Business Overview
We are
a biotechnology company dedicated to eradicate
“cross-over” (zoonotic) diseases such as Johne’s
disease, Mad Cow Disease, Chronic Wasting Disease, and E.coli. by
applying the latest molecular technologies. Diseases of
terrestrial, avian and aquatic life animals influence a number of
economic and global security issues, including food for an
increasing world population, access to international trade, species
conservation and protection of those endangered, and economic
growth in developing and re-organizing nations. Because many animal
disease agents are zoonotic (transmissible between humans and
animals, causing infection in both species), their management and
prevention are crucial to improving public health on a global
scale. We focus on developing molecular diagnostic tests,
therapeutics, and vaccines through robotic technology in the belief
that better technologies and methodology need to be implemented to
help control emerging diseases in animals and in humans. We believe
that, if not addressed, these diseases in animals will likely
continue to cause serious and growing problems in terms of
economics, human health and biodiversity.
We have
developed proprietary diagnostic assays for use in the agricultural
and veterinary markets. Specific assays for Chronic Wasting Disease
(among elk and deer) and Mad Cow Disease (among cattle) have been
developed and are available currently on a limited basis. A
Johne’s disease (predominantly dairy cattle) diagnostics is
in development. We intend to shift from a research and development
organization into a product marketing and revenue generating
entity. Our previous strategy from inception in 2007 to December
2018 had been of research only. We focused all our energies,
talent, and resources to the incubation and growth of new ideas in
the realm of genetically engineered disease detection and
vaccination. We feel that with recent announcements, we are
positioned to move from a developmental stage to a product oriented
stage company, depending on reliable funding.
We
provide genetics-based diagnostics through robotic technology and
are currently working on vaccine solutions to meet the growing
demands of today’s veterinary industry and tomorrow’s
healthcare industries. We are organized and operated both to
continually apply our scientific research to more effective
management of diseases and, in so doing, realize the commercial
potential of molecular biotechnology.
We
believe that we will require significant additional funding in
order to achieve our business plan. Over the next 12 months, in
order to have the capability of achieving our business plan, we
will require at least $45,000,000 in additional funding. There are
no guarantees that we will be able to secure such financing, and if
the financing is secured, there are no guarantees whether we can
fully achieve the goals laid out in our business plan.
About Johne’s Disease (Paratuberculosis)
Our
focus includes the diagnosis and treatment of Johne’s
disease. Johne’s disease is a worldwide problem of domestic
animals primarily including dairy cattle, sheep and goats. A
significant public health concern is associated with Johne’s
disease, which results from an infection with bacteria called
Mycobacterium Paratuberculosis. This organism grows very slowly,
causes a gradually worsening disease condition, and is highly
resistant to the infected animal’s immune defenses.
Therefore, infected animals harbor the organism for years before
they test positive or develop disease signs.
Major
factors related to Johne’s disease include:
●
Reduction in milk
production to 25%+
●
High culling rate
which increases costs
●
Affects trade and
hinders exports
●
Link between
Johne’s disease and Crohn’s disease
●
Reduction in
quality wool production in sheep
●
Highest at risk
animals are young calves or pre-born
●
Bacterium can
survive in contaminated soil for over 1 year
●
Spread in herds can
occur by fecal contamination, colostrum, milk, and trans
placental
●
Calves can become
infected by suckling on “dirty” teats
●
For every one
“clinical stage” in a herd there are 15-20 silently
infected plus additional 6-8 carriers
Stage I: Silent, subclinical, non-detectable infection.
Typically, this stage occurs in all calves, heifers, and young
stock less than two years of age and many adult animals exposed to
small doses of disease-causing organisms. Infected animals at this
early stage are rarely detected with currently available diagnostic
tests, including fecal culture or serologic tests (ELISA). This
stage progresses slowly over many months or years to stage
II.
Stage II: Subclinical infection. Typically, this stage
occurs in older heifers or adults. Animals at this stage appear
healthy but are shedding adequate numbers of Mycobacterium Avian
Para tuberculosis organisms in their manure to be detected on fecal
culture. Blood tests will detect some, but not all animals at this
stage. Blood test (ELISA) positive animals should be confirmed
positive by fecal culture.
Stage III: Clinical Johne’s disease. It is categorized
as any animal with advanced infection the onset, which is often
associated with a period of stress such as recent calving. Cattle
at this stage have intermittent, watery pea-soup manure. Animals
lose weight and gradually drop in milk production, but continue to
have a good appetite. Some animals appear to recover but often
relapse in the next stress period. Most of these animals are
shedding billions of organisms and are positive on culture. Most
are positive on serologic tests (ELISA & AGID). Clinical signs
often last several weeks to months before the animals are sent to
slaughter in a thin, emaciated condition. In the final and terminal
aspects of stage III of the fatal disease, animals become emaciated
with fluid diarrhea and develop “bottle jaw.” The
carcass may not pass meat inspection for human consumption in the
later phases of stage III.
About Crohn’s Disease
Crohn’s
disease is an inflammatory disease of the intestines that may
affect any part of the gastrointestinal tract from anus to mouth,
causing a wide variety of symptoms. It primarily causes abdominal
pain, diarrhea (which may be bloody), vomiting, or weight loss, but
may also cause complications outside of the gastrointestinal tract
such as skin rashes, arthritis, and inflammation of the
eye.
Crohn’s
disease is an autoimmune disease, in which the body’s immune
system attacks the gastrointestinal tract, causing inflammation. It
is classified as a type of inflammatory bowel disease. There has
been evidence of a genetic link to Crohn’s disease, putting
individuals with siblings afflicted with the disease at higher
risk. It is understood to have a large environmental component as
evidenced by the higher number of cases in western industrialized
nations. Males and females are equally affected. Smokers are three
times more likely to develop Crohn’s disease than
non-smokers. Crohn’s disease affects between 400,000 and
600,000 people in North America. Prevalence estimates for Northern
Europe have ranged from 27–48 per 100,000. Crohn’s
disease tends to present initially in the teens and twenties, with
another peak incidence in the fifties to seventies; although, the
disease can occur at any age.
Similar
to Johne’s disease in cattle, no known pharmaceutical or
surgical cure for Crohn’s disease currently exists for
humans. Furthermore, new discoveries of Mycobacterium Avian Para
tuberculosis have been found in human patients and we believe that
individuals that are genetically predisposed could possibly be
contracting the disease through digestion of Johne’s disease
- infected milk.
Business Model
A Para
tuberculosis molecular robotic assay diagnostics to is currently in
development. As discussed above, we intend to shift from a research
and development organization into a product marketing and revenue
generating entity, depending on obtaining funding.
Our
molecular disease assay development business is based on our
Molecular Robotic Platform that combines the use of advance robotic
hardware with Artificial Intelligence (AI). Our therapeutic vaccine
technology is based on the use of CRISPR-Case9 gene editing
technology. CRISPR-Case 9 technology is a new technique that is
based on the use of short RNA sequences complementary to a specific
target gene. Once the RNA sequence binds to the gene, the gene is
deactivated or “silenced” and no longer able to produce
the specific protein. It also allows for the efficient, effective,
and continuous testing, management and treatment of animal
populations. We plan to deliver CRISPR modified RNA sequences motif
using our proprietary PURIVAX technology. Our technology differs
from any alternative testing and management methodology available
today -- all of which require the destruction of individual animals
and even entire herds. Our testing and data analysis processes also
allow us not only to separate infected from clean animals, but also
to gain knowledge vital to development of preventative
vaccines.
We will
need the approval of the U.S. Department of Agriculture, or USDA,
before the vaccines can be manufactured or sold. The approval
process for animal vaccines is time-consuming and expensive. We
anticipate that such approval, if it is obtained, may require more
than $75 million and may require more than two years for each
vaccine for which approval is sought. Currently, we do not have the
capital necessary to seek approval of any of our candidate
vaccines, and we cannot provide any assurance that we will be able
to raise the capital necessary for such approval on terms that are
acceptable to us, if at all. Failure to raise the necessary capital
will likely cause us to curtail or cease operations. In addition,
even if we are successful in raising the capital necessary to seek
approval of any vaccine, there are no assurances that such an
approval will be granted, or if granted, whether we will be able to
produce and sell such vaccines following such an approval in
commercial quantities or to make a profit from such production and
sales.
PURIVAX Technology
We have
developed a large-scale process for highly purified and high viral
titer (viral concentration) Adenovirus and AAV genetically
engineered viruses. This technology enables us to develop
Adenovirus and AAV-based recombinant DNA vaccines for zoonotic
pathogens. Our PURIVAX is a purification system that dramatically
improves biological purity and viral titer of recombinant
Adenovirus and AAV vectors. PURIVAX is intended to completely
eliminate toxic side effects associated with Adenoviruses and AAV
vectors, thereby making it possible to develop highly immunogenic
and safe recombinant DNA vaccines. Importantly, rDNA vaccine
technology represents a powerful tool for an innovative vaccine
design process known as “genetic
immunization.”
rAD and
rAAV vectors are the ideal candidates for a gene delivery system.
These viruses can efficiently deliver genetic material to
both dividing and non-dividing cells, thereby overcoming some of
the obstacles encountered with first generation retroviral
vectors.
Equally
important, rAD and rAAV are engineered virus genomes that contain
no viral gene. One of the key features for rAD and rAAV is
their ability to infect a large variety of cells. However,
two technical challenges had to be overcome to fully utilize rAD
and rAAV in the development of rDNA vaccines:
1.
Lack of
large scale purification system; and
Traditional
technologies and first generation chromatography processes are
limited both in terms of purity and yield. Due to the
limitation of these purification technologies, adequate viral
titers may not be achieved. We believe that the result is
that there is currently no efficient system to deliver immunogenic
genetic sequences into cells.
This is
the significance of our PURIVAX, rAD and rAAV system for rDNA
vaccine development. Succinctly stated, it is designed to be
able to achieve both high purity and high viral titer (up to 10e16
viral particles/eluate) based on its propriety multi-resin anion
exchange chromatography system. We believe that biological
contaminants such as endogenous retrovirus, bacterial, mycoplasma,
non-specific nucleic acids, lipids, proteins, carbohydrates and
endotoxins are eliminated during the purification
process.
Product Development
We
provide a comprehensive Johne’s solution that allows
diagnosing, treating and managing herds at risk or already infected
with Johne’s disease.
Our
proprietary Molecular Robotic and Therapeutic Platform is design to
prevent the spread of Johne’s disease to healthy animals and
at the same time allow to better control the disease in those herds
where the disease is already present.
More
importantly, we believe that our platform can prevent the
spread of the Mycobacterium into the food chain and subsequent
infection of human population. An important part of this strategy
is our ability to detect the presence of a low number of
infected particles in milk tested for the presence of the
Mycobacterium Para tuberculosis. Therefore, our platform not only
is able to detect Johne’s infected animals, but can also
prevent potential human infections.
Herd
Guard is our comprehensive Johne’s management solution that
includes a diagnostic (HerdCheck), a therapeutic (HerdSafe), and a
management system (HerdSoft) to eradicate or mitigate Johne’s
disease.
HerdCheck (Molecular Test)
HerdCheck
is our diagnostic product. Samples are collected using a Field
Collection System with includes specific collection tubes and ship
to our laboratory for processing. The testing system is a
high throughput and highly defined and structured testing system
that is capable of more than 20,000 tests per month. The systems
use proprietary real time PCR technology.
We have
developed a molecular system for the detection of Mycobacterium
Avian Para tuberculosis in milk of infected dairy cows. Samples
from milk obtaining from supermarket shelves were either
‘spiked’ with different concentrations of Mycobacterium
Avian Para tuberculosis or ‘naturally processed.’ The
bacterial DNA was isolated using both, manual and robotic- based
DNA extraction procedures and analyzed using the real time PCR
technology. Using this methodology, we can detect between two (2)
and twenty (20) bacterial particles from 10 ml of milk. We believe
that our test will be very useful for early detection of
Mycobacterium Avian Para tuberculosis, both in milk samples and
infected cows.
We are
currently evaluating several robotic systems for DNA extraction. We
believe that we can further increase the sensitivity of the
molecular assay by using robotic driven DNA extraction
methods.
HerdSafe (Genetic Therapy)
HerdSafe
is our therapeutic product. HerdSafe is the large-scale
purification and recombinant based DNA vaccine using Adenovirus and
AVV genetically engineered viruses.
We are
currently developing a vaccine for Johne’s disease. Our
approach for developing this vaccine is based on the use of PURIVAX
technology, genetically engineered Adenoviral and AVV, and
CRISPR-Case9 technology
However,
at the present time, we do not have sufficient financial resources
to implement further development work; therefore, we will need to
secure substantial funding to continue the development of the
Johne’s vaccine.
HerdSoft (Software Management)
HerdSoft
is our comprehensive Johne’s disease management solution
which is a web-based product connected to our data center. The
management system will deliver results, collect data and
incorporate environmental analysis to guide the client on therapy
and management of their herd to control Johne’s disease in
their facility.
To
date, we have developed a prototype computer program to track
samples that will be received and processed in our commercial
laboratory. This program will initially be used to track samples
that will be sent out and received to our laboratory. We had to
stop our timeline waiting for secured funding. We will then work on
improving the system in order to track samples during the different
phases of DNA extraction procedures. In addition, we will continue
to develop a data base system to store and analyze data collected
during sample analysis.
Future Development Plans
We
anticipate that research and development, or R&D, will be the
source for both assay development and vaccine design/development.
If we are able to develop assays for different diseases, we intend
to formalize the procedure into a commercial application through a
series of laboratories to be owned and operated by us. To date, we
have introduced our diagnostic solution for Chronic Wasting Mad Cow
Disease on a very limited basis. We anticipate that R&D will be
ongoing during the life of the Company, as this is the source for
new products to be introduced to the market. Our plan is to seek
new innovations in the biotechnology field. We cannot assure you
that we will be successful in developing or validating any new
assays or, if we are successful in developing and validating any
such assays, that we can successfully commercialize them or earn
profits from sales of those assays. Furthermore, we cannot assure
you that we will be able to design, develop, or successfully
commercialize any vaccines as a result of our research and
development efforts.
It is
our intention to continue with the research and development and
validation of the molecular tests and DNA vaccines. Future
plans include initiating validation procedures for Johne’s
disease molecular test. These validation protocols will be
performed in our laboratory in Colorado.
In
parallel, we will continue R&D phases for the Johne’s
Disease vaccine. We plan on initiating an experimental animal
protocol to determine the safety of our vaccines. We estimate that
the experimental animal protocol may take up to a year. We project
to initiate the experimental animal’s studies within 24-36
months.
Research and Development
We
anticipate that R&D will be the source for both assay
development and vaccine design/development. If we are able to
develop assays for different diseases, we intend to formalize the
procedure into a commercial application through a series of
laboratories to be owned and operated by us. To date, we have
introduced our diagnostic solution for Chronic Wasting Disease and
Mad Cow Disease on a very limited basis. We anticipate that
R&D will be ongoing during the life of the Company, as this is
the source for new products to be introduced to the market.
Our plan is to seek new innovations in the biotechnology
field. We cannot assure you that we will be successful in
developing or validating any new assays or, if we are successful in
developing and validating any such assays, that we can successfully
commercialize them or earn profits from sales of those assays.
Furthermore, we cannot assure you that we will be able to
design, develop, or successfully commercialize any vaccines as a
result of our research and development efforts.
Marketing Strategy
Our
goal is to focus on international markets, primarily the Pacific
Rim and Europe, for the commercialization of our animal testing
platform. We have no plans to offer any veterinary services in the
United States.
Our
marketing approach is to align ourselves with both, the private
sector and government agencies.
Commercial Diagnostic Testing
In the
event that we are able to develop assays for the detection of
diseases in animals, we intend to establish a series of diagnostic
testing laboratories geographically proximate to the primary
sources of individual diseases and/or according to specific
available operating efficiencies. The specific number of labs to be
built and operated will be based on assay demand (demand
facilitated by the number of specific disease assays we develop),
our ability to obtain the capital to build the labs, and our
ability to successfully manage them from our principal office. We
are in negotiations to establish one diagnostic testing laboratory
outside of our Colorado facility.
Licensing
Through
our licensing division, we intend to manage the marketing and sale
of the vaccines developed by our R&D. As we do not intend to be
a vaccine manufacturer, we plan to use our licensing division to
license the technology related to any vaccines that may be
developed and to manage the revenue potential available from the
successful development and validation of specific vaccines. We
cannot provide any assurance that we will develop any vaccines or
that, if they are developed, we will be able to license them
successfully or that any such license will produce significant
revenues.
Intellectual Property
We do
not own any patents on any of our technology and have not filed any
applications for patents in any country. We cannot give any
assurance that we will be able to file any patent applications or
that, if we file one or more applications for patents, any patents
will issue or that, if issued, the claims granted in any such
patents will afford us adequate protection against competitors with
similar technology.
We
believe that we own common law proprietary rights with respect to
our technology and intend to use our best efforts to protect such
rights through confidentiality agreements.
We also
depend upon the skills, knowledge, and experience of our scientific
and technical personnel, none of which is patentable. To help
protect our proprietary know-how, which is not patentable, and for
inventions for which patents may be difficult to endorse, we rely
on trade secret protection to shield our interests.
Competition
We face
competition from many companies, universities, and research
institutions in the United States and abroad. Virtually all
of our competitors have substantially greater resources, experience
in product commercialization, and obtaining regulatory approvals
for their products, operating experience, research and development,
marketing capabilities, and manufacturing capabilities that we do.
We will face competition from companies marketing existing
products or developing new products for diseases targeted by our
technologies. The development of new products for those
diseases for which we are attempting to develop products could
render our product candidates noncompetitive and obsolete.
Our
current competitors include primarily, IDEXX Laboratories, Inc.,
and academic and government institutions are also carrying out a
significant amount of research in the field of veterinary health,
particularly in the field of Johne’s Disease. We
anticipate that these institutions will become more aggressive in
pursuing patent protection and negotiating licensing arrangements
to collect royalties for use of technology that they have developed
and to market commercial products similar to those that we seek to
develop, either on their own or in collaboration with competitors.
Any resulting increase in the cost or decrease in the
availability of technology or product candidates from these
institutions may affect our business.
Competition
with respect to our veterinary technologies and potential products
is and will be based, among other things, on effectiveness, safety,
reliability, availability, price, and patent protection.
Another important factor will be the timing of market
introduction of products that we may develop and for which we may
receive regulatory approval. Accordingly, the speed with which we
can develop products, complete the required animal studies or
trials and approval processes and ultimately supply commercial
quantities of the products to the market is expected to be an
important competitive factor. Our competitive position will also
depend upon our ability to attract and retain qualified personnel,
to obtain patent protection or otherwise develop propriety products
or processes, and to secure sufficient capital resources for the
often-substantial period between technological conception and
commercial sales.
Several
attempts have been made to develop technologies that compete with
F-PCR. To our knowledge none of these technologies have
resulted to date in any product available on the market. The
field of biotechnology is very dynamic. The possibility that
more advanced technologies could be developed into products that
may compete with ours is very strong. However, it is very
difficult to predict the length of time necessary for this scenario
to take place.
Manufacturing
We do
not manufacture any products. We do not intend to establish a
manufacturing facility to manufacture any products that we may
develop anywhere in the world.
Product Liability
The
testing, manufacturing, and marketing of our proposed products
involves an inherent risk of product liability attributable to
unwanted and potentially serious health effects in animals that may
receive any vaccines that we may develop and market. To the
extent we elect to test, manufacture, or market veterinary vaccines
and other products, we will bear the risk of product liability
directly. We do not currently have product liability
insurance. There is no guarantee that we can obtain product
liability insurance at a reasonable cost, or at all, or that the
amount of such insurance will be adequate to cover any liability
that we may be exposed to. In the absence of such insurance,
one or more product liability lawsuits against us can be expected
to have a material adverse effect on our business and could result
in our ceasing operations.
Government Regulation
Our
unique approach to the testing for various animal diseases allows
us to begin commercialization of our diagnostic tests without the
need for a long and enduring approval process from the USDA. USDA
approval will be required for commercialization of animal vaccines.
However, it is our intention not to seek, in the foreseeable
future, any approval either from the USDA or the U.S. Food &
Drug Administration for any of the products we develop both,
diagnostic or therapeutic. It is our intention to perform any
validation or clinical trials of our product abroad and primarily
in Europe and Pacific Rim where our commercial operation will also
be located. Our commercial laboratories will require a validation
study to be performed to demonstrate the effectiveness of the
system. Validation studies will be performed according to each
country’s guidelines. We have submitted an application
outlining a protocol for animal studies. It is expected that
validation studies will be conducted in collaboration with each
country’s government guidelines over the next 18-36 month
period.
Employees
We had
a total of two full-time employees as of December 31, 2018. No
changes in full-time employees have occurred subsequently. None of
our employees is represented by a collective bargaining
unit.
Investment in our common stock involves a high degree of risk. You
should carefully consider each of the following risks, together
with all other information set forth in this report, including the
financial statements and the related notes, before making a
decision to buy our common stock. If any of the following risks
actually occurs, our business could be harmed. In that case, the
trading price of our common stock could decline, and you may lose
part or all of your investment.
Risks Related to Our Business2
Our success depends on our ability to resume development of our
product candidate, HerdCheck.
We
focused on the development of HerdCheck, our product candidate for
the detection of Johne’s Disease among dairy cattle. As a
result, our success depends entirely on our ability to finish
development and commercialize HerdCheck. If we are unable to
achieve this goal, we may not be able to earn sufficient revenues
to continue our business.
Our recurring operating losses have raised substantial doubt
regarding our ability to continue as a going concern, and our
auditors issued a “going concern” audit opinion in
their report on our financial statements.
Our
independent auditors have indicated in their report on our audited
consolidated financial statements as of December 31, 2018, which
are included in this report, that there is substantial doubt about
our ability to continue as a going concern. A “going
concern” opinion indicates that the financial statements have
been prepared assuming we will continue as a going concern and do
not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets, or the amounts
and classification of liabilities that may result if we do not
continue as a going concern. As of this Annual Report on Form 10-K,
the circumstances have not been changed, and therefore, the
aforementioned going concern situation remains current. Therefore,
you should not rely on our consolidated balance sheet as an
indication of the amount of proceeds that would be available to
satisfy claims of creditors and potentially be available for
distribution to shareholders in the event of
liquidation.
We need to raise additional capital no later than early 2020 to
continue operations. If we fail to obtain additional financing, we
would be forced to delay the development of our products or
liquidate the company.
We are
a development stage company with limited operating history. We will
need significant, additional capital to continue development of
HerdCheck and to develop other product candidates. As of December
31, 2019, we had cash and cash equivalents (excluding restricted
cash) of $5,040 and negative working capital of
$7,964,977.
Based
on our current operating plan, we expect that our existing cash and
cash equivalents as of December 31, 2019, will enable us to fund
our operating expenses through the [first quarter of 2020]. We will
need to raise additional capital no later than early 2020 to
execute our current operating plan. Securing additional financing
may divert our management from our day-to-day activities, which may
adversely affect our ability to operate our business, including our
ability to develop and commercialize our product
candidates.
We
cannot guarantee that additional capital will be available in
sufficient amounts or on terms acceptable to us, if at all. If we
are unable to raise additional capital, when required in 2020 or
thereafter in the future, or on acceptable terms, we may be
required to:
●
significantly
delay, scale back or discontinue the development
HerdCheck;
●
seek corporate
partners for HerdCheck or our product candidates at an earlier
stage than otherwise would be 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 secrets
and confidentiality agreements to protect our intellectual
property. We cannot assure you that these trade secrets and
confidentiality agreements will provide meaningful protection for
our intellectual property. Furthermore, in absence of patent
protection, competitors who independently develop substantially
equivalent technology may harm our business.
Loss of key personnel will adversely affect the
Company.
We
depend to a large part on the efforts and continued employment of
Antonio Milici, M.D., Ph.D., our President, Chairman and Chief
Executive Officer. The loss of Dr. Milici would have a material
adverse effect on our business, results of operations and financial
condition. In addition, the loss of Dr. Milici would force us to
seek a replacement, who may have less experience, fewer contacts,
or less understanding of the business. Further, we may be unable to
find a suitable replacement for Dr. Milici. Finding qualified
personnel in the biotechnology industry is very challenging.
Smaller biotechnology companies are potentially at a disadvantage
in the employment marketplaces due to their limited financial
resources.
We may be unable to compete against other more establish
biotechnology companies.
We
operate in a very competitive and difficult area.
Biotechnology business is notoriously challenging and risky. We
compete with more established and better funded companies that are
involved in the development of similar products. Several of these
companies have significantly greater financial resources as well as
greater production and marketing capabilities. The field of
biotechnology requires extensive research and development. Better
funded competitors may be able to develop and market superior or
less expensive products that will make our products less valuable
or unmarketable.
If we
fail to anticipate or respond adequately to technological
developments, our ability to operate could suffer. We cannot assure
that research and discoveries by other biotechnology, agriculture,
pharmaceutical or other companies will not render our technologies
or products uneconomical or result in products superior to those we
develop, depend on new and evolving technologies. If our
technologies do not produce satisfactory results, our business may
be harmed.
Increased competition from and technological advances by our
competitors could negatively affect our operating
results.
We face
intense competition, and we expect that future competition may
become even more intense as new products, services and technologies
become available and other new competitors enter the market.
Competition could negatively affect our sales and profitability in
a number of ways. Other new competitors may enter our markets
through the development of innovative new technology, the
acquisition of rights to use existing technologies or the use of
existing technologies when patents protecting such existing
technologies expire. New or existing competitors may introduce new,
innovative, and competitive products and services, which could be
superior or perceived by our customers to be superior to our
products and services or lead to the obsolescence of one or more of
our products or services. Some of our competitors and potential
competitors may choose to differentiate themselves by offering
products and services perceived in the eyes of customers as
similar, at substantially lower sales prices, which could have an
adverse effect on our results of operations through loss of market
share or a decision to lower our own sales prices to remain
competitive. In addition, our ability to attract and retain
customers depends on the effectiveness of our customer marketing
and incentive programs and multiple competitors could bundle
product and service offerings through co-marketing or other
arrangements, which could enhance their ability to compete with our
broad product and service offering. Certain of our competitors and
potential competitors, have substantially greater financial and
managerial resources than us, as well as greater experience in
manufacturing, marketing, research and development, and obtaining
regulatory approvals than we do.
Changes in testing patterns could negatively affect our operating
results.
The
market for our products could be negatively impacted by a number of
factors impacting diagnostic assaying practices. Market acceptance
of vaccines or preventatives for the diseases and conditions for
which we sell diagnostic assays and services could result in a
decline in testing. Changes in accepted medical protocols regarding
the diagnosis of certain diseases and conditions could have a
similar effect. Eradication or substantial declines in the
prevalence of certain diseases also could lead to a decline in
diagnostic assaying for such diseases. Changes in government
regulations or in the availability of government funds available
for monitoring programs could negatively affect sales of our
products. In addition, changes and trends in local food markets
around the world could negatively affect the related production
markets resulting in a decline in demand for our diagnostic
assaying products. Declines in testing for any reason could have an
adverse effect on our results of operations.
Various U.S. and foreign government regulations could limit or
delay our ability to market and sell our products or otherwise
negatively impact our business.
Our
business is subject to numerous state, federal and international
rules and regulations. Several of these regulations may require
that we obtain approval from the related governmental agency prior
to the marking or sale of our products. Delays in obtaining
regulatory approvals for new products or product upgrades could
have a negative impact on our growth and
profitability.
We have
never successfully undertaken a clinical trial for animal testing.
Our experience in this area is limited. We have never obtained
regulatory approvals for any of our products. As such, we may be
unable to ever successfully undertake a clinical trial of our
products, and may be forced to curtail or modify our current
business plan.
In
addition, the manufacture, import, and sale of our products, as
well as our research and development processes, may be subject to
similar or more stringent laws in other countries. Compliance with
these regulations may require the expenditure of significant time
and resources by the Company, and could require the registration,
redesign or reformulation of our products in order to conform. Any
redesign or reformulation or restricted supply of parts and
components may negatively affect the availability or performance of
our products and services, add assaying lead-times for products and
reformulated products, reduce our margins, result in additional
costs, or have other similar effects. Any of these could adversely
affect our business, financial condition, or results of operations.
These legal and regulatory requirements are complex and subject to
change, and we continue to evaluate their impact. Additionally,
foreign governments may require us to register our products, and
these product registration requirements, which vary among the
applicable jurisdictions and change from time to time, are often
complex and require us to engage in lengthy and costly processes.
We cannot assure you that we will be able to obtain or maintain any
product registration required by one or more foreign governments.
Any inability to obtain or maintain a required product registration
in a jurisdiction could adversely affect our ability to market and
sell the applicable product in that jurisdiction, which could have
a negative effect on our business, financial condition and results
of operations.
We are
also subject to a variety of federal, state, local, and
international laws and regulations, as well as the associated legal
and political environments, concerning, among other things, the
importation and exportation of products; our business practices in
the U.S. and abroad, such as anti-corruption, anti-money
laundering, and anti-competition laws; and immigration and travel
restrictions. These legal, regulatory, and political requirements
and environments differ among jurisdictions around the world and
are rapidly changing and increasingly complex. The costs associated
with compliance with these legal and regulatory requirements and
adjusting to changing legal and political environments are
significant and likely to increase in the future.
Any
failure by us to comply with applicable legal and regulatory
requirements, or to adjust to changing legal and political
environments, could result in fines, penalties, and sanctions;
product recalls; suspensions or discontinuations of, or limitations
or restrictions on, our ability to design, manufacture, market,
import, export or sell our products; and damage to our reputation.
Any of these could negatively impact our business.
Future operating results could be negatively affected by changes in
tax rates, the adoption of new U.S. or international tax
legislation or exposure to additional tax liabilities.
We are
subject to local, state, regional and federal tax laws in
jurisdictions around the world. Our future tax expense could be
affected by changes in the mix of earnings in countries with
differing statutory tax rates, changes in the valuation of deferred
tax assets and liabilities or changes in tax laws or their
interpretation. Additionally, tax rules governing cross-border
activities are continually subject to modification as a result of
both coordinated actions by governments and unilateral measures
designed by individual countries, both intended to tackle concerns
over base erosion and profit shifting and perceived international
tax avoidance techniques.
The Tax
Cuts and Jobs Act, or the 2017 Tax Act, was enacted in the U.S. on
December 22, 2017, and includes significant changes to the U.S.
federal corporate tax system. Effective January 1, 2018, the 2017
Tax Act reduced the U.S. federal corporate tax rate from 35% to 21%
and transitioned from a worldwide tax system to a territorial tax
system. The 2017 Tax Act introduced new provisions including the
Global Intangible Low-Taxed Income, Foreign Derived Intangible
Income, Base Erosion Anti-Abuse Tax, expanded bonus depreciation
and changed deductions for executive compensation and interest
expense. The U.S. Department of Treasury continues to issue
regulations related to the 2017 Tax Act, which may increase or
decrease our tax liability in future periods.
Our
income tax filings may become subject to an audit by various tax
authorities, and the final determination of tax audits could be
materially different than that which is reflected in historical
income tax provisions and accruals. Significant judgment is
required in determining our provision for income taxes. We assess
our exposures related to our provision for income taxes to
determine the adequacy of our provision for taxes. Any reduction in
these contingent liabilities or additional assessments would
increase or decrease income, respectively, in the period such
determination is made.
Natural and other disasters, information technology system failures
and network disruptions and cybersecurity breaches and attacks
could adversely affect our business.
Our
business and results of operations could be negatively affected by
certain factors beyond our control, such as natural disasters
and/or climate change-related events (such as hurricanes,
earthquakes, fires, and floods); civil unrest; negative
geopolitical conditions and developments; war, terrorism, or other
man-made disasters; and information technology system failures,
network disruptions and cybersecurity breaches and attacks. Any of
these events could result in, among other things, damage to or the
temporary closure of our facilities; a temporary lack of an
adequate work force in one or more markets; an interruption in
power supply; a temporary or long-term disruption in our supply
chain (including a disruption to our ability to obtain critical
components for the development of our product candidates); and
short- or long-term damage to our prospective customers’
businesses (which would adversely impact demand for our products
and services).
We rely
on our own information systems, as well as those of our third-party
business partners and suppliers. Despite the introduction of system
backup measures and engage in information system redundancy
planning and processes, such measures, planning and processes may
be ineffective or inadequate to address all eventualities. Further,
our information systems and our business partners’ and
suppliers’ information systems may be vulnerable to attacks
by hackers and other security breaches, including computer viruses
and malware, through the internet (including via devices and
applications connected to the internet), email attachments and
persons with access to these information systems, such as our
employees or third parties with whom we do business. As information
systems and the use of software and related applications by us, our
business partners, suppliers, and customers become more cloud-based
and connected to the internet, there has been an increase in global
cybersecurity vulnerabilities and threats, including more
sophisticated and targeted cyber-related attacks that pose a risk
to the security of our information systems and networks and the
confidentiality, availability and integrity of data and
information. Any such attack or breach could compromise our
networks and the information stored thereon could be accessed,
publicly disclosed, lost, or stolen.
If we
or our business partners or suppliers were to experience a system
disruption, attack or security breach that impacts any of our
critical functions, or our customers were to experience a system
disruption, attack or security breach via any of our connected
products and services, it could result in a period of shutdown of
information systems during which we may not be able to operate, the
loss of sales and customers, financial misstatement, potential
liability for damages to our customers, reputational damage and
significant incremental costs, which could adversely affect our
business, results of operations and profitability. Furthermore, any
access to, public disclosure of, or other loss of data or
information (including any of our confidential or proprietary
information or personal data or information) as a result of an
attack or security breach could result in governmental actions or
private claims or proceedings, which could damage our reputation,
cause a loss of confidence in our products and services, damage our
ability to develop (and protect our rights to) our proprietary
technologies and adversely affect our business.
Risks Related to Ownership of our Common Stock
Our common stock is quoted on the Pink Open Market, formerly OTC
Pink Market, which may have an unfavorable impact on our stock
price and liquidity.
Our
common stock is quoted on the Pink Open Market under the symbol
“GTHR.” The Pink Open Market is a significantly more
limited market than the New York Stock Exchange or The NASDAQ Stock
Market. The quotation of our shares on the Pink Open Market may
result in a less liquid market available for existing and potential
stockholders to trade shares of our common stock, could depress the
trading price of our common stock and could have a long-term
adverse impact on our ability to raise capital in the
future.
We cannot predict the extent to which an active public trading
market for our common stock will develop or be sustained. If an
active public trading market does not develop or cannot be
sustained, you may be unable to liquidate your investment in our
common stock.
Currently
there is minimal public trading in our common stock. We cannot
predict the extent to which an active public market for our common
stock will develop or be sustained due to a number of factors,
including the fact that we are a small company that is relatively
unknown to stock analysts, stock brokers, institutional investors,
and others in the investment community that generate or influence
sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to
follow an unproven company such as ours or purchase or recommend
the purchase of our shares of common stock until such time as we
became more seasoned and viable. As a consequence, there may be
periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which
has a large and steady volume of trading activity that will
generally support continuous sales without an adverse effect on
share price. We cannot assure you that an active public trading
market for our common stock will develop or be sustained. If such a
market cannot be sustained, you may be unable to liquidate your
investment in our common stock.
Our common stock may be subject to significant price volatility,
which may have an adverse effect on your ability to liquidate your
investment in our common stock.
The
market for our common stock may be characterized by significant
price volatility when compared to seasoned issuers, and we expect
that our share price will be more volatile than a seasoned issuer
for the indefinite future. The potential volatility in our share
price is attributable to a number of factors. First, our shares of
common stock may be sporadically and/or thinly traded. As a
consequence of this lack of liquidity, the trading of relatively
small quantities of shares by our stockholders may
disproportionately influence the price of those shares in either
direction. The price for our shares could, for example, decline
precipitously in the event that a large number of our shares of
common stock are sold on the market without commensurate demand, as
compared to a seasoned issuer that could better absorb those sales
without adverse impact on its share price. Secondly, an investment
in us may be considered a speculative investment due to our lack of
profits to date and uncertainty of future profits. As a consequence
of this enhanced risk, more risk-adverse investors may, under the
fear of losing all or most of their investment in the event of
negative news or lack of progress, be more inclined to sell their
shares on the market more quickly and at greater discounts than
would be the case with the stock of a seasoned issuer.
We are subject to penny stock regulations and restrictions and you
may have difficulty selling shares of our common
stock.
The
United States Securities and Exchange Commission, or SEC, has
adopted regulations which generally define so-called “penny
stocks” to be an equity security that has a market price less
than $5.00 per share or an exercise price of less than $5.00 per
share, subject to certain exemptions. Our common stock is a
“penny stock” and is subject to Rule 15g-9, or the
Penny Stock Rule, under the Securities Exchange Act of 1934, as
amended, or the Exchange Act. This rule imposes additional sales
practice requirements on broker-dealers that sell such securities
to persons other than established customers and “accredited
investors” (generally, individuals with a net worth in excess
of $1,000,000 or annual incomes exceeding $200,000, or $300,000
together with their spouses). For transactions covered by the Penny
Stock Rule, a broker-dealer must make a special suitability
determination for the purchaser and have received the
purchaser’s written consent to the transaction prior to sale.
As a result, this rule may affect the ability of broker-dealers to
sell our securities and may affect the ability of purchasers to
sell any of our securities in the secondary market, thus possibly
making it more difficult for us to raise additional
capital.
For any
transaction involving a penny stock, unless exempt, the rules
require delivery, prior to any transaction in penny stock, of a
disclosure schedule prepared by the SEC relating to the penny stock
market. Disclosure is also required to be made about sales
commissions payable to both the broker-dealer and the registered
representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price
information for the penny stock held in the account and information
on the limited market in penny stock.
We
cannot assure you that our common stock will qualify for exemption
from the Penny Stock Rule. In any event, even if our common stock
were exempt from the Penny Stock Rule, we would remain subject to
Section 15(b)(6) of the Exchange Act, which gives the SEC the
authority to restrict any person from participating in a
distribution of penny stock, if the SEC finds that such a
restriction would be in the public interest.
We have never paid cash dividends on our stock and do not intend to
pay dividends for the foreseeable future.
We have
paid no cash dividends on any class of our stock to date and we do
not anticipate paying cash dividends in the near term. For the
foreseeable future, we intend to retain any earnings to finance the
development and expansion of our business, and we do not anticipate
paying any cash dividends on our common stock. Accordingly,
investors must be prepared to rely on sales of their common stock
after price appreciation to earn an investment return, which may
never occur. Investors seeking cash dividends should not purchase
our common stock. Any determination to pay dividends in the future
will be made at the discretion of our board of directors and will
depend on our results of operations, financial condition,
contractual restrictions, restrictions imposed by applicable law
and other factors our board deems relevant.
Fluctuations in our quarterly or annual results may cause our stock
price to decline.
Our
operating results could fluctuate due to a number of factors,
including changes in our accounting estimates; litigation and
claim-related expenditures; increase in the number and type of
competitors; changes in competitors’ product offerings; and
other matters. Similarly, our future operating results may vary
significantly from quarter to quarter or year to year due to these
and other factors, many of which are beyond our control. If our
operating results or projections of future operating results do not
meet the expectations of securities analysts or investors in future
periods, our stock price may fall.
ITEM
1B.
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 used to occupy approximately
7,990 square feet of office and laboratory space. The Company lost
the abovementioned lab and office space thanks to Fredric Oeschger,
the owner of FOGT, LLC. As soon as we completed our Third
Milestone, as per the Milestone Investment Agreement (signed and
agreed upon by Oeschger and his attorney), which the Milestone was
for the Company to be in compliance with the Securities and
Exchange Commission (SEC). Due to Fredric Oeschger breaching his
contract agreement with GeneThera, the lease agreement with WPC
Clear Creek and GTI Research, Inc., was terminated because WPC
could not continue waiting for the rent payment. Presently, we are
in negotiations with other landlords for laboratory space.
Meanwhile, we are renting a mailbox in Westminster while we review
the terms of lease agreements for three (3) prospective laboratory
spaces in Lafayette, Westminster, and Lakewood, CO. We are hopeful
to complete a lease agreement in early 2020. We believe any of
these three facilities are more than adequate for our needs and for
the immediate future and that, should it be needed, additional
space can be leased to accommodate any future growth. This sublease
arrangement was terminated effective April 29, 2019.
On
January 1, 2018, we entered into a sublease for a 7,990 square foot
office and lab space on 6860 Broadway in Denver, Colorado 80221,
with GTI Research, Inc., our scientific robotic technology
collaborator, for 75 months. GTI Research, Inc. required payment of
$12,000 security deposit in December of 2017. Monthly base rents
under this lease are as follows:
|
Period
|
Monthly
Base Rent
|
|
01/01/18 –
03/31/18
|
$0.00
|
|
04/01/18 –
03/31/19
|
$5,993
|
|
04/01/19 –
03/31/20
|
$6,658
|
|
04/01/20 –
03/31/21
|
$7,324
|
|
04/01/21 –
03/31/22
|
$7,990
|
|
04/01/22 –
03/31/23
|
$8,656
|
|
04/01/23 –
03/31/24
|
$9,322
|
Between
January 1, 2018, and April 29, 2019, we subleased office and
laboratory space in Denver, Colorado from GTI Research. As of April
29, 2019, the landlord of GTI Research, changed the locks, blocking
access to the laboratory facilities. The failure to receive two (2)
emergency injunctive payments in the amount of $80,000 from FOGT,
LLC aka Fredric Oeschger, during mediation/arbitration, caused the
landlord to block all occupants. Administration asked for more time
as the defendant continuously utilized delay tactics to cause
financial harm to the Company. We are not required to pay any
proportionate share of all real estate taxes, building insurance
and maintenance costs.
GTI
Corporate Transfer Agents, LLC partially relocated to Puerto Rico.
However, their mailing address is in Westminster, CO, together with
the Company’s mailing address. Since GTI Corporate Transfer
Agents, LLC and GeneThera no longer share office space, full
maintenance monthly payments for transfer services are
expected.
For
more than six months, we have been securing a lab space in
Lafayette, CO. Unfortunately, the current tenant has not moved out
as of yet. It is expected for the Company to renegotiate lab space
with the owner on or before January 2020, when the current tenant
will be moving out of such premises. We believe that our
prospective leasing properties will continue to be adequately
maintained, it will be generally in good condition, and is suitable
and adequate for our business.
No
right of use asset or corresponding lease liability was recorded on
the books as the lease terminated on April 29, 2019.
ITEM
3.
LEGAL
PROCEEDINGS
From time to time, we may be involved in litigation relating to
claims arising out of our operations.
We were involved in a breach of contract agreement with FOGT, LLC
and Fredric Oeschger. Oeschger failed to pay the third milestone
after completion of such milestone on November 30, 2018. According
to the contract, if it was breached, arbitration and mediation are
the venues to resolve any pending issues. Oeschger was our board
member, who resigned on December 6, 2018 and also resigned as our
investor, thanks to breaching his fiduciary duties as our board
member when he was negatively influenced by a third party.
Moreover, Oeschger, had made financial arrangements with such third
party in order to get financial gain for a debt owed by such third
party. FOGT and Oeschger’s legal representatives regularly
utilized delay tactics in order to financially harm and/or
completely shut down the Company and its market value, to no
success. Oeschger was well aware of the financial damages he was
and continued to cause the Company to the point of openly admitting
pledging his ownership of Preferred A Stock to a third party, which
was Jeffrey A. Diette.
Once this information was acknowledged, a settlement agreement was
completed for a minimum financial cost to Oeschger. His legal
representatives; one of them, Andre Bouffard, continued to diminish
the monetary award to $425,000. Dr. Milici was present during
arbitration/mediation. Dr. Milici refused to give FOGT, LLC aka
Fredric Oeschger any Preferred A Stock, after Oeschger provided an
alleged pledge to forward FOGT, LLC’s Preferred Stock A to a
third party.
The Preferred A Stock in the total amount of 10,350 was cancelled
effective September 3, 2019. Fredric Oeschger received no stock
from GeneThera. We may, however, be involved in material legal
proceedings in the future. Such matters are subject to uncertainty
and there can be no assurance that such legal proceedings will not
have a material adverse effect on our business, results of
operations, financial position or cash flows.
ITEM
4.
MINE
SAFETY DISCLOSURES
Not
applicable.