10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: JUNE 30, 2011

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission file number: 333-158474

SIGNPATH PHARMA INC.

(Exact name of Registrant as specified in its charter)

Delaware	20-5079533
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

1375 California Road

Quakertown, PA 18951

(Address of principal executive offices)

(215) 538-9996

(Registrant’s telephone number, including Area Code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 preceding 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.  ý Yes  ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes  ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated file” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   ¨ Yes  ý No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  ¨ Yes  ¨ No

APPLICABLE ONLY TO CORPORATE ISSUERS

As of August 9, 2011, the Company had authorized 45,000,000 shares, $.001 par value, common stock, of which 12,190,000 shares of common stock were issued and outstanding.

2

SignPath Pharma Inc.

Quarterly Report on Form 10-Q

Period Ended June 30, 2011

Table of Contents

		Page
PART I .	FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Balance Sheets as of June 30, 2011 (unaudited) and December 31, 2010 (audited)	4
	Condensed Statements of Operations for the three months and six months ended June 30, 2011 and 2010 and for the period from Inception on May 15, 2006 through June 30, 2011 (unaudited)	5
	Condensed Statements of Cash Flows for the six months ended June 30, 2011 and 2010 and for the period from Inception on May 15, 2006 through June 30, 2011 (unaudited)	6
	Notes to Condensed Financial Statements (unaudited)	7-13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Evaluation of Disclosure Controls and Procedures	20
PART II .	OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors – Not Applicable	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	22
Item 4	(Reserved)	22
Item 5.	Other Information	22
Item 6.	Exhibits	22
SIGNATURES		22
EXHIBIT INDEX		23

3

SIGNPATH PHARMA, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
	June 30,				December 31,
	2011				2010
CURRENT ASSETS	(Unaudited)
Cash		$	21,241			$	48,993
Total Current Assets			21,241				48,993
EQUIPMENT, net			2,041				2,673
TOTAL ASSETS		$	23,282			$	51,666
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses		$	795,139			$	237,864
Derivative liability			4,807,711				4,214,958
Total Current Liabilities			5,602,850				4,452,822
STOCKHOLDERS' DEFICIT
Preferred stock; $0.10 par value, 5,000,000 shares authorized 3,236 and  2,837 shares issued and   outstanding, respectively			323				284
Common stock; $0.001 par value, 45,000,000 shares authorized; 12,190,000 shares issued and outstanding, respectively			12,191				12,191
Additional paid-in capital			447,075				702,578
Deficit accumulated during the development stage			(6,039,157	)			(5,116,209	)
Total Stockholders' Deficit			(5,579,568	)			(4,401,156	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	23,282			$	51,666
The accompanying notes are an integral part of these financial statements.

4

SIGNPATH PHARMA, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
													From Inception
													on May 15, 2006
	For the Three Months Ended						For the Six Months Ended						Through
	June 30,						June 30,						June 30,
	2011			2010			2011			2010			2011
REVENUES	$	-		$	-		$	-		$	-		$	-
OPERATING EXPENSES
General and administrative		42,025			74,186			73,193			126,329			1,144,218
Professional fees		23,190			340,000			81,232			340,000			969,497
Financing expense		-			-			-			-			1,063,401
Research and development		319,983			162,773			773,207			224,086			2,143,051
Total Operating Expenses		385,198			576,959			927,632			690,415			5,320,167
OPERATING LOSS		(385,198	)		(576,959	)		(927,632	)		(690,415	)		(5,320,167	)
OTHER INCOME (EXPENSE)
Gain (loss) on derivative liability		131,553			(42,330	)		4,684			(137,560	)		(736,552	)
Grant income		-			-			-			40,784			81,557
Interest expense		-			-			-			-			(63,995	)
Total Other Income (Expense)		131,553			(42,330	)		4,684			(96,776	)		(718,990	)
NET LOSS BEFORE INCOME TAXES		(253,645	)		(619,289	)		(922,948	)		(787,191	)		(6,039,157	)
PROVISION FOR INCOME TAXES		-			-			-			-			-
NET LOSS	$	(253,645	)	$	(619,289	)	$	(922,948	)	$	(787,191	)	$	(6,039,157	)
BASIC AND DILUTED LOSS PER SHARE	$	(0.02	)	$	(0.05	)	$	(0.08	)	$	(0.07	)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING		12,190,000			11,405,934			12,190,000			11,373,149
The accompanying notes are an integral part of these financial statements.

5

SIGNPATH PHARMA, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
							From Inception
							on May 15, 2006
	For the Six Months Ended						Through
	June 30,						June 30,
	2011			2010			2011
OPERATING ACTIVITIES
Net loss	$	(922,948	)	$	(787,191	)	$	(6,039,157	)
Adjustments to reconcile net loss to
net cash used in operating activities:
Common stock issued for services		-			340,000			722,500
Warrants issued for services		11,684			-			50,894
Common stock issued with bridge financing					-			1,139,001
Depreciation expense		632			484			3,349
Change in derivative liability, net of bifurcation		(4,684	)		137,560			736,552
Changes in operating assets and liabilities
Accounts payable and accrued expenses		557,275			44,818			795,139
Net Cash Used in Operating Activities		(358,041	)		(264,329	)		(2,591,722	)
INVESTING ACTIVITIES
Purchase of equipment		-			(1,390	)		(5,390	)
Net Cash Used in Investing Activities		-			(1,390	)		(5,390	)
FINANCING ACTIVITIES
Preferred stock issued for cash		398,500			50,000			2,345,500
Stock offering costs paid		(68,211	)		(15,000	)		(627,022	)
Common stock issued for cash		-			-			10,000
Proceeds from notes payable		-			-			889,875
Net Cash Provided by Financing Activities		330,289			35,000			2,618,353
NET INCREASE (DECREASE) IN CASH		(27,752	)		(230,719	)		21,241
CASH AT BEGINNING OF PERIOD		48,993			295,418			-
CASH AT END OF PERIOD	$	21,241		$	64,699		$	21,241
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
CASH PAID FOR:
Interest	$	-		$	-		$	-
Income taxes	$	-		$	-		$	-
NON CASH FINANCING ACTIVITIES:
Preferred stock issued for bridge financing	$	-		$	-		$	889,875
Derivative liability	$	597,437		$	-		$	4,807,711
The accompanying notes are an integral part of these financial statements.

6

SIGNPATH PHARMA, INC.

(A Development Stage Company)

Notes to the Financial Statements

June 30, 2011 and December 31, 2010

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2011, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2010 audited financial statements.  The results of operations for the period ended June 30, 2011 are not necessarily indicative of the operating results for the full year.

NOTE 2 - GOING CONCERN

The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. During the six months ended June 30, 2011, the Company recognized sales revenue of $-0- and incurred a net loss of $922,948.  As of June 30, 2011, the Company had an accumulated deficit of $6,039,157. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's planned business. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Derivative Financial Instruments

The Company generally does not use derivative financial instruments to hedge exposures to cash-flow risks or market-risks that may affect the fair values of its financial instruments. The Company utilizes various types of financing to fund our business needs, including preferred stock with warrants attached and other instruments not indexed to our stock. The Company is required to record its derivative instruments at their fair value. Changes in the fair value of derivatives are recognized in earnings in accordance with ASC 815.

Recent Accounting Pronouncements

The Company has evaluated recent accounting pronouncements and their adoption has not had nor is it expected to have a material impact on the Company’s financial position, or statements.

7

SIGNPATH PHARMA, INC.

(A Development Stage Company)

Notes to the Financial Statements

June 30, 2011 and December 31, 2010

NOTE 4 – ACCRUED LIABILITIES

Pursuant to the applicable Codification literature, the Company has concluded it is probable that it will pay $85,738 in liquidated damages pursuant to the registration rights clause in certain of the securities sold in fiscal years 2008 and 2009, the Company was required to file a registration statement by January 27, 2009.  The Company failed to do so until April 7, 2009, resulting in liquidated damages of 2% per month of the gross proceeds, which approximated $1.8 million as of that date.  During the year ended December 31, 2009, the Company’s registration statement covering the securities was declared effective by the SEC.  Each holder is entitled to $47.32 per share owned.  The Company has resolved to pay the liquidated damages in shares of Common Stock valued at $1.00 per share, pursuant to the terms and provisions of the Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock.

NOTE 5 – DERIVATIVE LIABILITY AND FAIR VALUE MEASUREMENTS

The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with its preferred stock and associated warrants to purchase common stock. On January 1, 2009, the Company adopted ASC Topic No. 815-40 which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s own stock. As of January 1, 2009 the Company had issued 3,572,714 warrants which have exercise prices that are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than $0.85 and $1.27, respectively. If these provisions are triggered, the exercise price of all their warrants will be reduced.  As a result, the warrants are not considered to be solely indexed to the Company’s own stock and are not afforded equity treatment.

As a result, on January 1, 2009, 3,572,714 of the Company’s outstanding warrants containing exercise price reset provisions, originally classified as permanent equity, were reclassified to derivative liability. These warrants had exercise prices ranging from $0.85 - $1.27 and expire starting in December 2013. As of January 1, 2009, the fair value of these warrants of $1,676,633 was recognized and resulted in a cumulative effect adjustment to retained earnings of $43,808. The change in fair value during the years ended December 31, 2010 and 2009 of $(538,010) and $(159,418), respectively, is recorded as a derivative loss in the accompanying Statements of Operations.

During the six months ended June 30, 2011 the Company issued 469,034 warrants which were attached to 399 shares of convertible preferred stock.  The Company issued an additional 281,421 warrants as stock offering costs to the Company’s placement agent.  The combined fair market value of the derivative liability associated with these issuances for the six months ended June 30, 2011 was $597,437.

During the year ended December 31, 2010 the Company issued 676,775 warrants which were attached to 575 shares of convertible preferred stock.  The Company issued an additional 391,353 warrants as stock offering costs to the Company’s placement agent.  The combined fair market value of the derivative liability associated with these issuances for the year ended December 31, 2010 was $852,346.

During the year ended December 31, 2009 the Company issued 953,370 warrants which were attached to 810 shares of convertible preferred stock.  The Company issued an additional 286,011 warrants as stock offering costs to the Company’s placement agent.  The Combined fair market value of the derivative liability associated with these issuances for the year ended December 31, 2009 was $988,552.

The Company classifies the fair value of these warrants under level three of the fair value hierarchy of financial instruments. The fair value of the derivative liability was calculated using a lattice model that values the compound embedded derivatives based on a probability weighted discounted cash flow model. This model is based on future projections of the various potential outcomes. The embedded derivatives that were analyzed and incorporated into the model included the conversion feature with the full ratchet reset, and the redemption options.

8

SIGNPATH PHARMA, INC.

(A Development Stage Company)

Notes to the Financial Statements

June 30, 2011 and December 31, 2010

NOTE 5 – DERIVATIVE LIABILITY AND FAIR VALUE MEASUREMENTS (CONTINUED)

The Series A Preferred Derivatives were valued using the following assumptions:

· The Company was 12 months from being publicly traded and the Company/Holder would convert the Preferred Stock based on 200% of the adjusted conversion price;

· The Preferred maturity date used was 5 years following the Company being publicly traded (rolling 6 years from the Valuation Date);

· The stock price of $0.85 was used as the fair value of the common stock based on the previous common stock transaction;

· The projected volatility curve was based on the average of 17 comparable biotech companies historical volatility:

· The Holder would automatically convert at a stock price of $1.70 if the Company was not in default;

· The Holder would convert on a quarterly basis in equal amounts to maturity if in the money; and

· Capital raising events would occur annually, generating reset events based on pricing not greater than 100% of market.

The warrants were valued at issuance and marked to market quarterly through June 2011. The five-year warrants are options to purchase shares of common stock at an exercise price of $0.85 per share and $1.27, subject to adjustments. The following assumptions were used for the valuation of the derivative:

· The stock price of $0.85 was used as the fair value of the common stock based on the previous common stock transaction;

· The projected volatility curve was based on the average of comparable companies as provided in the Preferred assumptions above;

· The Holder would exercise the warrant at maturity if the stock price was above the exercise price;

· The Holder would exercise the warrant at target prices starting at $1.58 for the Investor Warrants and $1.40 for the Placement Agent Warrants, and lowering such target as the warrants approached maturity.

· The Holder would automatically convert all of the shares at a stock price of $1.58 for the Investor Warrants and $1.40 for the Placement Agent Warrants;

· The Holder would convert on a quarterly basis in amounts not to exceed the average quarters trading volume based on historical performance, assuming the volume would increase by 5% each quarter; and

· Capital raising events would occur annually, generating reset events based on pricing not greater than 100% of market for the Placement Agent Warrants and for the Investor Warrants the reset would be 150% of the Preferred.

The Company determined the fair value of the preferred stock to be $2,888,641and $2,564,963 and the fair value of the warrants to be $1,919,070 and $1,649,995 at June 30, 2011 and December 31, 2010, respectively.

The following shows the changes in the level three liability measured on a recurring basis from the adoption of ASC 815 through the six months ended June 30, 2011:

Balance, January 1, 2009	$	-
Cumulative effect of adoption of ASC 815		1,676,633
Derivative liability for preferred stock and warrants issued during the period		988,552
Derivative loss		159,418
Balance, January 1, 2010		2,824,603
Derivative liability for preferred stock and warrants issued during the period		852,345
Derivative loss		538,010
Balance, December 31, 2010		4,214,958
Derivative liability for preferred stock and warrants issued during the period		597,437
Derivative gain		(4,684	)
Balance, June 30, 2011	$	4,807,711

9

SIGNPATH PHARMA, INC.

(A Development Stage Company)

Notes to the Financial Statements

June 30, 2011 and December 31, 2010

NOTE 6 – CAPITAL STOCK

Common Stock

On June 16, 2010, the Company issued 400,000 shares of common stock to officers and consultants of the Company in exchange for services provided.  The shares were valued based on the price of $0.85 per share and the Company recognized $340,000 in consulting expense.

On December 28, 2010, the Company issued 450,000 shares of common stock to officers and consultants of the Company in exchange for services provided.  The shares were valued based on the price of $0.85 per share and the Company recognized $382,500 in consulting expense.

Series A Convertible Preferred Stock

The Series A Convertible Preferred Stock (“Preferred Stock”) has been authorized by resolutions adopted by the Company’s Board of Directors and set forth in a Certificate of Designation, Preferences and Rights (“Certificate of Designation”), filed with the Secretary of State of Delaware on November 26, 2008, which contains the designations, rights, powers, preferences, qualifications and limitations of the Preferred Stock.  The shares of Preferred Stock are fully paid and non-assessable.  As of June 30, 2011, the Company has issued 3,236 shares of Preferred Stock.

Rank

The Preferred Stock ranks(i) senior to the common stock and any other class or series of the Company’s capital stock either specifically ranking by its terms junior to the Preferred Stock or not specifically ranking by its terms senior to or on parity with the Preferred Stock, (ii) on parity with any class or series of the Company’s capital stock specifically ranking by its terms on parity with the Preferred Stock, and (iii) junior to any class or series of capital stock specifically ranking by its terms senior to the Preferred Stock, in each case, as to payment of dividends or as to distributions of assets upon liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary.  The approval of the holders of a majority of the Preferred Stock is required in order for the Company to issue any capital stock with rights on parity with or senior to the Preferred Stock.

Dividends

The holders of the Preferred Stock are entitled to receive annual cumulative per share dividends of 6.5% of the liquidation preference of the Preferred Stock, out of funds legally available, prior to any payment of dividends on the Company’s common stock or any other class of stock ranking junior to the Preferred Stock.  Such dividends are payable in cash or shares of common stock, at the option of the Company, semiannually on the last business day of February and August of each year (each a “Dividend Payment Date”), commencing in February 2009 with respect to the period from issuance through such date.  The holders of the Preferred Stock are entitled to share ratably with the holders of the common stock in any dividend declared on the common stock.

Dividends on the Preferred Stock will accrue whether or not the Company has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared.  Dividends accumulate to the extent they are not paid on the Dividend Payment Date to which they relate.  Dividends that are due in cash and which are not paid within (5) business days of the Dividend Payment date shall bear interest until paid at the default rate.  According to Delaware law, the Company may declare and pay dividends or make other distributions on its capital stock only out of legally-available funds.  In addition, no dividends or distributions may be declared, paid or made if the Company is or would be rendered insolvent by virtue of such dividend or distribution. The Company may not (i) pay any dividends in respect of any shares of capital stock ranking junior to the Preferred

Stock (including the common stock), other than dividends payable in the form of additional shares of the same junior stock as that on which such dividend is declared, or (ii) redeem any shares of capital stock ranking junior to the Preferred Stock (including the common stock), unless and until all accumulated and unpaid dividends on the Preferred Stock have been, or contemporaneously are, declared and paid in full.

10

SIGNPATH PHARMA, INC.

(A Development Stage Company)

Notes to the Financial Statements

June 30, 2011 and December 31, 2010

NOTE 6 – CAPITAL STOCK (CONTINUED)

Conversion

At the election of the holder thereof, each share of Preferred Stock will be convertible into common stock, at any time after issuance, at the Conversion Rate, as it may be adjusted from time to time in accordance with the Certificate of Designation.  The Preferred Stock will not convert automatically into Common Stock upon completion of this offering and only the underlying Common Stock issuable upon conversion is registered for the resale under this prospectus.  The Conversion Rate initially will be 1,177 shares of common stock ($.85 per share) for each Share of Preferred Stock.  If the Company issues or sells any shares of its common stock (or options, warrants or convertible securities, convertible or exchangeable into shares of common stock) hereinafter, a “Subsequent common stock Issuance”), then the Conversion Rate will be adjusted so that the number of shares of common stock issuable upon conversion of each share of preferred stock shall be equal to the quotient obtained by dividing $1,000 by the price per share of common stock (or the conversion price per share in the case of a sale of options, warrants or convertible securities) sold in such Subsequent common stock Issuance.

The Conversion Price is also subject to adjustment from time to time in the event of (i) the issuance of common stock as a dividend or distribution on any class of the Company’s capital stock; or (ii) the combination, subdivision or reclassification of the common stock.  No fractional shares will be issued upon conversion.  Payment of accumulated and unpaid dividends will be made upon conversion to the extent of legally-available funds.The shares of Preferred Stock may also be converted into common stock at the Conversion Rate at the Company’s option following the effectiveness of a Registration Statement, if the Company’s common stock trades above 200% of the Conversion Rate per share for a period of 20 consecutive trading days.

Voting Rights

The affirmative vote of the holders of at least two-thirds of the outstanding shares of Preferred Stock, voting as a class, shall be required to authorize, effect or validate (i) any change in the rights, privileges or preferences of the Preferred Stock that would adversely affect the Preferred Stock, or (ii) the authorization, creation, issuance or increase in the authorized or issued amount of any class or series of stock ranking on parity with or superior to the Preferred Stock with respect to the declaration and payment of dividends or distribution of assets upon liquidation, dissolution or winding-up of our Company.  In addition, the holders of Preferred Stock shall have the right to vote, together with holders of common stock as single class, on all matters upon which the holders of common stock are entitled to vote pursuant to applicable Delaware law or the Company’s Certificate of Incorporation.  The Preferred Stock shall vote on an “as converted basis” with each holder of Preferred Stock having one vote for each Conversion Share underlying such holder’s shares of Preferred Stock.

Liquidation

In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company, before any payment or distribution of the assets of the Company (whether capital or surplus), or the proceeds thereof, may be made or set apart for the holders common stock or any stock ranking junior to Preferred Stock, the holders of Preferred Stock will be entitled to receive, out of the assets of the Company available for distribution to stockholders, a liquidating distribution of $1,000 per share, plus any accrued and unpaid dividends, subject to adjustment upon the occurrence of certain events.  If, upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, the assets of the Company are insufficient to make the full payment of $1,000 per share, plus all accrued and unpaid dividends on the Preferred Stock and similar payments on any other class of stock ranking on a parity with the Preferred Stock upon liquidation, then the holders of Preferred Stock and such other shares will share ratably in any such distribution of the Company’s assets in proportion to the full respective distributable amounts to which they are entitled.  Certain events, including a consolidation or merger of the Company with or into another corporation or sale or conveyance of all or substantially all the property and assets of the Company will be deemed to be a liquidation, dissolution or winding-up of the Company for purposes of the foregoing.

Between January 26 and June 30, 2011 the Company issued 399 shares of its par value $0.10 convertible preferred stock for cash at $1,000 per share.

Between February 11 and November 19, 2010, the Company issued 575 shares of its par value $0.10 convertible preferred stock for cash at $1,000 per share.

11

SIGNPATH PHARMA, INC.

(A Development Stage Company)

Notes to the Financial Statements

June 30, 2011 and December 31, 2010

NOTE 6 – CAPITAL STOCK (CONTINUED)

Between March 5 and September 9, 2009, the Company issued 810 shares of its par value $0.10 convertible preferred stock at $1,000 per share.

On November 25, 2008, the Company issued 562 shares of its par value $0.10 convertible preferred stock for cash at $1,000 per share.

On November 25, 2008, the Company issued 890 shares of its par value $0.10 convertible preferred stock to extinguish bridge debt financing totaling $889,875.

Between January 24 and April 15, 2008, the Company issued 1,082,500 common shares of the Company at $0.85 per common share in accordance with the Bridge Note agreements.

NOTE 7 – WARRANTS

A summary of the status of the Company's warrants as of June 30, 2011 is presented below:

Date of	Warrant	Exercise	Value if		Expiration
Issuance	Shares	Price	Exercised		Date
11/25/08	1,259,639	1.27	$	1,599,742	08/10/14
11/25/08	530,314	0.85		450,767	08/10/14
11/26/08	449,220	1.27		570,509	08/10/14
Outstanding at 12/31/2008	2,239,173	1.17		2,621,018
03/05/09	347,215	1.27		440,963	08/10/14
03/05/09	104,165	0.85		88,540	08/10/14
04/01/09	17,655	1.27		22,422	08/10/14
04/01/09	5,296	0.85		4,502	08/10/14
06/17/09	235,400	1.27		298,958	08/10/14
06/17/09	70,620	0.85		60,027	08/10/14
07/23/09	58,850	1.27		74,740	08/10/14
07/23/09	35,310	0.85		30,014	08/10/14
08/20/09	58,850	1.27		74,740	10/14/15
09/09/09	235,400	1.27		298,958	10/14/15
09/09/09	70,620	0.85		60,027	10/14/15
Outstanding at 12/31/2009	3,478,554	1.17		4,074,909
02/11/10	29,425	1.27		37,370	10/14/15
02/11/10	17,655	0.85		15,007	10/14/15
05/21/10	29,425	1.27		37,370	10/14/15
05/21/10	17,655	0.85		15,007	10/14/15
08/10/10	88,275	1.27		112,109	10/14/15
08/10/10	52,965	0.85		45,020	10/14/15
09/15/10	264,825	1.27		336,328	10/14/15
09/15/10	52,965	0.85		45,020	10/14/15
09/24/10	105,930	0.85		90,041	10/14/15
10/27/10	147,125	1.27		186,849	*
10/27/10	73,563	0.85		62,529	*
11/19/10	117,700	1.27		149,479	*
11/24/10	70,620	0.85		60,027	*
Outstanding at 12/31/2010	4,546,682	1.16	$	5,267,063
01/26/11	117,700	1.27		149,479	*
01/26/11	60,027	1.27		76,234	*
01/26/11	106,636	0.85		90,641	*
03/15/11	29,425	1.27		37,370	*
03/15/11	29,425	1.27		37,370	*
03/15/11	35,310	0.85		30,014	*
04/06/11	70,620	0.85		60,027	*
04/06/11	29,425	1.27		37,370	*
04/06/11	88,275	1.27		112,109	*
06/08/11	51,200	0.85		43,520	*
06/08/11	14,712	1.27		18,684	*
06/08/11	11,770	1.27		14,948	*
06/08/11	58,850	127		74,740	*
06/20/11	17,655	0.85		15,007	*
06/20/11	29,425	1.27		37,370	*
Outstanding at 6/3011	5,297,137	1.15	$	6,101,946
*Fifth anniversary date of the next registration statement to be filed.

The warrants were issued in connection with the Preferred Stock Offering and were valued using the Lattice model and accounted for as described in Note 7.

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NOTE 8 – STOCK OPTIONS

The Company’s 2009 Employee Stock Incentive Plan (the “2009 Option Plan”) was adapted by the Company’s Board of Directors on February 9, 2009 in order to motivate participants by means of stock options and restricted stock to achieve the Company’s long-term performance goals and enable our employees, officers, directors and consultants to participate in our long term growth and financial success. The 2009 Plan, which is administered by our Board of Directors, authorizes the issuance of a maximum of 500,000 shares of our common stock, which may be authorized and unissued shares or treasury shares.  Employee options shall be deemed Incentive Stock Options (as defined in the 2009 Option Plan) to the maximum extent permitted by Section 422 of the Internal Revenue Code including a five-year limit on exercise for 10% or greater stockholders with any excess grant to the above individuals over the limits set by Section 422 being Non-Qualified Stock Options as defined in the 2009 Option Plan. Both the Incentive Stock Options or any Non-Qualified Stock Options must be granted at an exercise price of not less than the fair market value of shares of common stock at the time the option is granted and Incentive Stock Options granted to 10% or greater stockholders must be granted at an exercise price of not less than 110% of the fair market value of the shares on the date of grant.

If any award under the 2009 Plan terminates, expires unexercised, or is cancelled, the shares of common stock that would otherwise have been issuable pursuant thereto will be available for issuance pursuant to the grant of new

awards. The 2009 Plan will terminate on February 9, 2019.  As of June 30, 2011 the following options had been granted under the plan:

NOTE 8 – STOCK OPTIONS (CONTINUED)

On July 12, 2010 the Company issued 100,000 options to a member of its board of directors under the 2009 plan. The options have an exercise price of $0.85 per share and have a life of ten years. The options vest as follows: one third on the date of grant, one third on each of the second and third anniversary dates from the date of grant. The Company valued these options using the Black-Scholes option pricing model under the following assumptions:  $0.85 stock price, $0.85 stock price, 10 years to maturity, 400% volatility,2.02% risk free rate.  The Company record amortization expense of $11,684 related to these options for the six months ended June 30, 2011.

NOTE 9– SUBSEQUENT EVENTS

In accordance with ASC 855-10 Company management reviewed all material events through the date of this report and there are no material subsequent events to report.

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PART I   Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

Statements contained in this Item 2. “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and elsewhere in this report that are not historical or current facts may constitute “forward-looking statements” within the meaning of such term in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  These statements relate to future events or future predictions, including events or predictions relating to our future financial performance, and are generally identifiable by use of the words "may," "will," “forecast,” "should," "expect," "plan," "anticipate," "believe," "feel," "confident," "estimate," "intend," "predict," "potential" or "continue" or the negative of such terms or other variations on these words or comparable terminology.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause the Company's or its industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.  Important factors to consider and evaluate that could cause actual results to differ materially from those predicted in any such forward-looking statements include: (i) the general economic recession and changes in the external competitive market factors which might impact the Company's results of operations; (ii) unanticipated working capital or other cash requirements including those created by the failure of the Company to adequately anticipate the costs associated with clinical trials, manufacturing and other critical activities; (iii) changes in the Company's business strategy or an inability to execute its strategy due to unanticipated changes in the therapeutic drug industry; (iv) the inability or failure of the Company's management to devote sufficient time and energy to the Company's business; and (v) the failure of the Company to complete any or all of the transactions described herein on the terms currently contemplated.  In light of these risks and uncertainties, many of which are described in greater detail in the Risk Factors discussion contained in our registration statement filed with the Securities and Exchange Commission (“SEC”), there can be no assurance that the forward-looking statements contained in this prospectus will in fact transpire.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements.  Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of such statements.  We do not undertake any duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results or changes in our expectations.

General

The following discussion should be read in conjunction with the financial statements and notes thereto included in this report. Except for the historical information contained herein, the discussion in this report contains certain forward-looking statements that involve risks and uncertainties, such as statements of the Company’s plans, objectives, expectations and intentions as of the date of this filing. The cautionary statements made above should be read as being applicable to all related forward-looking statements wherever they appear in this document.

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Material Changes in Financial Conditions

Liquidity and Capital Resources

As of June 30, 2011 and December 31, 2010, the Company had $21,241 and $48,993, respectively, of cash on hand.  The Company’s working capital deficit increased from ($4,403,829) at December 31, 2010 to a deficit of ($5,581,609), as of June 30, 2011, as a result of  a decrease in cash resulting from a loss of ($922,948) offset, in part, by an increase in accounts payable of $557,275.  SignPath had a deficit accumulated during the development stage of $6,039,157, as of June 30, 2011.

During the 12 months ended December 31, 2010, SignPath sold 575 Units (the “2010 Private Placement”) consisting of its securities at a price of $1,000 per Unit.  Each Unit consists of (i) one share of 6.5% Series A Convertible Preferred Stock convertible into 1,177 shares of common stock (equivalent to $.85 per share of common stock) following the effective date of its Registration Statement (the “Effective Date”) subject to adjustment, and (ii) Warrants to purchase 1,177 shares of common stock at $1.27 per share for a five-year period following the Effective Date of a registration statement including the underlying securities.  The Company received gross proceeds of $575,000 and incurred stock offering costs of $121,709 related to such offering.  

During the six month period ended June 30, 2011, the Company sold an additional 398.5 Units.  The Company received gross proceeds of $398,500 and incurred stock offering costs of $68,211 related to the Offering.

The Company has no agreements, arrangements or understandings with any officer, director or shareholder as to any future financing, either equity or debt.  The Company expects to continue to incur losses for the foreseeable future and it is possible the Company may never reach profitability.  Therefore, the Company will require additional capital resources and financing to implement its business plan and continue its operations.  The Company’s current burn rate for salaries, research programs and professional fees averages about $60,000 per month.  Thus, it is expected that the Company currently does not have sufficient cash on hand to operate through the end of the fiscal year ended 2011.  Management believes it has enough funds to complete its pre-clinical trials.  Management believes that it has enough funds to complete its pre-clinical trials.  If the Company receives favorable results, Management believes it will have the ability to raise additional funds to complete INDs.  In view of general economic conditions, there can be no assurance that any additional financing will be available to us, that any affiliate will provide additional investments in the Company or that adequate funds for our operations will otherwise be available when needed or on terms acceptable to us.

Cash used in operating activities during the six months ended June 30, 2011 (“Fiscal 2011”) was $358,041 compared to cash used of $264,329 during the comparable period in 2010 (“Fiscal 2010”).  This resulted from a net loss of $922,948 in Fiscal 2011, offset by an increase in accounts payable and accrued expenses of $557,275, and a change in the fair value of the Company’s derivative liability of ($4,684).  This compared to a loss of $787,191 during Fiscal 2010 and an increase in accounts payable and accrued expenses of $44,818 and a change in the fair value of the Company’s derivative liability of $137,560.

15

The Company had net cash provided by financing activities of $330,289 in Fiscal 2011 as a result of the $398,500 received in the 2011 Private Placement described above, reduced by $68,211 of offering costs.  During Fiscal 2010, the Company had $35,000 of net cash provided by financing activities as a result of the $50,000 received from the 2010 Private Placement of Preferred Stock less the stock offering costs of $15,000.

As a result of the foregoing, the Company’s cash decreased by $27,752 during Fiscal 2011 from $48,993 to $21,241.

The financial statements included in this report have been prepared in conformity with generally accepted accounting principles that contemplate our continuance as a going concern.  The Company has had no revenues and has generated losses from operation.  As set forth in Note 2 to the audited Financial Statements, the continuation of the Company as a going concern is dependent upon the Company obtaining adequate capital to fund operating losses until it becomes profitable, if ever.  The financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Material Changes in Results of Operations

Six months ended June 30, 2011, as compared with six months ended June 30, 2010

The Company does not expect to receive any revenues prior to 2012.  Total operating expenses during the six months ended June 30, 2011 (the “2011 Period”) increased to $927,632, as compared with $690,415 during the six months ended June 30, 2010 (the “2010 Period”) primarily as a result of $773,207 of research and development expenses related to the continued manufacture and preclinical development of its lead curcumin formulations.  General and administrative expenses decreased to $73,193 in the 2011 Period from $126,329 in the 2010 Period, primarily as a result of a reduction in travel and other office related expenses.  Professional fees decreased to $81,232 in the 2011 period from $340,000 in the 2010 Period, primarily as a result of common stock issued for services issued in 2010.

During the 2011 period, the Company incurred an aggregate of $773,207 in research and development fees in the 2011 Period as compared to $224,086 in the 2010 Period.  This included $110,254 paid to University of Texas, MD Anderson Cancer Center (“UTMDACC”) for non-clinical and mouse pre-clinical non-GLP studies of lipsomal curcumin.  Other major research and development expenses included payments to Polymnun, Nucro Technology and Regis Pharmaceuticals for $253,571, $177,559 and $99,505, respectively, for lab fees and other costs related to the Company’s research and development efforts.

Payments in the 2010 Period included $19,370 and $10,000 paid to University of Texas, MD Anderson Cancer Center (“UTMDACC”) and John Hopkin’s University, respectively, for non-clinical and mouse pre-clinical non-GLP studies of lipsomal curcumin.  Other major research and development expenses included payments to Chemic Laboratories, ClinicPace Worldwide, and Surmodics Pharmaceuticals for $80,287, $49,971, and $32,000, respectively, for lab fees and other costs related to the Company’s research and development efforts.

The amount paid for research and development in the 2011 Period consisted of payments for overhead and patent fees for non-clinical studies and pre-clinical studies in the nanocurcumin compound and to produce polymer under the JHU Agreement for animal studies of nanocurcumin.  During the 2010 Period, the Company paid UTMDACC for non-clinical and mouse pre-clinical pre-GLP studies of lipomal curcumin.  It also includes expenses relating to development of depotcurcumin, a slow release formulation.  Depotcurcumin was originally made at UNT under non-GLP conditions from curcumin extract (and PLGA, a chemical surrounding the curcumin) originally purchased from a U.S. chemical supplier, Sigma Aldrich Fine Chemicals (“SAFC”).

16

As a result of the foregoing, the Company had a net loss of $922,948 in the 2011 Period as compared to a net loss of $787,191 in the 2010 period.  This translates to a loss per share of $0.08 in the 2011 Period compared to $0.07 in the 2010 Period.

Critical Accounting Policies

We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations. The list is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management’s judgment in their application. The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations where such policies affect our reported and expected financial results. Note that our preparation of the financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

Basis of Presentation

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. The Company’s fiscal year-end is December 31.

Use of Estimates

The preparation of these consolidated financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to valuation and amortization policies on property and equipment and valuation allowances on deferred income tax losses. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

17

Derivative Financial Instruments

The Company generally does not use derivative financial instruments to hedge exposures to cash-flow risks or market-risks that may affect the fair values of its financial instruments. The Company utilizes various types of financing to fund our business needs, including preferred stock with warrants attached and other instruments not indexed to our stock. The Company is required to record its derivative instruments at their fair value. Changes in the fair value of derivatives are recognized in earnings in accordance with ASC 815.

Revenue Recognition

As of the date of this disclosure, the Company has yet to recognize revenues.  As the Company continues to develop and implement its business plan, revenue from the performance of services or sale of products will be recognized in accordance with FASB codification standards. Revenue will be recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is provided, and collectability is assured.

Basic and Diluted Net Income (Loss) Per Share

The Company computes net income (loss) per share in accordance with FASB codification standards.  The standard requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

Income Taxes

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted FASB codification regarding the required tax asset benefit computations for net operating losses carry forward.  The potential benefits of net operating losses have not been recognized in these consolidated financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

Stock-Based Compensation

The Company records stock-based compensation in accordance with FASB codification standards, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

18

Plan of Operations

The Company's current focus is on the manufacture and preclinical development of its lead curcumin formulations (intravenous liposomal curcumin, oral and intravenous nanocurcumin and a slow release PLGA formulation) with a view toward filing two IND applications with the FDA. The Company's product candidates are still in the preclinical development phase.

The Company believes that a novel pharmaceutical preparation with enhanced absorption of the active compound with resistance to hepatic inactivation could potentially have greater clinical efficacy than the oral versions. The laboratory and oral administration studies by other researchers, to date, suggest that curcumin has high potency. The Company believes that an alternate route for administering this compound, such as the Company's parenteral (taken into the body other than through the digestive canal) formulation, could be more effective at lower dosages. SignPath intends to develop a parenteral liposomal formulation, and a nanoparticle formulation, nanocurcumin, to overcome the limitations of the oral form.

SignPath believes that the development and comparison of liposomal curcumin, nanocurcumin and PLGA formulation could expose potential differences in biological effects and distribution to different tissues. The Company intends to manufacture good manufacturing practice (GMP) grade of liposomal curcumin, nanocurcumin and PLGA formulation. These formulations will require outsourcing production to one or more commercial facilities. Our initial goals are to obtain sufficient material for in vitro and animal analysis and to develop these formulations in order to submit INDs to the FDA. Determination of safety, dosage, and efficacy of these formulations in a quantifiable manner will permit us to pursue clinical registration trials for a variety of malignant diseases. Following submission of the INDs, the Company plans to initially run Phase I studies with both of the parenteral formulations in patients with treatment refractory malignant disease. Subsequently, if the Phase I trials are successful, the Company plans to seek FDA authorization to run Phase II trials in selected malignancies.

Liposomal curcumin: The Company has agreements with contract manufacturers for the manufacture, chemistry. and controls for supplies of the drugs to be tested. Liposomal curcumin is manufactured by our contract manufacturer, Polymun, Inc. Initial quantities of GMP grade liposomal curcumin to conduct preclinical studies to corroborate previously published data from other researchers were obtained from Sigma Aldrich Fine Chemicals ("SAFC") or from Sabinsa. Final production of liposmal curcumin GMP was completed at Polymun in Vienna, Austria during 2009. Using Iipocurc, anti-cancer activity without toxicity in human colon and pancreatic cancer xenograft models were published.  Following the determination of safety and the optimum dosage and schedule in the most sensitive of the three species, we will be able to estimate starting dosages for Phase I trials in humans. We plan to outsource corroborative studies of Iiposomal absorption, distribution, metabolism, and excretion (ADME), and pharmacokinetics in rats with the aim of estimating optimum dosage schedules, as well as dosage and safety in mice, rats and dogs to satisfy IND regulations to GLP laboratories in M.D. Anderson Cancer Center in Houston, Texas.

Nanocurcumin: The Company intends to obtain commercial volumes of purified curcumin from third party manufacturers, Sabinsa and/or Regis Pharmaceuticals, in quantities suitable to satisfy preclinical and clinical demands. The Company believes that the manufacture of Iiposomal curcumin and nanocurcumin can also be scaled up as necessary since these additional substances are readily available from commercial sources utilizing established production technologies. We plan to outsource nanocurcumin pre-clinical development to M.D. Anderson. We will continue non-clinical and preclinical analyses of nanocurcumin at the NCI Nanocharacterization Laboratory. The nanocurcumin program will be managed by M.D. Anderson through the filing of the Company's IND. However, we intend to develop direct injection nanocurc, a new clinical entity at The Johns Hopkins Cancer Center for preventive therapy of inducted curcumin in situ in rats. Nanocurc, a parenteral formulation of nanocurcumin in human pancreatic cancer xenografts in nude mice has demonstrated anti-cancer effects. This formulation has activity against breast cancer-DCIS and passes the blood brain barrier.  We intend to conduct a European Phase I dose funding in Parkinson's Disease for volunteers in collaboration with Polymun, Vienna, Austria. Upon completion, we will also continue studies of nanocurcumin, PLGA-nanocurcumin and lipsomal curcumin against L-DOPA induced dyskinesias in dogs. We will measure inhibiting effects of curcumin on disease progression in Parkinson's Disease patients at the University of Western Ontario, Canada. Contracts with these institutions will be initiated upon receipt of manufactured nanocurcumin.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, our financial position is routinely subject to a variety of risks, including market risk associated with interest rate movement. We regularly assess these risks and have established policies and business practices intended to protect against these and other exposures. As a result, we do not anticipate material potential losses in these areas.

As of June 30, 2011, we had cash and cash equivalents of $21,241.  

Item 4.  Controls and Procedures.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, our management has validated the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the " Exchange Act"), as of June 30, 2011.  Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of such period, our disclosure controls and procedures were ineffective to ensure that (i) information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (ii) our disclosure and controls are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  This conclusion is based on the fact that due to limited resources, the Company is unable to maintain adequate segregation of duties.

20

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.  As defined by the Public Company Accounting Oversight Board Auditing Standard No. 5, a material weakness is a deficiency or a combination of deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected. A clear and concise segregation of duties is important to maximize checks and balances so that no single individual has control over two or more phases of a transaction or operation. A strong segregation of duty also is critical to reduce effectively the risk of mistakes and inappropriate actions preventing fraud and discourages collusion. It can be difficult for small businesses to always have a clear separation of duties because there simply are not enough personnel to cover each and every process and procedure. Ultimately, checks and balances need to be in place as a supportive measure to the business operations, but also as a fraud prevention measure as well. Because we have limited financial personnel, and limited resources, compliance with segregation of duties and proper oversight of control requirements is extremely difficult  In connection with the evaluation referred to in the foregoing paragraph, we have identified no change in our internal control of financial reporting that occurred during the quarter ended June 30, 2011, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART I.         OTHER INFORMATION

Item 1. Legal Proceedings.

As of the date of this Quarterly Report on Form 10-Q, we are not a party to any legal proceedings.

Item 1A.  Risk Factors

In accordance with the requirements of Form 10-Q, the Company, as a smaller reporting company, is not required to make disclosure under this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the three-month period ended June 30, 2011, Registrant sold 197,500 units (the “Units”), of its securities at a price of $1,000 per Unit or $197,500.  Each Unit consists of (i) one share of 6.5% Series A Convertible Preferred Stock convertible into 1,177 shares of common stock (equivalent to $.85 per share of common stock) subject to adjustment, and (ii) one Warrant to purchase 1,177 shares of common stock at $1.27 per share for a five-year period following the Effective Date of its registration statement.  The Company received gross proceeds of $197,500 and paid 10% sales commissions of $19,750 to Meyers Associates, L.P. the Company’s placement agent.

The Units were sold to four different accredited investors who were customers of the placement agent.  The Company claimed an exemption from registration pursuant to Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder, based upon subscription agreements executed by each investor.

The net proceeds of the offering were used for working capital and research and development towards filing an investigational new drug application to commence clinical trials.

21

Item 3.	Defaults Upon Senior Securities.
	None.
Item 4.	Reserved
Item 5.	Other Information.
	None.
Item 6.	Exhibits.
	Exhibits.

Set forth below is a list of the exhibits to this quarterly report on Form 10-Q.

Exhibit Number	Description
3.1	Certificate of Incorporation of the registrant (1)
3.2	Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock (1)
3.3	By-Laws of the registrant (1)
3.4	Amended and Restated Certificate of Incorporation of the registrant dated August 2, 2006 (1)
3.5	Certificate of Amendment of the registrant dated May 27, 2008 (1)
4.1	Form of Common Stock Certificate (1)
4.2	Form of Common Stock Purchase Warrant (1)
4.3	Form of Bridge Note (1)
4.4	Form of Registration Rights Agreement (1)
4.5	Form of Subscription Agreement (1)
31.1	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.  1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance
101.SCH	XBRL Schema
101.CAL	XBRL Calculation
101.DEF	XBRL Definition
101.LAB	XBRL Label
101.PRE	XBRL Presentation

(1)           Incorporated by reference to the Company’s Registration Statement on Form S-1 (Registration No. 333-158474, declared effective on August 10, 2009.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:  August 9, 2011	SIGNPATH PHARMA INC.
	By:	/s/  Lawrence Helson
		Dr. Lawrence Helson, Chief Executive Officer and Chief Financial Officer
		(Principal Executive Officer and Principal Financial Officer)

23

SignPath Pharma Inc.

Quarterly Report on Form 10-Q

Quarter Ended June 30, 2011

EXHIBITS

Exhibit Number	Description
31.1	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.  1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance
101.SCH	XBRL Schema
101.CAL	XBRL Calculation
101.DEF	XBRL Definition
101.LAB	XBRL Label
101.PRE	XBRL Presentation

24

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dr. Lawrence Helson, Chief Executive Officer and Chief Financial Officer (principal executive officer and principal financial and accounting officer) of SignPath Pharma Inc. certify that:

1. I have reviewed this quarterly report on Form 10-Q of SignPath Pharma Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2011	SIGNPATH PHARMA INC.
	/s/ Lawrence Helson
	Dr. Lawrence Helson, Chief Executive
	Officer and Chief Financial Officer
	(Principal Executive Officer and Principal
	Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q for the period ended June 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dr. Lawrence Helson, Chief Executive Officer and Chief Financial Officer of SignPath Pharma Inc. (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(a) The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  August 9, 2011	SIGNPATH PHARMA INC.
	By:  /s/ Lawrence Helson
	Dr. Lawrence Helson Chief Executive
	Officer and Chief Financial Officer
	(Principal Executive Officer andPrincipal
	Financial and Accounting Officer)

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to SignPath Pharma Inc. and will be retained by SignPath Pharma Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Balance Sheets Parenthetical (USD $)	Jun. 30, 2011	Dec. 31, 2010
Convertible preferred stock par value	$ 0.10	$ 0.10
Convertible preferred stock shares authorized	5,000,000	5,000,000
Preferred stock shares issued	3,236	2,837
Preferred stock shares outstanding	3,236	2,837
Common stock par value	$ 0.001	$ 0.001
Common stock shares authorized	45,000,000	45,000,000
Common stock shares issued	12,190,000	12,190,000
Common stock shares outstanding	12,190,000	12,190,000

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Statements of Operations (USD $)	3 Months Ended		6 Months Ended		62 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011
REVENUES
OPERATING EXPENSES
General and administrative	42,025	74,186	73,193	126,329	1,144,218
Professional fees	23,190	340,000	81,232	340,000	969,497
Financing expense					1,063,401
Research and development	319,983	162,773	773,207	224,086	2,143,051
Total Operating Expenses	385,198	576,959	927,632	690,415	5,320,167
OPERATING LOSS	(385,198)	(576,959)	(927,632)	(690,415)	(5,320,167)
OTHER INCOME (EXPENSE)
Gain (loss) on derivative liability	131,553	(42,330)	4,684	(137,560)	(736,552)
Grant income				40,784	81,557
Interest expense					(63,995)
Total Other Income (Expense)	131,553	(42,330)	4,684	(96,776)	(718,990)
NET LOSS BEFORE INCOME TAXES	(253,645)	(619,289)	(922,948)	(787,191)	(6,039,157)
NET LOSS	$ (253,645)	$ (619,289)	$ (922,948)	$ (787,191)	$ (6,039,157)
BASIC AND DILUTED LOSS PER SHARE	$ (0.02)	$ (0.05)	$ (0.08)	$ (0.07)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING BASIC	12,190,000	11,405,934	12,190,000	11,373,149
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING DILUTED	12,190,000	11,405,934	12,190,000	11,373,149

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Document and Entity Information	3 Months Ended
	Jun. 30, 2011	Aug. 09, 2011
Document and Entity Information
Entity Registrant Name	SIGNPATH PHARMA, INC.
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Entity Central Index Key	0001455694
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		12,190,000
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2

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Warrants

3 Months Ended

Jun. 30, 2011

Investments, All Other Investments

Financial Instruments Disclosure [Text Block]

NOTE 7 – WARRANTS

A summary of the status of the Company's warrants as of June 30, 2011 is presented below:

Date of	Warrant	Exercise	Value if		Expiration
Issuance	Shares	Price	Exercised		Date
11/25/08	1,259,639	1.27	$	1,599,742	08/10/14
11/25/08	530,314	0.85		450,767	08/10/14
11/26/08	449,220	1.27		570,509	08/10/14
Outstanding at 12/31/2008	2,239,173	1.17		2,621,018
03/05/09	347,215	1.27		440,963	08/10/14
03/05/09	104,165	0.85		88,540	08/10/14
04/01/09	17,655	1.27		22,422	08/10/14
04/01/09	5,296	0.85		4,502	08/10/14
06/17/09	235,400	1.27		298,958	08/10/14
06/17/09	70,620	0.85		60,027	08/10/14
07/23/09	58,850	1.27		74,740	08/10/14
07/23/09	35,310	0.85		30,014	08/10/14
08/20/09	58,850	1.27		74,740	10/14/15
09/09/09	235,400	1.27		298,958	10/14/15
09/09/09	70,620	0.85		60,027	10/14/15
Outstanding at 12/31/2009	3,478,554	1.17		4,074,909
02/11/10	29,425	1.27		37,370	10/14/15
02/11/10	17,655	0.85		15,007	10/14/15
05/21/10	29,425	1.27		37,370	10/14/15
05/21/10	17,655	0.85		15,007	10/14/15
08/10/10	88,275	1.27		112,109	10/14/15
08/10/10	52,965	0.85		45,020	10/14/15
09/15/10	264,825	1.27		336,328	10/14/15
09/15/10	52,965	0.85		45,020	10/14/15
09/24/10	105,930	0.85		90,041	10/14/15
10/27/10	147,125	1.27		186,849	*
10/27/10	73,563	0.85		62,529	*
11/19/10	117,700	1.27		149,479	*
11/24/10	70,620	0.85		60,027	*
Outstanding at 12/31/2010	4,546,682	1.16	$	5,267,063
01/26/11	117,700	1.27		149,479	*
01/26/11	60,027	1.27		76,234	*
01/26/11	106,636	0.85		90,641	*
03/15/11	29,425	1.27		37,370	*
03/15/11	29,425	1.27		37,370	*
03/15/11	35,310	0.85		30,014	*
04/06/11	70,620	0.85		60,027	*
04/06/11	29,425	1.27		37,370	*
04/06/11	88,275	1.27		112,109	*
06/08/11	51,200	0.85		43,520	*
06/08/11	14,712	1.27		18,684	*
06/08/11	11,770	1.27		14,948	*
06/08/11	58,850	127		74,740	*
06/20/11	17,655	0.85		15,007	*
06/20/11	29,425	1.27		37,370	*
Outstanding at 6/3011	5,297,137	1.15	$	6,101,946
*Fifth anniversary date of the next registration statement to be filed.

The warrants were issued in connection with the Preferred Stock Offering and were valued using the Lattice model and accounted for as described in Note 7.

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Significant Accounting Policies

3 Months Ended

Jun. 30, 2011

Accounting Policies

Significant Accounting Policies [Text Block]

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Derivative Financial Instruments

The Company generally does not use derivative financial instruments to hedge exposures to cash-flow risks or market-risks that may affect the fair values of its financial instruments. The Company utilizes various types of financing to fund our business needs, including preferred stock with warrants attached and other instruments not indexed to our stock. The Company is required to record its derivative instruments at their fair value. Changes in the fair value of derivatives are recognized in earnings in accordance with ASC 815.

Recent Accounting Pronouncements

The Company has evaluated recent accounting pronouncements and their adoption has not had nor is it expected to have a material impact on the Company’s financial position, or statements.

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Subsequent Events

3 Months Ended

Jun. 30, 2011

Subsequent Events

Subsequent Events [Text Block]

NOTE 9– SUBSEQUENT EVENTS

In accordance with ASC 855-10 Company management reviewed all material events through the date of this report and there are no material subsequent events to report.

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Stock Options

3 Months Ended

Jun. 30, 2011

Equity

Shareholders' Equity and Share-based Payments [Text Block]

NOTE 8 – STOCK OPTIONS

The Company’s 2009 Employee Stock Incentive Plan (the “2009 Option Plan”) was adapted by the Company’s Board of Directors on February 9, 2009 in order to motivate participants by means of stock options and restricted stock to achieve the Company’s long-term performance goals and enable our employees, officers, directors and consultants to participate in our long term growth and financial success. The 2009 Plan, which is administered by our Board of Directors, authorizes the issuance of a maximum of 500,000 shares of our common stock, which may be authorized and unissued shares or treasury shares.  Employee options shall be deemed Incentive Stock Options (as defined in the 2009 Option Plan) to the maximum extent permitted by Section 422 of the Internal Revenue Code including a five-year limit on exercise for 10% or greater stockholders with any excess grant to the above individuals over the limits set by Section 422 being Non-Qualified Stock Options as defined in the 2009 Option Plan. Both the Incentive Stock Options or any Non-Qualified Stock Options must be granted at an exercise price of not less than the fair market value of shares of common stock at the time the option is granted and Incentive Stock Options granted to 10% or greater stockholders must be granted at an exercise price of not less than 110% of the fair market value of the shares on the date of grant.

If any award under the 2009 Plan terminates, expires unexercised, or is cancelled, the shares of common stock that would otherwise have been issuable pursuant thereto will be available for issuance pursuant to the grant of new awards. The 2009 Plan will terminate on February 9, 2019.  As of June 30, 2011 the following options had been granted under the plan:

On July 12, 2010 the Company issued 100,000 options to a member of its board of directors under the 2009 plan. The options have an exercise price of $0.85 per share and have a life of ten years. The options vest as follows: one third on the date of grant, one third on each of the second and third anniversary dates from the date of grant. The Company valued these options using the Black-Scholes option pricing model under the following assumptions:  $0.85 stock price, $0.85 stock price, 10 years to maturity, 400% volatility,2.02% risk free rate.  The Company record amortization expense of $11,684 related to these options for the six months ended June 30, 2011.

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Condensed Financial Statements

3 Months Ended

Jun. 30, 2011

Organization, Consolidation and Presentation of Financial Statements

Basis of Accounting [Text Block]

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2011, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2010 audited financial statements.  The results of operations for the period ended June 30, 2011 are not necessarily indicative of the operating results for the full year.

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Accrued Liabilities

3 Months Ended

Jun. 30, 2011

Payables and Accruals

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

NOTE 4 – ACCRUED LIABILITIES

Pursuant to the applicable Codification literature, the Company has concluded it is probable that it will pay $85,738 in liquidated damages pursuant to the registration rights clause in certain of the securities sold in fiscal years 2008 and 2009, the Company was required to file a registration statement by January 27, 2009.  The Company failed to do so until April 7, 2009, resulting in liquidated damages of 2% per month of the gross proceeds, which approximated $1.8 million as of that date.  During the year ended December 31, 2009, the Company’s registration statement covering the securities was declared effective by the SEC.  Each holder is entitled to $47.32 per share owned.  The Company has resolved to pay the liquidated damages in shares of Common Stock valued at $1.00 per share, pursuant to the terms and provisions of the Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock.

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Derivative Liability and Fair Value Measurements

3 Months Ended

Jun. 30, 2011

Derivative Instruments and Hedging Activities

Derivatives and Fair Value [Text Block]

NOTE 5 – DERIVATIVE LIABILITY AND FAIR VALUE MEASUREMENTS

The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with its preferred stock and associated warrants to purchase common stock. On January 1, 2009, the Company adopted ASC Topic No. 815-40 which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s own stock. As of January 1, 2009 the Company had issued 3,572,714 warrants which have exercise prices that are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than $0.85 and $1.27, respectively. If these provisions are triggered, the exercise price of all their warrants will be reduced.  As a result, the warrants are not considered to be solely indexed to the Company’s own stock and are not afforded equity treatment.

As a result, on January 1, 2009, 3,572,714 of the Company’s outstanding warrants containing exercise price reset provisions, originally classified as permanent equity, were reclassified to derivative liability. These warrants had exercise prices ranging from $0.85 - $1.27 and expire starting in December 2013. As of January 1, 2009, the fair value of these warrants of $1,676,633 was recognized and resulted in a cumulative effect adjustment to retained earnings of $43,808. The change in fair value during the years ended December 31, 2010 and 2009 of $(538,010) and $(159,418), respectively, is recorded as a derivative loss in the accompanying Statements of Operations.

During the six months ended June 30, 2011 the Company issued 469,034 warrants which were attached to 399 shares of convertible preferred stock.  The Company issued an additional 281,421 warrants as stock offering costs to the Company’s placement agent.  The combined fair market value of the derivative liability associated with these issuances for the six months ended June 30, 2011 was $597,437.

During the year ended December 31, 2010 the Company issued 676,775 warrants which were attached to 575 shares of convertible preferred stock.  The Company issued an additional 391,353 warrants as stock offering costs to the Company’s placement agent.  The combined fair market value of the derivative liability associated with these issuances for the year ended December 31, 2010 was $852,346.

During the year ended December 31, 2009 the Company issued 953,370 warrants which were attached to 810 shares of convertible preferred stock.  The Company issued an additional 286,011 warrants as stock offering costs to the Company’s placement agent.  The Combined fair market value of the derivative liability associated with these issuances for the year ended December 31, 2009 was $988,552.

The Company classifies the fair value of these warrants under level three of the fair value hierarchy of financial instruments. The fair value of the derivative liability was calculated using a lattice model that values the compound embedded derivatives based on a probability weighted discounted cash flow model. This model is based on future projections of the various potential outcomes. The embedded derivatives that were analyzed and incorporated into the model included the conversion feature with the full ratchet reset, and the redemption options.

The Series A Preferred Derivatives were valued using the following assumptions:

· The Company was 12 months from being publicly traded and the Company/Holder would convert the Preferred Stock based on 200% of the adjusted conversion price;

· The Preferred maturity date used was 5 years following the Company being publicly traded (rolling 6 years from the Valuation Date);

· The stock price of $0.85 was used as the fair value of the common stock based on the previous common stock transaction;

· The projected volatility curve was based on the average of 17 comparable biotech companies historical volatility:

· The Holder would automatically convert at a stock price of $1.70 if the Company was not in default;

· The Holder would convert on a quarterly basis in equal amounts to maturity if in the money; and

· Capital raising events would occur annually, generating reset events based on pricing not greater than 100% of market.

The warrants were valued at issuance and marked to market quarterly through June 2011. The five-year warrants are options to purchase shares of common stock at an exercise price of $0.85 per share and $1.27, subject to adjustments. The following assumptions were used for the valuation of the derivative:

· The stock price of $0.85 was used as the fair value of the common stock based on the previous common stock transaction;

· The projected volatility curve was based on the average of comparable companies as provided in the Preferred assumptions above;

· The Holder would exercise the warrant at maturity if the stock price was above the exercise price;

· The Holder would exercise the warrant at target prices starting at $1.58 for the Investor Warrants and $1.40 for the Placement Agent Warrants, and lowering such target as the warrants approached maturity.

· The Holder would automatically convert all of the shares at a stock price of $1.58 for the Investor Warrants and $1.40 for the Placement Agent Warrants;

· The Holder would convert on a quarterly basis in amounts not to exceed the average quarters trading volume based on historical performance, assuming the volume would increase by 5% each quarter; and

· Capital raising events would occur annually, generating reset events based on pricing not greater than 100% of market for the Placement Agent Warrants and for the Investor Warrants the reset would be 150% of the Preferred.

The Company determined the fair value of the preferred stock to be $2,888,641and $2,564,963 and the fair value of the warrants to be $1,919,070 and $1,649,995 at June 30, 2011 and December 31, 2010, respectively.

The following shows the changes in the level three liability measured on a recurring basis from the adoption of ASC 815 through the six months ended June 30, 2011:

Balance, January 1, 2009	$	-
Cumulative effect of adoption of ASC 815		1,676,633
Derivative liability for preferred stock and warrants issued during the period		988,552
Derivative loss		159,418
Balance, January 1, 2010		2,824,603
Derivative liability for preferred stock and warrants issued during the period		852,345
Derivative loss		538,010
Balance, December 31, 2010		4,214,958
Derivative liability for preferred stock and warrants issued during the period		597,437
Derivative gain		(4,684	)
Balance, June 30, 2011	$	4,807,711

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Capital Stock

3 Months Ended

Jun. 30, 2011

Equity

Stockholders' Equity Note Disclosure [Text Block]

NOTE 6 – CAPITAL STOCK

Common Stock

On June 16, 2010, the Company issued 400,000 shares of common stock to officers and consultants of the Company in exchange for services provided.  The shares were valued based on the price of $0.85 per share and the Company recognized $340,000 in consulting expense.

On December 28, 2010, the Company issued 450,000 shares of common stock to officers and consultants of the Company in exchange for services provided.  The shares were valued based on the price of $0.85 per share and the Company recognized $382,500 in consulting expense.

Series A Convertible Preferred Stock

The Series A Convertible Preferred Stock (“Preferred Stock”) has been authorized by resolutions adopted by the Company’s Board of Directors and set forth in a Certificate of Designation, Preferences and Rights (“Certificate of Designation”), filed with the Secretary of State of Delaware on November 26, 2008, which contains the designations, rights, powers, preferences, qualifications and limitations of the Preferred Stock.  The shares of Preferred Stock are fully paid and non-assessable.  As of June 30, 2011, the Company has issued 3,236 shares of Preferred Stock.

Rank

The Preferred Stock ranks(i) senior to the common stock and any other class or series of the Company’s capital stock either specifically ranking by its terms junior to the Preferred Stock or not specifically ranking by its terms senior to or on parity with the Preferred Stock, (ii) on parity with any class or series of the Company’s capital stock specifically ranking by its terms on parity with the Preferred Stock, and (iii) junior to any class or series of capital stock specifically ranking by its terms senior to the Preferred Stock, in each case, as to payment of dividends or as to distributions of assets upon liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary.  The approval of the holders of a majority of the Preferred Stock is required in order for the Company to issue any capital stock with rights on parity with or senior to the Preferred Stock.

Dividends

The holders of the Preferred Stock are entitled to receive annual cumulative per share dividends of 6.5% of the liquidation preference of the Preferred Stock, out of funds legally available, prior to any payment of dividends on the Company’s common stock or any other class of stock ranking junior to the Preferred Stock.  Such dividends are payable in cash or shares of common stock, at the option of the Company, semiannually on the last business day of February and August of each year (each a “Dividend Payment Date”), commencing in February 2009 with respect to the period from issuance through such date.  The holders of the Preferred Stock are entitled to share ratably with the holders of the common stock in any dividend declared on the common stock.

Dividends on the Preferred Stock will accrue whether or not the Company has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared.  Dividends accumulate to the extent they are not paid on the Dividend Payment Date to which they relate.  Dividends that are due in cash and which are not paid within (5) business days of the Dividend Payment date shall bear interest until paid at the default rate.  According to Delaware law, the Company may declare and pay dividends or make other distributions on its capital stock only out of legally-available funds.  In addition, no dividends or distributions may be declared, paid or made if the Company is or would be rendered insolvent by virtue of such dividend or distribution. The Company may not (i) pay any dividends in respect of any shares of capital stock ranking junior to the Preferred

Stock (including the common stock), other than dividends payable in the form of additional shares of the same junior stock as that on which such dividend is declared, or (ii) redeem any shares of capital stock ranking junior to the Preferred Stock (including the common stock), unless and until all accumulated and unpaid dividends on the Preferred Stock have been, or contemporaneously are, declared and paid in full.

Conversion

At the election of the holder thereof, each share of Preferred Stock will be convertible into common stock, at any time after issuance, at the Conversion Rate, as it may be adjusted from time to time in accordance with the Certificate of Designation.  The Preferred Stock will not convert automatically into Common Stock upon completion of this offering and only the underlying Common Stock issuable upon conversion is registered for the resale under this prospectus.  The Conversion Rate initially will be 1,177 shares of common stock ($.85 per share) for each Share of Preferred Stock.  If the Company issues or sells any shares of its common stock (or options, warrants or convertible securities, convertible or exchangeable into shares of common stock) hereinafter, a “Subsequent common stock Issuance”), then the Conversion Rate will be adjusted so that the number of shares of common stock issuable upon conversion of each share of preferred stock shall be equal to the quotient obtained by dividing $1,000 by the price per share of common stock (or the conversion price per share in the case of a sale of options, warrants or convertible securities) sold in such Subsequent common stock Issuance.

The Conversion Price is also subject to adjustment from time to time in the event of (i) the issuance of common stock as a dividend or distribution on any class of the Company’s capital stock; or (ii) the combination, subdivision or reclassification of the common stock.  No fractional shares will be issued upon conversion.  Payment of accumulated and unpaid dividends will be made upon conversion to the extent of legally-available funds.The shares of Preferred Stock may also be converted into common stock at the Conversion Rate at the Company’s option following the effectiveness of a Registration Statement, if the Company’s common stock trades above 200% of the Conversion Rate per share for a period of 20 consecutive trading days.

Voting Rights

The affirmative vote of the holders of at least two-thirds of the outstanding shares of Preferred Stock, voting as a class, shall be required to authorize, effect or validate (i) any change in the rights, privileges or preferences of the Preferred Stock that would adversely affect the Preferred Stock, or (ii) the authorization, creation, issuance or increase in the authorized or issued amount of any class or series of stock ranking on parity with or superior to the Preferred Stock with respect to the declaration and payment of dividends or distribution of assets upon liquidation, dissolution or winding-up of our Company.  In addition, the holders of Preferred Stock shall have the right to vote, together with holders of common stock as single class, on all matters upon which the holders of common stock are entitled to vote pursuant to applicable Delaware law or the Company’s Certificate of Incorporation.  The Preferred Stock shall vote on an “as converted basis” with each holder of Preferred Stock having one vote for each Conversion Share underlying such holder’s shares of Preferred Stock.

Liquidation

In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company, before any payment or distribution of the assets of the Company (whether capital or surplus), or the proceeds thereof, may be made or set apart for the holders common stock or any stock ranking junior to Preferred Stock, the holders of Preferred Stock will be entitled to receive, out of the assets of the Company available for distribution to stockholders, a liquidating distribution of $1,000 per share, plus any accrued and unpaid dividends, subject to adjustment upon the occurrence of certain events.  If, upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, the assets of the Company are insufficient to make the full payment of $1,000 per share, plus all accrued and unpaid dividends on the Preferred Stock and similar payments on any other class of stock ranking on a parity with the Preferred Stock upon liquidation, then the holders of Preferred Stock and such other shares will share ratably in any such distribution of the Company’s assets in proportion to the full respective distributable amounts to which they are entitled.  Certain events, including a consolidation or merger of the Company with or into another corporation or sale or conveyance of all or substantially all the property and assets of the Company will be deemed to be a liquidation, dissolution or winding-up of the Company for purposes of the foregoing.

Between January 26 and June 30, 2011 the Company issued 399 shares of its par value $0.10 convertible preferred stock for cash at $1,000 per share.

Between February 11 and November 19, 2010, the Company issued 575 shares of its par value $0.10 convertible preferred stock for cash at $1,000 per share.

Between March 5 and September 9, 2009, the Company issued 810 shares of its par value $0.10 convertible preferred stock at $1,000 per share.

On November 25, 2008, the Company issued 562 shares of its par value $0.10 convertible preferred stock for cash at $1,000 per share.

On November 25, 2008, the Company issued 890 shares of its par value $0.10 convertible preferred stock to extinguish bridge debt financing totaling $889,875.

Between January 24 and April 15, 2008, the Company issued 1,082,500 common shares of the Company at $0.85 per common share in accordance with the Bridge Note agreements.

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Statements of Cash Flows (USD $)	6 Months Ended		62 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011
OPERATING ACTIVITIES
Net loss	$ (922,948)	$ (787,191)	$ (6,039,157)
Common stock issued for services		340,000	722,500
Warrants issued for services	11,684		50,894
Common stock issued with bridge financing			1,139,001
Depreciation expense	632	484	3,349
Change in derivative liability, net of bifurcation	(4,684)	137,560	736,552
Change in accounts payable and accrued expenses	557,275	44,818	795,139
Net Cash Used in Operating Activities	(358,041)	(264,329)	(2,591,722)
INVESTING ACTIVITIES
Purchase of equipment		(1,390)	(5,390)
Net Cash Used in Investing Activities		(1,390)	(5,390)
FINANCING ACTIVITIES
Preferred stock issued for cash	398,500	50,000	2,345,500
Stock offering costs paid	(68,211)	(15,000)	(627,022)
Common stock issued for cash			10,000
Proceeds from notes payable			889,875
Net Cash Provided by Financing Activities	330,289	35,000	2,618,353
NET INCREASE (DECREASE) IN CASH	(27,752)	(230,719)	21,241
CASH AT BEGINNING OF PERIOD	48,993
CASH AT END OF PERIOD	21,241	64,699	21,241
NON CASH FINANCING ACTIVITIES:
Preferred stock issued for bridge financing			889,875
Derivative liability non cash financing activity	$ 597,437		$ 4,807,711

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Going Concern

3 Months Ended

Jun. 30, 2011

Organization, Consolidation and Presentation of Financial Statements

Going Concern Note

NOTE 2 - GOING CONCERN

The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. During the six months ended June 30, 2011, the Company recognized sales revenue of $-0- and incurred a net loss of $922,948.  As of June 30, 2011, the Company had an accumulated deficit of $6,039,157. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's planned business. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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Balance Sheets (USD $)	Jun. 30, 2011	Dec. 31, 2010
CURRENT ASSETS
Cash	$ 21,241	$ 48,993
Total Current Assets	21,241	48,993
EQUIPMENT, net	2,041	2,673
TOTAL ASSETS	23,282	51,666
CURRENT LIABILITIES
Accounts payable and accrued expenses	795,139	237,864
Derivative liability	4,807,711	4,214,958
Total Current Liabilities	5,602,850	4,452,822
STOCKHOLDERS' DEFICIT
Preferred stock; $0.10 par value, 5,000,000 shares authorized 3,236 and 2,837 shares issued and outstanding, respectively	323	284
Common stock; $0.001 par value, 45,000,000 shares authorized; 12,190,000 shares issued and outstanding, respectively	12,191	12,191
Additional paid-in capital	447,075	702,578
Deficit accumulated during the development stage	(6,039,157)	(5,116,209)
Total Stockholders' Deficit	(5,579,568)	(4,401,156)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 23,282	$ 51,666