GENETHERA INC - Quarter Report: 2010 March (Form 10-Q)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2010
Commission File No. 000-27237
GENETHERA, INC.
(Exact name of small Business Issuer as specified in its Charter)
Nevada 65-0622463
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
7577 W. 103rd Ave. Suite 212, Westminster, CO 80021
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (303) 439-2085
Check whether the issuer (1) 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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [ ] Yes [X] 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 definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [ ]
Smaller reporting company [ x X ]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes [ ]
No [ x X ]
State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 21,865,913 Shares of $.001 par value Common Stock outstanding as of March 31, 2010 and Series A 4,600 Shares, and Series B 6,320,000 632,000,000 shares of $.001 par value Preferred Stock outstanding as of March 31, 2010.
PART 1 - FINANCIAL INFORMATION
Item 1 .
Financial Statements
GENETHERA, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010
UNAUDITED
TABLE OF CONTENTS
Page No.
Consolidated Balance Sheet s (Unaudited) March 31, 2010
4-7 3
Consolidated Statements of Operations for
March 31, 2010 and 2009 (Unaudited)
5 4
Consolidated Statements of Changes in Stockholders’
Equity (Deficit) for the Period ended March 31, 2010
(Unaudited)
6
Consolidated Statements of Cash Flows for
March 31, 2010 and 2009 (Unaudited)
7 5
Notes to Consolidated Financial Statements (Unaudited)
8 6
2
GeneThera, Inc. - Consolidated Balance Sheets aAnd Subsidiary
Consolidated Balance Sheets
Unaudited
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| March 31, 2010 |
| December 31, 2009 | ||||
| ASSETS |
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| Current assets |
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| Cash | $ 7 |
| $ 7 | ||||
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| Prepaid expenses | 1,742 |
| 1,742 | ||||
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| Total current assets | 1,749 |
| 1,749 | ||||
| Property and equipment |
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| Office and laboratory equipment | 729,078 |
| 729,078 | ||||
| Less: Accumulated depreciation | (718,455) |
| (716,315) | ||||
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| Total property and equipment | 10,623 |
| 12,763 | ||||
| TOTAL ASSETS | $ 12,372 |
| $ 14,512 | ||||
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| LIABILITIES & STOCKHOLDERS' DEFICIT |
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| Current liabilities |
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| Accounts payable | $ 514,207 |
| $ 483,707 | ||||
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| Accounts payable-related party | 15,326 |
| 10,570 | ||||
| Accrued expenses | 1,058,925 |
| 1,013,348 | ||||
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| Notes payable | 4,000 |
| 4,000 | ||||
| Loan from shareholder | 647,979 |
| 647,979 | ||||
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| Total liabilities | 2,240,437 |
| 2,159,604 | ||||
| Stockholders' deficit: |
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| Series A preferred stock, par value $0.001 per share, 20,000,000 |
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| shares authorized, 4,600 shares and 4,600 shares issued and outstanding |
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| as of March 31, 2010 and December 31, 2009, respectively | 5 |
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| Series B preferred stock, par value $0.001 per share, 30,000,000 |
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| shares authorized, 6,320,000 shares issued and outstanding |
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| as of March 31, 2010 and December 31, 2009, respectively | 6,320 |
| 6,320 | ||||
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| Common stock, par value $0.001 per share, 300,000,000 |
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| shares authorized, |
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| outstanding as of March 31, 2010 and December 31, 2009, respectively | 21,866 |
| 21,148 | ||||
| Additional paid-in capital | 16,822,944 |
| 16,798,112 | ||||
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| | (19,079,200) |
| (18,970,677) | ||||
| Total stockholders' deficit | (2,228,065) |
| (2,145,092) | ||||
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| TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT | $ 12,372 |
| $ 14,512 | ||||
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See accompanying notes to unaudited consolidated financial statements.
3
GeneThera, Inc. and Subsidiary - Consolidated Statements of Expenses
Consolidated Statements of ExpensesOperations
Unaudited
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| Expenses |
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| Consulting | $ | 25,550 | $ | 136,990 |
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| General and administrative expenses |
| 11,083 |
| 57,453 |
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| Payroll expenses |
| 69,750 |
| 103,500 |
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| Depreciation |
| 2,140 |
| 15,786 |
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| Laboratory expenses |
| - |
| 185 |
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| Total |
| 108,523 |
| 313,914 |
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| Net loss | $ | (108,523) | $ | (313,914) |
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| Loss per common share - Basic and diluted | $ | (0.00) | $ | (0.12) |
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| Weighted average common shares outstanding - |
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| Basic and diluted |
| 22,202,907 |
| 2,513,836 |
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See accompanying notes to unaudited consolidated financial statements.
4
GeneThera, Inc. and Subsidiary
Consolidated Statement of Changes in Stockholders’ equity (Deficit)
Unaudited
5
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See accompanying notes to unaudited consolidated financial statements.
6
GeneThera, Inc. - Consolidated Statements of Cash Flows and Subsidiary
Consolidated Statements of Cash Flows
Unaudited
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| 2010 |
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| Cash flows from operating activities |
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| Net loss | $ | (108,523) | $ | (313,914) | |||||
| Adjustments to reconcile net loss to net cash |
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| provided by (used in) operating activities: |
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| Stock-based compensation |
| 25,550 |
| 190,740 | |||||
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| Depreciation and amortization |
| 2,140 |
| 15,786 | |||||
| Changes in operating assets and liabilities: |
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| Accounts payable - related parties |
| 4,756 |
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| Accounts payable and accrued expenses |
| 76,077 |
| 107,393 | |||||
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| Net cash provided by |
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| 5 | |||||
| Net increase in cash |
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| Cash at the beginning of the period |
| 7 |
| 48 | |||||
| Cash at the end of the period | $ | 7 | $ | 53 | |||||
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| Supplemental disclosures of cash flow information: |
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| Cash paid for interest | $ | - | $ | - | |||||
| Cash paid for income taxes | $ | - | $ | - | |||||
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See accompanying notes to unaudited consolidated financial statements.
7
GENETHERA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010
UNAUDITED
Note 1- Basis of presentation
The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.
Note 2- Going Concern
As shown in the accompanying consolidated financial statements, GeneThera had an accumulated deficit and a working capital deficit as of March 31, 2010. These conditions raise substantial doubt as to GeneThera ability to continue as a going concern. Management’s plan with regard to these matters includes raising working capital and significant assets and resources to assure GeneThera viability, through private or public equity offering, and/or debt financing, and/or through the acquisition of new business or private ventures. The financial statements do not include any adjustments that might be necessary if GeneThera is unable to continue as a going concern.
Note 3- Recently issued accounting pronouncements
We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.
Note 1 – Organization, nature of operations and summary of significant accounting policies
Organization and nature of operations
The consolidated financial statements include GeneThera, Inc. and its wholly owned subsidiary GeneThera, Inc. (Colorado) (collectively “GeneThera” or the “Company”).
GeneThera, Inc., formerly Hand Brand Distribution, Inc., was incorporated in November 1995 in Florida. On February 25, 2002, GeneThera, Inc. acquired 100% of GeneThera, Inc. (Colorado) for 16,611,900 common shares. For accounting purposes, the acquisition has been treated as a reverse merger and as a recapitalization of GeneThera, Inc. (Colorado).
GeneThera is a biotechnology company that develops molecular assays for the detection of food contaminating pathogens, veterinary diseases and genetically modified organisms.
Interim Financial Statements
In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) which are necessary to provide a fair presentation of operating results for the interim periods presented. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. These condensed consolidated financial statements should be read in connection with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The results of operations presented for the three months ended March 31, 2010, are not necessarily indicative of the results to be expected for the year. Interim financial data presented herein are unaudited.
Use of estimates
The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Principles of consolidation
The consolidated financial statements include the accounts of the Company and its controlled subsidiary. Equity investments in which we exercise significant influence, but do not control and are not the primary beneficiary, are accounted for using the equity method of accounting. Investments in which we do not exercise significant influence over the investee are accounted for using the cost method of accounting. Intercompany transactions are eliminated.
Property and equipment, net
Property and equipment consists primarily of office and laboratory equipment and is stated at cost. Depreciation is computed on a straight-line basis over the estimated useful lives ranging from five to seven years.
GENETHERA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010
UNAUDITED
Impairment of long-lived assets
The Company reviews the recoverability of its long-lived assets to determine whether events or changes in circumstances occurred that indicate the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the ability to recover the carrying value of the asset from the expected future cash flows of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between the estimated fair value and carrying value. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.
Revenue recognition
Research and development contracts are on a pre-paid basis in order to reflect milestones during research investigation. Revenues are recognized when services are completed. There were no revenues during the three months ended March 31, 2010 and 2009.
Stock-based compensation
Stock-based compensation is accounted for under FASB ASC Topic No. 718 – Compensation – Stock Compensation . The guidance requires recognition in the financial statements of the cost of employee services received in exchange for an award of equity instruments over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period). The guidance also requires measurement of the cost of employee services received in exchange for an award based on the grant-date fair value of the award. The Company accounts for non-employee share-based awards in accordance with guidance related to equity instruments that are issued to other than employees for acquisition, or in conjunction with selling, goods or services.
Income taxes
Income taxes are accounted for in accordance with the provisions of FASB ASC Topic No. 740 - Income Taxes . Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.
Basic and diluted net loss per common share
Basic and diluted net loss per share calculations are presented in accordance with FASB ASC Topic No. 260 – Earnings per Share , and are calculated on the basis of the weighted average number of common shares outstanding during the period. Diluted net loss per share calculations includes the dilutive effect of common stock equivalents in years with net income. Basic and diluted loss per share is the same due to the absence of common stock equivalents.
Fair value of financial instruments
The carrying value of cash, accounts payable and accrued expenses approximates fair value due to the short term nature of these accounts.
GENETHERA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010
UNAUDITED
Reclassifications
Certain amounts in the consolidated financial statements of the prior periods have been reclassified to conform to the current presentation for comparative purposes.
Recently issued accounting pronouncements
The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant effect on its consolidated financial position or results of operations.
Note 2 – Going concern
As reflected in the accompanying consolidated financial statements, the Company has an accumulated deficit of $19,079,200 and negative working capital of $2,238,688 as of March 31, 2010. This raises substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital and implement its business plan. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.
Note 3 – Property and equipment
Property and equipment at March 31, 2010 and December 31, 2009 consisted of the following:
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Note 4 – Related party transactions:
The Company has an outstanding loan payable to Antonio Milici, its President and shareholder amounting to $647,979 as of March 31, 2010 and December 31, 2009, respectively. This outstanding loan to the Company is unsecured and non-interest bearing.
The Company has an outstanding loan payable to Setna Holding, LLC, a related party amounting to $15,326 and $10,570 as of March 31, 2010 and December 31, 2009, respectively. This outstanding loan to the Company is unsecured and non-interest bearing.
GENETHERA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010
UNAUDITED
Note 5 – Shareholders’ equity:
Common and preferred stock
The Company’s Articles of Incorporation, as amended on November 8, 2007, authorizes the issuance of up to 50,000 shares of common stock, par value $.0000 per share. On February 5, 2008, the Company increased its authorized share to 100,000,000 of common stock, par value $.001 per share. On August 23, 2011, the Company increased its authorized shares to 300,000,000 of common stock, par value $.001 per share. Shares issued prior to August 23, 2011 have been retroactively restated to reflect the impact of the change in par value per share.
On August 23, 2011, the Company authorized 20,000,000 Series A preferred shares and 30,000,000 Series B preferred shares. The par value per share for all classes of preferred stock was set at $0.001 per share.
Convertible preferred stock rights
Preferred Stock (‘Series A’) shall be convertible into Common Stock any time at the holder’s sole discretion in part or in whole by dividing the Purchase Price per Share by 110% of the Market Value on the Closing Date. ‘Market Value’ on any given date shall be defined as the average of the lowest three intra-day trading prices of the Company’s common stock during the 15 immediately preceding trading days.
Preferred Stock (“Series B”) shall be convertible into ten common shares at any time and holders are entitled to 20 common share votes per such preferred share.
Common stock issuances
During the first quarter of 2010, the Company issued 1,150,000 shares valued at $25,550 for consulting services.
Common stock cancelled
During the first quarter of 2010, the Company cancelled 431,634 shares of its common stock in relation to prior years’ issuances for common stock for services.
2004 Equity Incentive Plan
The Company’s 2004 Senior Executive Officer Option Plan provides for the grant of equity incentives to senior employees of the Company. A maximum of 3,000,000 common shares are available for issuance under the 2004 Plan.
Warrants
None were issued during 2010 and none are outstanding.
Note 6 – Commitments and contingencies
Operating leases
During 2008 and early 2009, the Company leased its office space which have initial terms on a month-to-month basis. The Company sub-leased 700 square foot office space to GTI Corporate Transfer Agents, LLC located on the 3924 unit of this lease space reflected as 3930 Youngfield Street, Suite #2, Wheat Ridge, CO 80033. The rent on this lease was either settled in cash or through issuance of the Company’s common stock.
GENETHERA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010
UNAUDITED
Starting on March 1, 2009, the Company signed a five-year lease for office space in Colorado. The approximate square footage is 1,908. The base rent for this office space was approximately $24,000 during the first year. The lease expiration was February 28, 2014. The Company vacated the premises in May 2010.
In May 2010, the Company entered into a five-year lease agreement commencing on April 1, 2010 covering an area of approximately 7,660 square feet intended for research and office space located at 331 South 104th Street, Louisville, Colorado. The base rent for this space was approximately $38,300 during the first year, and was set to expire on March 31, 2015. The lease was terminated by agreement on September 6, 2010.
On November 30, 2010, the Company signed a 38-month lease agreement commencing on December 1, 2010. The office space is located in Westminster, Colorado. The space is approximately 9,681 square feet intended specifically for a biotechnology company’s use. The base rent was free during the first and second months; $7,000 per month during the next 12 months; $10,970 during the following 12 succeeding months; and $12,584 during the last 12 months, for a total guaranteed base rent of $366,648 during the 38-month lease term. This lease expires on January 31, 2014 and required a security deposit of $7,000.
Employment agreements
On January 8, 2007, the Company entered into an employment agreement with its chief executive officer and scientific officer for a five year term and providing for compensation of $12,000 per month. On the same date, the Company also entered into an employment agreement with its chief administrative and financial officer for a five year term and providing for compensation of $11,250 per month. Both employment contracts contract expire on January 7, 2012.
Legal contingencies
The Company is involved in claims arising during the ordinary course of business resulting from disputes with vendors and shareholders over various contracts and agreements.
Note 74 – Subsequent events
The Company issued 1,800,000 shares valued at $29,000 for cash during 2011.
The Company issued 1,580,600 shares for conversion of promissory notes totaling $10,988 during 2011.
The Company received cash proceeds of $111,591 from financing activities during 2011.
Item 2 .
Management's Discussion and Analysis and Results of Operation
The following discussion and analysis should be read in conjunction with the financial statements and notes thereto that appear elsewhere herein.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
Sections of this Form 10-Q, including the Management's Discussion and Analysis or Plan of Operation, contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements are subject to risks and uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. You should not unduly rely on these statements. Forward-
8
looking statements involve assumptions and describe our plans, strategies, and expectations. You can generally identify a forward-looking statement by words such as may, will, should, would, could, plan, goal, potential, expect, anticipate, estimate, believe, intend, project, and similar words and variations thereof. This report contains forward-looking statements that address, among other things,
* Our financing plans,
* Regulatory environments in which we operate or plan to operate, and
* Trends affecting our financial condition or results of operations, the impact of competition, the start-up of certain operations and acquisition opportunities.
Factors, risks, and uncertainties that could cause actual results to differ materially from those in the forward-looking statements ("Cautionary Statements") include, among others,
* Our ability to raise capital,
* Our ability to execute our business strategy in a very competitive environment,
* Our degree of financial leverage, risks associated with our acquiring and integrating companies into our own,
* Risks relating to rapidly developing technology, regulatory considerations;
* Risks related to international economies,
* Risks related to market acceptance and demand for our products and services,
* The impact of competitive services and pricing, and
* Other risks referenced from time to time in our SEC filings.
All subsequent written and oral forward-looking statements attributable to us, or anyone acting on our behalf, are expressly qualified in their entirety by the cautionary statements. We do not undertake any obligations to publicly release any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect unanticipated events that may occur.
RESULTS OF OPERATIONS
Gross profits for the three-month period ended March 31, 2010 were $0 compared to $10,822 for the same period last year. Personnel (salaries) increased decreased from $ 73,875 103,500 for the prior three month period ending March 31, 2010 2009 to $ 58,500 69,750 for the three month period ending March 31, 2009. Professional expenses (consulting and professional fees) comparing the three month period ending March 31, 2010, to the three month period ending March 31, 2009, decrease d from $ 282,881 136,990 to $ 2,880,055 25,550 with the decrease attributable to stock issued for consulting and professional services received throughout the quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a cash balance of $7 as of March 31, 2010. Accounts receivable as of March 31, 2010 was $0. It is estimated that it will require outside capital for the remainder of fiscal year 2009 2010 for the commercialization of GeneThera molecular assays as well as the development of their therapeutic vaccines. The Company intends to raise these funds by means of one or more private offerings of debt or equity securities or both and also generating revenue from Mexico.
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Currently the company is in discussions with one group to obtain financing through either debt and/or equity. No definitive agreements have been signed. There are no guarantees whether the Company will be able to secure such a financing, and if the financing is secured, there are no guarantees whether the Company can achieve the goals laid out in its business plan fully. We will require significant additional funding in order to achieve our business plan.
Our longer-term working capital and capital requirements will depend upon numerous factors, including revenue and profit generation, pre-clinical studies and clinical trials, the timing and cost of obtaining regulatory approvals, the cost of filing, prosecuting, defending, and enforcing patent claims and other intellectual property rights, competing technological and market developments, collaborative arrangements. Additional capital will be required in order to attain such goals. Such additional funds may not become available on acceptable terms and we cannot give any assurance that any additional funding that we do obtain will be sufficient to meet our needs in the long term.
Item 3 .
GENETHERA PLAN OF OPERATION GeneThera Plan of Operation
Background
In November 2007, GeneThera, Inc. reincorporated in the State of Nevada due to a third party which purchased the GeneThera Florida Charter in order to blackmail our Company for $80,000. We had a special meeting with three shareholders where it was unanimously resolved for GeneThera to transfer its Charter to the State of Nevada as soon as possible in order to recognize our new incorporation on our next SEC filing. The reinstatement was completed by January 2008. GeneThera has developed proprietary diagnostic assays for use in the agricultural and veterinary markets. Specific assays for Chronic Wasting Disease (among elk and deer) and Mad Cow Disease (among cattle) have been developed and are available currently on a limited basis. E. coli (predominantly cattle) and Johne's disease (predominantly dairy cattle and bison) diagnostics are in development. GeneThera is making a pivotal shift from a Research and Development organization into a product marketing and revenue generating entity. The company strategy that we maintained from inception to our recent reverse split (July, 2008) had been one of research only. We focused all our energies, talent, and resources to the incubation and growth of new ideas in the realm of genetically engineered disease detection and vaccination. We feel that with recent announcements the company is positioned to move from a developmental stage to a product oriented stage.
GeneThera provides genetics-based diagnostic and is currently working on vaccine solutions to meet the growing demands of today's veterinary industry and tomorrow's agriculture and healthcare industries. The company is organized and operated both to continually apply its scientific research to more effective management of diseases and, in so doing, realize the commercial potential of molecular biotechnology.
The Company believes it will require significant additional funding in order to achieve its business plan. Over the next 12 months, in order to have the capability of achieving its business plan, the Company will require at least $5,000,000. There are no guarantees whether the
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Company will be able to secure such a financing, and if the financing is secured, there are no guarantees whether the Company can achieve the goals laid out in its business plan fully.
RESEARCH AND DEVELOPMENT
We anticipate that research and development (R&D) will be the source for both assay development and vaccine design/development. If we are able to develop assays for different diseases, we intend to formalize the procedure into a commercial application through a series of laboratories to be owned and operated by GeneThera. To date, we have introduced our diagnostic solution for Chronic Wasting Disease and Mad Cow Disease on a very limited basis. We anticipate that R&D will be ongoing during the life of the Company, as this is the source for new products to be introduced to the market. Our plan is to seek new innovations in the biotechnology field. We cannot assure you that we will be successful in developing or validating any new assays or, if we are successful in developing and validating any such assays, that we can successfully commercialize them or earn profits from sales of those assays. Furthermore, we cannot assure you that we will be able to design, develop, or successfully commercialize any vaccines as a result of our research and development efforts.
COMMERCIAL DIAGNOSTIC TESTING
In the event that we are able to develop assays for the detection of diseases in animals, we intend to establish a series of diagnostic testing laboratories geographically proximate to the primary sources of individual diseases and/or according to specific available operating efficiencies. The specific number of labs to be built and operated will be based on assay demand (demand facilitated by the number of specific disease assays GeneThera develops), our ability to obtain the capital to build the labs, and our ability to successfully manage them from our principal office. As of the date of this filing, we are in negotiation to establish one diagnostic testing laboratory outside of our Colorado facility.
LICENSING
Through our third division, Licensing, we intend to manage the marketing and sale of the vaccines developed by GeneThera Research & Development division. As GeneThera does not intend to be a vaccine manufacturer, we plan to use our Licensing division to license the technology related to any vaccines that may be developed and to manage the revenue potential available from the successful development and validation of specific vaccines. We cannot provide any assurance that we will develop any vaccines or that, if they are developed, we will be able to license them successfully or that any such license will produce significant revenues.
R&D SERVICES
Molecular, Cellular, Viral Biology Research and Consulting Services. We provide independent research services to scientists in academia, the pharmaceutical industry, and the biotechnology industry. Primarily, GeneThera expertise focuses on technology relevant to animal and human immunotherapy. These services are backed by the cumulative experiences of greater than 50 years of research and development in both government and industry by
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GeneThera senior scientists. GeneThera intends to develop a commercial-scale implementation of Adenovector Purification Process to support R&D material production. Furthermore, GeneThera intends to evaluate and test commercially available expression vectors and incorporate them into its vector repertoire. These technologies are well established within the repertoire of GeneThera scientific staff. We cannot provide any assurance, however, that we will be able to successfully offer these services or that, if offered, we can provide them profitably.
Research & Development Services:
Molecular Biology:
Synthetic cDNA Construction
Prokaryotic Expression Vector Construction & Development
E. coli Expression Strain Evaluation
Pilot Scale Fermentation
Mammalian Expression Vector Construction & Development
Baculovirus Expression
Protein Isolation
Protein Engineering: Complement Determining Region Conjugated Proteins
Monoclonal Antibody Production Chimerization & Humanization
Vector design for Prokaryotic Expression of Antibody Fragments (Fab) and Single Chain Antibody (ScFv)
Pilot Scale-up Development
Process Purification & Characterization
Assay Development & Quality Control Pharmaceutical Dosage and Formulation
Gene Therapy Testing Services. GeneThera offers GLP (Good Laboratory Procedure) testing programs for somatic cell, viral and naked DNA-based gene therapies. Our scientists have over nine years experience in providing fully integrated bio-safety testing programs for the cell and gene therapy fields. To date, the Company has not generated any revenues with regard to these services, and there is no assurance that we will generate any revenues from such services.
Replication-Competent Viral Vector Testing. Sensitive in vitro cell culture assays are used to detect replication-competent retroviruses or adenoviruses. GeneThera can work with clients to provide custom replication-competent virus detection assays for the particular vector construct.
Complete Somatic Cell and Viral Vector Packaging and Producer Cell Line Characterization. GeneThera offers all of the assays mandated by regulatory authorities worldwide for the bio-safety analysis and characterization of cells and cell lines used in gene therapy products.
Vector Stock Characterization. Custom purity and potency testing is available for gene therapy viral vector stocks.
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Vector Purification Process Validation for Viral Clearance. Most biopharmaceuticals require viral clearance studies to validate the removal of potential contaminants, such as those from bovine components or from helper viruses (adenovirus in AAV production). GeneThera can provide custom design and performance of viral studies for various vector purification processes.
Custom Bio-safety Testing Programs for Somatic Cell, Ex Vivo Cell, and Tissue Therapies. GeneThera can guide our clients through the unique process of designing and implementing a bio-safety testing program that meets the needs of each specific project.
GeneThera is currently seeking contracts for these services and is in the final negotiation stage with a publicly traded company to perform these services on an annual basis. There is no assurance that any contracts will be signed or that the company will generate significant revenues or profits from any such contracts.
BUSINESS MODEL
Summary. GeneThera animal disease assay development business is based on its Integrated Technology Platform (ITP) that combines a proprietary diagnostic solution called Gene Expression Assay (GES) with PURIVAXTM, its system for analyzing large-scale DNA sequencing. The first part of this platform is the ongoing development of molecular diagnostic assays solutions using real time Fluorogenic Polymerase Chain Reaction (F-PCR) technology to detect the presence of infectious disease from the blood of live animals. The second part of the ITP is the development of therapeutic vaccines using RNA interference technology. It also allows for the efficient, effective, and continuous testing, management and treatment of animal populations. These facts distinguish the technology from any alternative testing and management methodology available to agriculture today -- all of which require the destruction of individual animals and even entire herds. Our testing and data analysis processes also allow us not only to separate infected from clean animals, but also to gain knowledge vital to development of preventative vaccines.
Each individual assay utilizes the proprietary Field Collection System (FCS) for the collection and transportation of blood samples to GeneThera laboratory. The FCS allows GeneThera to maintain the integrity of each sample by the addition of specific reagents to test tubes contained in the system. GeneThera FCS is designed to be an easy-to-use method of gathering blood samples from harvested or domesticated animals. It ensures consistency of samples as well as increased assurance of each sample's integrity.
To date, GeneThera has successfully developed the ability to detect Chronic Wasting Disease, a disease affecting elk and deer in North America. The release of commercialized Field Collection Systems and laboratory diagnostic testing occurred in October of 2003 as a marketing trial. GeneThera has also successfully developed an assay for the detection of Mad Cow Disease, a disease recently found in the United States, but which has been in Europe for many years. The Field Collection Systems are available for purchase from the Company. Chronic Wasting Disease and Mad Cow Disease are both in the family of diseases called Transmissible Spongiform Encephalopathy (TSE). Diagnostic assays for E.coli O157:H7 and Johne's disease are in the final stages of development.
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The Company, through GeneThera, is also developing vaccines for Chronic Wasting Disease and E.coli O157:H7. The Company will need the approval of the USDA before the vaccines can be manufactured or sold. The approval process for animal vaccines is time-consuming and expensive. We anticipate that such approval, if it is obtained, may require more than $5 million and may require more than two years for each vaccine for which approval is sought. Currently we do not have the capital necessary to seek approval of any of our candidate vaccines, and we cannot provide any assurance that we will be able to raise the capital necessary for such approval on terms that are acceptable to us, if at all. In addition, even if we are successful in raising the capital necessary to seek approval of any vaccine, there are no assurances that such an approval will be granted, or if granted, whether we will be able to produce and sell such vaccines following such an approval in commercial quantities or to make a profit from such production and sales.
Our recent developments include the progress we are making in regards to our Johne's disease validation trials scheduled to begin in collaboration with the Universidad National Autonoma de Mexico, a prominent state university in Mexico City. Our joint venture with Nutricion Avanzada, (the joint venture created a new company Applied Genetics. Applied Genetics is the marketing arm of GeneThera for the Mexican marketing of our Johne's disease testing service and subsequent Vaccine, (which is currently under development) has been in contact with several major ranchers throughout Mexico, and the overwhelming response from the ranchers has been an outcry for help in detecting and eliminating Johne's disease which is running rampant in their herds. Government approval and recommendation is expected to occur quickly once the validation trials are complete. The validation trials should be complete within 3-4 months from start. We will be conducting paid testing on a limited basis during the validation trials.
The recent signing of our agreement with STC.UNM (the technology development arm of The University of New Mexico) for the genetic vaccine they have developed and patented for E.coli 0157:h7 has thrust GeneThera into the global spotlight. The vaccine acts on a genetic level to inhibit the growth and shedding of the deadly E.coli 0157:h7 bacteria from cattle. The vaccine has already passed initial animal trials and is now set to enter the clinical trial phase. We are currently seeking partnerships for the completion of the clinical trials and subsequent taking of the finished vaccine to market. Due to the specific genetic makeup of the vaccine, we expect the clinical trials to be completed within 9-12 months from start. This is 3 to 5 times faster than a standard vaccine might take.
Since February 17, 2009, GeneThera no longer has a business relationship with The Goldsmith Group LLC due to manipulation of our market initiated by this independent contractor together with Steven Lockhart from Lockhart Capital Group. These two entities have continued to write negative connotations and comments against the Company through Investors Hub and other blogs in order to continue misrepresenting the Company. They were not involved in any product development for our Biotech Company.
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Item 4
.
CONTROLS AND PROCEDURES . Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934 (The Exchange Act), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures within the 90 days prior to the filing date of this report. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Consulting Chief Financial Officer, and Controller. We concluded that our internal controls are ineffective. We will be working on them to improve its effectiveness.
There will be significant changes in our internal controls and in other factors that will definitely affect internal controls positively subsequent to the date we carried out our evaluation.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
PART II - OTHER INFORMATION
Item 1 .
Legal Proceedings
On October 11, 2006, MAG Capital, a California Limited Liability Company (Mercator Momentum III, LP; Mercator Momentum Fund LP; Monarch Pointe Fund, Ltd; a British Virgin Islands Corporation), filed litigation against GeneThera, Inc., GTI Corporate Transfer Agents, LLC, a Colorado limited liability company, Antonio Milici, an individual, Tannya L. Irizarry, and Laura Bryan, individuals in the Superior Court State Complaint for breach of written contract. The Company retained legal counsel from Mark A. Shoemaker. In January 2008, MAG Capital dismissed the claims except the anticipatory breach of contract for which the Company’s legal counsel filed an appeal dated February 19, 2008. The Company lost the appeal. MAG Capital sold the debt to a London Company. MAG Capital was investigated by the Securities and Exchange Commission causing the hedge fund to close permanently.
On or about May 11, 2009, Goldsmith Group, LLC filed a Complaint of Breach of Contract against GeneThera, Inc. for traveling done by Alvin Goldsmith from Goldsmith Group for trips not authorized by the Company. The Company was seeking to retain legal counsel due to the complexity of it since Goldsmith combined personal issues and another company in the Complaint. Goldsmith also filed a claim of Unduly Enrichment against GeneThera. The Company was not unduly enriched by anything Goldsmith claimed he did. There was no breach of contract as Alvin Goldsmith from Goldsmith Group LLC did job abandonment on February 18, 2009. Messner & Reeves Law Firm was retained as our legal counsel. The judgment by default was vacated.
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Item 2
. Changes in Securities
None.
Item 3 .
Defaults upon Senior Securities
No defaults upon senior securities.
Item 4
. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders as of June 30, 2009.
Item 5 .
Other Information
None.
Item 6 .
Exhibits and Reports on Form 10-Q
(A) Financial Statements
Reference is made to the financial statements listed on the Index to Financial Statements in this Form 10-Q.
(B) Exhibits
Exhibits
31.1 Certification pursuant to section 302 of the Sarbanes-Oxley act of 2002
31.2 Certification pursuant to section 302 of the Sarbanes-Oxley act of 2002
99 32 .1 Certification of the President and Chief Executive
Office r
r
99 32 .2 Certification of the Chief Financial Officer
Signatures
Pursuant to the requirements of the Securities Act of 1933 the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Westminster, Colorado on this 15Th day of November, 2011.
GENETHERA, INC.
By: s/ Antonio Milici
Name: Antonio Milici
Title: President and Chief Executive Officer
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Pursuant to the requirements of the Securities Act of 1933 this Registration Statement has been signed by the following persons in the capacities indicated on November 15, 2011:
| Signature | Title(s) |
| /s/ Antonio Milici Antonio Milici | President, Chief Executive Officer |
|
|
|
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EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Antonio Milici, certify that:
1. I have reviewed this Form 10-Q for the fiscal quarter ended March 31, 2010 of GeneThera, 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 small business issuer as of, and for, the periods presented in this report;
4. The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer 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 small business issuer, 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) Evaluated the effectiveness of the small business issuer'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
c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
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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 small business issuer'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 small business issuer's internal control over financial reporting.
Date: November 15, 2011
/s/ Antonio Milici
--------------------------
Antonio Milici
President/Director
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EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Tannya L. Irizarry, certify that:
1. I have reviewed this Form 10-Q for the quarterly year ended March 31, 2010 of GeneThera, 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 small business issuer as of, and for, the periods presented in this report;
4. The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer 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 small business issuer, 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) Evaluated the effectiveness of the small business issuer'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
c) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and,
5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
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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 small business issuer'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 small business issuer's internal control over financial reporting.
Date: November 15, 2011
/s/ Tannya L. Irizarry
--------------------------
Tannya L. Irizarry
Chief Financial Officer (Interim)
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Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
I, Antonio Milici, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of GeneThera, Inc. for the quarterly period ended March 31, 2010, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of GeneThera, Inc.
By: /s/ Antonio Milici
Name:
Antonio Milici
Title:
Chief Executive Officer
Date:
November 15, 2011
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
I, Tannya L. Irizarry, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of GeneThera, Inc. for the quarterly period ended March 31, 2010, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of GeneThera, Inc.
By: /s/ Tannya L Irizarry
Name:
Tannya L Irizarry
Title:
Chief Financial Officer (Interim)
Date:
November 15, 2011
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