GENETHERA INC - Quarter Report: 2013 September (Form 10-Q)

GeneThera, Inc.

Consolidated Balance Sheets

(Unaudited)

UNITED STATES

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 September 30, 2013

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. 103^rd 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 [x] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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).

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]

(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]

State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 31,481,590 Shares of $.001 par value Common Stock outstanding as of September 30, 2013 and Series A 4,600 Shares, and Series B 15,410,000 shares of $.001 par value Preferred Stock outstanding as of November 18, 2013.

2

GeneThera, Inc.

Consolidated Balance Sheets

(Unaudited)

ASSETS		September 30, 2013			December 31, 2012
Current assets
Cash		$	943		$	1,055
Receivable-related party			-			5,718
Total current assets			943			6,773
Property and equipment
Office and laboratory equipment and leasehold improvements			813,923			812,333
Less: Accumulated depreciation			(777,649)			(765,525)
Total property and equipment, net			36,274			46,808
Other assets			7,000			7,000
TOTAL ASSETS		$	44,217		$	60,581
LIABILITIES & STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable		$	1,210,857		$	1,035,436
Accounts payable-related party			285,621			173,573
Accrued expenses			2,165,572			1,877,547
Notes payable			10,800			10,800
Convertible notes payable			880,162			882,716
Loan from shareholder			645,271			645,271
Total liabilities			5,198,283			4,625,343
Stockholders' deficit:
Series A preferred stock, par value $0.001 per share, 20,000,000
shares authorized, 4,600 shares shares issued and outstanding
as of September 30, 2013 and December 31, 2012, respectively			5			5
Series B preferred stock, par value $0.001 per share, 30,000,000
shares authorized, 15,410,000 shares issued and outstanding
as of  September 30, 2013 and December 31, 2012, respectively			15,410			15,410
Common stock, par value $0.001 per share, 300,000,000
shares authorized, 31,481,590 and 25,960,596 shares issued and
outstanding as of  September 30, 2013 and December 31, 2012, respectively			31,482			25,960
Additional paid-in capital			18,071,370			17,743,332
Deficit accumulated during the development stage			(23,266,295)			(22,346,418)
Total stockholders' deficit of Genethera, Inc.			(5,148,028)			(4,561,711)
Non-controlling interest			(6,038)			(3,051)
Total stockholders’ deficit			(5,154,066)			(4,564,762)
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT		$	44,217		$	60,581

See accompanying notes to these unaudited consolidated financial statements.

2

GENETHERA, INC.

Consolidated Statements of Expenses

 (Unaudited)

See accompanying notes to these unaudited consolidated financial statements.

3

GeneThera, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

		Nine Months Ended
		September 30,
		2013		2012
Cash flows from operating activities
Net loss	$	(922,864)	$	(1,099,590)
Adjustments to reconcile net loss to net cash  used in operating activities:
Stock-based compensation		330,806		-
Depreciation and amortization		12,124		14,432
Changes in operating assets and liabilities:
Accounts receivable - related parties		5,718		3,499
Accounts payable - related parties		-		(361)
Accounts payable and accrued expenses		463,446		540,936
Net cash used in operating activities		(110,770)		(541,084)
Cash flows from investing activities
Cash paid for purchase of property and equipment		-		(44,093)
Net cash used in investing activities		-		(44,093)
Cash flows from financing activities
Proceeds from issuance of stock		200		25,000
Net advance from related parties		112,048		-
Proceeds from convertible notes		-		567,199
Net cash provided by financing activities		112,248		592,199
Net effect of exchange rates change		(1,590)		(4,906)
Net increase (decrease) in cash		(112)		2,116
Cash  at the beginning of the year		1,055		1,436
Cash at the end of the year		943		3,552
Supplemental disclosures of cash flow information:		-
Cash paid for interest	$	$                            -	$	$                            -
Cash paid for income taxes	$	$                            -	$	$                            -
Non-cash investing and financing transactions:
Equipment purchased on account		-		356,219
Shares issued arising from note conversion		2,554		-

See accompanying notes to these unaudited consolidated financial statements.

4

GeneThera, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

The consolidated financial statements include GeneThera, Inc., its wholly owned subsidiary GeneThera, Inc. (Colorado) and its 90% owned Mexico subsidiary, Applied Genetics S.A. de C.V. (“Applied Genetics”), (collectively “GeneThera” or the “Company”). On January 3, 2012, the Company obtained, at no additional cost to the Company, 40% of the shares of Applied Genetics in addition to 50% of the shares already owned by the Company.

GeneThera is a biotechnology company that develops molecular assays for the detection of food contaminating pathogens, veterinary diseases and genetically modified organisms.

The accompanying unaudited interim consolidated financial statements of GeneThera 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 latest Annual Report 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 periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year ending December 31, 2012, as reported in Form 10-K, have been omitted.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reclassifications

Certain amounts in prior periods have been reclassified to conform to current period presentation.

Non-controlling Interest

Non-controlling interests are recorded for the entities that are consolidated but are not wholly owned by the Company.  Non-controlling interest recorded in these Consolidated Financial Statements is comprised of 10% of the shares of Applied Genetics, the Company's subsidiary in Mexico, of which at September 30, 2013, the Company owns 90%.

NOTE 3 – GOING CONCERN

As shown in the accompanying consolidated financial statements, GeneThera had an accumulated deficit and a working capital deficit as of September 30, 2013. These conditions raise substantial doubt as to GeneThera’s 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’s viability, through private or public equity offerings, 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 4 – RELATED PARTY TRANSACTIONS

The Company has an outstanding loan payable to Antonio Milici, its President and shareholder, amounting to $645,271 as of September 30, 2013 and December 31, 2012. Additionally, the Company has an outstanding loan payable to Tannya L Irizarry, its Chief Financial Officer and shareholder, amounting to $80,000 as of September 30, 2013. These outstanding loans to the Company are unsecured and non-interest bearing.

The Company owes Setna Holdings, a related party $205,621 and $173,573 as of September 30, 2013 and December 31, 2012, respectively. The total is non-interest bearing and due on demand.

Net advances received from related parties totaled to $112,048 for the nine months ended September 30, 2013.

4

GeneThera, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

 

NOTE 5 – SHAREHOLDER’S EQUITY

For the nine months ended September 30, 2013, the Company issued 5,393,294 common shares for services, valued at $330,806. Two hundred ($200) in cash was received from a consultant as consideration for these services.

For the nine months ended September 30, 2013, the Company issued 127,700 common shares as a pending settlement for the defaulted escrow agreement and convertible notes payable between Gold X Change and the Company valued at $882,716. The fair value of the shares was $2,554.

4

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". 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-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, and 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

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2013, COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2012

We did not generate any revenue for the three months ended September 30, 2013 and 2012.

We had total operating expenses of $354,075 for the three months ended September 30, 2013, compared to total operating expenses of $240,917 for the three months ended September 30, 2012, an increase of $113,158 from the prior period.  The increase in expenses was largely due to a increase in general and administrative to $254,661 for the three months ended September 30, 2013, compared to $97,711 for the three months ended September 30, 2012, an increase of $162,950 from the prior period, and a decrease in laboratory expenses to $0 for the three months ended September 30, 2013, compared to $43,248 for the three months ended September 30, 2012, an decrease of $43,248 from the prior period.

We had a net loss of $354,075 for the three months ended September 30, 2013, compared to a net loss of $240,927 for the three months ended September 30, 2012, an increase of $113,148 from the prior period.

4

LIQUIDITY AND CAPITAL RESOURCES

We had total assets as of September 30, 2013 of $44,217, which included cash of $943, accounts receivable related party of $0, net property and equipment of $36,274, and total other assets of $7,000.

We had total liabilities of $5,198,283 as of September 30, 2013, which included $1,210,857 of accounts payable, $2,165,572 of accrued expenses, $10,800 of notes payable, $880,162 of convertible notes payable, $645,471 of loan from shareholder and $285,621 to related party.

We had negative working capital of $5,197,340 and a deficit accumulated during the development stage of $23,266,295.

We had negative net cash used in operating activities of $110,770 for the nine months ended September

 30, 2013, which mainly included $922,864 of net loss that was largely offset by an increase of $463,446 in accounts payable and accrued liabilities.

It is estimated that we will require outside capital for the remainder of 2013 for the commercialization of GeneThera molecular assays as well as the development of our 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. 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, and 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.

In the future, we may be required to seek additional capital by selling debt or equity securities, selling assets, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then shareholders.

Applied Genetics marketing agreement with Nutrición Avanzada

On February 1, 2012, Applied Genetics, a 90% owned subsidiary of GeneThera, Inc., entered into a sales and marketing agreement with Nutrición Avanzada. According to the terms of the agreement, GeneThera, Inc., through its subsidiary Applied Genetics, granted Nutrición Avanzada the exclusive right to purchase, market, and distribute the GeneThera Field Collection System product in Mexico. Applied Genetics will pay Nutrición Avanzada a 30% commission of the total price of each product. The initial term of the agreement is for a period of one year. After a year, the agreement will not be renewed.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

4

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on our evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are designed at a reasonable assurance level and are effective due to additional segregation  of duties to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

We regularly review our system of internal control over financial reporting to ensure we maintain an effective internal control environment. There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On June 6, 2006, the Internal Revenue Service filed a Federal Tax Lien at the Jefferson County Recorder in the State of Colorado in the amount of $29,321. The Company has not satisfied the judgment.

On June 29, 2007, the Internal Revenue Service filed a Federal Tax Lien at the Jefferson County Recorder in the State of Colorado in the amount of $1,983. The Company has not satisfied the judgment.

On June 6, 2008, Mark A. Shoemaker filed a Civil Judgment at the LA County/Recorder of Deeds Court in the State of California the amount of $37,721. The Company will not satisfied the judgment since Mr. Shoemaker has been incarcerated and disbarred.

In June 2009, James Tufts filed a complaint at the Small Claims Court in Jefferson County, Colorado in the amount of $4,000 plus expenses from a London trip. The Company will not satisfy the judgment. The Company discovered that during the time his spouse was working at the transfer agency, she issued more than one stock certificate in the amount of $15,000. In December 2009, James Tufts returned only one certificate in the amount of $15,000; the other stock certificate for the same amount is still active and in the database. An investigation will be pursued.

On June 26, 2009, Enterprise Leasing Company of Denver filed a Civil Judgment at the Jefferson County District Court in the State of Colorado in the amount of $78,178. The Company has not satisfied the judgment.

4

On August 17, 2010, Banc of America Leasing filed a Civil Judgment at the Oakland County District in Troy, Michigan in the amount of $24,002. The Company has not satisfied the judgment.

On September 23, 2010, Liberty Acquisitions filed a Civil Judgment at the Jefferson County Court in the State of Colorado in the amount of $3,300. The Company has not satisfied the judgment since the original amount was only $1,100.

On February 10, 2009, Centennial Credit Corporation filed a Civil Judgment at the Jefferson County Court in the State of Colorado in the amount of $967. The Company has not satisfied the judgment.

On August 29, 2011, the Company had a court hearing concerning a litigation filed by The Park III related to unpaid rent according to our lease agreement. The District Court of Boulder (Colorado) entered a judgment against the Company in the amount of $77,000. The Company has not satisfied the judgment.

On January 31, 2013, the Company had a judgment by default in the amount of $19,586. Laboratory equipment was arbitrarily and improperly seized from the Company premises. These equipment were not Company’s properties since were loaned to the Company as part of an ongoing research project. The Company strongly argues that the equipment was unlawfully removed from its facilities. The Company has retained a law firm to pursue litigations against all the parties that caused to illegally and arbitrarily seize the equipment without proper procedure or cause.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K, filed with the Commission on April 11, 2012 and investors are encouraged to review such risk factors prior to making an investment in the Company.

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

On January 17, 2013, the Company issued 1,000,000 shares of its common stock for cash for total proceeds of $200, a nominal fee. This issuance has a restrictive legend until such consultant’s forthcoming report for services rendered. If consultant does not obliged before the end of 2013, the stock issuance in the amount of 1,000,000 will be cancelled.

The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances did not involve a public offering, the recipients took the securities for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On April 18, 2013, the Company issued restricted stock in lieu of cash invested during a binding Escrow Agreement, which was defaulted by Gold X Change, Inc. The issuance of restricted stock will not hinder the Company from pursuing litigation against Gold X Change, Inc.

Item 6. Exhibits

4

Exhibit Number	Description of Exhibit
10.1*	Employment Agreement with Antonio Milici (CEO)
10.2*	Employment Agreement with Tannya L. Irizarry (CFO)
10.3(1)	Marketing and Sales Agreement with Nutrición Avanzada
10.4*	Agreement with National University Autonomous of Mexico
31.1*	Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certificate of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certificate of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certificate of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*(#)	XBRL Instance Document
101.SCH*(#)	XBRL Schema Document
101.CAL*(#)	XBRL Calculation Linkbase Document
101.DEF*(#)	XBRL Definition Linkbase Document
101.LAB*(#)	XBRL Label Linkbase Document
101.PRE*(#)	XBRL Presentation Linkbase Document

* Attached hereto.

(1) Filed as an exhibit to our Report on Form 8-K, filed with the Commission on March 5, 2012 and incorporated herein by reference.

(#) XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

4

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.

GENETHERA, INC.

By:  s/ Antonio Milici

Name:   Antonio Milici
Title:  President and Chief Executive Officer (Principal Executive Officer)

November 18, 2013

4