mr. Yakatan has been the Chairman, President and Chief
Executive Officer of Katan Associates, a life sciences advisory business.
From 2000 to 2005, Mr. Yakatan was also a director of Lifepoint, Inc., a
manufacturer of drug and alcohol testing systems, and is a strategic advisor
to
the state government of Victoria, Australia. Between 1968 and 1989, Mr.
Yakatan held various senior executive positions with New England Nuclear
Corporation (a division of E.I. DuPont), ICN Pharmaceuticals, Inc., New
Brunswick Scientific Co., Inc. and Biosearch.
Dr.
Hun-Chi Lin.
Dr. Lin
has been the President, Chief Scientific Officer, and a Director since October
2005. Since 2003, Dr. Hun-Chi Lin has been co-founder and President of XepMed,
Inc., which develops medical devices used for separating blood components and
treating infectious diseases. From 1999 to present, Dr. Lin has been co-founder
and President of BioMedical Research Laboratories, Inc., which developed a
Web-based healthcare partner-connectivity system to be used by individual health
maintenance organizations, individuals, and in clinical trials. From 1996 to
1999, Dr. Lin was Director of Clinical Trials at Specialty Laboratories, where
he built and managed a clinical trials division that had the broadest
esoteric-testing capabilities in the contract research organization
industry.
Doyle
Judd.
Mr. Judd
has been Chief Financial Officer since April 2007. Mr. Judd has been a member
of
Tatum LLC, a national CFO services firm, since April 2006 and serves other
Tatum
clients concurrent with his service to the Company. Prior to his engagement
by
the Company, Mr. Judd served other Tatum clients in a variety of industries.
From May 2004 through March 2006, Mr. Judd was Chief Financial Officer of The
LoveSac Corporation, an operator and franchisor of specialty retail stores,
which filed for bankruptcy protection in January 2006. From July 1994 through
June 2003, Mr. Judd was Chief Financial Officer of Slaymaker Group, Inc., which
operated causal theme restaurants in six intermountain states.
Michael
Ahlin.
Mr. Ahlin was one of the original founders of Impact Diagnostics, the
predecessor company of Grant Life Sciences. From July 1998 to May 2004,
Mr. Ahlin was the Chairman of the Board, President and Chief Executive Officer
of Impact Diagnostics. Since May 2004, Mr. Ahlin has retained the positions
of Vice President and Director. Mr. Ahlin has been President of WetCor,
Inc., a land development company, since 1983.
Jack
Levine.
Mr. Levine has been a Director since July 2004. Since 1984, Mr. Levine has
been the President of Jack Levine, PA, a certified public accounting firm.
In addition, since July 2003, Mr. Levine has served as a Director of RealCast
Corporation, an internet streaming company. From 1999 until October 2007,
Mr. Levine served as a Director and Chairman of the Audit Committee of PharmaNet
Development Group, Inc. (formerly, SFBC International Inc.), a global drug
development company. He also served as Chairman of the Board of Directors
of this company from January 2006 until October 2007. Mr. Levine served as
a
Director, Chairman of the Audit and Asset Liability Committees, and a member
of
the Executive Committee of Beach Bank from May 2000 until December 2006, and
as
a Director and Chairman of the Audit Committee of The Prairie Fund, a mutual
fund, from August 2000 until December 2006. Mr. Levine is a certified public
accountant currently licensed by the State of Florida. He also is a member
of
the National Association of Corporate Directors, Washington, D.C., and a member
of the Association of Audit Committee Members, Inc.
Section
16 Beneficial Ownership Compliance
Section
16(a) of the Securities and Exchange Act of 1934, as amended, requires our
executive officers and directors, and persons who beneficially own more than
10%
of the C ompany’s
common stock, to file initial reports of ownership and reports of changes in
ownership of our common stock with the SEC.
Based
solely on the reports received by the C ompany
and on written representations from certain reporting persons, we are not aware
of any Section 16(a) filings made by any directors, executive officers and
persons who beneficially own more than 10% of the Company’s common stock during
the fiscal year ended December 31, 2007.
ITEM
10 - EXECUTIVE COMPENSATION
The
following table sets forth information concerning the total compensation that
we
have paid or that has accrued on behalf of our Chief Executive Officer and
other
executive officers during the
years
ended December 31, 2007 and 2006.
Summary
Compensation Table
Name
and
Principal
P osition
|
|
Year
|
|
Salary
($)
|
|
Option
Awards
($)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
Stan
Yakatan,
Chairman
and Former
Chief
Executive Officer (1)
|
|
|
2007
|
|
|
30,000
|
|
|
74,883
|
|
|
104,883
|
|
|
|
|
2006
|
|
|
18,000
|
|
|
-
|
|
|
18,000
|
|
Michael
Ahlin,
Vice
President and Director (2 )
|
|
|
2007
|
|
|
30,000
|
|
|
59,805
|
|
|
89,805
|
|
|
|
|
2006
|
|
|
40,000
|
|
|
-
|
|
|
40,000
|
|
Dr
Hun-Chi Lin,
President,
Chief Scientific Officer and Director ( 3)
|
|
|
2007
|
|
|
90,000
|
|
|
105,482
|
|
|
195,482
|
|
|
|
|
2006
|
|
|
60,000
|
|
|
5,868
|
|
|
65,868
|
|
Donald
Rutherford
Former
Chief Financial Officer (4)
|
|
|
2007
|
|
|
29,607
|
|
|
59,736
|
|
|
89,343
|
|
|
|
|
2006
|
|
|
116,625
|
|
|
60,892
|
|
|
177,517
|
|
Doyle
Judd
Chief
Financial Officer (5)
|
|
|
2007
|
|
|
90,050
|
|
|
61,111
|
|
|
151,161
|
|
|
|
|
2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
(1)
Mr. Yakatan resigned from the position of Chief Executive Officer
in
August 2005, after which he was paid $1,500 per month as Chairman
of the
Board of Directors. In 2007, this compensation was increased to $2,500
per
month. Mr. Yakatan does not have an employment contract with the
Company.
In 2007, Mr. Yakatan was granted 3,359,531 share options, of which
approximately 40% vested immediately, 40% vest in 2008, and 20% vest
in
2009.
|
(2)
Mr. Ahlin has
an
employment contract with the C ompany
which initially set his monthly salary at $12,000. The employment
contract
can be terminated by the Company at any time. During 2005, the pay
rate
was reduced to $5,000 per month and, during 2006, to $2,500 per month.
In
2007, Mr. Ahlin was granted 3,000,000 share options, of which one-third
vested immediately, one-third vest in 2008 and one-third vest in
2009.
|
(3)
Dr. Lin joined the Company as President, Chief Scientific Officer
and
Director in October 2005 with a monthly salary of $5,000. He was
also
entitled to 500,000 share options with an exercise price of $0.05
per
share, one-third vesting effective the date of hiring and the remaining
two-thirds vesting quarterly over 2 years. On May 23, 2006, Dr. Lin
received additional compensation in the form of 100,000 share options,
vesting one-third on the grant date, one-third on the first anniversary
of
the grant date and one-third on the second anniversary of the grant
date.
In 2007, Dr. Lin’s compensation was increased to $7,500 per month and he
was granted 3,961,204 share options, of which approximately 57% vested
immediately, 31% vest in 2008, and 12% vest in 2009.
|
(4)
Mr. Rutherford joined the Company as Chief Financial Officer on April
1,
2005 at an annual salary of $104,167 for work on a part-time basis.
Mr.
Rutherford was granted 750,000 share options ,
one-third vesting immediately and the remainder on a monthly basis
over
two years. In 2007, Mr. Rutherford was granted 2,500,000 share options,
of
which one-third vested immediately, one-third vests in 2008, and
one-third
vests in 2009. He was replaced by Doyle Judd, who joined the Company
as Chief Financial Officer on April 9, 2007.
|
(5)
Mr. Judd joined the Company as Chief Financial Officer on April 9,
2007 at
an annual salary of $99,000 for work on a half-time basis. Mr. Judd
was granted 2,500,000 share options, 56% of which vested immediately
with
the remainder vesting in 2008.
|
For
the
year ended December 31, 2007, we did not have any benefit plans, except the
2004
Stock Incentive Plan which was approved on September 30, 2004 by a majority
of
the shareholders (the “2004 Plan”) and the 2007 Stock Incentive Plan which was
adopted by the Board of Directors on June 27, 2007 (the “2007
Plan”).
The
following table sets forth information concerning individual grants of stock
options to the Company’s named executive officers outstanding as of December
31, 2007 under
the
Company’s 2004 Plan and 2007 Plan.
Outstanding
Equity Awards at Fiscal Year End
|
|
Option
Awards
|
|
Stock
Awards
|
|
Name
|
|
Option
Grant Date
|
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
|
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable(1)
|
|
|
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options (#)
|
|
Option
Exercise Price ($)
|
|
Option
Expiration Date
|
|
Number
of Shares or Units of Stock That Have Not Vested
(#)
|
|
Market
Value of Shares or Units of Stock That Have Not Vested
($)
|
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other
Rights
That Have Not Vested (#)
|
|
Equity
Incentive Plan Awards Market or Payout Value of Unearned Shares,
Units or
Other Rights That Have Not Vested ($)
|
|
Stan Yakatan,
Chairman
|
|
|
7/6/04
|
|
|
1,720,952
|
|
|
-
|
|
|
|
|
|
-
|
|
$
|
0.180
|
|
|
7/6/14
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
6/27/07
|
|
|
1,333,335
|
|
|
2,026,196
|
|
|
|
|
|
-
|
|
$
|
0.030
|
|
|
6/27/17
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
Ahlin, Vice President, Director
|
|
|
6/27/07
|
|
|
1,000,000
|
|
|
2,000,000
|
|
|
|
|
|
-
|
|
$
|
0.030
|
|
|
6/27/17
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Hun-Chi Lin,
President,
Director
|
|
|
5/23/06
|
|
|
500,000
|
|
|
-
|
|
|
|
|
|
-
|
|
$
|
0.050
|
|
|
5/23/16
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
5/23/06
|
|
|
66,666
|
|
|
33,334
|
|
|
(2
|
)
|
|
-
|
|
$
|
0.018
|
|
|
5/23/16
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
6/27/07
|
|
|
2,266,668
|
|
|
1,694,538
|
|
|
|
|
|
-
|
|
$
|
0.030
|
|
|
6/27/17
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Don Rutherford,
Former
CFO
|
|
|
4/1/05
|
|
|
750,000
|
|
|
-
|
|
|
|
|
|
-
|
|
$
|
0.180
|
|
|
4/1/15
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
6/27/07
|
|
|
833,334
|
|
|
1,666,666
|
|
|
|
|
|
-
|
|
$
|
0.030
|
|
|
6/27/17
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Doyle
Judd,
CFO
|
|
|
6/27/07
|
|
|
1,400,000
|
|
|
1,100,000
|
|
|
|
|
|
-
|
|
$
|
0.030
|
|
|
6/27/17
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
(1) Vesting
schedule by individual for 2007 share option grants is included in footnotes
to
Summary Compensation Table above.
(2)
Shares vest on May 23, 2008.
Employment
Contracts and Termination of Employment and Change-In-Control
Arrangements
We
have
the following employment contracts with the named executive officers:
Dr.
Hun-Chi Lin has an employment agreement with the Company. Pursuant to this
employment agreement, Dr. Lin was paid an annual salary of $60,000 through
2006 (increased to $90,000 effective January 1, 2007) for approximately 50%
of
his time and the Board of Directors of the Company has the discretion to grant
an annual bonus. Dr. Lin has been granted 500,000 share options at $0.05
per share vesting quarterly over 2 years from date of hiring. On June 27,
2007, he was granted 3,961,204 share options, of which approximately 57% vested
immediately, 31% vest in 2008, and 12% vest in 2009. Dr. Lin is entitled to
participate in all employee benefit plans or programs that are available to
management employees of the Company and all other benefit plans or programs
as
may be specified by the Board of Directors of the Company. The employment
agreement provides that either we or Dr. Lin may terminate the agreement at
any
time upon 30 days written notice.
Doyle
Judd has an employment agreement with the Company. Pursuant to this
employment agreement Mr. Judd is paid an annual salary of $99,000 for
approximately 20 hours per week, depending on the needs of the Company.
Mr. Judd was granted 2,500,000 share options on June 27, 2007 at an exercise
price per share equal to the closing price of the common stock on the date
the
options were granted, of which 1,400,000 options vested immediately
with the remainder vesting in 2008. Mr. Judd is entitled to participate in
all employee benefit plans or programs that are available to management
employees of the Company and all other benefit plans or programs as may be
specified by the Board of Directors of the Company. The employment agreement
provides that either we or Mr. Judd may terminate the agreement upon 30 days
written notice.
Michael
Ahlin has an employment agreement with the Company. Under the terms of the
agreement he was
to receive as compensation a monthly salary of $12,000. In 2006, Mr. Ahlin
agreed to reduce his monthly salary to $2,500. The Board of Directors has the
discretion to grant an annual bonus to Mr. Ahlin. Mr. Ahlin was granted
3,000,000 share options on June 27, 2007, of which one-third vested immediately,
one-third vest in 2008 and one-third vest in 2009. Mr. Ahlin is entitled
to participate in all employee benefit plans or programs that are available
to
management employees of the Company. The Company currently has no benefit plans.
The employment agreement provides that either we or Mr. Ahlin may terminate
the agreement at any time.
Compensation
of Directors
We
pay
our directors compensation in the form of options to purchase shares for each
year that they serve as directors. These options have an exercise price
equal to the market value at the time they are granted. One third of the
options become exercisable on the grant date, plus one-third on each of the
first and second anniversaries of the date of their grant. The
compensation of all directors other than Stan Yakatan and Jack Levine has been
reflected in the Summary Compensation Table above.
Mr.
Yakatan became a non-employee director after his resignation as CEO in 2005
and
is paid a fee of $1,500 per month for his services as Chairman of the board
of
directors. In 2007, this compensation was
increased to $2,500 per month. In
2007,
Mr. Yakatan was granted 3,359,531 share options, of which approximately 40%
vested immediately, 40% vest in 2008, and 20% vest in 2009. The amount of stock
option expense recognized in the 2007 and 2006 financial statements with respect
to stock options previously granted to Mr. Yakatan was $74,883 and $0,
respectively.
In
2007,
Mr. Levine was granted 3,359,531 share options, of which approximately 40%
vested immediately, 40% vest in 2008, and 20% vest in 2009. The amount of stock
option expense recognized in the 2007 and 2006 financial statements with respect
to stock options previously granted to Mr. Levine totaled $75,429 and $3,784,
respectively.
ITEM
11- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED
STOCKHOLDER MATTERS
The
following table lists stock ownership of our common stock as of February 22,
2008. The information includes beneficial ownership by (i) holders of more
than 5% of our common stock, (ii) each of our current directors and executive
officers and (iii) all of our directors and executive officers as a
group. .
The
information is determined in accordance with Rule 13d-3 promulgated under the
Exchange Act based upon information furnished by the persons listed or contained
in filings made by them with the Commission. Except
as
noted below, to our knowledge, each person named in the table has sole voting
and investment power with respect to all shares of our common stock beneficially
owned by them.
Amount
and Nature of Beneficial Ownership
Name and Address of
Beneficial Owner
|
|
Director/Officer
|
|
Amount and Nature of
Beneficial Ownership (1)
|
|
|
|
Percentage
of Class (1)
|
|
|
|
|
|
|
|
|
|
|
|
Stan
Yakatan
245
33rd Street
Hermosa
Beach, CA 90254
|
|
|
Chairman
of the Board of Directors
|
|
|
3,970,953
|
|
|
(2
|
)
|
|
1.19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack
Levine
16855
N.E. 2nd
Avenue,
Suite 303
N.
Miami Beach, FL 33162
|
|
|
Director
|
|
|
3,535,806
|
|
|
(3
|
)
|
|
1.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Hun-Chi Lin
17th
Floor
3550
Wilshire Blvd.
Los
Angeles, CA 90010
|
|
|
President,
Chief Scientific Officer and Director
|
|
|
3,966,667
|
|
|
(4
|
)
|
|
1.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
Ahlin
1787
E. Fort Union Blvd., Suite 202
Salt
Lake City, UT 84121
|
|
|
Vice
President and Director
|
|
|
5,227,164
|
|
|
(5
|
)
|
|
1.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Doyle
Judd
1787
E. Fort Union Blvd., Suite 202
Salt
Lake City, UT 84121
|
|
|
Chief
Financial Officer
|
|
|
2,200,000
|
|
|
(6
|
)
|
|
0.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
directors and officers as a group
|
|
|
|
|
|
18,650,590
|
|
|
(7
|
)
|
|
5.96
|
%
|
(1)
Applicable percentage ownership is based on 31 2,87 5,613
shares of common stock outstanding as of February
22, 2008, together with securities exercisable or convertible into shares of
common stock within 60 days of February
22, 2008 for each shareholder.
Beneficial ownership is determined in accordance with the rules of the
SEC
and
generally includes voting or investment power with respect to securities. Shares
of common stock that are currently exercisable or exercisable within 60 days
of February
22, 2008 are deemed to be beneficially owned by the person holding such
securities for the purpose of computing the percentage of ownership of such
person, but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person.
(2)
Represents options to purchase 3,720,953 shares of our common stock beneficially
owned by Mr. Yakatan exercisable within 60 days. Does not include options to
purchase 1,359,530 shares of our common stock that are not exercisable within
60
days.
(3)
Includes options to purchase 2,175,001 shares of our common stock beneficially
owned by Mr. Levine that are exercisable within 60 days. Does not include
options to purchase 1,359,530 shares of our common stock that are not
exercisable within 60 days.
(4)
Represents options to purchase 3,966,667 shares of our common stock beneficially
owned by Mr. Lin that are exercisable within 60 days. Does not include options
to purchase 561,203 shares of our common stock that are not exercisable
within 60 days.
(5)
Includes options to purchase 1,500,000 shares of our common stock beneficially
owned by Mr. Ahlin that are exercisable within 60 days. Does not include options
to purchase 1,500,000 shares of our common stock that are not exercisable within
60 days.
(6)
Represents options to purchase 2 ,2 00,000
shares of our common stock beneficially owned by Mr. Judd that are exercisable
within 60 days. Does not include options to purchase 3 00,000
shares of our common stock not exercisable within 60 days. Mr. Judd replaced
Don
Rutherford as Chief Financial Officer in April 2007. Mr. Rutherford maintains
ownership of options to
purchase
2,416,667 shares of our common stock that are exercisable within 60 days. Such
ownership does not include options to purchase 833,333 shares of our common
stock that are not exercisable within 60 days.
(7)
Includes options to purchase 12,762,621 shares of our common stock exercisable
within 60 days. Does not include options to purchase 5,880,263 shares of
our common stock that are not exercisable within 60 days.
ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except
as
set forth below, there have been no material transactions during the past two
years between us and any officer, director or any share holder
owning greater than 5% of the Company’s outstanding shares, or any of their
immediate family members.
Seth
Yakatan has been contracted as a consultant to the Company in the business
development area since November 1, 2004, at a fee of $5,000 per
month. Mr. Yakatan is the son of Stan Yakatan, the chairman of the board of
directors.
In
October 2007, Mr. Ahlin advanced $7,000 to the Company. He was repaid in full,
without interest, in December 2007.
We
believe that these transactions were on terms as favorable as could have been
obtained from unaffiliated third parties. Any future transactions we enter
into
with our directors, executive officers and other affiliated persons will be
on
terms no less favorable to us than can be obtained from an unaffiliated party
and will be approved by a majority of the independent, disinterested members
of
our board of directors, who have access, at our expense, to independent legal
counsel.
ITEM
13. EXHIBITS
Exhibits:
Exhibit
No.
|
|
Description
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2.1
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|
Agreement
and Plan of Merger, dated as of July 6, 2004, by and among Grant
Ventures, Inc., Impact Acquisition Corporation and Impact Diagnostics,
Inc. (incorporated by reference to Form SB-2 filed with the SEC
on
September 30, 2004).
|
3.1
|
|
Articles
of Incorporation of North Ridge Corporation, filed with the Secretary
of
State of Nevada on January 31, 2000 (incorporated by reference
to Form
SB-2 filed with the SEC on September 30, 2004).
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3.2
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|
Certificate
of Amendment to Articles of Incorporation of North Ridge Corporation,
changing its name to Grant Ventures, Inc. and changing its authorized
capital to 50,000,000 shares, par value $0.001 per share, filed
with the
Secretary of State of Nevada on May 30, 2001 (incorporated by reference
to
Form SB-2 filed with the SEC on September 30, 2004).
|
3.3
|
|
Form
of Amended and Restated Articles of Incorporation of Grant Ventures,
Inc.
(incorporated by reference to Form SB-2 filed with the SEC on September
30, 2004).
|
3.4
|
|
Articles
of Merger for the merger of Impact Diagnostics, Inc. (Utah) and
Impact
Acquisitions Corporation (Utah), filed with the Secretary of State
of Utah
on July 30, 2004 (incorporated by reference to Form SB-2 filed
with the
SEC on September 30, 2004).
|
3.5
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|
Bylaws
of Grant Life Sciences, Inc. (incorporated by reference to Form
SB-2/A
filed with the SEC on January 25, 2005).
|
|
|
2004
Stock Incentive Plan of Grant Ventures, Inc. (incorporated by reference
to
Form SB-2 filed with the SEC on September 30, 2004).
|
10.4
|
|
2007
Stock Incentive Plan of Grant Life Sciences, Inc.
|
10.5
|
|
Securities
Purchase Agreement dated February 7, 2007 by and among the Company
and New
Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC,
AJW
Offshore, Ltd. and AJW Partners, LLC (incorporated by reference to
Form 8-K/A filed with SEC on February 13, 2007).
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10.6
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|
Form
of Callable Secured Convertible Note dated February 7, 2007 (incorporated
by reference to Form 8-K/A filed with SEC on February 13,
2007).
|
10.7
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|
Form
of Stock Purchase Warrant dated February 7, 2007 (incorporated
by
reference to Form 8-K/A filed with SEC on February 13,
2007).
|
10.8
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|
Registration
Rights Agreement dated February 7, 2007 by and among the Company
and New
Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC,
AJW
Offshore, Ltd. and AJW Partners, LLC (incorporated by reference
to Form
8-K/A filed with SEC on February 13, 2007).
|
10.9
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|
Security
Agreement dated February 7, 2007 by and among the Company and New
Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC,
AJW
Offshore, Ltd. and AJW Partners, LLC (incorporated by reference
to Form
8-K/A filed with SEC on February 13, 2007).
|
10.10
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|
Intellectual
Property Security Agreement dated February 7, 2007 by and among
the
Company and New Millennium Capital Partners II, LLC, AJW Qualified
Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC (incorporated
by
reference to Form 8-K/A filed with SEC on February 13,
2007).
|
10.11
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|
Securities
Purchase Agreement dated March 7, 2007 by and among the Company
and New
Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC,
AJW
Offshore, Ltd. and AJW Partners, LLC (incorporated by reference
to Form
8-K filed with SEC on March 13, 2007).
|
10.12
|
|
Form
of Callable Secured Convertible Note dated March 7, 2007 (incorporated
by
reference to Form 8-K filed with SEC on March 13,
2007).
|
10.13
|
|
Form
of Stock Purchase Warrant dated March 7, 2007 (incorporated by
reference
to Form 8-K filed with SEC on March 13, 2007).
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10.14
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|
Registration
Rights Agreement dated March 7, 2007 by and among the Company and
New
Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC,
AJW
Offshore, Ltd. and AJW Partners, LLC (incorporated by reference
to Form
8-K filed with SEC on March 13, 2007).
|
10.15
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|
Security
Agreement dated March 7, 2007 by and among the Company and New
Millennium
Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore,
Ltd.
and AJW Partners, LLC (incorporated by reference to Form 8-K filed
with
SEC on March 13, 2007).
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10.16
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|
Intellectual
Property Security Agreement dated March 7, 2007 by and among the
Company
and New Millennium Capital Partners II, LLC, AJW Qualified Partners,
LLC,
AJW Offshore, Ltd. and AJW Partners, LLC (incorporated by reference
to
Form 8-K filed with SEC on March 13, 2007).
|
10.17
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|
Employment
Agreement dated April 9, 2007 between Doyle Judd and Grant Life
Sciences,
Inc.
|
10.18
|
|
Securities
Purchase Agreement dated June 15, 2007 by and among the Company
and New
Millennium Capital Partners II, LLC, AJW Master Fund, Ltd. and
AJW
Partners, LLC (incorporated by reference to Form 8-K filed with
SEC on
June 22, 2007).
|
10.19
|
|
Form
of Callable Secured Convertible Note dated June 15, 2007 (incorporated
by
reference to Form 8-K filed with SEC on June 22, 2007).
|
10.20
|
|
Form
of Stock Purchase Warrant dated June 15, 2007 (incorporated by
reference
to Form 8-K filed with SEC on June 22, 2007).
|
10.21
|
|
Registration
Rights Agreement dated June 15, 2007 by and among the Company and
New
Millennium Capital Partners II, LLC, AJW Master Fund, Ltd. and
AJW
Partners, LLC (incorporated by reference to Form 8-K filed with
SEC on
June 22, 2007).
|
10.22
|
|
Security
Agreement dated June 15, 2007 by and among the Company and New
Millennium
Capital Partners II, LLC, AJW Master Fund, Ltd. and AJW Partners,
LLC
(incorporated by reference to Form 8-K filed with SEC on June 22,
2007).
|
10.23
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|
Intellectual
Property Security Agreement dated June 15, 2007 by and among the
Company
and New Millennium Capital Partners II, LLC, AJW Master Fund, Ltd.
and AJW
Partners, LLC (incorporated by reference to Form 8-K filed with
SEC on
June 22, 2007).
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10.24
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|
Exclusive
License Purchase Agreement, dated November 6, 2007 by and among
the
Company and Mr. Sveshnikov and Mr. Kiselev (incorporated by reference
to
Form 8-K filed with SEC on November 16, 2007).
|
10.25
|
|
Exclusive
License Purchase Agreement, dated November 10, 2007 by and among
the
Company and Alphagenics Diaco Biotechnologies S.r.l. (incorporated
by
reference to Form 8-K filed with SEC on November 16,
2007).
|
10.26
|
|
Securities
Purchase Agreement dated November 27, 2007 by and among the Company
and
New Millennium Capital Partners II, LLC, AJW Master Fund, Ltd.
and AJW
Partners, LLC (incorporated by reference to Form 8-K filed with
SEC on
November 30, 2007).
|
10.27
|
|
Form
of Callable Secured Convertible Note dated November 27, 2007 (incorporated
by reference to Form 8-K filed with SEC on November 30,
2007).
|
10.28
|
|
Form
of Stock Purchase Warrant dated November 27, 2007 (incorporated
by
reference to Form 8-K filed with SEC on November 30,
2007).
|
10.29
|
|
Registration
Rights Agreement dated November 27, 2007 by and among the Company
and New
Millennium Capital Partners II, LLC, AJW Master Fund, Ltd. and
AJW
Partners, LLC (incorporated by reference to Form 8-K filed with
SEC on
November 30, 2007).
|
10.30
|
|
Security
Agreement dated November 27, 2007 by and among the Company and
New
Millennium Capital Partners II, LLC, AJW Master Fund, Ltd. and
AJW
Partners, LLC (incorporated by reference to Form 8-K filed with
SEC on
November 30, 2007).
|
10.31
|
|
Intellectual
Property Security Agreement dated November 27, 2007 by and among
the
Company and New Millennium Capital Partners II, LLC, AJW Master
Fund, Ltd.
and AJW Partners, LLC (incorporated by reference to Form 8-K filed
with
SEC on November 30, 2007).
|
16.1
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|
Letter
from Singer Lewak Greenbaum & Goldstein LLP, dated April 30, 2007
(incorporated by reference to Form 8-K filed with SEC on April
30,
2007).
|
21.1
|
|
Subsidiaries
of Grant Life Sciences, Inc. (incorporated by reference to Form
SB-2 filed
with the SEC on September 30, 2004).
|
23.1
|
|
Consent
of Singer, Lewak, Greenbaum & Goldstein LLP.
|
31.1
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|
Certification
by Chief Executive Officer pursuant to Sarbanes Oxley Act of 2002
Section
302.
|
31.2
|
|
Certification
by Chief Financial Officer pursuant to Sarbanes Oxley Act of 2002
Section
302.
|
32.1
|
|
Certification
by Chief Executive Officer pursuant to Sarbanes-Oxley Act of 2002
Section
906.
|
32.2
|
|
Certification
by Chief Financial Officer pursuant to Sarbanes-Oxley Act of 2002
Section
906.
|
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit
Fees. The aggregate fees incurred
by the
Company’s independent
registered public accounting firms for professional services rendered for
the
audit of our annual financial statements for the years ended December 31,
2007
and December 31, 2006, for the reviews of the financial statements included
in
our quarterly reports on Form 10-QSB during those
fiscal years, and for services in connection with the Company’s various
statutory and regulatory filings were approximately $142,000 (Tanner LC)
and $183,600
(SLGG), respectively.
Tax
Fees.
The aggregate fees incurred by the Company’s independent registered public
accounting firms were $7,000 (Tanner LC) and $5,000
(SLGG), respectively, for
tax
compliance or tax
consulting services during the years
ended December 31, 2007 and December 31, 2006, respectively.
All
Other
Fees. The Company did not incur any other fees from
its
independent registered public accounting firms for
services rendered to the Company.
The
charter of the Company’s Audit Committee, which was established by the Board of
Directors in July 2004, includes a written policy regarding the pre-approval
of
audit and permitted non-audit services to be performed by the
Company’s independent registered public accounting firm .
All
services provided by Tanner LC, both audit and non-audit, must be pre-approved
by the Audit Committee. The Audit Committee’s charter specifies that the
Committee is directly responsible for the appointment, compensation and
oversight of the work of the independent auditor (including resolution of
disagreements between management and the independent auditor regarding financial
reporting) for the purpose of preparing its audit report or any related work.
The charter specifies that the Committee meet at least quarterly with the
independent auditor in separate executive sessions. All services provided
by our
principal accountant since July 2004 have been pre-authorized by the Audit
Committee.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
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|
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GRANT
LIFE SCIENCES, INC.
|
|
|
|
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By:
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/s/
Hun-Chi Lin
|
|
Hun-Chi
Lin
|
|
President
and Director (principal executive
officer)
|
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the
dates indicated.
Name
|
|
Title
|
|
Date
|
/s/
Stan Yakatan
|
|
Chairman
of the Board of Directors
|
|
March
6, 2008
|
Stan
Yakatan
|
|
|
|
|
|
|
|
|
|
/s/
Hun-Chi Lin
|
|
President
and Director (principal executive officer)
|
|
March
6, 2008
|
Hun-Chi
Lin
|
|
|
|
|
/s/
Doyle Judd
|
|
Chief
Financial Officer (principal financial and accounting
officer)
|
|
March
6, 2008
|
Doyle
Judd
|
|
|
|
|
/s/
Michael Ahlin
|
|
Vice
President and Director
|
|
March
6, 2008
|
Michael
Ahlin
|
|
|
|
|
/s/
Jack Levine
|
|
Director
|
|
March
6, 2008
|
Jack
Levine
|
|
|
|
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