SICHENZIA ROSS FRIEDMAN FERENCE LLP
1065 AVENUE OF THE AMERICAS NEW YORK NY 10018
TEL 212 930 9700 FAX 212 930 9725 WWW.SRFFLLP.COM
January 25, 2005
Jeffrey P. Riedler, Assistant Director
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: GRANT LIFE SCIENCES, INC.
REGISTRATION STATEMENT ON FORM SB-2
FILED ON SEPTEMBER 30, 2004
FILE NO. 333-119425
Dear Mr. Riedler:
This firm represents Grant Life Sciences, Inc. (the "Company") in the
above-referenced matter. Enclosed for filing is the Company's Form SB-2 for
filing, which relates to File No. 333-119425. Below, please find our responses
to your November 5, 2004 comment letter:
Prospectus Cover Page
1. Information presented on the cover page should be limited to the
information specified in Item 501(a) of Regulation S-B. Accordingly,
please delete all but the first and last two sentences of the first
paragraph.
Response
We have deleted all but the first and last two sentences of the
first paragraph in accordance with Item 501(a) of Regulation S-B.
Prospectus Summary
2. Please revise the second sentence of the introductory paragraph so
that it reads "You should carefully read the entire prospectus prior
to making an investment decision."
Response
The second sentence of the introductory paragraph has been revised
to state to read as follows: "You should carefully read the entire
prospectus prior to making an investment decision."
3. Please revise your summary to present a more balanced view of your
company by including the following information:
o You have not generated any revenues since inception;
o You have a history of losses and expect to continue to incur
losses for the foreseeable future;
o You have an accumulated deficit; and
o Your auditors have issued an opinion that expresses
substantial doubt about your ability to continue as a going
concern.
Please note, your losses and accumulated deficit should be
quantified.
Response
The summary has been revised by adding a new paragraph under the
which states that the company has not generated any revenues since
inception, has a history of losses and expects to continue to incur
losses for the foreseeable future and has an accumulated deficit and
our auditors have issued an opinion that expresses substantial doubt
about your ability to continue as a going concern. Our losses and
accumulated deficit have been quantified.
4. Throughout the prospectus you make claims regarding the market for
your products and provide other statistical information. Please
provide supplemental factual support for each claim. Please mark the
supporting documents to show the location of the information you are
relying on.
Response
We have provided supplemental factual support for each claim we have
made in the prospectus. The location of the information we have
relied on has been marked for your review. In addition, we have
deleted all claims that we have deemed irrelevant to the prospectus.
5. Please update the information regarding your information statement
in the section called "History of our Company."
Response
We have updated the "History of our Company" section regarding the
information statement that was filed with the SEC on October 15,
2004.
6. It is unclear what information you are trying to convey in the
second sentence of the first paragraph under "The Offering by the
Selling Stockholders" on page 3. Please revise the sentence
accordingly.
Response
We have deleted the second sentence of the first paragraph under
"The Offering by the Selling Stockholders."
Risk Factors - page 3
7. In this section and elsewhere in the registration statement you
state that you "cannot be certain that" and "there is no assurance
that" various things will or will not happen. Statements such as
these are legalistic and redundant. Please delete them. Instead,
please be certain that you have adequately explained why you cannot
make the assurance.
Response
We have removed all references to "cannot be certain that" and
"there can be no assurance that" and have adequately explained why
we cannot make the relevant assurances.
8. Additionally, describe the consequences if the event(s) that you
cannot assure will occur do not occur. For example:
o On page 8, you state that you cannot assure investors that
your patent applications will result in patents being issued
in the U.S. or foreign countries. Please revise to discuss the
consequences if these applications do not result in patents
being issued.
o On page 9, you state that there can be no assurance that
product liability assurance will continually be available on
acceptable terms or that it will be sufficient. Please revise
to discuss the consequences.
Response
We have revised these risk factors to discuss the consequences to
our company if the patent applications do not result in patents
being issued or we are unable to obtain continuous product liability
insurance on acceptable terms or that such coverage will be
sufficient.
We will need to obtain regulatory approval before we can market and sell
our planned tests in the United States and in many other countries.-page 6
9. Please explain the meaning of the terms "anayte specific reagent"
and "homebrew diagnostic assays."
Response
We have revised the risk factor to explain the meaning of the term
"analyte specific reagent" and substituted the term "in-house" for
"homebrew" in the prospectus.
If we are unable to successfully protect our intellectual property or
obtain certain licenses, our ability to develop market and sell our tests
and any other product we may develop in the future will be harmed. - page
8
10. Please revise the subheading and body of the risk factor to
eliminate the references to "certain licenses," "certain processes"
and "certain instances." If the licenses, processes and instances
are material, please discuss them in their own sentences. The use of
the word "certain" in these contexts raises more questions than it
answers.
Response
Need company input
11. Although you refer to "certain licenses" in the subheading, the body
of the risk factor does not contain any discussion of your need to
obtain any licenses. Please revise both the subheading and the body
to identify the licenses you are referring to. Also, please identify
the specific risks and consequences involved with your need to
obtain the licenses.
Response
The risk factor subheading has been revised to include a discussion
of our potential need to obtain additional licenses.
Others could claim that we infringe on their intellectual property rights,
which may result in costly and time-consuming litigation. - page 8
12. If you are aware of any claims of infringement, please provide this
information.
Response
We are not aware of any claims of infringement at this time
If we are able to market and sell our cervical cancer tests, we will be
subject to product liability claims or face product recalls for which our
insurance may be inadequate. - page 9
13. In the body of the risk factor you indicate that you are currently
in the process of obtaining product liability insurance coverage.
Please update the disclosure to indicate whether you have obtained
coverage, and if so, the amount of the coverage.
Response
We are not currently in the process of obtaining product liability
insurance coverage since we do not currently have an existing
product. This risk factor has been revised accordingly.
14. If you have not obtained liability insurance coverage, please revise
the subheading to more adequately describe the risk and its
consequences. For example, if you don't have coverage the subheading
should not state that your insurance may not be adequate.
Response
This risk factor has been revised to state that we have general
liability insurance coverage that may be inadequate.
We do not have any manufacturing facilities and we have no arrangements
with third party manufacturers. - page 9
15. Currently the subheading and the body of the risk factor are simple
statements of fact that do not identify a specific risk and its
potential adverse consequences. If you retain the risk factor,
please revise it accordingly.
Response
We have deleted this risk factor as we have determined that it does
not apply to our plan of operations.
Our future operations may be adversely affected by risks associated with
international business. - page 9
16. The heading and body of this risk factor also do not describe a
specific risk and its potential adverse consequences for you. In
this regard, please note that it is inadequate to simply state that
"any or all" of the bulleted items could "materially harm [your]
business." Please provide an appropriate factual context for each
bulleted item. In addition, please explain how each factor could
adversely affect you.
Response
We have deleted this risk factor as we have determined that it does
not apply to our plan of operations.
Use of Proceeds - page 14
17. Currently you state that any proceeds you might receive upon
exercise of the warrants will be used for general corporate purposes
consistent with your business strategy. This statement is too vague
to be meaningful. Please be more specific about how you will use the
proceeds.
Response
We have revised the use of proceeds section. Any proceeds received
will be used for working capital, administrative expenses and
product development.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - page 14
18. Please expand to clarify that you are providing disclosures related
to management's plan of operation. Please disclose whether you have
any off-balance sheet arrangements. Please refer to Items 303(a) and
303(c) of Regulation S-B.
Response
Pursuant to Items 303(a) and 303(c) of Regulation S-B, this section
has been revised to clarify that we are providing disclosures
relating to management's plan of operation and that we do not have
any off-balance sheet arrangements.
19. Please disclose here and in other sections of the filing, the
following:
o The significant terms of the merger with Impact Diagnostics;
o Please expand your disclosures to clarify why the acquisition
of Impact Diagnostics is treated and presented as
recapitalization of Impact Diagnostics.
o Please disclose the accounting treatment of a
recapitalization.
Response
We have revised the filing to provide disclosure about the
significant terms of the merger and to clarify why the acquisition
of Impact Diagnostics is treated and presented as recapitalization
of Impact Diagnostics. The reverse merger is presented as a
recapitalization because the Company did not have any operating
activity prior to the acquisition of Impact Diagnostics, ownership
of the Company upon the reverse merger was controlled by the
stockholders of Impact Diagnostics and the management of Impact
Diagnostics controlled the operating activity of the Company
post-merger.
Initial Validation Studies - page 20
20. Please revise to state that later studies might not support these
results.
Response
The prospectus has been revised to state that later studies might
not support these results.
Regulatory Approval - page 20
21. Please explain the basis for your belief that your tests will be
classified by the FDA as Class I or Class II devices.
Response
This section has been revised to explain the we believe the FDA will
classify our tests as Class II devices.
22. Please revise to discuss the requirements to market and sell Class I
medical devices.
Response
We have revised the discussion to include the requirements to market
and sell Class II medical devices.
Intellectual Property
23. If your agreement with Dr. Hu provided for licensing fees, annual
licensing payments or milestone payments, please revise to disclose
all payments made to date, the aggregate amount of potential
milestone payments and annual fees.
Response
We have revised this disclosure to provide information regarding the
licensing fees, annual licensing payments, all payments made to day
and the aggregate amount of any potential payments or fees.
24. Additionally, if the licensing agreement provides for minimum
royalty payments, please disclose and quantify.
Response
We have disclosed and quantified the minimum royalty payments in
connection with the licensing agreement.
25. We note your statement that the term of the license is for 17 years.
Please revise to disclose when you entered into the license
agreement.
Response
We have revised this disclosure to state when we entered into the
license agreement with Dr. Hu.
Security Ownership of Certain Beneficial Owners and Management - page 31
26. Please revise to identify the natural persons who have voting and
dispositive rights over the shares owned by DCOFI Master LDC.
Response
We have revised this disclosure to identify the natural persons who
have voting and dispositive rights over the shares owned by DCOFI
Master LDC.
Certain Relationships and Related Transactions - page 34
27. Please revise to indicate whether these transactions were on terms
as could have been obtained from unrelated third parties.
Response
We have disclosed that the transactions, except for advances made
with no interest, were on terms as could have been obtained from
unrelated third parties.
28. Please revise the second, third and fourth paragraphs to indicate
whether any amounts are still outstanding. Additionally, applicable
interest rates on these advances and the loan discussed in the
seventh paragraph.
Response
This section has been revised to state how any outstanding amounts
were repaid and that no amounts are currently payable or receivable
from these related parties. The interest rates on the advances and
loans have been disclosed.
Selling Stockholders - page 34
29. Please provide appropriate disclosure regarding the circumstances
under which the selling shareholders acquired their shares.
Response
We have revised this section to provide appropriate disclosure
regarding the circumstances under which the selling shareholders
acquired their shares. Need from company
30. For each selling shareholder that is not a natural person or
reporting company, please revise to disclose the natural person(s)
who hold voting and dispositive rights.
Response
We have revised this section to disclose the natural person(s) who
hold voting and dispositive rights in any selling shareholder that
is not a natural person or reporting company.
31. If any of the selling shareholders are broker-dealers, please revise
to identify them and state that they are underwriters. The only
exception to this position is if the shares were issued as
underwriting compensation.
Response
We have revised this section to disclose the shareholders that are
broker-dealers.
32. If any of the selling shareholders are affiliates of broker dealers,
please revise to identify them and state that they purchased the
shares in the ordinary course of business and they have no
agreements to distribute the shares either directly or indirectly.
If they are unable to make these representations, then please revise
to identify these selling shareholders as underwriters.
Response
None of the selling shareholders are affiliates of broker-dealers.
Experts - page 39
33. We note that you refer to HJ & Associates, LLC in your expert
section, however it does not appear appropriate to include this
disclosure under Item 509 of Regulation S-B. Please remove this
disclosure as it was previously reported in your Form 8-K/A dated
August 30, 2004.
Response
This disclosure has been removed as it was previously reported in
our Form 8-K/A dated August 30, 2004.
Financial Statements
General
34. In the event of a delay, please update the financial statement to
comply with Rule 310(g) of Regulation S-B.
Response
The financial statements and the SB-2 have been updated to include
the unaudited financial statements and information for the period
ended September 30, 2004. Please see the financial statements and
Management Discussion and Analysis of the amended Form SB-2.
35. We note your disclosure on page 14 that no historical financial
information or financial statements of Grant Ventures are included
in the filing. Please retroactively restate the historical financial
statements of Impact Diagnostics in the registration statement to
give effect to the recapitalization transaction. Please revise your
pro forma financial statements, accordingly.
Response
The historical financial statements of Impact Diagnostics have been
restated to reflect the recapitalization transaction at December 31,
2003 and 2002 and the years then ended, including the subsequent
name change to Grant Life Sciences, Inc. The pro forma statements
have been revised to reflect this and other comments. Based upon our
conversation with Todd Sherman and Don Abbott the Company has
included pro forma income statements for the year ended December 31,
2003 and the nine months ended September 30, 2004.
Financial Statements of Impact Diagnostics, Inc. - December 31, 2003
Statement of Operation, page 43
36. Please disclose total research and development costs charged to
expense for each period presented as required by paragraph 13 of
SFAS 2.
Response
The total research and development expense has now been disclosed
for all periods presented.
Statement of Stockholders' Deficit, page 44
37. Please disclose the dollar amounts assigned to the consideration
received for each equity issuance. For issuances involving non- cash
consideration, please disclose the basis for assigning amounts.
Please refer to paragraph 11(d) of SFAS 7.
Response
The Statement of Stockholders' Deficit now includes the price per
share for all issuances of common stock. Notes 5 and 12 have been
changed to provide additional information on the basis for assigning
amounts for the value of the stock issuances. As additional
information related to the per share prices in 2002, the prices are
based on blended prices and dilution due to common stock splits. Of
the stock issued for services, in May 2002, 3,500 shares were issued
for $1 per share. These shares then split at a rate of 10 for 1,
then again at a rate of 7 for 1. Then in December 2002, 199,500
shares were issued at $.50 per share. All of these shares then were
retroactively affected for the 3.58 for 1 split that occurred in
2004. As a result, the price per share appears to be $.06.
Additionally, original shares issued for cash and in satisfaction of
debt in December of 2002 were issued at prices ranging from $.46 to
$.50.
Note 3. Related Party Transactions, page 48
38. Please disclose the terms and manner of settlement for employee
receivables and other related party receivables. Please refer to
paragraph 2(d) of SFAS 57.
Response
Note 3 to the financial statements have been modified to include the
terms of repayment. Supplementally, the total aggregate outstanding
balance of related party receivables is $4.
Note 4, Note Payable, page 49
39. We note that the note payable was in default as of December 31,
2002. Please tell us and disclose any default provisions the loan
may have and if the venture capital firm is seeking any recourse and
or damages outside of the negotiations.
Response
Note 4 has been modified to clarify and include information
regarding the satisfaction of the note in default. The financial
statements originally included some information in Note 12
Subsequent Events as to the disposition of the note. Note 12 has
also been modified to include information to clarify the resolution
of the note in default.
Note 5, Common Stock, page 49
40. We note that you issued stock for services in the year ended
December 31, 2002. If material, please disclose the amount of
compensation cost recognized in the Statement of Operations. Please
refer to paragraph 47 (e) of SFAS 123.
Response
The amount of compensation expense was $103,250 and $0 in 2002 and
2003, respectively. Those amounts are disclosed in the statement of
cash flows and have been reclassified in the statement of operations
as stock compensation expense from general and administrative
expense.
Note 6. Gain on Extinguishment of Debt, page 50
41. We note that you restated your financial statements to record a gain
on an extinguishment of debt upon refinancing certain debt. Please
disclose, and explain to us, the significant terms of the old and
new debt under EITF 96-19 that results in gain recognition.
Response
The original debt instrument was for $200,000 with interest at 6%,
convertible at a rate of $.335 per share. As such, it contained an
embedded beneficial conversion feature, convertible at any time at
the option of the note holder. Therefore a beneficial conversion
feature of $98,507 was recorded as interest expense based on the
intrinsic value of the feature at the date of issuance, which was
June 3, 2002. The intrinsic value was $0.165 (fair value of $.50
less conversion rate of $.335). A second party then agreed with the
first note holder to satisfy the note. For this assumption of the
first note, the Company issued a second convertible note for
$200,000 with interest at 6%, convertible at $.50 per share at any
time at the option of the note holder. This conversion rate did not
constitute a beneficial conversion feature as the conversion rate
and fair value were the same. Upon the refinancing of the old debt
EITF 98-5, paragraph 12 was applied, which reads:
"The Task Force considered situations in which a debt instrument
containing the embedded beneficial conversion feature is
extinguished prior to conversion. The Task Force recognized that a
portion of the reacquisition price includes a repurchase of the
beneficial conversion feature. The Task Force reached a consensus
that the amount of the reacquisition price to be allocated to the
beneficial conversion feature should be measured using the intrinsic
value of the conversion feature at the extinguishment date. The
residual amount, if any, would be allocated to the convertible
security. The Task Force indicated that the issuer would record a
gain or loss on extinguishment of the convertible debt security."
Believing the first note had been extinguished because of the
significant change in the terms of the two notes, and based on the
application of EITF 98-5, the beneficial conversion feature of the
first note was measured again at the extinguishment date, which also
yielded an amount of $98,507 and was considered the reacquisition
price of the beneficial conversion feature. The residual amount was
applied to the debt, and therefore a gain on the extinguishment of
the debt was recorded in this amount.
Because of the significant change in the terms of the note, we
believed the note had, in fact, been extinguished, and the
application of EITF 98-5 was the appropriate accounting treatment.
42. Please explain to us why the gain on extinguishment of debt was not
originally recorded in the 2002 financial statements. Tell us where
the beneficial conversion feature, recorded as interest expense, is
presented in the statement of operations.
Response
The gain on the extinguishment of debt was not originally presented
in the 2002 financial statements as complete documentation and facts
surrounding the transaction were not timely provided to the
accounting department. Originally, the terms of the old and new debt
were understood to have been the same, and therefore no gain would
have been recorded. Upon review of the complete documentation by the
accounting department, the accounting treatment as noted in comment
41 above was recorded.
Interest expense was misclassified in general and administrative
expense, and has now been properly reclassified as interest expense
in the statement of operations to reflect all interest expense,
including the beneficial conversion feature in the 2002 financial
statements.
Note 11. Restatement of Financial Statements, page 53
43. Please disclose what effect, if any, the error had on related per
share amounts. Please refer to paragraph 36 of APB 20.
Response
Note 11 has been modified to include the per share amounts for the
restatement.
Financial Statements of Impact Diagnostics, Inc - June 30, 2004
44. Based on the preceding audited financial statement comments, please
revise your disclosures as appropriate.
Response
The financial statements have been revised for the above comments.
Statements of Operations, page 56
45. We note that interest expense for the six months ended June 30, 2004
totals $38,765. Please tell us where the beneficial conversion
feature totaling $200,000 is presented in the interim 2004 financial
statement. Please refer to Note 12 of the audited financial
statements.
Response
The disclosure in Note 12 relating to the conversion taking place
was not clear as far as the date first allowed for the conversion to
take place. The beneficial conversion feature of $200,000 occurred
in July 2004 when the trigger for the beneficial conversion took
place for the holder of the note. The interim financial statements
for the period ending September 30 2004 reflect the amount of the
beneficial conversion as it took place in that period.
46. Please provide cumulative from inception financial information as
required by SFAS 7 and Rule 310(b) of Regulation S-B.
Response
The financial statements have been modified to include the
cumulative amounts from inception through the interim period of
September 30, 2004.
Notes to Unaudited Financial Statements of Impact Diagnostics, Inc., page 57
47. Please revise your financial statements to include the necessary
disclosures required by Item 310(b) of Regulation S-B. For example,
please disclose material subsequent events that occurred subsequent
to the annual financial statements.
Response
The unaudited financial statements have been modified and include
the required disclosures. Most of the significant subsequent events
discussed in the previously filed SB-2 occurred in the period ending
September 30, 2004 and are reflected in the unaudited interim
financial statements. All material subsequent events to September
30, 2004 have been disclosed.
Pro Forma Financial Statements
Pro Forma Balance Sheet, page 58
48. Please refer to your disclosure related to footnote (g). It appears
that this disclosure is not appropriate since the event is not
directly attributable to the Merger or factually supportable since
the Board of Directors and stockholders have not approved the
increase in authorized shares. Please remove this disclosure or
advise us.
Response
Based upon our discussion with Todd Sherman and Don Abbott this pro
forma balance sheet is no longer required and has not been included
in the amended SB-2 filing.
Pro Forma Statements of Operations, page 59 and 60
49. We note that you include nonrecurring pro forma adjustments. Please
only include adjustments that are directly attributable to the
specific transaction, factually supportable and expected to have
continuing impact on your statement o operations. For example, pro
forma adjustments related to the gain on the extinguishment of debt
are not expected to have a continuing impact. Please remove these
adjustments or advise us.
Response
The non-recurring items have been removed from the pro forma
statement of operations.
50. Please disclose the historical basic and diluted earnings per share
as required by Rule 11 - 02(b)(7) of Regulation S-X.
Response
The historical basic and diluted earnings per share as required have
been added to the pro forma statement of operations.
51. Please expand your disclosure in pro forma adjustment (f) to clarify
how the weighted average shares amounts were computed for each
period presented.
Response
The disclosure has been expanded to clarify how the weighted average
shares were computed for each period presented.
Notes to Unaudited Pro Forma Consolidated Financial Statements, page 61
52. Please revise footnote (b) to disclose the date shares were issued
in the private placement.
Response
The dates have been included in footnote (b) to disclose the dates
the shares were issued in the private placement.
53. Please expand footnote (c) to disclose the date the agreement was
reached with affiliates to convert notes to shares and expand
footnote (d) to disclose the date the lender exercised the
conversion of its note and accrued interest into shares.
Response
Footnote (c) has been expanded to include the dates of the agreement
and the dates the lender exercised the conversion of their notes and
accrued interest into common shares.
54. Pro Forma footnote disclosures should be sufficiently detailed to
understand your basis for the adjustment and how the adjustment was
computed. Please refer to pro forma adjustment (d). It is not clear
from your disclosure why the beneficial conversion feature
recognized as interest expense is presented in the pro forma
financial statements. Based on your disclosure in Note 12 to the
audited financial statements it appears that the loan commitment
date was April 14, 2004 and the beneficial conversion feature should
have been recorded in the quarter ended June 30, 2004. Please revise
or advise us.
Response
The pro forma footnote disclosure has been modified to remove the
nonrecurring items and to disclose the actual dates of the
transactions. The transactions are all included in the period ended
September 30, 2004 that were previously included in the subsequent
event footnotes.
Exhibit list
55. We note that a number of exhibits have not yet been filed. Please
file them with your first pre-effective amendment. We may have
additional comments once we have had an opportunity to review them.
Response
We have filed the bylaws, the Licensing Agreement with Dr. Hu, dated
July 20, 2004, and Form 8-K dated July 30, 2004, as amended (per
comment 57).
56. Based on the proceeding comments, please revise your financial
statement and pro forma information disclosures as appropriate.
Response
The financial statements have been modified to include the changes
from the comments made in the letter dated November 5, 2004.
Pro Forma Balance Sheet
57. Please provide a subtotal column on the face of the pro forma
balance sheet to present a pro forma balance sheet giving effect to
the Merger before other material transactions consummated subsequent
to the balance sheet date.
Response
Per our discussion, the 8-K/A has been revised to include a subtotal
column after accounting for the reverse merger to reflect that
effect and an additional column for the financing adjustments due to
its material significance with a grand total account.
58. It is not clear from your disclosures in footnote (a) the nature of
the pro forma adjustments that give effect to the merger. Please
revise your disclosures and address the following in your expanded
disclosures:
o Historical Stockholders' equity of Impact prior to the merger
is retroactively restated, a recapitalization, for the
equivalent number of shares received in the transaction after
giving effect to any difference in par value of Grant Ventures
and Impact's stock with an offset to paid- in capital.
o Common stock is the stock of the legal entity, Grant Ventures,
Inc. The par value of Impact is adjusted to the par value of
the legal entity.
o Direct transaction costs of the Merger are charged to expense.
Response
The wording in the disclosures have been rewritten to provide the
reader more clarity in understanding the effect of the merger.
Should you have any further questions, please do not hesitate to contact
the undersigned at 646-810-2177.
Sincerely,
/s/ David Schiff
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David B. Schiff