GENETHERA INC - Annual Report: 2018 (Form 10-K)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

(Mark One)

 

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2018

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

 

Commission File No. 000-27237

 

GeneThera, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada		65-0622463
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

 

3051 W 105th Ave. #350251, Westminster, CO		80035
(Address of principal executive offices)		(Zip Code)

 

(720) 587-5100

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

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

 

Large Accelerated Filer ☐	Accelerated Filer ☐
Non-Accelerated Filer ☐	Smaller reporting company ☒
	Emerging growth company ☐

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The aggregate market value of the common stock held by non-affiliates of the registrant was approximately $418,835 as of June 30, 2018, based on the closing price of such stock as reported on the OTC Pink Market. Stock held by each executive officer and each director and by each person who is known by the registrant to own 10% or more of our common stock has been excluded from this calculation as such persons may deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purpose.

There was a total of 36,402,602 shares of the registrant’s common stock outstanding as of February 20, 2020.

 

DOCUMENTS INCORPORATED BY REFERENCE

None.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FORM 10-K

TABLE OF CONTENTS

 

PART I
Item 1.	Business	5
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	16
Item 3.	Legal Proceedings	17
Item 4.	Mine Safety Disclosures	18
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	18
Item 6.	Selected Financial Data	19
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	23
Item 8.	Financial Statements and Supplementary Data	23
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	23
Item 9A.	Controls and Procedures	23
Item 9B.	Other Information	24
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	25
Item 11.	Executive Compensation	28
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	29
Item 13.	Certain Relationships and Related Transactions, and Director Independence	30
Item 14.	Principal Accounting Fees and Services	31
PART IV
Item 15.	Exhibits, Financial Statement Schedules	32
Item 16.	Form 10-K Summary	32

 

 

 

 

 

 

 

 

 

 

EXPLANATORY NOTES

This annual report of GeneThera, Inc. (together with its consolidated subsidiary, the “Company”, “we”, “us”, and “our,” unless the context indicates otherwise) covers periods from January 1, 2018 through December 31, 2018. Readers should be aware that several aspects of this Annual Report on Form 10-K differ from other annual reports. Because of the amount of time that has passed since our last periodic report was filed with the Securities and Exchange Commission, or the SEC, the information relating to our business and related matters is focused on our more recent periods. We will successively be filing separately our Quarterly Reports on Form 10-Q for each of the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019.

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “us, “our”, “GeneThera”, and the “Company” refer to, collectively, GeneThera, Inc., a Nevada corporation, and its consolidated subsidiary, GeneThera, Inc., a Colorado corporation.1

Special Note Regarding Forward Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts are “forward-looking statements” for purposes of these provisions. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions intended to identify forward-looking statements.

 

These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. We discuss many of these risks, uncertainties and other factors in this Annual Report on Form 10-K in greater detail under the heading “Risk Factors.” Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing. You should read this Annual Report on Form 10-K completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

The specific discussions herein about the Company include financial projections and future estimates and expectations about our business. The projections, estimates and expectations are presented in this report only as a guide about future possibilities and do not represent actual amounts or assured events. All the projections and estimates are based exclusively on our management’s own assessment of our business, the industry in which we work and the economy at large and other operational factors, including capital resources and liquidity, financial condition, fulfillment of contracts and opportunities. The actual results may differ significantly from the projections. Potential investors should not make an investment decision based solely on our projections, estimates or expectations.

 

PART I

Business Overview

We are a biotechnology company dedicated to eradicate “cross-over” (zoonotic) diseases such as Johne’s disease, Mad Cow Disease, Chronic Wasting Disease, and E.coli. by applying the latest molecular technologies. Diseases of terrestrial, avian and aquatic life animals influence a number of economic and global security issues, including food for an increasing world population, access to international trade, species conservation and protection of those endangered, and economic growth in developing and re-organizing nations. Because many animal disease agents are zoonotic (transmissible between humans and animals, causing infection in both species), their management and prevention are crucial to improving public health on a global scale.  We focus on developing molecular diagnostic tests, therapeutics, and vaccines through robotic technology in the belief that better technologies and methodology need to be implemented to help control emerging diseases in animals and in humans. We believe that, if not addressed, these diseases in animals will likely continue to cause serious and growing problems in terms of economics, human health and biodiversity.

We have 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. A Johne’s disease (predominantly dairy cattle) diagnostics is in development. We intend to shift from a research and development organization into a product marketing and revenue generating entity. Our previous strategy from inception in 2007 to December 2018 had been 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, we are positioned to move from a developmental stage to a product oriented stage company, depending on reliable funding.

We provide genetics-based diagnostics through robotic technology and are currently working on vaccine solutions to meet the growing demands of today’s veterinary industry and tomorrow’s healthcare industries. We are organized and operated both to continually apply our scientific research to more effective management of diseases and, in so doing, realize the commercial potential of molecular biotechnology.

We believe that we will require significant additional funding in order to achieve our business plan. Over the next 12 months, in order to have the capability of achieving our business plan, we will require at least $45,000,000 in additional funding. There are no guarantees that we will be able to secure such financing, and if the financing is secured, there are no guarantees whether we can fully achieve the goals laid out in our business plan.

About Johne’s Disease (Paratuberculosis)

Our focus includes the diagnosis and treatment of Johne’s disease. Johne’s disease is a worldwide problem of domestic animals primarily including dairy cattle, sheep and goats. A significant public health concern is associated with Johne’s disease, which results from an infection with bacteria called Mycobacterium Paratuberculosis. This organism grows very slowly, causes a gradually worsening disease condition, and is highly resistant to the infected animal’s immune defenses. Therefore, infected animals harbor the organism for years before they test positive or develop disease signs.

Major factors related to Johne’s disease include:

Stage I: Silent, subclinical, non-detectable infection. Typically, this stage occurs in all calves, heifers, and young stock less than two years of age and many adult animals exposed to small doses of disease-causing organisms. Infected animals at this early stage are rarely detected with currently available diagnostic tests, including fecal culture or serologic tests (ELISA). This stage progresses slowly over many months or years to stage II.

Stage II: Subclinical infection. Typically, this stage occurs in older heifers or adults. Animals at this stage appear healthy but are shedding adequate numbers of Mycobacterium Avian Para tuberculosis organisms in their manure to be detected on fecal culture. Blood tests will detect some, but not all animals at this stage. Blood test (ELISA) positive animals should be confirmed positive by fecal culture.

Stage III: Clinical Johne’s disease. It is categorized as any animal with advanced infection the onset, which is often associated with a period of stress such as recent calving. Cattle at this stage have intermittent, watery pea-soup manure. Animals lose weight and gradually drop in milk production, but continue to have a good appetite. Some animals appear to recover but often relapse in the next stress period. Most of these animals are shedding billions of organisms and are positive on culture. Most are positive on serologic tests (ELISA & AGID). Clinical signs often last several weeks to months before the animals are sent to slaughter in a thin, emaciated condition. In the final and terminal aspects of stage III of the fatal disease, animals become emaciated with fluid diarrhea and develop “bottle jaw.” The carcass may not pass meat inspection for human consumption in the later phases of stage III.

About Crohn’s Disease

Crohn’s disease is an inflammatory disease of the intestines that may affect any part of the gastrointestinal tract from anus to mouth, causing a wide variety of symptoms. It primarily causes abdominal pain, diarrhea (which may be bloody), vomiting, or weight loss, but may also cause complications outside of the gastrointestinal tract such as skin rashes, arthritis, and inflammation of the eye.

Crohn’s disease is an autoimmune disease, in which the body’s immune system attacks the gastrointestinal tract, causing inflammation. It is classified as a type of inflammatory bowel disease. There has been evidence of a genetic link to Crohn’s disease, putting individuals with siblings afflicted with the disease at higher risk. It is understood to have a large environmental component as evidenced by the higher number of cases in western industrialized nations. Males and females are equally affected. Smokers are three times more likely to develop Crohn’s disease than non-smokers. Crohn’s disease affects between 400,000 and 600,000 people in North America. Prevalence estimates for Northern Europe have ranged from 27–48 per 100,000. Crohn’s disease tends to present initially in the teens and twenties, with another peak incidence in the fifties to seventies; although, the disease can occur at any age.

Similar to Johne’s disease in cattle, no known pharmaceutical or surgical cure for Crohn’s disease currently exists for humans. Furthermore, new discoveries of Mycobacterium Avian Para tuberculosis have been found in human patients and we believe that individuals that are genetically predisposed could possibly be contracting the disease through digestion of Johne’s disease - infected milk.

Business Model

A Para tuberculosis molecular robotic assay diagnostics to is currently in development. As discussed above, we intend to shift from a research and development organization into a product marketing and revenue generating entity, depending on obtaining funding.

Our molecular disease assay development business is based on our Molecular Robotic Platform that combines the use of advance robotic hardware with Artificial Intelligence (AI). Our therapeutic vaccine technology is based on the use of CRISPR-Case9 gene editing technology. CRISPR-Case 9 technology is a new technique that is based on the use of short RNA sequences complementary to a specific target gene. Once the RNA sequence binds to the gene, the gene is deactivated or “silenced” and no longer able to produce the specific protein. It also allows for the efficient, effective, and continuous testing, management and treatment of animal populations. We plan to deliver CRISPR modified RNA sequences motif using our proprietary PURIVAX technology. Our technology differs from any alternative testing and management methodology available 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.

 

 

We will need the approval of the U.S. Department of Agriculture, or 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 $75 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. Failure to raise the necessary capital will likely cause us to curtail or cease operations. 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.

PURIVAX Technology

We have developed a large-scale process for highly purified and high viral titer (viral concentration) Adenovirus and AAV genetically engineered viruses.  This technology enables us to develop Adenovirus and AAV-based recombinant DNA vaccines for zoonotic pathogens. Our PURIVAX is a purification system that dramatically improves biological purity and viral titer of recombinant Adenovirus and AAV vectors.  PURIVAX is intended to completely eliminate toxic side effects associated with Adenoviruses and AAV vectors, thereby making it possible to develop highly immunogenic and safe recombinant DNA vaccines. Importantly, rDNA vaccine technology represents a powerful tool for an innovative vaccine design process known as “genetic immunization.”

rAD and rAAV vectors are the ideal candidates for a gene delivery system.  These viruses can efficiently deliver genetic material to both dividing and non-dividing cells, thereby overcoming some of the obstacles encountered with first generation retroviral vectors.

Equally important, rAD and rAAV are engineered virus genomes that contain no viral gene.  One of the key features for rAD and rAAV is their ability to infect a large variety of cells.  However, two technical challenges had to be overcome to fully utilize rAD and rAAV in the development of rDNA vaccines:

Traditional technologies and first generation chromatography processes are limited both in terms of purity and yield.  Due to the limitation of these purification technologies, adequate viral titers may not be achieved.  We believe that the result is that there is currently no efficient system to deliver immunogenic genetic sequences into cells.

This is the significance of our PURIVAX, rAD and rAAV system for rDNA vaccine development.  Succinctly stated, it is designed to be able to achieve both high purity and high viral titer (up to 10e16 viral particles/eluate) based on its propriety multi-resin anion exchange chromatography system. We believe that biological contaminants such as endogenous retrovirus, bacterial, mycoplasma, non-specific nucleic acids, lipids, proteins, carbohydrates and endotoxins are eliminated during the purification process.

Product Development

We provide a comprehensive Johne’s solution that allows diagnosing, treating and managing herds at risk or already infected with Johne’s disease.

Our proprietary Molecular Robotic and Therapeutic Platform is design to prevent the spread of Johne’s disease to healthy animals and at the same time allow to better control the disease in those herds where the disease is already present.

More importantly, we believe that our platform can prevent the spread of the Mycobacterium into the food chain and subsequent infection of human population. An important part of this strategy is our ability to detect the presence of a low number of infected particles in milk tested for the presence of the Mycobacterium Para tuberculosis. Therefore, our platform not only is able to detect Johne’s infected animals, but can also prevent potential human infections.

Herd Guard is our comprehensive Johne’s management solution that includes a diagnostic (HerdCheck), a therapeutic (HerdSafe), and a management system (HerdSoft) to eradicate or mitigate Johne’s disease.

  

HerdCheck (Molecular Test)

HerdCheck is our diagnostic product. Samples are collected using a Field Collection System with includes specific collection tubes and ship to our laboratory for processing. The testing system is a high throughput and highly defined and structured testing system that is capable of more than 20,000 tests per month. The systems use proprietary real time PCR technology.

We have developed a molecular system for the detection of Mycobacterium Avian Para tuberculosis in milk of infected dairy cows. Samples from milk obtaining from supermarket shelves were either ‘spiked’ with different concentrations of Mycobacterium Avian Para tuberculosis or ‘naturally processed.’ The bacterial DNA was isolated using both, manual and robotic- based DNA extraction procedures and analyzed using the real time PCR technology. Using this methodology, we can detect between two (2) and twenty (20) bacterial particles from 10 ml of milk. We believe that our test will be very useful for early detection of Mycobacterium Avian Para tuberculosis, both in milk samples and infected cows.

We are currently evaluating several robotic systems for DNA extraction. We believe that we can further increase the sensitivity of the molecular assay by using robotic driven DNA extraction methods.

HerdSafe (Genetic Therapy)

HerdSafe is our therapeutic product. HerdSafe is the large-scale purification and recombinant based DNA vaccine using Adenovirus and AVV genetically engineered viruses.

We are currently developing a vaccine for Johne’s disease. Our approach for developing this vaccine is based on the use of PURIVAX technology, genetically engineered Adenoviral and AVV, and CRISPR-Case9 technology

However, at the present time, we do not have sufficient financial resources to implement further development work; therefore, we will need to secure substantial funding to continue the development of the Johne’s vaccine.

HerdSoft (Software Management)

HerdSoft is our comprehensive Johne’s disease management solution which is a web-based product connected to our data center. The management system will deliver results, collect data and incorporate environmental analysis to guide the client on therapy and management of their herd to control Johne’s disease in their facility.

To date, we have developed a prototype computer program to track samples that will be received and processed in our commercial laboratory. This program will initially be used to track samples that will be sent out and received to our laboratory. We had to stop our timeline waiting for secured funding. We will then work on improving the system in order to track samples during the different phases of DNA extraction procedures. In addition, we will continue to develop a data base system to store and analyze data collected during sample analysis.

Future Development Plans

We anticipate that research and development, or 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 us. To date, we have introduced our diagnostic solution for Chronic Wasting 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.

It is our intention to continue with the research and development and validation of the molecular tests and DNA vaccines.  Future plans include initiating validation procedures for Johne’s disease molecular test. These validation protocols will be performed in our laboratory in Colorado.

In parallel, we will continue R&D phases for the Johne’s Disease vaccine. We plan on initiating an experimental animal protocol to determine the safety of our vaccines. We estimate that the experimental animal protocol may take up to a year. We project to initiate the experimental animal’s studies within 24-36 months.

  

Research and Development

We anticipate that 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 us.  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.

Marketing Strategy

Our goal is to focus on international markets, primarily the Pacific Rim and Europe, for the commercialization of our animal testing platform. We have no plans to offer any veterinary services in the United States.

Our marketing approach is to align ourselves with both, the private sector and government agencies.

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 we develop), our ability to obtain the capital to build the labs, and our ability to successfully manage them from our principal office. We are in negotiations to establish one diagnostic testing laboratory outside of our Colorado facility.

Licensing

Through our licensing division, we intend to manage the marketing and sale of the vaccines developed by our R&D. As we do 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.

Intellectual Property

We do not own any patents on any of our technology and have not filed any applications for patents in any country.  We cannot give any assurance that we will be able to file any patent applications or that, if we file one or more applications for patents, any patents will issue or that, if issued, the claims granted in any such patents will afford us adequate protection against competitors with similar technology.

We believe that we own common law proprietary rights with respect to our technology and intend to use our best efforts to protect such rights through confidentiality agreements.

We also depend upon the skills, knowledge, and experience of our scientific and technical personnel, none of which is patentable.  To help protect our proprietary know-how, which is not patentable, and for inventions for which patents may be difficult to endorse, we rely on trade secret protection to shield our interests.

 

Competition

We face competition from many companies, universities, and research institutions in the United States and abroad.  Virtually all of our competitors have substantially greater resources, experience in product commercialization, and obtaining regulatory approvals for their products, operating experience, research and development, marketing capabilities, and manufacturing capabilities that we do.  We will face competition from companies marketing existing products or developing new products for diseases targeted by our technologies.  The development of new products for those diseases for which we are attempting to develop products could render our product candidates noncompetitive and obsolete.  

Our current competitors include primarily, IDEXX Laboratories, Inc., and academic and government institutions are also carrying out a significant amount of research in the field of veterinary health, particularly in the field of Johne’s Disease.  We anticipate that these institutions will become more aggressive in pursuing patent protection and negotiating licensing arrangements to collect royalties for use of technology that they have developed and to market commercial products similar to those that we seek to develop, either on their own or in collaboration with competitors.  Any resulting increase in the cost or decrease in the availability of technology or product candidates from these institutions may affect our business.

Competition with respect to our veterinary technologies and potential products is and will be based, among other things, on effectiveness, safety, reliability, availability, price, and patent protection.  Another important factor will be the timing of market introduction of products that we may develop and for which we may receive regulatory approval. Accordingly, the speed with which we can develop products, complete the required animal studies or trials and approval processes and ultimately supply commercial quantities of the products to the market is expected to be an important competitive factor. Our competitive position will also depend upon our ability to attract and retain qualified personnel, to obtain patent protection or otherwise develop propriety products or processes, and to secure sufficient capital resources for the often-substantial period between technological conception and commercial sales.

Several attempts have been made to develop technologies that compete with F-PCR.  To our knowledge none of these technologies have resulted to date in any product available on the market.  The field of biotechnology is very dynamic.  The possibility that more advanced technologies could be developed into products that may compete with ours is very strong.  However, it is very difficult to predict the length of time necessary for this scenario to take place.

Manufacturing

We do not manufacture any products. We do not intend to establish a manufacturing facility to manufacture any products that we may develop anywhere in the world. 

Product Liability

The testing, manufacturing, and marketing of our proposed products involves an inherent risk of product liability attributable to unwanted and potentially serious health effects in animals that may receive any vaccines that we may develop and market.  To the extent we elect to test, manufacture, or market veterinary vaccines and other products, we will bear the risk of product liability directly.  We do not currently have product liability insurance.  There is no guarantee that we can obtain product liability insurance at a reasonable cost, or at all, or that the amount of such insurance will be adequate to cover any liability that we may be exposed to.  In the absence of such insurance, one or more product liability lawsuits against us can be expected to have a material adverse effect on our business and could result in our ceasing operations.

Government Regulation

Our unique approach to the testing for various animal diseases allows us to begin commercialization of our diagnostic tests without the need for a long and enduring approval process from the USDA. USDA approval will be required for commercialization of animal vaccines. However, it is our intention not to seek, in the foreseeable future, any approval either from the USDA or the U.S. Food & Drug Administration for any of the products we develop both, diagnostic or therapeutic. It is our intention to perform any validation or clinical trials of our product abroad and primarily in Europe and Pacific Rim where our commercial operation will also be located. Our commercial laboratories will require a validation study to be performed to demonstrate the effectiveness of the system. Validation studies will be performed according to each country’s guidelines. We have submitted an application outlining a protocol for animal studies. It is expected that validation studies will be conducted in collaboration with each country’s government guidelines over the next 18-36 month period.

 

 

Employees

We had a total of two full-time employees as of December 31, 2018. No changes in full-time employees have occurred subsequently. None of our employees is represented by a collective bargaining unit.

Investment in our common stock involves a high degree of risk. You should carefully consider each of the following risks, together with all other information set forth in this report, including the financial statements and the related notes, before making a decision to buy our common stock. If any of the following risks actually occurs, our business could be harmed. In that case, the trading price of our common stock could decline, and you may lose part or all of your investment.

Risks Related to Our Business2

Our success depends on our ability to resume development of our product candidate, HerdCheck.

We focused on the development of HerdCheck, our product candidate for the detection of Johne’s Disease among dairy cattle. As a result, our success depends entirely on our ability to finish development and commercialize HerdCheck. If we are unable to achieve this goal, we may not be able to earn sufficient revenues to continue our business.

Our recurring operating losses have raised substantial doubt regarding our ability to continue as a going concern, and our auditors issued a “going concern” audit opinion in their report on our financial statements.

Our independent auditors have indicated in their report on our audited consolidated financial statements as of December 31, 2018, which are included in this report, that there is substantial doubt about our ability to continue as a going concern. A “going concern” opinion indicates that the financial statements have been prepared assuming we will continue as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result if we do not continue as a going concern. As of this Annual Report on Form 10-K, the circumstances have not been changed, and therefore, the aforementioned going concern situation remains current. Therefore, you should not rely on our consolidated balance sheet as an indication of the amount of proceeds that would be available to satisfy claims of creditors and potentially be available for distribution to shareholders in the event of liquidation.

We need to raise additional capital no later than early 2020 to continue operations. If we fail to obtain additional financing, we would be forced to delay the development of our products or liquidate the company.

We are a development stage company with limited operating history. We will need significant, additional capital to continue development of HerdCheck and to develop other product candidates. As of December 31, 2019, we had cash and cash equivalents (excluding restricted cash) of $5,040 and negative working capital of $7,964,977.

Based on our current operating plan, we expect that our existing cash and cash equivalents as of December 31, 2019, will enable us to fund our operating expenses through the [first quarter of 2020]. We will need to raise additional capital no later than early 2020 to execute our current operating plan. Securing additional financing may divert our management from our day-to-day activities, which may adversely affect our ability to operate our business, including our ability to develop and commercialize our product candidates.

We cannot guarantee that additional capital will be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to raise additional capital, when required in 2020 or thereafter in the future, or on acceptable terms, we may be required to:

If we are unable to raise additional capital in sufficient amounts or on terms acceptable to use, we will be prevented from pursuing development and commercialization efforts, which will have a material adverse impact on our business operating results and prospects, including possible liquidation of the company.

 

 

In addition, we may secure additional capital using credit facilities and other debt and may substantially increase our reliance on such debt in the future. Such debt may be secured by a portion or substantially all of our assets. If we do not repay such indebtedness in a timely fashion, secured lenders could declare a default and foreclose upon our assets, which would result in harmful disruption to our business, the sale of assets for less than their fully realizable value, and possible bankruptcy. Such credit facilities also typically include several operational and financial covenants. If we fail to comply with the covenants and our other obligations under any credit facility, the secured lenders would be able to accelerate the required repayment of amounts due and, if they are not repaid, could foreclose upon our assets, which would result in harmful disruption to our business, the sale of assets for less than their fully realizable value, and possible bankruptcy. In addition, future credit facilities may limit our ability to incur incremental debt without our lenders’ permission.

Future sales and issuances of our common stock or rights to purchase common stock by us will result in additional dilution of the percentage ownership of our shareholders and may cause our share price to decline.

Until such time, if ever, as we can generate substantial product revenues, we expect that significant additional capital will be needed to continue our planned operations, including securing regulatory approvals, commercialization efforts, expanding research and development activities and costs associated with operating as a public company. We may sell shares of our common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner that we determine from time to time. If we sell shares of our common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing shareholders and new investors. In addition, new shareholders could gain rights superior to our existing shareholders.

We have identified material weaknesses in our internal control over financial reporting. If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results and prevent fraud. As a result, current and potential shareholders could lose confidence in our financial statements, which would harm the trading price of our common shares.

We are subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404. SOX 404 requires management to establish and maintain a system of internal control over financial reporting and annual reports on Form 10-K filed under the Securities Exchange Act of 1934, as amended, or the Exchange Act, to contain a report from management assessing the effectiveness of a company’s internal control over financial reporting. During its evaluation of the effectiveness of internal control over financial reporting, the Company’s management identified material weaknesses. These material weaknesses were associated with our lack of sufficient accounting resources and internal personnel with GAAP knowledge. We are undertaking remedial measures, which measures will take time to implement and test, to address these material weaknesses. We cannot assure you that such measures will be sufficient to remedy the material weaknesses identified or that additional material weaknesses or other control or significant deficiencies will not be identified in the future. If we continue to experience material weaknesses in our internal controls or fail to maintain or implement required new or improved controls, such circumstances could cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements, or adversely affect the results of periodic management evaluations and, if required, annual auditor attestation reports. Each of the foregoing results could cause investors to lose confidence in our reported financial information and lead to a decline in our stock price.

Our technology is not protected by patents.

Our technology and know-how are not patented. We rely on trade secrets and confidentiality agreements to protect our intellectual property. We cannot assure you that these trade secrets and confidentiality agreements will provide meaningful protection for our intellectual property. Furthermore, in absence of patent protection, competitors who independently develop substantially equivalent technology may harm our business.

Loss of key personnel will adversely affect the Company.

We depend to a large part on the efforts and continued employment of Antonio Milici, M.D., Ph.D., our President, Chairman and Chief Executive Officer. The loss of Dr. Milici would have a material adverse effect on our business, results of operations and financial condition. In addition, the loss of Dr. Milici would force us to seek a replacement, who may have less experience, fewer contacts, or less understanding of the business. Further, we may be unable to find a suitable replacement for Dr. Milici. Finding qualified personnel in the biotechnology industry is very challenging. Smaller biotechnology companies are potentially at a disadvantage in the employment marketplaces due to their limited financial resources.

 

 

We may be unable to compete against other more establish biotechnology companies.

We operate in a very competitive and difficult area. Biotechnology business is notoriously challenging and risky. We compete with more established and better funded companies that are involved in the development of similar products. Several of these companies have significantly greater financial resources as well as greater production and marketing capabilities. The field of biotechnology requires extensive research and development. Better funded competitors may be able to develop and market superior or less expensive products that will make our products less valuable or unmarketable.

If we fail to anticipate or respond adequately to technological developments, our ability to operate could suffer. We cannot assure that research and discoveries by other biotechnology, agriculture, pharmaceutical or other companies will not render our technologies or products uneconomical or result in products superior to those we develop, depend on new and evolving technologies. If our technologies do not produce satisfactory results, our business may be harmed.

Increased competition from and technological advances by our competitors could negatively affect our operating results.

We face intense competition, and we expect that future competition may become even more intense as new products, services and technologies become available and other new competitors enter the market. Competition could negatively affect our sales and profitability in a number of ways. Other new competitors may enter our markets through the development of innovative new technology, the acquisition of rights to use existing technologies or the use of existing technologies when patents protecting such existing technologies expire. New or existing competitors may introduce new, innovative, and competitive products and services, which could be superior or perceived by our customers to be superior to our products and services or lead to the obsolescence of one or more of our products or services. Some of our competitors and potential competitors may choose to differentiate themselves by offering products and services perceived in the eyes of customers as similar, at substantially lower sales prices, which could have an adverse effect on our results of operations through loss of market share or a decision to lower our own sales prices to remain competitive. In addition, our ability to attract and retain customers depends on the effectiveness of our customer marketing and incentive programs and multiple competitors could bundle product and service offerings through co-marketing or other arrangements, which could enhance their ability to compete with our broad product and service offering. Certain of our competitors and potential competitors, have substantially greater financial and managerial resources than us, as well as greater experience in manufacturing, marketing, research and development, and obtaining regulatory approvals than we do.

Changes in testing patterns could negatively affect our operating results.

The market for our products could be negatively impacted by a number of factors impacting diagnostic assaying practices. Market acceptance of vaccines or preventatives for the diseases and conditions for which we sell diagnostic assays and services could result in a decline in testing. Changes in accepted medical protocols regarding the diagnosis of certain diseases and conditions could have a similar effect. Eradication or substantial declines in the prevalence of certain diseases also could lead to a decline in diagnostic assaying for such diseases. Changes in government regulations or in the availability of government funds available for monitoring programs could negatively affect sales of our products. In addition, changes and trends in local food markets around the world could negatively affect the related production markets resulting in a decline in demand for our diagnostic assaying products. Declines in testing for any reason could have an adverse effect on our results of operations.

Various U.S. and foreign government regulations could limit or delay our ability to market and sell our products or otherwise negatively impact our business.

Our business is subject to numerous state, federal and international rules and regulations. Several of these regulations may require that we obtain approval from the related governmental agency prior to the marking or sale of our products. Delays in obtaining regulatory approvals for new products or product upgrades could have a negative impact on our growth and profitability.

We have never successfully undertaken a clinical trial for animal testing. Our experience in this area is limited. We have never obtained regulatory approvals for any of our products. As such, we may be unable to ever successfully undertake a clinical trial of our products, and may be forced to curtail or modify our current business plan.

 

 

In addition, the manufacture, import, and sale of our products, as well as our research and development processes, may be subject to similar or more stringent laws in other countries. Compliance with these regulations may require the expenditure of significant time and resources by the Company, and could require the registration, redesign or reformulation of our products in order to conform. Any redesign or reformulation or restricted supply of parts and components may negatively affect the availability or performance of our products and services, add assaying lead-times for products and reformulated products, reduce our margins, result in additional costs, or have other similar effects. Any of these could adversely affect our business, financial condition, or results of operations. These legal and regulatory requirements are complex and subject to change, and we continue to evaluate their impact. Additionally, foreign governments may require us to register our products, and these product registration requirements, which vary among the applicable jurisdictions and change from time to time, are often complex and require us to engage in lengthy and costly processes. We cannot assure you that we will be able to obtain or maintain any product registration required by one or more foreign governments. Any inability to obtain or maintain a required product registration in a jurisdiction could adversely affect our ability to market and sell the applicable product in that jurisdiction, which could have a negative effect on our business, financial condition and results of operations.

We are also subject to a variety of federal, state, local, and international laws and regulations, as well as the associated legal and political environments, concerning, among other things, the importation and exportation of products; our business practices in the U.S. and abroad, such as anti-corruption, anti-money laundering, and anti-competition laws; and immigration and travel restrictions. These legal, regulatory, and political requirements and environments differ among jurisdictions around the world and are rapidly changing and increasingly complex. The costs associated with compliance with these legal and regulatory requirements and adjusting to changing legal and political environments are significant and likely to increase in the future.

Any failure by us to comply with applicable legal and regulatory requirements, or to adjust to changing legal and political environments, could result in fines, penalties, and sanctions; product recalls; suspensions or discontinuations of, or limitations or restrictions on, our ability to design, manufacture, market, import, export or sell our products; and damage to our reputation. Any of these could negatively impact our business.

Future operating results could be negatively affected by changes in tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities.

We are subject to local, state, regional and federal tax laws in jurisdictions around the world. Our future tax expense could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities or changes in tax laws or their interpretation. Additionally, tax rules governing cross-border activities are continually subject to modification as a result of both coordinated actions by governments and unilateral measures designed by individual countries, both intended to tackle concerns over base erosion and profit shifting and perceived international tax avoidance techniques.

The Tax Cuts and Jobs Act, or the 2017 Tax Act, was enacted in the U.S. on December 22, 2017, and includes significant changes to the U.S. federal corporate tax system. Effective January 1, 2018, the 2017 Tax Act reduced the U.S. federal corporate tax rate from 35% to 21% and transitioned from a worldwide tax system to a territorial tax system. The 2017 Tax Act introduced new provisions including the Global Intangible Low-Taxed Income, Foreign Derived Intangible Income, Base Erosion Anti-Abuse Tax, expanded bonus depreciation and changed deductions for executive compensation and interest expense. The U.S. Department of Treasury continues to issue regulations related to the 2017 Tax Act, which may increase or decrease our tax liability in future periods.

Our income tax filings may become subject to an audit by various tax authorities, and the final determination of tax audits could be materially different than that which is reflected in historical income tax provisions and accruals. Significant judgment is required in determining our provision for income taxes. We assess our exposures related to our provision for income taxes to determine the adequacy of our provision for taxes. Any reduction in these contingent liabilities or additional assessments would increase or decrease income, respectively, in the period such determination is made.

Natural and other disasters, information technology system failures and network disruptions and cybersecurity breaches and attacks could adversely affect our business.

Our business and results of operations could be negatively affected by certain factors beyond our control, such as natural disasters and/or climate change-related events (such as hurricanes, earthquakes, fires, and floods); civil unrest; negative geopolitical conditions and developments; war, terrorism, or other man-made disasters; and information technology system failures, network disruptions and cybersecurity breaches and attacks. Any of these events could result in, among other things, damage to or the temporary closure of our facilities; a temporary lack of an adequate work force in one or more markets; an interruption in power supply; a temporary or long-term disruption in our supply chain (including a disruption to our ability to obtain critical components for the development of our product candidates); and short- or long-term damage to our prospective customers’ businesses (which would adversely impact demand for our products and services).

 

 

We rely on our own information systems, as well as those of our third-party business partners and suppliers. Despite the introduction of system backup measures and engage in information system redundancy planning and processes, such measures, planning and processes may be ineffective or inadequate to address all eventualities. Further, our information systems and our business partners’ and suppliers’ information systems may be vulnerable to attacks by hackers and other security breaches, including computer viruses and malware, through the internet (including via devices and applications connected to the internet), email attachments and persons with access to these information systems, such as our employees or third parties with whom we do business. As information systems and the use of software and related applications by us, our business partners, suppliers, and customers become more cloud-based and connected to the internet, there has been an increase in global cybersecurity vulnerabilities and threats, including more sophisticated and targeted cyber-related attacks that pose a risk to the security of our information systems and networks and the confidentiality, availability and integrity of data and information. Any such attack or breach could compromise our networks and the information stored thereon could be accessed, publicly disclosed, lost, or stolen.

If we or our business partners or suppliers were to experience a system disruption, attack or security breach that impacts any of our critical functions, or our customers were to experience a system disruption, attack or security breach via any of our connected products and services, it could result in a period of shutdown of information systems during which we may not be able to operate, the loss of sales and customers, financial misstatement, potential liability for damages to our customers, reputational damage and significant incremental costs, which could adversely affect our business, results of operations and profitability. Furthermore, any access to, public disclosure of, or other loss of data or information (including any of our confidential or proprietary information or personal data or information) as a result of an attack or security breach could result in governmental actions or private claims or proceedings, which could damage our reputation, cause a loss of confidence in our products and services, damage our ability to develop (and protect our rights to) our proprietary technologies and adversely affect our business.

Risks Related to Ownership of our Common Stock

Our common stock is quoted on the Pink Open Market, formerly OTC Pink Market, which may have an unfavorable impact on our stock price and liquidity.

Our common stock is quoted on the Pink Open Market under the symbol “GTHR.” The Pink Open Market is a significantly more limited market than the New York Stock Exchange or The NASDAQ Stock Market. The quotation of our shares on the Pink Open Market may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.

We cannot predict the extent to which an active public trading market for our common stock will develop or be sustained. If an active public trading market does not develop or cannot be sustained, you may be unable to liquidate your investment in our common stock.

Currently there is minimal public trading in our common stock. We cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares of common stock until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot assure you that an active public trading market for our common stock will develop or be sustained. If such a market cannot be sustained, you may be unable to liquidate your investment in our common stock.

Our common stock may be subject to significant price volatility, which may have an adverse effect on your ability to liquidate your investment in our common stock.

The market for our common stock may be characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will be more volatile than a seasoned issuer for the indefinite future. The potential volatility in our share price is attributable to a number of factors. First, our shares of common stock may be sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our shares of common stock are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price. Secondly, an investment in us may be considered a speculative investment due to our lack of profits to date and uncertainty of future profits. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.

 

 

We are subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.

The United States Securities and Exchange Commission, or SEC, has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. Our common stock is a “penny stock” and is subject to Rule 15g-9, or the Penny Stock Rule, under the Securities Exchange Act of 1934, as amended, or the Exchange Act. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by the Penny Stock Rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market, thus possibly making it more difficult for us to raise additional capital.

For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

We cannot assure you that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.

We have never paid cash dividends on our stock and do not intend to pay dividends for the foreseeable future.

We have paid no cash dividends on any class of our stock to date and we do not anticipate paying cash dividends in the near term. For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board deems relevant.

Fluctuations in our quarterly or annual results may cause our stock price to decline.

Our operating results could fluctuate due to a number of factors, including changes in our accounting estimates; litigation and claim-related expenditures; increase in the number and type of competitors; changes in competitors’ product offerings; and other matters. Similarly, our future operating results may vary significantly from quarter to quarter or year to year due to these and other factors, many of which are beyond our control. If our operating results or projections of future operating results do not meet the expectations of securities analysts or investors in future periods, our stock price may fall.

None.

Our previous offices and laboratory premises, which included our headquarters and our research and development facilities, were located in Denver, Colorado, where we used to occupy approximately 7,990 square feet of office and laboratory space. The Company lost the abovementioned lab and office space thanks to Fredric Oeschger, the owner of FOGT, LLC. As soon as we completed our Third Milestone, as per the Milestone Investment Agreement (signed and agreed upon by Oeschger and his attorney), which the Milestone was for the Company to be in compliance with the Securities and Exchange Commission (SEC). Due to Fredric Oeschger breaching his contract agreement with GeneThera, the lease agreement with WPC Clear Creek and GTI Research, Inc., was terminated because WPC could not continue waiting for the rent payment. Presently, we are in negotiations with other landlords for laboratory space. Meanwhile, we are renting a mailbox in Westminster while we review the terms of lease agreements for three (3) prospective laboratory spaces in Lafayette, Westminster, and Lakewood, CO. We are hopeful to complete a lease agreement in early 2020. We believe any of these three facilities are more than adequate for our needs and for the immediate future and that, should it be needed, additional space can be leased to accommodate any future growth. This sublease arrangement was terminated effective April 29, 2019.

 

 

On January 1, 2018, we entered into a sublease for a 7,990 square foot office and lab space on 6860 Broadway in Denver, Colorado 80221, with GTI Research, Inc., our scientific robotic technology collaborator, for 75 months. GTI Research, Inc. required payment of $12,000 security deposit in December of 2017. Monthly base rents under this lease are as follows:

Period	Monthly Base Rent
01/01/18 – 03/31/18	$0.00
04/01/18 – 03/31/19	$5,993
04/01/19 – 03/31/20	$6,658
04/01/20 – 03/31/21	$7,324
04/01/21 – 03/31/22	$7,990
04/01/22 – 03/31/23	$8,656
04/01/23 – 03/31/24	$9,322

 

Between January 1, 2018, and April 29, 2019, we subleased office and laboratory space in Denver, Colorado from GTI Research. As of April 29, 2019, the landlord of GTI Research, changed the locks, blocking access to the laboratory facilities. The failure to receive two (2) emergency injunctive payments in the amount of $80,000 from FOGT, LLC aka Fredric Oeschger, during mediation/arbitration, caused the landlord to block all occupants. Administration asked for more time as the defendant continuously utilized delay tactics to cause financial harm to the Company. We are not required to pay any proportionate share of all real estate taxes, building insurance and maintenance costs.

GTI Corporate Transfer Agents, LLC partially relocated to Puerto Rico. However, their mailing address is in Westminster, CO, together with the Company’s mailing address. Since GTI Corporate Transfer Agents, LLC and GeneThera no longer share office space, full maintenance monthly payments for transfer services are expected.

For more than six months, we have been securing a lab space in Lafayette, CO. Unfortunately, the current tenant has not moved out as of yet. It is expected for the Company to renegotiate lab space with the owner on or before January 2020, when the current tenant will be moving out of such premises. We believe that our prospective leasing properties will continue to be adequately maintained, it will be generally in good condition, and is suitable and adequate for our business.

No right of use asset or corresponding lease liability was recorded on the books as the lease terminated on April 29, 2019.

From time to time, we may be involved in litigation relating to claims arising out of our operations.

We were involved in a breach of contract agreement with FOGT, LLC and Fredric Oeschger. Oeschger failed to pay the third milestone after completion of such milestone on November 30, 2018. According to the contract, if it was breached, arbitration and mediation are the venues to resolve any pending issues. Oeschger was our board member, who resigned on December 6, 2018 and also resigned as our investor, thanks to breaching his fiduciary duties as our board member when he was negatively influenced by a third party. Moreover, Oeschger, had made financial arrangements with such third party in order to get financial gain for a debt owed by such third party. FOGT and Oeschger’s legal representatives regularly utilized delay tactics in order to financially harm and/or completely shut down the Company and its market value, to no success. Oeschger was well aware of the financial damages he was and continued to cause the Company to the point of openly admitting pledging his ownership of Preferred A Stock to a third party, which was Jeffrey A. Diette.

Once this information was acknowledged, a settlement agreement was completed for a minimum financial cost to Oeschger. His legal representatives; one of them, Andre Bouffard, continued to diminish the monetary award to $425,000. Dr. Milici was present during arbitration/mediation. Dr. Milici refused to give FOGT, LLC aka Fredric Oeschger any Preferred A Stock, after Oeschger provided an alleged pledge to forward FOGT, LLC’s Preferred Stock A to a third party.

The Preferred A Stock in the total amount of 10,350 was cancelled effective September 3, 2019. Fredric Oeschger received no stock from GeneThera. We may, however, be involved in material legal proceedings in the future. Such matters are subject to uncertainty and there can be no assurance that such legal proceedings will not have a material adverse effect on our business, results of operations, financial position or cash flows.

Not applicable.

PART II

Market Information

Our common stock currently eligible for quotation on the Pink Open Market, formerly OTC Pink Market, under the symbol “GTHR.” The following table sets forth, for the periods indicated, the high and low closing prices of our common stock as reported by OTC Markets, Inc. These prices reflect inter-dealer prices, without retain mark-up or commission, and may not represent actual transactions.

	High	Low
Year Ended December 31, 2017:
First Quarter	$0.01500	$0.00650
Second Quarter	0.00850	0.00520
Third Quarter	0.00520	0.00250
Fourth Quarter	0.04000	0.00519
Year Ended December 31, 2018:
First Quarter	$0.01700	$0.00900
Second Quarter	0.01700	0.00820
Third Quarter	0.01700	0.00830
Fourth Quarter	0.01750	0.00830

 

Holders

As of December 31, 2019, there were approximately 279 holders of record of our common stock. This number excludes the shares owned by stockholders holding shares under nominee security position listings.

Dividends

We have never declared or paid a cash dividend. We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future, if at all. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant.

Securities Authorized for Issuance under Equity Compensation Plans

We do not have any compensation plans under which our securities are authorized for issuance.

Recent Sales of Unregistered Securities

We did not sell any unregistered securities during the year ended December 31, 2018, and, as of December 31,2019, we have not sold any registered securities.

 

 

Purchases of Equity Securities by Issuer and Affiliated Purchasers

There were no purchases of our common stock by us or on our behalf, or by or on behalf of any of our affiliates, during the year ended December 31, 2018, and, as of December 31, 2019, no such purchases have been made.

Transfer Agent

The transfer agent and registrar for our common stock is GTI Corporate Transfer Agents, LLC, Westminster, CO. Tannya Irizarry, our Chief Administrative Officer and Interim Chief Financial Officer, owns one-third of GTI Corporate Transfer Agents, LLC.

As a smaller reporting company, this section is not required.

The following discussion and analysis of our financial condition and result of operations should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this report. In addition to historical information, the following discussion contains certain forward-looking information. See “Special Note Regarding Forward Looking Statements” above for certain information concerning those forward looking statements. Our financial statements are prepared in U.S. dollars and in accordance with United States generally accepted accounting principles, or GAAP.

Liquidity and Capital Resources – Going Concern3

As of December 31, 2018, we had cash and cash equivalents of $5,040. We have historically financed activities with cash from the private placement of equity and debt securities and advances from related parties. Our auditors have issued a going concern opinion. This means that our auditors believe there is a substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. We have had negligible revenues since inception and had an accumulated deficit of $7,926,582 and negative working capital of $7,964,982as of December 31, 2018.

Our current cash balance is not sufficient to fund our business objectives and we will need significant additional capital over the next 12-18 months in order to fund our planned operations. Specifically, we intent to spend significant funds on validating and testing our products, seeking necessary regulatory approvals and focusing on international expansion. Over the next 12 months, in order to have the capability of achieving our business plan, we believe that we will require at least $40,000,000. We will attempt to raise these funds by means of one or more private offerings of debt or equity securities or both. We may not be able to secure the financing that we believe is necessary to implement our strategic objectives and, even if additional financing is secured, we may not achieve our strategic objectives. As of the date of this report, we do not have any firm commitments from any investors for any additional funding.

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 assurance that any additional funding that we do obtain will be sufficient to meet our needs in the long term.

The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on recoverability and classification of liabilities that may result from the outcome of this uncertainty. If we are unable to obtain additional working capital, our business may fail. Accordingly, we must raise cash from sources other than operations. To date, we have financed our operations primarily through cash flow from limited operations, augmented by cash proceeds from financing activities, short-term borrowings and equity contributions by our stockholders. We must raise cash to implement our projected plan of operations. Failure to obtain capital to fund short-term and long-term needs will likely result in the curtailment of our operations or cessation of certain aspects of our business strategy.

We are currently seeking both, liquidity on our market and capital resources as an ongoing concern after our previous board member, who was also our investor, resigned from the board and ceased future investments per the contract. We are actively seeking capital resources from private investors through equity funding in order for us to complete the robotic prototype system. The Company is seeking to regain full control of the Company’s R&D and robotic system commercialization prospects.

Capital Expenditures and Resources

Our operations require capital expenditures primarily for lab equipment and software development.  Capital expenditures for the years ended December 31, 2018 and 2017 were $0 and $26,400, respectively.

 

Results of Operations

The following table sets forth key components of our results of operations during the years ended December 31, 2018 and 2017.

	Years Ended December 31,
	2018	2017
Expenses
General and administrative expenses	$529,124	$37,704
Payroll expenses	3,397,643	567,996
Research and development		-
		-
Total operating expenses	3,926,767	605,700
Loss from operations	(3,926,767)	(605,700)
Other expenses
Interest expense	(117,970)	(146,623)
Loss on write off of vendor receivable		(39,310)
Total other expense	(117,970)	(185,933)
Other Income
Gain on extinguishment of liabilities	-	33,913
Total other income	-	33,913
Net loss before income taxes	(4,044,738)	(757,720)
Provision for income taxes		-
Net loss	$(4,044,738)	$(757,720)

 

Revenue. We did not generate any revenue for the years ended December 31, 2018 or December 31, 2017.

General and administrative expenses. Our general and administrative expenses consist primarily of office lease, overhead, insurance, professional advisor fees, and other expenses incurred in connection with general operations. Our total general and administrative expenses increased by $491,420 to $529,124 for the year ended December 31, 2018 from $37,704 for the year ended December 31, 2017. Such increase was primarily due to increased professional fees, legal and consulting.

Payroll expenses. Our payroll expenses include employee salaries and bonuses plus related payroll taxes. Our accrued payroll expenses were $3,397,643 for the year ended December 31, 2018 compared to $567,996 for the year ended December 31, 2017. Stock-based compensation recorded for the two comparative periods were $2,931,643 and 135,000, respectively. The entire amount of accrued payroll expense incurred in 2018 was deferred due to lack of funds.

Research and development expenses. Our research and development expenses primarily include costs associated with research and development arrangements with external parties in connection with our robotic technology project. Our total research and development expenses were approximately $180,000 for the year ended December 31, 2018, while we did not have any research and development expenses for the year ended December 31, 2017. The research and development costs are included in general and administrative expenses.

 

 

Total other expenses. We had $117,970 in total other expenses for the year ended December 31, 2018, as compared $185,933 for the year ended December 31, 2017. Other expenses for the year ended December 31, 2018 consisted entirely of interest expense, while other expenses for the year ended December 31, 2017 consisted of interest expenses of $146,623 and a loss on the write off of vendor receivables of $39,310.

Total other income. We had $0 in total other income for the year ended December 31, 2018, as compared $33,913 for the year ended December 31, 2017, which consisted of a gain on extinguishment of debt or other liabilities.

Net loss. As a result of the cumulative effect of the factors described above, our net loss increased by $3,287,017 to $4,044,738 for the year ended December 31, 2018 from $757,720 for the year ended December 31, 2017. Share-based compensation for the year ended December 31, 2018 was $2,931,643.

Summary of Cash Flow

The following table provides detailed information about our net cash flow for the years ended December 31, 2018 and 2017:

	Years Ended December 31,
	2018	2017
Net cash used in operating activities	$(462,613)	$(97,916)
Net cash used in investing activities	-	(26,400)
Net cash provided by financing activities	300,000	291,969
Net (decrease) increase in cash and cash equivalents	(162,613)	167,653
Cash and cash equivalents at beginning of year	167,653	-
Cash and cash equivalents at end of year	$5,040	$167,653

 

Net cash used in operating activities was $162,613 for the year ended December 31, 2018, as compared to $97,916 for the year ended December 31, 2017. For the year ended December 31, 2018, the net loss of $4,044,738, offset by accounts payable and accrued expenses in the amount of $668,776 and stock-based compensation of $2,931,7380, were the primary drivers of the cash used by operating activities. For the year ended December 31, 2017, the net loss of $757,720 and extinguishment of liabilities in the amount of $33,913, offset by accounts payable and accrued expenses in the amount of $511,355 and stock-based compensation in the amount of $135,000, were the primary drivers of the cash used by operating activities.

Net cash used in investing activities was $0 for the year ended December 31, 2018, as compared to $26,400 for the year ended December 31, 2017, which consisted of the purchase of fixed assets.

Net cash provided by financing activities was $300,000 for the year ended December 31, 2018, as compared to $291,969 for the year ended December 31, 2017. For the year ended December 31, 2018 and 2017, net cash provided by financing activities consisted of proceeds from issuance of stock in the amount of $300,000 and $275,000, respectively.

Contractual Obligations and Commitments

There were no contractual obligations and commitments of any kind.

Convertible Notes

In previous years we borrowed money from investors and issued convertible notes due on demand and bearing interest at an annual rate of 8%. The notes are convertible into shares our common stock at a conversion price of $0.01 to $0.05 per share. As of December 31, 2018 and 2017, the outstanding principal and interest on these notes was $454,140 and $596,683, respectively.

Related Party Loans

From time to time, certain directors, officers and stockholders have made loans to the Company.

As of December 31, 2018 and 2017, the Company has outstanding loan payables to Antonio Milici, its Chairman, Chief Executive Officer and stockholder, in the amounts of $673,092 and $693,155, respectively. This loan is unsecured, due on demand, and bears interest at 2.41%.

As of December 31, 2018 and 2017, the Company has outstanding loan payables to Tannya Irizarry, its Chief Administrative Officer and stockholder, in the amounts of $90,523 and $101,172, respectively. This loan is unsecured, due on demand, and bears interest at 8%.

Investment Agreement

In March 2018, we entered into a Milestones Investment Agreement with FOGT, LLC (in part controlled by a former member of the Board of Directors), pursuant to which FOGT, LLC had agreed to invest and purchase up to $5 million of Series A Convertible Preferred Stock pending completion of certain milestones. As of December 31, 2018, FOGT, LLC has invested $550,000 and we agreed to issue 5,500 shares of Series A Convertible Preferred Stock. FOGT, LLC had agreed to invest additional amounts as follows: (i) $1,500,000 upon completion of design, assembly and validation of an advanced robotic system; and (ii) $1,750,000 upon entering into a commercial agreement with a government organization or private entity. A dispute arose between FOGT, LLC and the Company. As a result, FOGT, LLC ceased further investments in the Company. (The dispute is described in the “Legal Proceedings” Section of this Form 10-K.)

Capital Expenditures

Our operations require capital expenditures primarily for lab equipment and software development.  Capital expenditures for the years ended December 31, 2018 and 2017 were $0 and $26,400, respectively.

Inflation

Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor price changes in our industry and continually maintain effective cost control in operations.

Seasonality

Our operating results and operating cash flows historically have not been subject to significant seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introductions.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.

Effect of Inflation and Market Prices on Net Sales and Revenues

Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor price changes in our industry and continually maintain effective cost control in operations.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles GAAP requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements:

Property and Equipment, Net. Property and equipment consist primarily of office and laboratory equipment, leasehold improvements, vehicle, and is stated at cost. Depreciation is computed on a straight-line basis over the estimated useful lives ranging from five to seven years.

Impairment of Long-Lived Assets. We review the recoverability of 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.

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. We account 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.

Fair Value of Financial Instruments. The carrying value of cash, accounts payable, accrued expenses and notes payable approximates fair value due to the short-term nature of these accounts.

Recently Issued Accounting Standards

[For a description of recently issued accounting pronouncements, see Notes [*] and [*] to our consolidated financial statements contained in this Annual Report on Form 10-K, which is incorporated herein by reference.]

As a smaller reporting company, this section is not required.

The financial statements required by this item are set forth beginning on page F-[3] of this Annual Report on Form 10-K and are incorporated herein by reference.

There have been no changes in our independent registered public accounting firm or disagreements with our accountants on matters of accounting and financial disclosure.

Evaluation of Disclosure Controls and Procedures

We are responsible for maintaining disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that 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. Disclosure controls and procedures include, without limitation, controls and procedures 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 our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Based on our management’s evaluation (with the participation of our principal executive officer and our principal financial officer) of our disclosure controls and procedures as required by Rule 13a-15 under the Exchange Act, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures were not effective to achieve their stated purpose as of December 31, 2018, the end of the period covered by this Annual Report on Form 10-K, because of the material weaknesses described below.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting refers to the process designed by, or under the supervision of, our principal executive officer and principal financial and accounting officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those policies and procedures that:

Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2018. In making this evaluation, management used the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on our evaluation, we determined that, as of December 31, 2018, our internal control over financial reporting was not effective due to the following material weaknesses.

To cure the foregoing material weakness, we will look to increase our personnel resources, including those with GAAP knowledge, as funds become available. Management believes that hiring additional knowledgeable personnel with technical accounting expertise and GAAP knowledge will remedy the foregoing weakness.

We intend to complete the remediation of the material weaknesses discussed above as soon as practicable but we cannot assure you that we will be able to do so. Designing and implementing an effective disclosure controls and procedures is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to devote significant resources to maintain a financial reporting system that adequately satisfies our reporting obligations. The remedial measures that we intend to take may not fully address the material weaknesses that we have identified, and material weaknesses in our disclosure controls and procedures may be identified in the future. Should we discover such conditions, we intend to remediate them as soon as practicable. We are committed to taking appropriate steps for remediation, as needed.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the year ended December 31, 2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Effective April 29, 2019, we terminated our sublease arrangement with GTI Research, Inc. for our prior facilities in Denver, Colorado. In connection with such termination, we entered into a Sublease Termination Agreement that, among other things, terminated any and all of our future rent and other financial commitments under the sublease arrangement. The lease deposit related to the sublease termination was written off in the amount of $12,000.

PART III

Directors and Executive Officers

The following sets forth information about our directors and executive officers:

Name		Age		Position
Antonio Milici		64		Chairman of the Board, Chief Executive Officer and Chief Scientific Officer
Tannya L. Irizarry		60		Chief Administrative Officer and Interim Chief Financial Officer
Jeremiah Bartley		63		Director

4

 

Antonio Milici. Dr. Milici founded the Company in 1998 and has served as its Chairman and Chief Executive Officer since inception. Prior to founding the Company, Dr. Milici served as Chief Executive Officer and President of Genetrans, Inc., a genetic diagnostic company from 1993 to 1998. Dr. Milici was also an assistant professor in the department of Molecular Pathology at the University of Texas M.D. Anderson Cancer Center. Dr. Milici was selected to serve on our board of directors due to his tenure, having founded the Company and served as its Chief Executive Officer since inception, as well as his extensive experience in the industry in which we operate.

Tannya L. Irizarry. Ms. Irizarry has served as our Interim Chief Financial Officer since May 2006 and as our Chief Administrative Officer since 1999. Ms. Irizarry has over 22 years of experience in medical technology and biotechnology industries. She was the Vice President of Genetrans, Inc. from 1994 to 1998. Ms. Irizarry worked at the University of Texas M.D. Anderson Cancer Center in the department of Neuro-Oncology with Dr. William S. Fields and the Office of Education with Dr. James Bowen. She also worked at the Medical College of Georgia and subsequently, at the St. Joseph Hospital in the biotechnology division.

Jeremiah Bartley. Dr. Bartley has served as a member of our board of directors since April 2, 2018. He has served as the Director of Women’s Health Care at Rocky Mountain Internal Medicine in Denver, Colorado since 1990. He is a past President of the Colorado Section of the American College of Obstetrics and Gynecology. Dr. Bartley was a member of the Hospital Provider Fee Oversight and Advisory Board from 2009 to 2016. Dr. Bartley received a BA degree from Yale University and MD degree from University of Miami. He completed his residency in Obstetrics and Gynecology at Case Western University. Dr. Bartley was selected to serve on our board of directors due to his extensive medical experience. The CotB is planning to pay Dr. Bartley with $5,000 common stock.

Fredric Oeschger. Mr. Oeschger is no longer a Director or Board member. He resigned from GeneThera Board on December 6, 2018. Mr. Oeschger has at least partial control of FOGT, LLC that invested in the Company. There was a dispute between FOGT, LLC and the Company, which is included in the “Legal Proceedings Section of the Form 10-K.

Directors are elected until their successors are duly elected and qualified by the Chairman of the Board (Chairman). Dr. Milici, as the Chairman of the Board has the majority of voting rights through ownership of GTHR stock globally. Shareholders suggestions for new directors is welcome and thoroughly researched by the Chairman, who makes the final decision for such election(s). If a selected director breaches his/her fiduciary duties against the best interest of the Company, legal repercussions will be executed to the full extent of the law.

There are no arrangements or understandings known to us pursuant to which any director was or is to be selected as a director or nominee. There are no agreements or understandings for any of our executive officers or directors to resign at the request of another person and no officer or director is acting on behalf of nor will any of them act at the direction of any other person. The Company has a Code of Conduct which provides specific expectations from each director and senior management officers, and the penalty of permanent dismissal from any public traded company in his/her future.

Except as set forth in our discussion below in Item 13 “Certain Relationships and Related Transactions, and Director Independence—Transactions with Related Persons,” none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

 

 

 

Family Relationships

Dr. Antonio Milici and Ms. Tannya L. Irizarry are husband and wife.

Involvement in Certain Legal Proceedings

To the best of our knowledge, with no exceptions, except as described below, none of our directors or executive officers has, during the past ten years:

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our directors and executive officers and beneficial holders of more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our equity securities. We believe, based solely on a review of the copies of such reports furnished to us, that all reports required to be filed have been timely filed for the year ended December 31, 2018.

Code of Ethics

We have adopted and included below, a code of conduct that applies to all of our directors and senior management, including our principal executive officer, principal financial officer and principal accounting officer. Such code of conduct addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, and reporting of violations of the code.

We are required to disclose any amendment to, or waiver from, a provision of our code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions. We intend to use our website as a method of disseminating this disclosure, as permitted by applicable SEC rules. Any such disclosure will be posted to our website within four business days following the date of any such amendment to, or waiver from, a provision of our code of ethics.

 

 

CODE OF CONDUCT FOR THE BOARD MEMBERS AND SENIOR MANAGEMENT OF GENETHERA INC.

This Code has been approved by the Board of Directors of the Company with board resolution dated 29th December, 2004. As required under Clause 49 of the Listing Agreement as amended up to date, the Company hereby notifies “the Code.”

All Directors and members of the Senior Management are mandatorily required to understand and adhere to the code/standards prescribed herein, including any amendments/modifications/replacements thereof as may be notified by the Board of Directors (BOD) of the Company from time to time, in the course of their dealings, exercise of powers and discharge of their duties, responsibilities and obligations in relation to the Company and its transactions. Nothing in this Code or related communications creates or implies an employment contract or term of employment.

Violations of Law - Violations of law, this Code or other Company policies or procedures should be reported immediately to the Managing Directors and/or the Compliance Officer, in writing. Violations of law, this Code or other Company policies or procedure can lead to disciplinary action up to and including termination/vacation of office.

Date of Operation – This Code shall be operative with effect from 31st December, 2004.

Applicability – This Code shall be applicable to all the board members (“Directors”) and senior management of the Company.

Part A-Definitions – ‘Company’ means GENETHERA INC. ‘Board Members’ means Board of Directors of GeneThera, Inc. ‘Senior Management’ shall mean personnel of the company who are members of its core management team excluding Board of Directors. This would comprise of all members of management one level below the executive directors, including all functional heads. ‘Compliance Officer’ means the office appointed by the BOD for the purpose of this code from time to time.

Part B – Compliance-

Compliance Officer: The Company has appointed Ms. Tannya L. Irizarry, Company Secretary as Compliance Officer for the purpose of this Code and she shall report to the Managing Directors of the Company. Affirmation of Compliance- All Board Members and senior management personnel of the Company shall affirm compliance with this Code on annual basis in such form as may be prescribed and send it to the Compliance Officer by 30th April of each year. The Annual Report of the Company shall contain a declaration to this effect.

Part C- CODE OF CONDUCT

The Directors and Senior Management personnel of the Company shall adhere to the following:

Material Changes to Director Nomination Procedures

There have been no material changes to the procedures by which stockholders may recommend nominees to our board of directors since such procedures were last disclosed. The Chairman of the Board can also select prospective board members

Audit Committee and Audit Committee Financial Expert

We do not have an audit committee or an audit committee financial expert serving on the audit committee. Our entire board of directors currently is responsible for the functions that would otherwise be handled by an audit committee.

Smaller Reporting Company Summary Compensation Table - Fiscal Years Ended December 31, 2018 and 2017

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods. No other executive officers received total annual salary and bonus compensation in excess of $100,000. 

Name and Principal Position	Year	Salary ($)	Stock Awards ($)	Total ($)
Antonio Milici, Chief Executive Officer	2018	258,000	270,000	5288,000
	2017	225,000	90,000	315,000
Tannya L. Irizarry, Interim Chief Financial Officer	2018	208,000	135,000	343,000
	2017	207,996	45,000	252,996

 

On January 8, 2017, we entered into an employment agreement with Antonio Milici, M.D., Ph.D., to serve as the Chief Executive Officer and Chief Scientific Officer of the Company through January 31, 2022. Unless either party gives notice to terminate the agreement at least thirty days prior to expiration of the agreement, the agreement will automatically be extended for an additional two-year period. In consideration for his services, Dr. Milici receives a base salary of $258,000 per annum, plus $90,000 worth of Series B Convertible Preferred Stock in March of each year. We also agreed to pay Dr. Milici bonus compensation or a lump sum equal to two (2) times the salary at the time we have net income of at least $2,000,000 dollars each year based on performance. In addition, we agreed to pay a onetime payment of $26,900 at the renewal of the employment agreement. We are also required to pay all living expenses to Dr. Milici during the time his deferred salary is not entirely released during the term of his employment agreement. Once deferred salary is entirely released to Dr. Milici, he is responsible for his taxes. However, during deferred salary, we are obligated to accrue deferred tax debt in our balance sheet. Dr. Milici is also entitled to a leased Company vehicle of his selection. At the end of aforementioned lease, Dr. Milici is authorized to either purchase the vehicle and/or exchange leased vehicle for another vehicle. For the years ended December 31, 2018 and 2017, all salary was deferred.

 

 

On January 8, 2017, we entered into an employment agreement with Tannya L. Irizarry to serve as the Chief Administrative Officer and Interim Chief Financial Officer of the Company through January 31, 2022. Unless either party gives notice to terminate the agreement at least thirty days prior to expiration of the agreement, the agreement will automatically be extended for an additional two-year period. In consideration for her services, Ms. Irizarry receives a base salary of $208,000 per annum, plus $45,000 worth of Series B Convertible Preferred Stock in March of each year. We also agreed to pay Ms. Irizarry bonus compensation or a lump sum equal to two (2) times the salary at the time we have net income of at least $2,000,000 dollars each year based on performance. In addition, we agreed to pay a onetime payment of $18,000 at the renewal of the employment agreement. We are also required to pay all living expenses to Ms. Irizarry during the time her deferred salary is not entirely released during the term of her employment agreement. Once deferred salary is entirely released to Ms. Irizarry, she is responsible for her taxes. However, during deferred salary, we are obligated to accrue deferred tax debt in its balance sheet. Ms. Irizarry is also entitled to a leased Company vehicle of her selection. At the end of aforementioned lease, Ms. Irizarry is authorized to either purchase the vehicle and/or exchange leased vehicle for another vehicle. During fiscal years 2018 and 2017, all salary was deferred.

Outstanding Equity Awards Value at Fiscal Year-End

There were no unexercised options or unvested shares of restricted stock previously awarded to the executive officers named above at the fiscal year ended December 31, 2018.

Director Compensation

No member of our board of directors received any compensation for his services as a director during the fiscal year ended December 31, 2018.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information regarding beneficial ownership of our voting stock as of December 31, 2018, by (i) each of our officers and directors; (ii) all of our officers and directors as a group; and (iii) each person who is known by us to beneficially own more than 5% of each class of our voting stock. Unless otherwise indicated, the address of each person or entity named below is c/o GeneThera, Inc., 3051 W. 105th Ave. #350251, Westminster, CO 80035.

Name and Address of Beneficial Owner	Amount of Beneficial Ownership(1)			Percent of Common Stock(2)	Percent of Series A Preferred Stock(3)	Percent of Series B Preferred Stock(4)	Percent of Total Voting Stock(5)
	Common Stock	Series A Preferred Stock	Series B Preferred Stock
Antonio Milici (6)	2,519,567	0	17,559,593	7.0%	*	67.00%	65.00%
Tannya L. Irizarry (7)	2,519,567	0	8-5478,979	7.0%	*	33.00%	31.00%
Jerry Bartley	0	0	0	0	*	*	*
GeneThera Inc. (10)	7,064,967	0	0	20.0%	*	*	*
All directors and officers as a group (3 persons named above)	12,104,101	0	26,038,572	100.00%	*	100.00%	96.0%
Gold X Change, Inc. (8)	4,003,860	0	0	11.0%	*	*	1.1%
FOGT, LLC (9)	0	10,350	0	0	100.00	*	*

 

* Less than 1%

Changes in Control

We do not currently have any arrangements which if consummated may result in a change of control of the Company.

Securities Authorized for Issuance Under Equity Compensation Plans

We do not have any compensation plans in effect under which our equity securities are authorized for issuance.

Transactions with Related Persons

The following includes a summary of transactions since the beginning of the 2017 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Item 11. Executive Compensation”).

From time to time, certain directors, officers and stockholders have made loans to the Company. As of December 31, 2018, and 2017, the Company has outstanding loan payables to Antonio Milici, its Chairman, Chief Executive Officer and stockholder, in the amounts of $673 092 and $693,155, respectively. This loan is unsecured, due on demand, and bears interest at 2.41%. As of December 31, 2018, and 2017, the Company has outstanding loan payables to Tannya Irizarry, its Chief Administrative Officer and stockholder, in the amounts of $90,523 and $101,172, respectively. This loan is unsecured, due on demand, and bears interest at 8%.

Tannya Irizarry owns one-third of GTI Corporate Transfer Agents, LLC, the Company’s transfer agent. During the years ended December 31, 2018, and 2017, the Company made payments to GTI Corporate Transfer Agents, LLC in the amounts of $4,170 and $227, respectively.

The Company utilizes Elia Holding, LLC for construction and other maintenance services to maintain the Company’s office and lab space. Elia Holding, LLC is controlled by Tannya Irizarry’s brother. Costs incurred related to such services were $12,245 and $1,189 for the years ended December 31, 2018, and 2017, respectively.

The Company paid rent, license agreement and consulting fees to GTI Research, Inc. in the amount of $244,624 during 2018. The Company signed the lease agreement for and behalf of the President of GTI Research as he lives out of the country.

Independent Auditors’ Fees

The following is a summary of the fees billed to us by our principal accountants during the years ended December 31, 2018 and 2017.

	Year Ended December 31,
	2018	2017
Audit Fees	$55,970	$26,250
Audit-Related Fees		-
Tax Fees		-
All Other Accounting Fees	20,850	7,500
TOTAL	$76,820	$33,750

 

“Audit Fees” consisted of fees billed for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Form 10-K and 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.

“Audit-Related Fees” consisted of fees billed for assurance and related services by the principal accountant that were reasonably related to the performance of the audit or review of our financial statements and are not reported under the paragraph captioned “Audit Fees” above.

“Tax Fees” consisted of fees billed for professional services rendered by the principal accountant for tax returns preparation.

“All Other Fees” consisted of fees billed for products and services provided by the principal accountant, other than the services reported above under other captions of this Item 14.

Pre-Approval Policies and Procedures

Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our auditors must be approved in advance by our board of directors to assure that such services do not impair the auditors’ independence from us. In accordance with its policies and procedures, our board of directors pre-approved the audit service performed by BF Borgers for our financial statements as of and for the years ended December 31, 2018 and 2017, respectively.

PART IV

(a) The following documents are filed as part of this Annual Report on this Form 10-K:

(1) Financial Statements. The financial statements required by this item are set forth beginning at F-1 of this Annual Report on this Form 10-K and are incorporated herein by reference.

(2) Financial Statement Schedules. None. Financial statement schedules have been omitted because they are not applicable.

(3) Exhibits: See Item 15(b) below.

(b) Exhibits. The following exhibits are included herein or incorporated herein by reference:5 6

Exhibit No.		Description
3.1		Amended and Restated Articles of Incorporation of the Company
3.2		Amended and Restated Certificate of Designation of Series A Convertible Preferred Stock of the Company
3.3		Amended and Restated Certificate of Designation of Series B Convertible Preferred Stock of the Company
3.4		Amended and Restated Bylaws of the Company
10.1		Milestones Investment Agreement, dated March 15, 2018, between the Company and FOGT, LLC
10.2		Sublease, dated January 1, 2018, between GTI Research, Inc. and GeneThera, Inc.
10.3		Sublease Termination Agreement, effective April 29, 2019, between GTI Research, Inc. and GeneThera, Inc.
10.4		Lab and Office Lease still pending.
10.5†		Employment Agreement, dated January 8, 2017, between the Company and Antonio Milici, M.D., Ph.D.
10.6†		Employment Agreement, dated January 8, 2017, between the Company and Tannya L. Irizarry
14.1		Code of Conduct
21.1		List of subsidiaries of the Company
24.1		Power of Attorney (contained in the signature page to this Annual Report on Form 10-K)
31.1		Certifications of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certifications of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document7

 

† Executive Compensation Plan or Agreement

None.

 

 

5 [NTD: We recommend re-filing all of these exhibits, as the exhibits to the prior 10-K were not filed correctly (e.g., missing pages, etc.).]

6 [NTD: Confirm material contracts are listed, including ALL leases agreements, any potential customer agreements, collaboration agreements, etc. If there is a question as to whether a contract or other agreement is material, send us a copy and the background to evaluate.]

 

 

 

 

 

FINANCIAL STATEMENTS

	Page No.
Audited Consolidated Financial Statements for the Years Ended December 31, 2018 and 2017	F-2
Report of Independent Registered Public Accounting Firm	F-3
Consolidated Balance Sheets as of December 31, 2018 and 2017	F-4
Consolidated Statements of Operations for the Years Ended December 31, 2018 and 2017	F-5
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2018 and 2017	F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018 and 2017	F-7
Notes to Consolidated Financial Statements	F-8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GENETHERA, INC.

AND SUBSIDIA RY

CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2018 and 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Report of Independent Registered Public Accounting Firm

To the shareholders and the board of directors of GeneThera, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of GeneThera, Inc. (the "Company") as of December 31, 2018 and 2017, the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ BF Borgers CPA PC

BF Borgers CPA PC

 

We have served as the Company's auditor since 2018.

Lakewood, CO

February 27, 2019

 

 

 

 

 

 

GeneThera, Inc.

Consolidated Balance Sheets

December 31,

	2018	2017
ASSETS
Current assets
Cash	$5,040	$167,653
Total current assets	5,040	167,563
Office and laboratory equipment and leasehold improvements	729,859	729,859
Automobile & trucks	26,400	26,400
Less: Accumulated depreciation	(735,139)	(729,859)
Total property and equipment, net	21,120	26,400
Other assets - deposit	12,000	12,000
TOTAL ASSETS	$38,160	$206,053
LIABILITIES & STOCKHOLDERS’ DEFICIT
Current liabilities
	$
Accounts payable	$776,021	683.678
	-	-
Accrued expenses	5,096,781	4,135,810
Settlement payable	-	384,545
Notes payable	25,800	25,800
Convertible notes payable, net of discount	420,500	488,960
Loan from shareholder	770,753	794,327
Contingency	880,162	880,162
Total liabilities	7,970,017	7,393,281
Commitments and Contingencies	-	-
Stockholders’ deficit:
Series A preferred stock, par value $0.001 per share, 20,000,000 shares authorized, 10,350 shares and 7,350 shares to be issued as of December 31, 2018 and December 31, 2017,6, respectively	12	9
Series B preferred stock, par value $0.001 per share, 30,000,000 shares authorized, 26,038,572 and 16,374,286 shares to be issued as of December 31, 2018 and December 31, 2017, respectively	26,039	16,374
Common stock, par value $0.001 per share, 300,000,000 shares authorized, 35,905,602 and 40,064,983 shares issued and outstanding as of December 31, 2018 and December 31, 2017, respectively	35,904	40,065
Common stock to be issued	53,572	53,572
Additional paid-in capital	22,568,815	19,274,214
Accumulated deficit	(30,616,199)	(26,571,461)
Total stockholders’ deficit of GeneThera, Inc.	(7,931,857)	(7,187,228)
TOTAL LIABILITIES & STOCKHOLDERS’ DEFICIT	$38,160	$206,053

See accompanying notes to consolidated financial statements.

 

 

 

 

GeneThera, Inc.

Consolidated Statements of Operations

 

	For the Years Ended December 31,
	2018	2017
Expenses
General and administrative expenses	$529,124	$37,7004
Payroll expenses	3,397,643	567,996
Total operating expenses	3,926,767	605,700
Loss from operations	(3,926,767)	(605,700)
Other expenses
Interest expense	(117,970)	(146,623)
Loss on write off of investment	-
Loss on disposal of asset	-
Loss on write off of vendor receivables	-	(39,310)
Loss on write off of related party receivable	-
Total other expense	(117,970)	(185,933)
Other income
Gain on extinguishment of liabilities	-	33,913
Total other income	-	33,913
Net loss before income taxes	(4,044,738)	(757,720)
Provision for income taxes	-	-
Net loss	$(4,044,738)	$(757,720)
Loss per common share - basic and diluted	$(0.11)	$(0.02)
Weighted average common shares outstanding - basic and diluted	38,197,887	40,064,983

 

See accompanying notes to the consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

GeneThera, Inc.

Consolidated Statements of Stockholders’ Equity (Deficit)

For the years ended December 31, 2018 and 2017

 

 

	Series A Preferred Stock		Series B Preferred Stock		Common Stock
	Shares	Amount	Shares	Amount	Shares	Amount	Additional Paid-In Capital	Accumulated Deficit	Stock to be Issued	Total
Balance at December 31, 2016	4,600	$5	15,410,000	$15,410	40,064,983	$40,065	$18,583,242	$(25,813,741)	$53,572	$(7,121,447)
Preferred Stock to be issued	250	1	-	-	-	-	24,999	-	-	25,000
Preferred Stock to be issued	2,500	3	-	-	-	-	249,997	-	-	250,000
Stock issued for officer wages	-	-	964,286	964	-	-	134,036	-	-	135,000
Adjustment to PIC	-	-	-	-	-	-	25,000	-	-	25,000
Related party liability extinguished	-	-	-	-	-	-	256,940	-	-	256,940
Net Loss	-	-	-	-	-	-	-	(757,720)	-	(757,720)
Balance at December 31, 2017	7,350	$9	16,374,286	$16,374	40,064,983	$40,065	$19,274,214	$(26,571,461)	$53,572	$(7,187,227)
Preferred Stock to be issued			-	-	-	-		-	-
Preferred Stock to be issued	3,000	3	-	-	-	-	299,997	-	-	300,000
Stock to be issued for officer wages	-	-	9,664,286	9,664	-	-	2,621,979	-	-	2,931,643
Cancelation of common stock					(4,662,351)	(4,662)	4.662	-		-
Stock issued for convertible debt					500,000	500	9,500		-	10,000
Stock to be issued for convertible debt	-						58,460			58,460
Adjustment to PIC	-	-	-	1	(30)	1	3	-	-	5
Net Loss	-	-	-	-	-	-	-	(4,044,738)	-	(4,044,738)
Balance at December 31, 2018	10,350	$12	26,038,572	$26,039	35,902,602	$35,904	$20,042,172	$(28,089,556)	$53,572	$(7,931,857)

 

 

See accompanying notes to the consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

  

GeneThera, Inc.

Consolidated Statements of Cash Flows

 

	For the Years Ended December 31,
	2018	2017
Cash flows from operating activities
Net loss	$(4,044,738)	$(757,720)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	2,931,643	135,000
Depreciation expense	5,280	-
Shares issued for services	-	-
Extinguishment of liabilities	-	(33,913)
Loss on abandonment	-	-
Loss on investment	-	-
Loss on write off of vendor receivables	-	39,310
Changes in operating assets and liabilities:
Deposit	-	(12,000)
Accounts receivable - related parties	-	-
Accounts payable and accrued expenses - related parties	(23,573)	20,052
Accounts payable and accrued expenses	668,776	511,355
Convertible notes payable	-	-
Net cash used in operating activities	(462,613)	(97,916)
Cash flows from investing activities
Purchase of fixed asset	-	(26,400)
Net cash used in investing activities	-	(26,400)
Cash flows from financing activities
Proceeds from issuance of stock	300,000	275,000
	-	-
Proceeds from notes payable	-	15,000
Net advance from related parties	-	1,969
Net cash provided by financing activities	300,000	291,969
Net (decrease) increase in cash	(162,613)	167,653
Cash at the beginning of the year	167,653,	-
Cash at the end of the year	$5,040	$167,653
Supplemental disclosures of cash flow information:
Cash paid for interest	$-	$-
Cash paid for income taxes	$-	$-
Non-cash investing and financing transactions:
Conversion of convertible notes payable to common stock	$(68,460)	$- )
Cancellation of common stock shares	$4,662	$-

 

See accompanying notes to the consolidated financial statements.

 

GeneThera, Inc.

Notes to Consolidated Financial Statements

December 31, 2018

 

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, the “Company”). The Company has a long-standing research collaboration with GTI Research. GTI Research is assisting the Company in managing the robotic technology project. The Company’s CEO is also collaborating with this project in order for the Company’s research and development to finally become commercial in order to generate revenues.

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

Use of Estimates

The preparation of financial statements in accordance with U.S. 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. Certain prior period amounts in the consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation.

Cash and Cash Equivalents

Cash equivalents are highly liquid investments with an original maturity of three months or less.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, it is a controlled subsidiary. Intercompany accounts are eliminated upon consolidation.

Property and Equipment, Net

Property and equipment consist primarily of office and laboratory equipment and leasehold improvements and is stated at cost. Depreciation is computed on a straight-line basis over the estimated useful lives ranging from five to seven years. Leasehold improvements are amortized over the shorter of their economic lives or lease terms.

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

There were no revenues during the years ended December 31, 2018 and 2017.

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 per share calculations includes the dilutive effect of common stock equivalents in years with net income. As the Company is in a loss position, any calculation of the dilutive effects of the Company’s convertible securities would reduce the loss per share amount, and, as such, the Company will not perform the calculation.

Fair Value of Financial Instruments

The carrying value of cash, accounts payable, accrued expenses and notes payable approximates fair value due to the short- term nature of these accounts.

Recently Issued Accounting Pronouncements

Accounting for Leases. In February 2016, the FASB amended the FASB Accounting Standards Codification and created a new Topic 842, Leases (the “New Lease Standard”). The guidance requires lessees to recognize a right-of-use asset and a lease liability for all leases (with the exception of short-term leases) at the commencement date and recognize expenses on their income statements similar to the current Topic 840, Leases. The New Lease Standard is effective for fiscal years and interim periods beginning after December 15, 2018. The Company will adopt this standard effective January 1, 2019. The Company has not finalized its assessment but believes this standard will have a significant impact on the Company’s consolidated balance sheet. The standard is not expected to have a material impact on the Company’s results of operations or cash flows. The primary effect of adopting the New Lease Standard will be to record an asset and obligation for the Company’s operating lease which commenced in 2018.

Note 2 – Going Concern

As reflected in the accompanying consolidated financial statements, the Company has an accumulated deficit of $30,616,199 and negative working capital of $7,964,977 as of December 31, 2018. 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 – Accrued Expenses

The following is the breakdown of the Company’s accrued expenses as of December 31, 2018 and 2017:

	2018	2017
Accrued officer salaries	$4,473,415	$4,007,415
Accrued interest	164,313	112,546
Accrued expenses- other	459,053	15,849
Total accrued expenses	$5,096,781	$4,135,810

 

 

 

Note 4 – Related Party Transactions

The Company has an outstanding loan payable to Antonio Milici, its CEO and stockholder amounting to $673,092 and $693,155 as of December 31, 2018 and 2017, respectively. This outstanding loan to the Company is unsecured and bears interest at 2.41%. The Company has an outstanding loan payable to Tannya Irizarry, its COO and stockholder, amounting to $90,523 and $101,172 as December 31, 2018 and 2017, respectively. This outstanding loan to the Company is unsecured and bears interest at 8%.

Tannya Irizarry owns one-third of GTI Corporate Transfer Agents, LLC, the Company’s transfer agent. During the years ended December 31, 2018 and 2017, the Company made payments to GTI Corporate Transfer Agents, LLC in the amounts of $4,170 and $477, respectively.

During 2018, the Company paid $12,245 to Elia Holdings, LLC, which entity is controlled by Ms. Irizarry’s ex-husband. Elia Holdings, LLC also converted $14,980 of convertible notes into shares of common stock at a conversion price of $.03 per share.

For the year ended December 31, 2018 the Company paid $244,624 to GTI Research Inc. for rent, scientific license agreement and for other expenses incurred by GTI Research Inc. The Chairman of the Company signed for the lease on the laboratory facility.

On January 1, 2018, the Company entered into a sublease for a 7,990 square foot office and lab space on 6860 Broadway in Denver, Colorado 80221, with GTI Research, Inc. a related party, the Company’s scientific robotic technology collaborator, for 75 months. GTI Research, Inc. a related party, required payment of $12,000 security deposit in December of 2017. Monthly base rents per square foot under this lease are as follows:

Period	Monthly Base Rent
01/01/18 – 03/31/18	$0.00/SF
04/01/18 – 03/31/19	$9.00/SF
04/01/19 – 03/31/20	$10.00/SF
04/01/20 – 03/31/21	$11.00/SF
04/01/21 – 03/31/22	$12.00/SF
04/01/22 – 03/31/23	$13.00/SF
04/01/23 – 03/31/24	$14.00/SF