PART
I
Company
Overview
We
are a biotechnology company dedicated to eradicating zoonotic diseases such as COVID-19 (Novel Coronavirus), Paratuberculosis
(Johne’s disease), Mad Cow Disease, Chronic Wasting Disease, and E.coli and Salmonella infections, by applying our advanced
proprietary molecular sciences and 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 more than
80% of animal bacteria and viruses are zoonotic (i.e. transmissible between humans and animals, causing infection in both species),
their management and prevention are crucial to improving public health on a global scale. Zoonotic diseases are the major cause
of global pandemics throughout human history. These diseases are capable of altering human history by causing significant loss
of life, and major economic and social upheaval. We focus on developing novel molecular diagnostic tests, therapeutics, and vaccines
through our proprietary robotic technologies with the belief that improved technologies and methodologies must be developed and
implemented in order to aid mankind’s control of emerging diseases in animals and in humans. We believe that, if not properly
addressed, diseases in animals will continue to cause serious and growing global problems with respect to economics, human health
and biodiversity.
We
previously developed proprietary diagnostic assays for use in the agricultural and veterinary markets, and we intent to develop
proprietary, genetics-based diagnostic assays and vaccine solutions through our robotic technologies with the goal of controlling
the spread of zoonotic infection in the human population. Our mission is to continually apply our scientific research to the more
effective management of zoonotic diseases and, in so doing, realize the commercial potential of our molecular biotechnologies.
We
will require significant additional funding in order to implement our business plan. There is no guarantee that we will be successful
in securing the required financing, and if such financing is secured, there is no guarantee that we will fully achieve our business
goals.
Target
Zoonotic Diseases
COVID-19
COVID-19
is an infectious disease caused by SARS- CoV-2. Common symptoms include fever, cough and shortness of breath. Other symptoms may
include muscle pain, diarrhea, sore throat, and loss of smell. The majority of cases result in mild symptoms. However, some cases
progress to viral pneumonia and multi-organ failure. SARS-Cov-2 coronavirus is the latest example of a long list of viruses and
bacteria that can cause widespread global infection in humans. As of early June 2020, the number of infectious cases worldwide
were close to seven and a half million with more than 415,000 deaths. In December 2019, SARS- Cov-2 was first discovered in the
city of Wuhan, China. In February 2020, the World Health Organization (WHO) declared COVID-19 a global pandemic. The SARS-Cov-2
is a genetically mutated strain of the SARS-Cov-1 virus that caused SARS in 2003-2004 epidemic. Coronaviruses are opportunistic
viruses that are harbor in the Asian bat population. Pangolins, nocturnal mammals, native to Asia and Africa especially tropical
forests, are the most likely intermediate carriers of the SARS-Cov-2 between bats and humans. In
2002–03, Civet cats, nocturnal mammals found in Asia and Africa sold for meat in local markets of China’s Yunnan
province carried the SARS virus from bats to
humans.
SARS-CoV-1
and 2’s abilities to genetically mutate through passages into humans is one of the reasons of their enhanced virulence.
Coronaviruses are easily transmitted by human-to-human close contact primarily through saliva droplets. Coronaviruses are “positive
single stranded (ss) RNA virus. These types of viruses can replicate into human cells without using the host DNA as a template.
Positive single stranded RNA viruses have genetic material that can function both as genome and messenger RNA. This feature allows
the Coronaviruses to work more efficiently once it infects its target. SARS-Cov-2 is the etiological cause of COVID-19, a highly
infectious respiratory disease causing an atypical pneumonia.
The
mechanism of infections to humans is through saliva droplets caused by persistent cough and sneezing. Indirect contact with contaminated
surfaces is another way of infection although it is not a very efficient way of transmission. Viral RNA is also being found in
the stools of infected patients. SARS-Cov-2 is able to enter human cells by binding to the ACE2 cell receptor. Once inside the
cells, the virus starts the process of replication by using its own RNA polymerase enzyme. The incubation time COVID-19 varies
between 2-14 days. It is not clear if during the incubation period, the virus is able to infect humans.
Major
clinical symptoms and epidemiological risk factors related to COVID-19:
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Pneumonia
(severe cases)
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Organ
failure (terminal cases)
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Higher
mortality rate compared to influenza (>0.1-1%)
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Pre-existing
medical conditions (cancer, cardiovascular diseases, diabetes, immunodeficiency diseases)
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Mortality
Age factor (individuals >65yrs old)
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Saliva
droplets transmission
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Virus
can survive in the air up to 3 hours and on surfaces up to 72 hours
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Unknown
asymptomatic transmission
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Epidemiological
evidences support the hypothesis that SARS-CoV-2 neuronal cells in the medulla oblongata region of the brain could become infected
with the virus. Anosmia (loss of smell) and ageusia (loss of taste) are reported to be early signs of COVID-19. In some cases
the neuronal infection of the medulla oblongata can contribute to a patient’s breathing problems and respiratory failure
within five days from the infection. SARS-CoV-2 enters human cell by binding the ACE2 receptor. The ACE2 protein regulates cardiovascular
function and is express in many human cells including lung, heart, kidney, intestine, and
brain tissue. There are multiple ways the virus could invade the central nervous system. A possible mechanism of action
is that the SARS-CoV-2 is in the blood of infected patients and through this infectious route binds to ACE2 receptors in the endothelial
cells of the blood capillaries in the brain, breaching the blood-brain barrier and invading neurons through that route. A breached
blood-brain barrier could also cause brain swelling, compressing the brain stem and affecting respiration. The cells innervating
the lungs could also become infected, making involuntary respiration more difficult.
Evidence
from experiments in mice also suggest that the virus might target the nervous system through the olfactory bulb. A study published
in 2008 (Netland et al. J Virology 2008 Aug (15): 7264-7275) showed that SARS-CoV-1 — the virus that caused the SARS outbreak
in 2003 — entered the brains of transgenic mice expressing human ACE2 through neurons in the nose. The virus then rapidly
spread to connecting nerve cells. The extensive nerve damage was the major cause of death, even though, low levels of the virus
were detected in the animals’ lungs. It is therefore possible that the respiratory failure in patients with COVID-19 could
be caused from the extensive neuronal damages in the cardiorespiratory area of the medulla oblongata.
Diagnostics
assays and Treatment of COVID -19
Nasopharyngeal,
oropharyngeal swabs and saliva specimen are collected from patients to detect the SARS-Cov-2 viral infection. Viral RNA is extracted
from the swab and amplified using the Real Time Polymerase Chain reaction (RT-PCR) technology. The COVID-19 detection molecular
assay is a multi-step procedure that requires up to 72 hours to obtain a result. Because of the complexity of the assay, a limited
number of samples can be manually processed daily. Limitations in the number of samples to be process is the main reason of the
spreading of the COVID-19. Automated systems such as the Roche COBA 8800 are capable of processing up to 4,000 samples/daily.
However, due to the sheer number of potentially infected people globally, this system could not fully meet assay demand.
Currently,
no treatment is available to treat COVID-19. Influenza vaccines are not effective to stop the spread of COVID-19 infection. Several
COVID-19 vaccines are currently in Phase I clinical trials. Estimated development time is between 15-18 months. Alternatively,
“off label” drug combination protocols have been used, with various degree of success, to treat COVID-19 patients.
Paratuberculosis
Paratuberculosis,
also known as Johne’s disease in Stage III clinical phase, is a worldwide problem in domestic livestock animals including
dairy cattle, sheep and goats. A significant public health concern is associated with Paratuberculosis, which results from an
infection with the Mycobacterium Avium Sub Paratuberculosis (MAP) bacteria. This bacterial 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 a MAP infection include:
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Global
widespread infection
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Reduction
in milk production to 25%+
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High
culling rate which increases costs
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Link
between MAP infection and Immunodeficiency Diseases
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Highest
at-risk animals are young calves or pre-born
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Bacterium
can survive pasteurization process
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MAP
present in infant formula products
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MAP
present in contaminated soil, water, dairy products
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Spread
in herds can occur by fecal contamination, colostrum, milk, and trans placental
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For
every “clinical stage” animal in a herd, there are 15-20 silently infected plus an additional 6-8 carriers
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Seventy
to ninety percent of the herds worldwide are infected with MAP. Most of the infected animals do not show any clinical signs of
the disease. The majority of infected animals are capable of shedding billions of bacteria mostly in the soil and milk without
ever developing clinical signs of paratuberculosis and are responsible for the spreading of the disease to other animals and for
the transmission of MAP to humans, mostly through milk. Lack of routine testing has resulted in the inability of managing MAP
infection worldwide. MAP is resistant to conventional pasteurization protocols. Therefore, many of the dairy products, infant
formula, and milk sold in stores are contaminated with the bacterium.
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 of 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 maintain a healthy 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). 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.
MAP
and Immunodeficiency Diseases
A
large number of studies show that several immunodeficiency diseases including, Crohn’s Disease (CD) a chronic inflammatory
disease of the intestine and colon, Type 1 Diabetes and Multiple Sclerosis can be triggered by MAP. The bacterium is therefore
a zoonotic infectious organism which can be transmitted through contaminate milk, infant formula and water.
MAP
Related Immunodeficiency Diseases
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Systemic
Lupus Erythematosus
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Hashimoto’s
Thyroiditis
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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 immunodeficiency 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.
Histological
alterations found in Crohn’s patients’ intestinal tract, closely resembles similar tissue changes observed in the
intestine of Johne’s disease cattle.
Similar
to Paratuberculosis in cattle, no known pharmaceutical or surgical cure for Crohn’s disease currently exists for humans.
Furthermore, Mycobacterium Avian Paratuberculosis have been found in human patients and we believe that individuals that are genetically
predisposed could be contracting the disease through digestion of MAP - infected dairy products.
Business
Model
Molecular
Robotic Artificial Intelligence (AI) Integrated Platform (MORAP)
It
has become evident from the COVID-19 global pandemic that current systems and related technologies are not capable of preventing
or successfully controlling the spreads of zoonotic infectious agents. One of the features of these infectious organisms is their
ability to infect both people and animals while some carriers remain asymptomatic for a period of time or for the entire duration
of the infection. We believe it is imperative that during pandemic outbreaks the entire population must be tested for the presence
of infection agents. In addition, we believe that AI models should be developed to analyze data and forecast zoonotic diseases
outbreak and ultimately prevent epidemics and pandemics from occurring in the future. GeneThera’s goal is to develop the
infrastructure of a nationwide zoonotic infectious agents “alert shield” which would operate to predict, detect and
manage the spread of pandemics and ultimately prevent pandemics from developing, similar to a “nuclear shield,” which
is designed to detect incoming nuclear warheads and destroy them before they can be deployed. We believe that a nationwide network
of AI controlled laboratory robotic systems may be able to perform such a task.
Our
business model is based on an Ultra High Throughput Molecular Robotic/AI Platform (MORAP) which combines the use of advance robotic
integrated systems with AI and Machine Learning (ML) software systems. Upon development, MORAP would encompass a nationwide network
of interactive molecular laboratories operated using advanced integrated robotic and machine learning cloud-based software systems,
which would be able to share data and interact with each other. We believe the MORAP would be capable of processing millions of
samples and collecting, storing and analyzing data. We believe that the MORAP nationwide communications network could be accomplished
through advanced cloud-based software systems, machine learning and Internet-of-Things (IoT) networks. MORAP could be readily
replicated and scaled utilizing identical instrumentation and software.
We
have designed the MORAP’s second generation molecular robotic/AI laboratory system prototype. Upon development subject to
securing the requisite funding, each individual MORAP system would be capable, in a full-scale commercial platform, to perform
over 100,000 samples/daily with minimal human intervention.
We
envision the MORAP’s cloud-based AI-integrated software system with a dual purpose: 1) data obtained from each individual
robotic laboratory system would be sent to the cloud to be stored where data could be analyzed and risk factors could be evaluated;
and 2) each individual robotic laboratory system as part of the MORAP network could be configured in the cloud. The individual
robotic laboratory systems, identical in each location, would be controlled and operated through MORAP’s cloud-based software.
The
MORAP’s cloud software architecture would:
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Collect
and analyze data from each run performed by each robotic clone;
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Compare
data between runs from individual robotic clones and determined risk factors;
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Send
commands to operate each robotic clone; and
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Run
diagnostics for each clone and alert and possibly fix any software or hardware problem the system may experience.
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Each
individual robotic unit is composed of different equipment controlled by the integrated software. The MORAP cloud-base system
would be function as the ‘brain’ of the entire network.
Our
MORAP system is designed to targeted zoonotic diseases in general; however, we intend to focus our robotic/AI and therapeutic
vaccine technologies on SARS-Cov-2 and MAP related diseases.
Zoonotic
Diseases Vaccine Development
Our
therapeutic vaccine technology is based on the use of CRISPR gene editing technology. CRISPR 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 focus will be to develop CRISPR based vaccines for SARS-COV-2 and MAP. Our
strategy is to silence the expression of gene pathways, which are activated by the infectious agents to gain entry into the host
cells.
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, recombinant DNA (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:
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Lack
of large-scale purification system; and
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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 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 solution that allows diagnosing, treating and managing zoonotic diseases in animals and humans. Our proprietary
Molecular Robotic/AI Platform and Therapeutic strategy (MORAPAT) is design to prevent the spread of disease from animals and at
the same time, allow to better control of zoonotic infectious agents. More importantly, we believe that our platform could prevent
the spread of viruses and bacteria 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 different specimen tested for the presence
of zoonotic virus and bacteria such as SARS- CoV-2 and MAP. Consequentially, our platform is not only able to detect infected
animals, but can also prevent human infections.
We
have developed a molecular system for the detection of Mycobacterium Avian Paratuberculosis in the milk of infected dairy cows.
Samples from milk obtained 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 in infected cows.
We
are currently evaluating several robotic systems for nucleic acid extraction. We believe that we can further increase the sensitivity
of the molecular assay by using robotic driven DNA and RNA extraction methods.
We
are currently developing a vaccine for MAP infection. Our approach for developing this vaccine is based on the use our Molecular
Robotic/AI Platform and Therapeutic (MORAPAT) technology which also includes our PURIVAX technology, genetically engineered Adenoviral
and AVV, and CRISPR technology.
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 MAP vaccine.
To
date, we have developed a prototype computer program to track samples that will be received and processed in our planned commercial
laboratory. This program will initially be used to track samples that will be sent out and received by our laboratory. Upon raising
the additional requisite funding, of which there is no guarantee, we will then work on improving the system in order to track
samples during the different phases of DNA and RNA extraction procedures. In addition, we will continue to develop a database
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 successful in developing 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. 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 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 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 of the Company include initiating validation procedures for MAP and SARS-CoV-2 molecular tests.
In
parallel, we will continue R&D phases for the MAP vaccine. We intend to initiate development of a SARS-CoV-2 vaccine. We plan
on initiating an experimental animal protocol to determine the safety of our vaccines. Moreover, upon raising the necessary capital,
we plan to initiate the experimental animal studies within 12-18 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. 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
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
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 both the domestic and international markets for the commercialization of our MORAP and MORAPAT systems.
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 offices.
Licensing
We
intend to manage the marketing and sales of our vaccines developed as through 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 technologies and we intend to use our best efforts to protect
such rights through maintaining trade secret protections and entering into 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, Roche Diagnostics, Abbott Laboratories, IDEXX Laboratories, Inc., and academic and government
institutions are also carrying out a significant amount of research in the field of health, particularly in the field zoonotic
diseases. We anticipate that these institutions will become more aggressive in pursuing patent protection and negotiating licensing
arrangements to collect royalties for the use of technologies they have developed and to market commercial products similar to
those that we seek to develop, either on their own or in collaboration with our 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 robotic 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 Real-time-PCR (RT-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 zoonotic 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 and therapeutic. It is our intention to perform any validation
or clinical trials of our product both domestically and abroad. 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. It is expected that validation studies will be conducted in collaboration with each country’s government guidelines
over the next 18 to 36 month period. 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.
Employees
We
had a total of two full-time employees as of December 31, 2020. No changes in full-time employees have occurred subsequently.
None of our employees is represented by a collective bargaining unit. We will be hiring more scientists, laboratory technicians,
administrative and IT employees soon.
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 Business
Our
success depends on our ability to resume development of our MORAP technology.
We
focused on the development of MORAP technology for zoonotic disease diagnostic detection and vaccine development. As a result,
our success depends entirely on our ability to finalize the development and commercialize the of molecular robotic/AI laboratory
platform. If we are unable to achieve this goal, we may not be able to earn sufficient revenue to continue our business.
Business
interruptions, including any interruptions resulting from COVID-19, could significantly disrupt our operations and could have
a material adverse impact on the Company if the situation continues. Under Colorado Updated Public Health Order 20-24 Implementing
Stay At Home Requirements (the “Order”), GeneThera falls under the definition of a “Critical Business”,
as, pursuant to the Order “Critical Business” means (1) research and laboratory services, and (2) pharmaceutical and
biotechnology companies.
Further,
all employees, including our specialized scientific and technical staff, are working from home or in a virtual environment. The
Company always maintains the ability for team members to work virtual and we will continue to stay virtual, until the State and
or the Federal government indicate the environment is safe to return to work.
The
ongoing coronavirus outbreak which began in China at the beginning of 2020 has impacted various businesses throughout the world,
including travel restrictions and the extended shutdown of certain businesses in impacted geographic regions. If the coronavirus
outbreak situation should worsen, we may experience disruptions to our business including, but not limited to equipment, to our
workforce, or to our business relationships with other third parties.
The
extent to which the coronavirus impacts our operations or those of our third-party partners will depend on future developments,
which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that
may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.
Any such disruptions or losses we incur could have a material adverse effect on our financial results and our ability to conduct
business as expected.
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, 2019,
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 in 2020 to continue operations. If we fail to obtain additional financing, we would be forced
to delay the development of our MORAP or liquidate the Company.
We
are a development stage company with limited operating history. We will need significant, additional capital to continue development
of the molecular robotic/AI laboratory platform and to develop diagnostic assays and vaccine product candidates. As of December
31, 2020, we had cash and cash equivalents (excluding restricted cash) of $0 and negative working capital of $7,691,065.
Based
on our current operating plan, we don’t expect that our existing cash and cash equivalents as of December 31, 2020, will
enable us to maintain our operating expenses in 2021. We will need to raise additional capital in 2021 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 2021 or thereafter in the future, or on acceptable terms, we may be required
to:
|
|
■
|
Significantly
delay, scale back or discontinue the development of the MORAP;
|
|
|
■
|
Seek
corporate partners for the development of our diagnostic assays and vaccine product candidates than other wise desirable or
on terms that are less favorable than might otherwise be available; or
|
|
|
■
|
Significantly
curtail or cease operations.
|
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 secret protections 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 in large part on the efforts and continued employment of Dr. 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, but feasible. Smaller biotechnology companies are potentially at
a disadvantage in the employment marketplaces due to their limited financial resources; something like reliable funding can resolve
with ease. Dr. Milici continues interviewing highly experienced scientists in molecular biology and robotic engineers in order
to expanding our current projects globally.
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 unless we acquire reliable funding from trustworthy investors
in order to have an excellent advantage to succeed with our competitors.
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. Once we secure reliable funding, we can increase our success astronomically.
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. As we can attest, the market for
our products is in high demand and we are eager to improve the healthcare of both humans and animals.
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 states, 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.
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 OTC Markets, which may have an unfavorable impact on our stock price and liquidity.
Our
common stock is quoted on the OTC Markets under the symbol “GTHR.” The OTC Markets is a significantly more limited
market than the New York Stock Exchange or the NASDAQ stock market. The quotation of our shares on the OTC Markets 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.
|
ITEM
1B.
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UNRESOLVED
STAFF COMMENTS
|
None.
Our
previous offices and laboratory premises, which included our headquarters and our research and development facilities, were located
in Denver, Colorado, where we subleased approximately 7,990 square feet of office and laboratory space. Effective April 29, 2019,
we terminated our sublease with the facilities in Denver, Colorado.
Presently,
we are in negotiations to lease a new laboratory space, and we are currently reviewing the terms of lease agreements for three
(3) prospective laboratory spaces located in Lafayette, Westminster, and Lakewood, CO. We intend to enter into a lease agreement
and secure a laboratory space in the third quarter 2021. We believe that any of these three facilities are more than adequate
for our needs and for the immediate future and that, should it be required, additional space can be leased to accommodate any
future growth.
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ITEM
3.
|
LEGAL
PROCEEDINGS
|
From
time to time, we may be involved in litigation relating to claims arising out of our operations. We are not currently a party
to, and our property is not subject to, any material legal proceedings.
On
November 14, 2014, Litchfield Church Ranch, LLC filed a Summons in Forcible Entry and Detainer against the Company after the owner
was unable to sell the building to us because he was upended for over $800,000 in his mortgage. As per the Summons, the plaintiff
claimed $364,968.69 in past due rent. As per our accounting records, the Company had accrued $242,000 in rent expense with the
offer to purchase such property at $1,850,000 plus scheduled payments for the past due rent. The owner’s bank did not allow
him to sell the property. We participated in a mediation resulting in a settlement for $115,000 with the contingency to pay the
goodwill amount of $15,000 by September 12, 2015. The Company had an additional six months to complete the remaining $100,000
settlement. If not paid off prior to August 12, 2016, there would be no discount and the Company shall owe the judgment balance
in the amount of $325,885. The mediator, a retired judge, found in our favor. Therefore, the settlement was agreed upon by both
parties. The Company did not pay the settlement agreement as of December 31, 2019 and default interest of 18% was accrued on the
outstanding judgment balance through December 31, 2018. In July 2019, Litchfield Church Ranch, LLC was dissolved after the ownership
sold the property. The Company claims that no money is owed.
Milestones
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.
On
September 6, 2019, FOGT, LLC and GeneThera, Inc. reached a settlement in the amount of $425,000. The legal team received $171,000
from this settlement resulting in net proceeds to the Company of approximately $254,000.
|
ITEM
4.
|
MINE
SAFETY PROCEDURES
|
Not
applicable.
PART
III
|
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Directors
and Executive Officers
The
following sets forth information about our directors and executive officers as of the date hereof:
|
Name
|
|
Age
|
|
Position
|
|
Antonio
Milici
|
|
66
|
|
Chairman
of the Board, Chief Executive Officer and Chief Scientific Officer
|
|
Tannya
L. Irizarry
|
|
62
|
|
Chief
Administrative Officer and Interim Chief Financial Officer
|
|
Jeremiah
Bartley
|
|
66
|
|
Director
|
Officers
are elected annually by the Board of Directors (subject to the terms of any employment agreement), to hold such office until an
officer’s successor has been duly appointed and qualified, unless an officer sooner dies, resigns or is removed by the Board.
The
principal occupation and business experience during at least the past five years for our executive officers and directors is as
follows:
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 23 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.
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 married.
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:
|
|
●
|
been
convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other
minor offences);
|
|
|
●
|
had
any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or
business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or
within two years prior to that time;
|
|
|
●
|
been
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction
or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement
in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities,
or to be associated with persons engaged in any such activity;
|
|
|
●
|
been
found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity
Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated;
|
|
|
●
|
been
the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an
alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial
institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement
or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or
any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
|
|
|
●
|
been
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined
in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or persons associated with a member.
|
Compliance
with Section 16(A) of the Exchange Act.
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, 2020.
Code
of Ethics
We
have adopted 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.
This Code of Conduct is incorporated by reference to the Company’s Form 10-K filed on February 27, 2020. In addition, we
intend to post on our website all disclosures that are required by law or the listing standards of our applicable trading platform
or market concerning any amendments to, or waivers from, any provision of the code. The reference to our website address does
not constitute incorporation by reference of the information contained at or available through our website, and you should not
consider it to be a part of this report.
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.
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 board of directors is
currently responsible for the functions that would otherwise be managed by an audit committee.
|
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
Compensation
of Executive Officers
The
following table sets forth information concerning all compensation awarded to, earned by or paid to the named Executive Officers
for services rendered in all capacities during the fiscal year ended December 31, or who earned compensation exceeding $100,000
during fiscal year 2020, for services as executive officers for the last two fiscal years.
Summary
Compensation Table
|
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
|
Stock Awards
($)
|
|
|
Total
($)
|
|
|
Antonio Milici, Chief Executive Officer
|
|
2020
|
|
|
258,000
|
|
|
|
-
|
|
|
|
258,000
|
|
|
|
|
2019
|
|
|
258,000
|
|
|
|
90,000
|
|
|
|
348,000
|
|
|
Tannya L. Irizarry, Interim Chief Financial Officer
|
|
2020
|
|
|
208,000
|
|
|
|
-
|
|
|
|
208,000
|
|
|
|
|
2019
|
|
|
208,000
|
|
|
|
45,000
|
|
|
|
253,000
|
|
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 provides 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 Series B Preferred
Stock annually. 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. The Company
did not issue $90,000 worth of Series B Preferred Stock in 2020 or 2019 as the Company did not have enough authorized shares of
Series B Preferred stock. The Company accrued $0 and $90,000 in the annual salary accrual for Dr. Milici for the years ended December
31, 2020 and 2019, respectively. For the years ended December 31, 2020 and 2019, 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 provides 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 Preferred Stock annually. 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. The Company did not issue $45,000 worth of Series B Preferred Stock in 2019 as the Company did not have enough
authorized shares of Series B Preferred stock. The Company accrued $0 and $45,000 in the annual salary accrual for Ms. Irizarry
for the years ended December 31, 2020 and 2019, respectively. For the years ended December 31, 2020 and 2019, 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, 2020.
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.
Director
Compensation
Dr.
Jeremiah Bartley of our board of directors received 100,000 shares of common stock for services as a director. The Company recognized
an expense in the amount of $5,000 during 2020.
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS’ MATTERS
|
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth information regarding beneficial ownership of our voting stock as of May 26, 2020, 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.
|
|
|
Amount of Beneficial Ownership(1)
|
|
|
|
|
|
Percent of
|
|
Percent of
|
|
|
Percent of
|
|
|
|
|
|
|
|
Series A
|
|
|
Series B
|
|
|
Percent
|
|
|
Series A
|
|
Series B
|
|
|
Total
|
|
|
|
|
Common
|
|
|
Preferred
|
|
|
Preferred
|
|
|
of Common
|
|
|
Preferred
|
|
Preferred
|
|
|
Voting
|
|
|
Name and Address of Beneficial Owner
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock(2)
|
|
|
Stock(3)
|
|
Stock(4)
|
|
|
Stock(5)
|
|
|
Antonio Milici (6)
|
|
|
1,812,797
|
|
|
|
0
|
|
|
|
17,559,593
|
|
|
|
7.5
|
%
|
|
*
|
|
|
67.0
|
%
|
|
(5)
|
%
|
|
Tannya L. Irizarry (7)
|
|
|
1,425,033
|
|
|
|
0
|
|
|
|
8,478,979
|
|
|
|
5.9
|
%
|
|
*
|
|
|
33.0
|
%
|
|
(5)
|
%
|
|
Jeremiah Bartley
|
|
|
100,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
*
|
|
|
*
|
|
|
*
|
|
|
*
|
|
|
All directors and officers as a group (3 persons named above)
|
|
|
3,337,830
|
|
|
|
0
|
|
|
|
26,038,572
|
|
|
|
13.9
|
%
|
|
*
|
|
|
100.0
|
%
|
|
(5)
|
%
|
|
Other (8)(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Beneficial
Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect
to securities. Except as set forth below, each of the beneficial owners listed above has direct ownership of and sole voting
power and investment power with respect to the shares of its stock. For each beneficial owner above, any options exercisable
within 60 days have been included in the denominator.
|
|
|
(2)
|
Based
on 24,071,255 shares of common stock outstanding as of December 31, 2020.
|
|
|
(3)
|
It
was based on 10,350 shares of Series A Convertible Preferred Stock, which were cancelled as of December 31, 2019. Shares of
Series A Convertible Preferred Stock were, upon the occurrence of certain events, convertible into shares of common stock
on the basis of 400 shares of common stock for each share of Series A Preferred Stock. Holders of Series A Convertible Preferred
Stock would have voted with the holders of common stock on all matters on an as converted to common stock basis. As of December
31, 2020, all shares were cancelled, and there were no issued and outstanding shares of Series A Convertible Preferred Stock.
|
|
|
(4)
|
Based
on 26,038,572 shares of Series B Convertible Preferred Stock outstanding as of December 31, 2020. Shares of Series B Convertible
Preferred Stock are, upon the occurrence of certain events, convertible into shares of common stock on the basis of 10 shares
of common stock for each share of Series B Preferred Stock. Holders of Series B Convertible Preferred Stock are entitled to
20 votes per share and vote with the holders of common stock on all matters.
|
|
|
(5)
|
Percentage
of Total Voting Stock represents total ownership with respect to all shares of common stock, Series A Convertible Preferred
Stock and Series B Convertible Preferred Stock, as a single class. The Series B Convertible Preferred Stockholders have 20
votes per share resulting in 100% voting power.
|
|
|
(6)
|
Includes
2,519,567 shares of common stock held by Kalos Holdings, LLC. Dr. Milici’s son was the managing director of Kalos Holdings,
LLC until 2014 and has no voting and dispositive power over the securities held by it. Dr. Milici has no beneficial ownership
of such securities; neither does Tannya L. Irizarry, Dr. Milici’s wife.
|
|
|
(7)
|
Includes
shares held by Antonio Milici, Ms. Irizarry’s husband.
|
|
|
(8)
|
A
total of 4,003,860 shares of common stock was issued to Gold X Change, Inc. and Pavel Kolesnikov, the President. Currently,
Gold X Change, Inc. holds 1,189,300 shares of common stock. Mr. Kolesnikov disbursed much of the remaining shares to other
parties and has no voting and dispositive power over the securities held by these parties. Mr. Kolesnikov disclaims beneficial
ownership of such securities except to the extent of his pecuniary interest in such securities, if any.
|
|
|
(9)
|
GeneThera,
Inc. held 7,064,967 shares of common stock controlled by the Board of Directors.
|
Changes
in Control
We
do not currently have any arrangements which, if consummated, may result in a change of control of the Company.
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
Transactions
with Related Persons
The
following includes a summary of transactions since the beginning of the 2020 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, 2020, and 2019,
the Company has outstanding loan payables to Antonio Milici, its Chairman, Chief Executive Officer and stockholder, in the amounts
of $679,783 and $673,092, respectively. These loans are unsecured, due on demand, and bear interest at 2.41%. As of December 31,
2020, and 2019, the Company has outstanding loan payables to Tannya Irizarry, its Chief Administrative Officer and stockholder,
in the amounts of $61,995 and $90,523, respectively. These loans are unsecured, due on demand, and bear interest at 8%.
Tannya
Irizarry owns one-third of GTI Corporate Transfer Agents, LLC, and the Company’s in-house transfer agency. During the years
ended December 31, 2020, and 2019, the Company made payments to GTI Corporate Transfer Agents, LLC in the amounts of $23,616 and
$4,170, respectively.
The
Company utilizes Elia Holdings, LLC for construction and other maintenance services to conserve the Company’s office and
lab space. Elia Holdings, LLC is controlled by Tannya Irizarry’s brother. Costs incurred related to such services were $5,715
and $12,245 for the years ended December 31, 2020, and 2019, respectively.
|
ITEM
14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
Independent
Auditors’ Fees
The
following is a summary of the fees billed to us by our principal accountants during the years ended December 31, 2020 and 2019.
|
|
|
Year Ended December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Audit Fees
|
|
$
|
35,000
|
|
|
$
|
27,000
|
|
|
Audit-Related Fees
|
|
|
-
|
|
|
|
-
|
|
|
Tax Fees
|
|
|
-
|
|
|
|
-
|
|
|
All Other Accounting Fees
|
|
|
-
|
|
|
|
-
|
|
|
TOTAL
|
|
$
|
35,000
|
|
|
|
$76, 820
|
|
“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
On
March 9, 2019 the Company engaged the audit firm MaughanSullivan LLC to audit its financial statements for the years ended December
31, 2018 through 2020.
Notes
to Consolidated Financial Statements
December
31, 2020
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 had a long-standing research collaboration with GTI Research. GTI Research was assisting
the Company in managing the robotic technology project. The Company’s CEO is collaborating with this project with another
group 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 and therapeutics for the detection and treatment of zoonotic
diseases.
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.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company, it is a controlled subsidiary. Intercompany accounts are
eliminated upon consolidation.
Cash
and Cash Equivalents
Cash
equivalents are highly liquid investments with an original maturity of three months or less.
Fair
Value of Financial Instruments
For
purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged
in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amount of the Company’s
short-term financial instruments approximates fair value due to the relatively short period to maturity for these instruments.
Property
and Equipment, Net
Property
and equipment consist of a vehicle and is stated at cost. Depreciation is computed on a straight-line basis over the estimated
useful life of five years. Leasehold improvements are amortized over the shorter of their economic lives or lease terms.
Fair
Value Measurements
The
Company follows ASC 820-10 of the FASB Accounting Standards Codification to measure the fair value of its financial instruments
and disclosures about fair value of its financial instruments. ASC 820-10 establishes a framework for measuring fair value in
accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820-10 establishes
a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.
The three (3) levels of fair value hierarchy defined by ASC 820-10 are described below:
|
Level
1
|
Quoted
market prices available in active markets for identical assets or liabilities as of the reporting date.
|
|
|
|
|
Level
2
|
Pricing
inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable
as of the reporting date.
|
|
|
|
|
Level
3
|
Pricing
inputs that are generally unobservable inputs and not corroborated by market data.
|
Financial
assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or
similar techniques and at least one significant model assumption or input is unobservable.
The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within
more than one level described above, the categorization is based on the lowest level input that is significant to the fair value
measurement of the instrument.
The
carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, inventory, prepaid
expenses and other current assets, accounts payable and accrued expenses approximate their fair values because of the short maturity
of these instruments.
Transactions
involving related parties typically cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions
of competitive, free-market dealings may not exist.
Reclassifications
Certain
prior period amounts have been reclassified to conform to current period presentation.
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, 2020 and 2019.
The
Company follows the FASB Accounting Standards Codification ASC 606 – Revenues from Contracts with Customers for revenue
recognition. The Company considers revenue realized or realizable and earned when all the following criteria are met:
|
|
1)
|
Identification
of the contract with a customer;
|
|
|
2)
|
Identification
of the performance obligations in the contract;
|
|
|
3)
|
Determination
of the transaction price;
|
|
|
4)
|
Allocation
of the transaction price to the performance obligations in the contract; and
|
|
|
5)
|
Recognition
of revenue when or as a performance obligation is satisfied. Revenue is recognized when
each performance obligation is satisfied by the entity. An estimate of the variable consideration
or performance obligations that an entity ultimately expects to be entitled to is included
in the transaction price, and revenue is recognized upon satisfaction of the related
performance obligation(s). An implicit or explicit significant financing component is
taken into consideration. IP licenses must be analyzed. Each contract with customers
is analyzed for multiple elements if any element must stand alone.
|
Leases
The
Company leased laboratory space from GTIR. The lease agreement was terminated in April 2019. No right of use asset and liability
were recorded for this lease.
On
January 1, 2019, the Company adopted ASC 842 using the modified retrospective approach and will recognize a right of use (“ROU”)
asset and liability in the consolidated balance sheet when and if the Company enters into a qualifying lease agreement. At contract
inception, the Company determines whether an arrangement is or contains a lease and whether the lease should be classified as
an operating or a financing lease. A contract is or contains a lease if the contract conveys the right to control the use of the
identified asset for a period of time in exchange for consideration. Control is determined based on the right to obtain all of
the economic benefits from use of the identified asset and the right to direct the use of the identified asset. ROU assets for
operating leases represent the right to use an underlying asset for the lease term, and operating lease liabilities represent
the obligation to make lease payments.
Lease
liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement
date for leases exceeding 12 months. Minimum lease payments include only the fixed lease component of the agreement, as well as
any variable rate payments that depend on an index, initially measured using the index at the lease commencement date. Non-lease
components are accounted for separately from the fixed lease component for all leases. Most of the Company’s leases do not
provide an implicit rate that can readily be determined. Therefore, the applied discount rate is based on the Company’s
incremental borrowing rate, which is determined using its credit rating and other information available as of the commencement
date and is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments
under similar terms. Lease terms may include options to renew, which the Company factors into the determination of the lease term
when it is reasonably certain that the Company will exercise that option. The ROU asset is measured at the initial amount of the
lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred
less any lease incentives received.
Operating
lease expense is recognized on a straight-line basis over the lease term and is included in “Cost of sales” and “Selling,
general and administrative” line items in the Company’s consolidated statements of comprehensive income. Leases with
an initial term of 12 months or less are not recorded on the balance sheet, and the expense for these short-term leases is recognized
on a straight-line basis over the lease term.
The
Company monitors for events or changes in circumstances that require a reassessment of its leases. When a reassessment results
in the premeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the ROU asset unless
doing so would reduce the ROU asset to an amount less than zero, in which case the remaining adjustment would be recorded in the
consolidated statements of comprehensive income.
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.
Research
and development costs
R&D
cost are currently expensed as incurred and primarily include cost associated with R&D arrangements with external parties
in connection with the Company’s robotic technology project.
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.
Shipping
and Handling Costs
The
Company accounts for shipping and handling fees in accordance with paragraph 605-45-45-19 of the FASB Accounting Standards Codification.
While amounts charged to customers for shipping products are included in revenues, the related costs are classified in cost of
revenue as incurred.
Shipping
and handling costs were $0 and $0 for the years ended December 31, 2020 and 2019, respectively.
Recently
issued accounting pronouncements
In
March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting.” ASU 2020-04 provides optional expedients and exceptions to account for contracts,
hedging relationships and other transactions that reference LIBOR or another reference rate if certain criteria are met. The amendments
of ASU No. 2020-04 are effective immediately, as of March 12, 2020, and may be applied prospectively to contract modifications
made and hedging relationships entered into on or before December 31, 2022. The Company is evaluating the impact that the amendments
of this standard would have on the Company’s consolidated financial statements.
In
December 2019, the FASB issued ASU 2019-12, Income Taxes(Topic 740): “Simplifying the Accounting for Income Taxes”,
which is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic
740 and by clarifying and amending existing guidance to improve consistent application. This ASU is effective for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. Certain amendments
within this ASU are required to be applied on a retrospective basis, certain other amendments are required to be applied on a
modified retrospective basis and all other amendments on a prospective basis. The Company is currently evaluating the impact the
adoption of this standard will have on the consolidated financial statements.
In
August 2020, the FASB issued ASU 2020-06, Debt—“Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts
in an Entity’s Own Equity”. This ASU amends the guidance on convertible instruments and the derivatives scope
exception for contracts in an entity’s own equity, and also improves and amends the related EPS guidance for both Subtopics.
The ASU will be effective for annual reporting periods after December 15, 2021 and interim periods within those annual periods
and early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial
statements.
Management
has evaluated all recent accounting pronouncements as issued by the FASB in the form of Accounting Standards Updates (“ASU”)
through the date these financial statements were available to be issued and found no recent accounting pronouncements issued,
but not yet effective accounting pronouncements, when adopted, will have a material impact on the financial statements of the
Company.
Note
2 – Going Concern
As
reflected in the accompanying consolidated financial statements, the Company has an accumulated deficit of $31,259,962 and negative
working capital of $7,691,065 as of December 31, 2020. 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.
Presently
the Company is considering ways to apply its molecular robotic technology to address the COVID-19 pandemic. 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, 2020 and 2019:
|
|
|
2020
|
|
|
2019
|
|
|
Accrued
officer salaries
|
|
$
|
5,338,900
|
|
|
$
|
4,872,900
|
|
|
Accrued
interest
|
|
|
252,546
|
|
|
|
192,895
|
|
|
Accrued
expenses- other
|
|
|
1,207,474
|
|
|
|
1,026,569
|
|
|
Total
accrued expenses
|
|
$
|
6,798,920
|
|
|
$
|
6,092,364
|
|
Note
4 – Related Party Transactions
The
Company has an outstanding loan payable and accrued interest to Antonio Milici, its CEO and stockholder amounting to $673,092
and $679,783 as of December 31, 2020 and 2019, respectively. This outstanding loan to the Company is unsecured and bears interest
at 2.41%. The Company has an outstanding loan and accrued interest payable to Tannya Irizarry, its interim CFO interim and stockholder,
amounting to $58,704 and $61,995 as December 31, 2020 and 2019, respectively. This outstanding loan to the Company is unsecured
and bears interest at 8%.
Tannya
Irizarry owns 50% of GTI Corporate Transfer Agents, LLC, the Company’s transfer agent. During the years ended December 31,
2020 and 2019, the Company made payments to GTI Corporate Transfer Agents, LLC in the amounts of $29,723 and $23,616, respectively.
The
Company utilizes Elia Holdings, LLC for construction and other maintenance services to maintain the Company’s office and
lab space. Elia Holdings, LLC is controlled by Ms. Irizarry’s ex-husband. Costs incurred related to such services were $11,495
and $5,715 during the years December 31, 2020 and 2019, respectively.
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. The lease termed on April 29, 2019, and the Company expensed the security deposit of $12,000 and $4,861 of other expenses
in 2019. There were no expenses related to this lease during 2020.
The
lease terminated on April 29, 2019. No right of use asset and corresponding liability were included in the Balance Sheet.
Note
5 – Other Income
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.
On
September 6, 2019, FOGT, LLC and GeneThera, Inc. reached a settlement in the amount of $425,000. The legal team received $171,000
from this settlement resulting in net proceeds to the Company of approximately $254,000.
Note
6 – Convertible Notes Payable
In
previous years the Company borrowed additional money from investors and issued convertible notes, due on demand, bearing interest
at an annual rate of 8%. The notes are convertible into shares of Company common stock at a conversion price of $0.01 to $0.05
per share. As December 31, 2020 and 2019, the outstanding principal and interest on these notes was $54,5000, respectively.
As
of December 31, 2020, an analysis of the principal amount of convertible notes payable that have elected conversion to common
stock amounted to $366,000. The Company’s transfer agent has been constrained in its efforts to issue the common stock for
these convertible notes due to the noncompliance of the Company’s filing requirements. The Company has ceased accruing interest
on these convertible notes but continues to accrue interest on the remaining convertible notes of $54,500. The convertible notes
that have elected conversion without the stock being issued have been included in ‘Accrued liabilities’ on the Balance
Sheet.
No
holders of convertible notes payable elected conversion to common stock during the year ended December 31,2020.
Note
7- Stockholders’ Equity
Convertible
preferred stock rights
Preferred
Stock (Series A) shall be convertible into Common Stock any time at the holder’s sole discretion in part or in whole by
dividing the Purchase Price per Share by 110% of the Market Value on the Closing Date. ‘Market Value’ on any given
date shall be defined as the average of the lowest three intra-day trading prices of the Company’s common stock during the
15 immediately preceding trading days. Preferred Stock (Series B) shall be convertible into ten common shares at any time and
holders are entitled to 20 common share votes per such preferred shares.
The
Company has authorized 20,000,000 shares of Series A Preferred Stock, $.001 par value, and 30,000,000 shares of Series B Preferred
Stock, $.001 par value.
As
of December 31, 2020 and 2019, the Company had 0 shares Series A Preferred Stock issued and outstanding respectively. The Company
still has 20,000,000 preferred A stock availability.
As
of December 31, 2020 and 2019, the Company had 26,038,572 shares of Series B Preferred Stock issued and outstanding respectively
of the total authorized shares of 30,000,000.
Common
Stock
The
Company has authorized 300,000,000 shares of common stock, $.001 par value. As of December 31, 2020 and 2019, there were 24,071,255
and 35,902,602 shares of common stock issued and outstanding, respectively.
During
the year ended December 31, 2020, the Company canceled 13,426,728 common shares in an effort to update its stock ledger. The cancelled
shares consisted of shares issued to consultants for failure to perform the duties of their contracts, the lack of compliance
on the part of some entities that did not renewal its charter, dissolution of other corporate entities, the deletion of stock
held in escrow and treasury by the Company and other true-up efforts.
During
the year ended December 31, 2020, the Company issued 1,591,381 shares of common stock in exchange for services and property:
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●
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100,000
shares to a director on the board for services rendered. The Company recognized an expense
of $5,000.
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●
|
995,381
shares to a consultant for services. The Company recognized an expense of $9,954.
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|
|
●
|
500,000
shares representing a reissuance of a certificate to a shareholder.
|
Designation
of Series A Convertible Preferred Stock
On
August 29, 2018, the Company filed a certificate of designation (the “Series A Certificate of Designation”) with the
Nevada Secretary of State to set forth the terms of the Series A Convertible Preferred Stock. Pursuant to the Series A Certificate
of Designation, the Company designated 20,000,000 shares of its preferred stock as Series A Convertible Preferred Stock. Following
is a summary of the material terms of the Series A Convertible Preferred Stock:
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●
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Dividends.
Holders of shares of Series A Convertible Preferred Stock are not entitled to dividends.
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●
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Liquidation.
Upon any dissolution or winding up of the Company, whether voluntary or involuntary (a
“Liquidation”), holders of Series A Convertible Preferred Stock shall be
entitled to receive out of the assets of the Company, before any distribution of assets
is made to holders of any other class of capital stock of the Company, an amount equal
to $100 per share (the “Series A Liquidation Preference”). If upon any Liquidation
the amounts payable with respect to the Series A Convertible Preferred Stock and any
other shares of stock of the Company ranking as to any such distribution on parity with
the Series A Convertible Preferred Stock are not paid in full, the holders of Series
A Convertible Preferred Stock and of such other shares shall share ratably in any such
distribution in proportion to the full respective preferential amounts to which they
are entitled. After the payment of the Series A Liquidation Preference shall have been
made in full to the holders of the Series A Convertible Preferred Stock, the remaining
assets of the Company legally available for distribution to its stockholders shall be
distributed among the holders of any junior capital stock that has a liquidation preference
senior to holders of common stock, and after such holders have received in full their
liquidation preference, the remaining amounts shall be distributed among the holders
of the Series A Convertible Preferred Stock and the common stock, collectively, as one
class.
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●
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Voting.
On any matter presented to stockholders for their action or consideration, each holder
of Series A Convertible Preferred Stock shall be entitled to cast the number of votes
equal to the number of shares of common stock into which the shares of Series A Convertible
Preferred Stock held by such holder are convertible as of the record date for determining
stockholders entitled to vote on such matter. Except as provided by law or by the other
provisions of the Series A Certificate of Designation, the holders shall vote together
with the holders of shares of common stock as a single class. However, so long as at
least 50% of the shares of Series A Convertible Preferred Stock originally issued remains
outstanding, the Company may not, without the affirmative vote or the written consent
of the holders of at least 51% of the then outstanding shares of Series A Convertible
Preferred Stock, voting separately as a class, (i) create, authorize or issue any equity
security, or any security convertible into or exercisable for any equity security, unless
such security is junior to the Series A Convertible Preferred Stock, in terms of dividend
and liquidation preference; or (ii) increase the total number of authorized shares of
Series A Convertible Preferred Stock.
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●
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Conversion.
Each holder of shares of Series A Convertible Preferred Stock may, at holder’s
option and at any time, convert any or all such shares into shares of common stock. The
number of shares of common stock into which each share of Series A Convertible Preferred
Stock may be converted (the “Conversion Rate”) shall be determined according
to the terms of a stock purchase agreement between the Company and the holder. In addition,
each share of Series A Convertible Preferred Stock shall automatically convert into shares
of common stock, at the then applicable Conversion Rate, upon the earlier of (i) the
closing of a public offering of equity or equity equivalent securities resulting in minimum
gross proceeds to the Company of $20 million and (ii) upon the Company’s common
stock trading at or above $6.00 per share for 20 out of 30 consecutive trading days;
provided that prior to the event specified by (ii) above, the Company shall have (y)
an effective registration statement on file with the SEC registering the resale of the
common stock issuable upon conversion of the Series A Convertible Preferred Stock and
(ii) obtained the approval for listing the common stock on any national securities exchange.
The Conversion Rate is subject to customary adjustments as described in the Series A
Certificate of Designation.
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●
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Redemption.
The Series A Convertible Preferred Stock is not redeemable.
|
The
Company entered in a stock purchase agreement with the holder of the Series A Convertible Preferred Stock, FOGT, LLC, pursuant
which the parties agreed on the conversion rate of 400 shares of common stock for each share of Series A Convertible Preferred
Stock. As of December 31, 2019, the purchase agreement, subject to the terms of a settlement in a dispute with FOGT, LLC has been
cancelled along with 10,350 shares of Series A Convertible Preferred Stock previously issued.
Designation
of Series B Convertible Preferred Stock
On
August 29, 2018, the Company filed a certificate of designation (the “Series B Certificate of Designation”) with the
Nevada Secretary of State to set forth the terms of the Series B Convertible Preferred Stock. Pursuant to the Series B Certificate
of Designation, the Company designated 30,000,000 shares of its preferred stock as Series B Convertible Preferred Stock. Following
is a summary of the material terms of the Series B Convertible Preferred Stock:
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●
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Dividends.
Holders of shares of Series B Convertible Preferred Stock are not entitled to dividends.
|
|
|
●
|
Liquidation.
Upon any Liquidation, holders of Series B Convertible Preferred Stock shall be entitled to receive out of the assets of the
Company, before any distribution of assets is made to holders of any other class of capital stock of the Company, an amount
equal to $100 per share (the “Series B Liquidation Preference”). If upon any Liquidation the amounts payable with
respect to the Series B Convertible Preferred Stock and any other shares of stock of the Company ranking as to any such distribution
on parity with the Series B Convertible Preferred Stock are not paid in full, the holders of Series B Convertible Preferred
Stock and of such other shares shall share ratably in any such distribution in proportion to the full respective preferential
amounts to which they are entitled. After the payment of the Series B Liquidation Preference shall have been made in full
to the holders of the Series B Convertible Preferred Stock, the remaining assets of the Company legally available for distribution
to its stockholders shall be distributed among the holders of any junior capital stock that has a liquidation preference senior
to holders of common stock, and after such holders have received in full their liquidation preference, the remaining amounts
shall be distributed among the holders of the Series B Convertible Preferred Stock and the common stock, collectively, as
one class.
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|
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●
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Voting.
On any matter presented to stockholders for their action or consideration, each holder of Series A Convertible Preferred Stock
shall be entitled to cast 20 votes per share. Except as provided by law or by the other provisions of the Series B Certificate
of Designation, the holders shall vote together with the holders of shares of common stock as a single class. However, so long
as at least 50% of the shares of Series B Convertible Preferred Stock originally issued remains outstanding, the Company may not,
without the affirmative vote or the written consent of the holders of at least 51% of the then outstanding shares of Series B
Convertible Preferred Stock, voting separately as a class, (i) create, authorize or issue any equity security, or any security
convertible into or exercisable for any equity security, unless such security is junior to the Series B Convertible Preferred
Stock, in terms of dividend and liquidation preference; or (ii) increase the total number of authorized shares of Series B Convertible
Preferred Stock.
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●
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Conversion.
Each holder of shares of Series B Convertible Preferred Stock may, at holder’s option and at any time, convert any or all
such shares into shares of common stock. The number of shares of common stock into which each share of Series B Convertible Preferred
Stock may be converted is ten shares of common stock for each share of Series B Convertible Preferred Stock.
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●
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Redemption.
The Series B Convertible Preferred Stock is not redeemable.
|
As
of December 31, 2020, the Company has issued to Dr. Milici, CEO and Tannya Irizarry, CAO, CFO a total of 26,038,572 shares of
Series B Preferred Stock pursuant to the terms of their employee agreements.
Note
8 – Commitments and Contingencies
Employment
Agreements
On
January 8, 2017, the Company entered into an employment agreement with Antonio Milici, its chief executive officer and chief scientific
officer, for a five-year term. On the same date, the Company also entered into an employment agreement with Tannya L. Irizarry,
its chief administrative officer and interim chief financial officer, for a five-year term.
The
Company agreed to pay Dr. Milici a base salary of $258,000 per annum, plus $90,000 worth of Series B Convertible Preferred Stock
in March of each year. The Company also agreed to pay Dr. Milici bonus compensation or a lump sum equal to two (2) times the salary
at the time the Company has net income of at least two million ($2,000,000) dollars each year based on performance. In addition,
the Company agreed to pay a onetime payment of $26,900 at the renewal of the employment agreement. The Company is 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. 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. The Company did not issue $90,000 worth of Series B Preferred
Stock in 2019 as the Company did not have enough authorized shares of Series B Preferred stock. The Company included $0 and $90,000
in the annual salary accrual for Dr. Milici as of December 31, 2020 and 2019, respectively. For the fiscal years 2020 and 2019,
all salary was deferred.
The
Company agreed to pay Ms. Irizarry a base salary of $208,000 per annum, plus $45,000 worth of Series B Convertible Preferred Stock
in March of each year. The Company also agreed to pay Ms. Irizarry bonus compensation or a lump sum equal to two (2) times the
salary at the time the Company has net income of at least two million ($2,000,000) dollars each year based on performance. In
addition, the Company agreed to pay a onetime payment of $18,000 at the renewal of the employment agreement. The Company is 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. 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. The Company did not issue $45,000 worth of
Series B Preferred Stock in 2019 as the Company did not have enough authorized shares of Series B Preferred stock. The Company
included $0 and $45000 in the annual salary accrual for Ms. Irizarry as of December 31, 2020 and 2019, respectively. For the fiscal
years 2020 and 2019, all salary was deferred.
As
of December 31, 2020, the Company has issued to Dr. Milici, CEO and Tannya Irizarry, CAO, CFO a total of 26,038,572 shares of
Series B Preferred Stock pursuant to the terms of their employee agreements.
Legal
Contingencies
The
Company is involved in claims arising during the ordinary course of business resulting from disputes with vendors and stockholders
over various contracts and agreements. The Company has outstanding judgments that are deemed to be lapsed and passed Colorado’s
statute of limitations. Other than those outstanding judgments listed below, no other legal claims have been made or are known
at this time.
On
November 14, 2014, Litchfield Church Ranch, LLC filed a Summons in Forcible Entry and Detainer against the Company after the owner
was unable to sell the building to us because he was upended for over $800,000 in his mortgage. As per the Summons, the plaintiff
claimed $364,968.69 in past due rent. As per our accounting records, the Company had accrued $242,000 in rent expense with the
offer to purchase such property at $1,850,000 plus scheduled payments for the past due rent. The owner’s bank did not allow
him to sell the property. We participated in a mediation resulting in a settlement for $115,000 with the contingency to pay the
goodwill amount of $15,000 by September 12, 2015. The Company had an additional six months to complete the remaining $100,000
settlement. If not paid off prior to August 12, 2016, there will be no discount and the Company shall owe the judgment balance
in the amount of $325,885. The mediator, a retired judge, found in our favor. Therefore, the settlement was agreed upon by both
parties. The Company did not pay the settlement agreement as of December 31, 2020 and default interest of 18% was accrued on the
outstanding judgment balance through December 31, 2018. In July 2019, Litchfield Church Ranch, LLC was dissolved after the ownership
sold the property. The Company claims that no money is owed. The Company has not received subsequent correspondence relating to
the judgment.
Milestones
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.
On
September 6, 2019, FOGT, LLC and GeneThera, Inc. reached a settlement in the amount of $425,000. The legal team received $171,000
from this settlement resulting in net proceeds to the Company of approximately $254,000.
Lease
Agreement
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.
The
lease was terminated on April 29, 2019, and the deposit of $12,000 was expensed at the date of the lease termination. No ROU asset
or liability was established or recorded by the Company as of December 31, 2020 and 2019, respectively. The Company has not incurred
any expense in 2020 related to this lease.
The
Company currently has a temporary office space at 3051 W 105th Ave., in Westminster, CO until a permanent space is located. The
lease term does not warrant the establishment of a right of use asset or liability. No asset or liability has been recorded on
the balance sheet.
Note
9 – Income Taxes
Deferred
Tax Assets
At
December 31, 2020, the Company has available for U.S. federal income tax purposes a net operating loss (“NOL”) carry-forwards
of approximately $14.3 million that may be used to offset future taxable income through the fiscal year ending December 31, 2036.
If not used, these NOLs may be subject to limitation under Internal Revenue Code Section 382 should there be a greater than 50%
ownership change as determined under the regulations. The Company plans on undertaking a detailed analysis of any historical and/or
current Section 382 ownership changes that may limit the utilization of the net operating loss carryovers. No tax benefit has
been reported with respect to these net operating loss carry forwards in the accompanying consolidated financial statements since
the Company believes that the realization of its net deferred tax asset of approximately $3.0 million was not considered more
likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by a valuation allowance
of $3.0 million.
Deferred
tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the
deferred tax assets because of the uncertainty regarding its reliability. In assessing the realization of deferred tax assets,
management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon future generation for taxable income during the periods in which
temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration
of all the information available, Management believes that significant uncertainty exists with respect to future realization of
the deferred tax assets and has therefore established a full valuation allowance. The valuation allowance increased by approximately
$156,337 and $108,707 for the years ended December 31, 2020 and 2019, respectively.
The
Company evaluated the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements. ASC 740 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain
positions that the Company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position
must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or
expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to
as “unrecognized benefits.” A liability is recognized (or amount of net operating loss carry forward or amount of
tax refundable is reduced) for unrecognized tax benefit because it represents an enterprise’s potential future obligation
to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740.
If
applicable, interest costs related to the unrecognized tax benefits are required to be calculated and would be classified as “Other
expenses – Interest expense” in the statement of operations. Penalties would be recognized as a component of “General
and administrative.”
No
material interest or penalties on unpaid tax were recorded during the years ended December 31, 2020 and 2019, respectively. As
of December 31, 2020 and 2019, no liability for unrecognized tax benefits was required to be reported. The Company does not expect
any significant changes in its unrecognized tax benefits in the next year.
Net
deferred tax assets consist of the following components as of December 31:
|
|
|
2020
|
|
|
2019
|
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
|
NOL Carryover
|
|
$
|
3,011,294
|
|
|
$
|
2,854,957
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
|
Less valuation allowance
|
|
|
(3,011,294
|
)
|
|
|
(2,854,957
|
)
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Income
Tax Provision in the Consolidated Statement of Operations
A
reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income
taxes is as follows for the years ended December 31,
|
|
|
2020
|
|
|
2019
|
|
|
Federal statutory income tax rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
|
Change in valuation allowance on net operating loss carry-forwards
|
|
|
(21.0
|
)%
|
|
|
(21.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Note
10 – Subsequent Events
The
impact of COVID-19 on the Company is unknown at this time. The financial consequences of this situation cause uncertainty as to
the future and its effects on the economy and the Company. Presently, the Company continuous to considering ways to apply its
molecular robotic technology to address the COVID-19 pandemic.
On
March 11, 2021, a Board Resolution was presented by the Board of Directors of the Company for the cancellation of the stock issuance
to a consultant of 995,381 restricted common shares due to their failure to complete such endeavor to the satisfaction of the
Company. The contract was signed on and restricted shares were issued August 31. 2020. The Company reversed the expense of $9,954.
On
April 2, 2021, the Company signed a Master Agreement with Intrado Digital Media, LLC for 12 press releases distributed to the
US and/or Canada National with unlimited words per release. This agreement is renewable at $6,000 per year.
In
April 2021, the Company signed a consulting agreement with Aberdeen Equity (AE) to develop an outward campaign to generate indications
of interest for funding on an eight-week period from the date of execution of this agreement. AE will also provide a website engineer
to update all the Company’s data and its design. The contract terms state that the Company will issue AE 1,500,000 restricted
shares of common stock and pay a cash bonus of 5% of funds raised up to $750,000.
As
of April 14, 2021, no additional conversions have occurred, and no new convertible notes have been issued.