c. Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i) 750,000,000 shares of Common Stock, of which 136,420,423 shares are issued and outstanding, 2,652,613 shares are reserved for issuance pursuant to the Company’s stock option plans, 10,405,010 shares are reserved for issuance pursuant to securities (other than the Notes and the Warrants) exercisable for, or convertible into or exchangeable for shares of Common Stock and 11,407,407 shares are reserved for issuance upon conversion of the Notes and exercise of the Warrants (subject to adjustment pursuant to the Company’s covenant set forth in Section 4(h) below); and (ii) 20,000,000 shares of preferred stock, of which 0 shares are issued and outstanding.
Item 1.01 Entry into a Material Definitive Agreement
To obtain funding for its ongoing operations, Grant Life Sciences, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Agreement”) with New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC (collectively, the “Investors”) on December 27, 2006 for the sale of (i) $400,000 in callable secured convertible notes (the “Notes”) and (ii) stock purchase warrants (the “Warrants”) to buy 4,000,000 shares of our common stock. On December 27, 2006, the Investors purchased $400,000 in Notes and received Warrants to purchase 4,000,000 shares of the Company’s common stock. The Company received net proceeds of $342,500.00, after deducting expenses of $57,500.00.
The Notes bear interest at 6%, mature three years from the date of issuance, and are convertible into our common stock, at the Investors' option, at a conversion price equal to the lower of (i) $0.15 or (ii) 60% of the average of the three lowest intraday trading prices for our common stock during the 20 trading days before, but not including, the conversion date. As of December 27, 2006, the average of the three lowest intraday trading prices for our common stock during the preceding 20 trading days as reported on the Over-The-Counter Bulletin Board was $0.09 and, therefore, the conversion price for the secured convertible notes was $0.054. Based on this conversion price, the $400,000 Notes, excluding interest, were convertible into 7,407,407 shares of our common stock.
We may prepay the Notes in the event that no event of default exists, there are a sufficient number of shares available for conversion of the callable secured convertible notes and the market price is at or below $.40 per share. The full principal amount of the Notes is due upon default under the terms of Notes. In addition, we have granted the Investors a security interest in substantially all of our assets and intellectual property as well as registration rights.
The Warrants are exercisable until seven years from the date of issuance at a purchase price of $.14 per share. In addition, the exercise price of the Warrants is adjusted in the event we issue common stock at a price below market.
The Investors have contractually agreed to restrict their ability to convert the Notes and exercise the Warrants and receive shares of our common stock such that the number of shares of the Company common stock held by them and their affiliates after such conversion or exercise does not exceed 4.99% of the Company’s then issued and outstanding shares of common stock.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant
The sale of the Notes described in Item 1.01 was completed on December 27, 2006 with respect to $400,000 of the Notes. As of the date hereof, the Company is obligated on $400,000 in face amount of Notes issued to the Investors. The Notes are a debt obligation arising other than in the ordinary course of business which constitute a direct financial obligation of the Company.
Item 3.02 Unregistered Sales of Equity Securities
The Notes and Warrants described in Item 1.01 were offered and sold to the Investors in a private placement transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated thereunder. Each of the Investors is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.
Item 9.01 Financial Statements and Exhibits
Exhibit No. Description 10.1 Securities Purchase Agreement dated December 27, 2006 by and among the Company and New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC
10.2 Form of Callable Secured Convertible Note dated December 27, 2006
10.3 Form of Stock Purchase Warrant dated December 27, 2006
10.4 Registration Rights Agreement dated December 27, 2006 by and among the Company and New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC
10.5 Security Agreement dated December 27, 2006 by and among the Company and New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC
10.6 Intellectual Property Security Agreement dated December 27, 2006 by and among the Company and New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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