Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
¨
No
x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
¨
No
x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
x
No
¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
x
No
¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant
s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes
x
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, and accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of
large accelerated filer,
accelerated filer
and
smaller reporting company
in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act Yes
¨
No
x
The issuer's revenues for the most recent fiscal year ended December 31, 2015 were $0.
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant
s most recently completed second fiscal quarter was approximately $23,711.
PART I.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
Sections of this Form 10-K, including Business and Management's Discussion and Analysis or Plan of Operation, contain "forward-looking statements". These forward-looking statements are subject to risks and uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. You should not unduly rely on these statements. Forward-looking statements involve assumptions and describe our plans, strategies, and expectations. You can generally identify a forward-looking statement by words such as may, will, should, would, could, plan, goal, potential, expect, anticipate, estimate, believe, intend, project, and similar words and variations thereof. This report contains forward-looking statements that address, among other things,
* Our financing plans,
* Regulatory environments in which we operate or plan to operate, and
*Trends affecting our financial condition or results of operations, the impact of competition, the start-up of certain operations and acquisition opportunities.
Factors, risks, and uncertainties that could cause actual results to differ materially from those in the forward-looking statements ("Cautionary Statements") include, among others,
* Our ability to raise capital,
* Our ability to execute our business strategy in a very competitive environment,
* Our degree of financial leverage, risks associated with our acquiring and integrating companies into our own,
* Risks relating to rapidly developing technology, and regulatory considerations;
* Risks related to international economies,
* Risks related to market acceptance and demand for our products and services,
* The impact of competitive services and pricing, and
* Other risks referenced from time to time in our SEC filings.
All subsequent written and oral forward-looking statements attributable to us, or anyone acting on our behalf, are expressly qualified in their entirety by the cautionary statements. We do not undertake any obligations to publicly release any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect unanticipated events that may occur.
ITEM 1. BUSINESS
In November 2007, GeneThera, Inc. (
we
,
us
, the
Company
or
GeneThera
) reincorporated in the State of Nevada due to the fact that a third party had acquired the Company
s prior Florida Corporate Charter and the fact that the Company was unable to regain the control of such Corporate Charter. We had a special meeting of shareholders where it was unanimously resolved for GeneThera to transfer its Charter to the State of Nevada as soon as possible in order to recognize our new incorporation on our next SEC filing. The reinstatement was completed by January 2008.
Our common stock currently trades on the OTC
Over-The-Counter
pink market under the symbol GTHR. Our temporary office is located at 9101 Harlan Street Suite 130 in Westminster, CO 80031 and our telephone number is 303-439-2085. This office only answers the phone calls until our new laboratory space
s new lease agreement and renovations are completed.
For the fiscal year 2015, and as of now, the Company had one subsidiary, GeneThera, Inc., a Colorado corporation. GeneThera no longer has holds a commercial diagnostics laboratory in Mexico.
COMPANY PROFILE
GeneThera is a biotechnology company, dedicated to improving food safety by
applying the latest molecular technologies to eradicate "cross-over"(zoonotic) diseases such as Johne's Disease, Mad Cow Disease, Chronic Wasting Disease, and E.coli. Diseases of terrestrial, avian and aquatic life animals influence a number of economic and global security issues; 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. The Company focuses on developing molecular diagnostic tests, therapeutics, and vaccines in the belief that better technologies and methodology need to be implemented to help control emerging diseases in animals and in humans, and believes that, if not, these diseases in animals will likely continue to cause serious and growing problems in terms of economics, human health and biodiversity.
GeneThera has developed proprietary diagnostic assays for use in the agricultural and veterinary markets. Specific assays for Chronic Wasting Disease (among elk and deer) and Mad Cow Disease (among cattle) have been developed and are available currently on a limited basis. E. coli (predominantly cattle) and Johne's disease (predominantly dairy cattle and bison) diagnostics are in development. GeneThera is making a pivotal shift from a Research and Development organization into a product marketing and revenue generating entity. The Company
s previous strategy that we had maintained from inception to July 2008 had been one of research only. We focused all our energies, talent, and resources to the incubation and growth of new ideas in the realm of genetically engineered disease detection and vaccination. We feel that with recent announcements
the Company is positioned to move from a developmental stage to a product oriented stage company, depending on reliable funding.
GeneThera provides genetics-based diagnostic and is currently working on vaccine solutions to meet the growing demands of today's veterinary industry and tomorrow's agriculture and healthcare industries. The Company is organized and operated both to continually apply its scientific research to more effective management of diseases and, in so doing, realize the commercial potential of molecular biotechnology.
The Company believes it will require significant additional funding in order to achieve its business plan. Over the next 12 months, in order to have the capability of achieving its business plan, the Company will require at least $10,000,000 in additional funding. There are no guarantees that the Company will be able to secure such financing, and if the financing is secured, there are no guarantees whether the Company can fully achieve the goals laid out in its business plan.
Johne
s Disease
GeneThera
s 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 (JD), 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:
·
Worldwide Infection.
·
Reduction in milk production to 25%+.
·
High culling rate which increases costs.
·
JD affects trade and hinders exports.
·
Link between JD 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 transplacental.
·
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 MAP 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 JD. 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.
Crohn
s Disease
Crohn's disease (also known as Crohn-Leśniowski Disease, or "Charlotte Forditis" morbus Leśniowski-Crohn, granulomatous and regional enteritis) 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 MAP 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
GeneThera has developed proprietary diagnostic assays for use in the agricultural and veterinary markets. Specific assays for Chronic Wasting Disease (among elk and deer) and Mad Cow Disease (among cattle) have been developed and are available currently on a limited basis. E. coli (predominantly cattle) and Johne's disease (predominantly dairy cattle and bison) diagnostics are in development. GeneThera is making a pivotal shift from a Research and Development organization into a product marketing and revenue generating entity, depending on reliable source of funding. The Company
s previous strategy that we had maintained from inception to July, 2008 had been one of research only. We focused all our energies, talent, and resources to the incubation and growth of new ideas in the realm of genetically engineered disease detection and vaccination. We feel that with recent announcements the Company is positioned to move from a developmental stage to a product oriented stage company once funding is secured.
GeneThera provides genetics-based diagnostic and is currently working on vaccine solutions to meet the growing demands of today's veterinary industry and tomorrow's agriculture and healthcare industries. The Company is organized and operated both to continually apply its scientific research to more effective management of diseases and, in so doing, realize the commercial potential of molecular biotechnology.
GeneThera animal disease assay development business is based on its Integrated Technology Platform (ITP) that combines a proprietary diagnostic solution called Gene Expression System (GES) with PURIVAX, its system for analyzing large-scale DNA sequencing. The first part of this platform is the ongoing development of molecular diagnostic assays solutions using real time Fluorogenic Polymerase Chain Reaction (F-PCR) technology to detect the presence of infectious disease from the blood of live animals. The second part of the ITP is the development of therapeutic vaccines using RNA interference technology. Interference RNA 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. These facts distinguish the technology from any alternative testing and management methodology available to agriculture today -- all of which require the destruction of individual animals and even entire herds. Our testing and data analysis processes also allow us not only to separate infected from clean animals, but also to gain knowledge vital to development of preventative vaccines.
Each individual assay utilizes the proprietary Field Collection System (FCS) for the collection and transportation of blood samples to GeneThera laboratory. This system consists of two (2) tubes. A 5 milliliter (ml) red cap tube containing 1ml anticoagulant
solution and a 10 ml white cap tube. One (1) ml of blood is collected from the animal and added to the red cap tube. Ten (10ml) of milk is collected into the white cap tube. The FCS allows GeneThera to maintain the integrity of each sample by the addition of specific reagents to test tubes contained in the system. GeneThera FCS is designed to be an easy-to-use method of gathering blood samples from harvested or domesticated animals. It ensures consistency of samples as well as increased assurance of each sample's integrity.
To date, GeneThera has successfully developed the ability to detect Chronic Wasting Disease, a disease affecting elk and deer in North America. The release of commercialized Field Collection Systems and laboratory diagnostic testing occurred in October of 2003 as a marketing trial. GeneThera has also successfully developed an assay for the detection of Mad Cow Disease, a disease recently found in the United States, but which has been in Europe for many years. The Field Collection Systems are available for purchase from the Company. Chronic Wasting Disease and Mad Cow Disease are both in the family of diseases called Transmissible Spongiform Encephalopathy (TSE). Diagnostic assays for E. coli O157:H7 and Johne's disease are in the final stages of development.
The Company, through GeneThera, is also developing vaccines for Chronic Wasting Disease and E. coli O157:H7. The Company will need the approval of the USDA before the vaccines can be manufactured or sold. The approval process for animal vaccines is time-consuming and expensive. We anticipate that such approval, if it is obtained, may require more than $5 million and may require more than two years for each vaccine for which approval is sought. Currently, we do not have the capital necessary to seek approval of any of our candidate vaccines, and we cannot provide any assurance that we will be able to raise the capital necessary for such approval on terms that are acceptable to us, if at all. In addition, even if we are successful in raising the capital necessary to seek approval of any vaccine, there are no assurances that such an approval will be granted, or if granted, whether we will be able to produce and sell such vaccines following such an approval in commercial quantities or to make a profit from such production and sales.
INTEGRATED TECHNOLOGY PLATFORM (ITP)
GeneThera
s Integrated Technology Platform (ITP) is the foundation for
fast-track
rDNA vaccine development. We are currently working on the development of a recombinant DNA vaccine for Johne
s disease. Johne
s disease is a chronic debilitating infectious disease of ruminants, characterized by weight loss and, particularly in cattle, by profuse diarrhea. The causal agent is a bacterium, Mycobacterium avium subspecies paratuberculosis. Infected animals may show no sign of the disease until years after the initial infection. Johne
s is a slow, progressive disease with worldwide distribution.
The vaccine development is in the
in vitro
or pre-clinical stage. We expect to initiate experimental animal studies for Johne
s disease in the next 36-48 months. ITP combines the following technologies: 1) gene expression system technology or
GES
; 2) viral DNA purification technology or PURIVAX technology; 3) genetically engineered Adenovirus (rAD) and recombinant Adeno Associate Virus (rAAV) systems (vectors).
This integrated technology platform yields fast-track vaccine development. Leveraging its ITP, GeneThera believes that it can develop a prototype vaccine within 18 months versus the current standard of 24 to 36. We estimate that the cost to bring these vaccines to market is $5-7 million. There is no assurance that we will be able to raise the capital necessary to bring a vaccine to market and if the capital is raised, that we will be able to comply with the government regulations involved in bringing such a product to market. The GES applied modular unit system utilizes robotics and is based on nucleic acid extraction in conjunction with F-PCR technology to develop gene expression assays. Using GES assays, vaccine efficacy can be measured quickly because it will be unnecessary to wait for the antibody response to measure how well the vaccine is working. F-PCR will allow effective quantification of the precise number of viral or bacterial genetic particles before, during and after vaccine injection(s). We anticipate that the more effective the vaccine is, the stronger the decrease of the infectious disease particles will be.
GES SYSTEM
GES is a proprietary assay development system. To date, the system has been used to develop our TSE and Johne
s disease molecular assay. GES is a gene expression system to be used in our laboratory and will be marketed for commercial sale under the trade name HERDCHECK. The core of GES is Fluorogenic Polymerase Chain Reaction technology (F-PCR). GeneThera approaches the technical problems related to the use of conventional PCR in molecular diagnostics via our modular unit concept. Specifically, the modular unit consists of an Automated Nucleic Acid Workstation (ANAW) and a Sequence Detection System (SDS) that are integrated, allowing an operator to perform the entire procedure of DNA extraction and F-PCR analysis within a closed computerized system. This system results in minimal intervention and non-post-PCR manipulation. GES is a molecular genetic base system that utilizes Fluorogenic Polymerase Chain Reaction (F-PCR). Fluorogenic PCR (F-PCR) is a technology based on sequence specific hybridization between a nucleic acid target and a fluorogenic probe, a short sequence of DNA chemically treated to generate light at a specific wavelength, complementary to the target sequence. The probe consists of an oligonucleotide, a short synthetic DNA molecule, with two fluorescent molecules (a reporter and quencher dye) attached to both ends of the oligonucleotide. Due to the unique design of the Fluorogenic probe, the activity of the Taq Polymerase enzyme allows direct detection of PCR products by the release of the fluorogenic reporter during PCR. The reporter and the quencher dye are linked at the end of the probe. When the probe is intact, the proximity of the reporter dye to the quencher dye results in a suppression of the reporter fluorescence. During PCR, if the target of interest is present, the probe specifically anneals between the forward and the reverse primer site. The nuclease activity of the Taq DNA Polymerase cleaves the probe between the reporter and the quencher only if the region binds to the target. If the probe is not bound then no cleavage occurs. After cleavage, the shortened probe dissociates from the target and the polymerization of the DNA strand continues. This process occurs in every cycle and does not interfere with the exponential accumulation of the product. The cleavage of the oligonucleotide between the reporter and the quencher dye results in an increase of fluorescence of the reporter
that is directly proportional to the amount of the product accumulated. The specificity of this 5
nuclease assay results from the requirement of sequence complementary between probe and template in order for cleavage to occur. Thus, the fluorogenic signal is generated only if the target sequence of the probe is generated by PCR. No signal is generated by non-specific amplification.
To perform GES, specific laboratory equipment is needed. This involves some substantial initial costs to set up the laboratory operations. We have performed this substantial set up and will be fully operational again to perform GES, once the laboratory renovations are completed. We currently have an exclusive worldwide collaboration agreement with Hudson Robotics, Inc., which will provide the specific equipment necessary to further development. However, the use of F-PCR represents a great advantage over other available systems because of its greater sensitivity, speed, and accuracy.
The Automated Nucleic Acid Workstation is a highly flexible robotic system that extracts and purifies acids from a variety of complex samples, preparing them for F-PCR analysis. Data management system software includes a database to manage all run phases and record sample processing.
The Sequence Detection System detects the fluorescent signal generated by the cleavage of the reporter dye during each PCR cycle. This process confers specificity without the need of post-PCR hybridization. Most importantly, the SDS offers the advantage of monitoring real-time increases in fluorescence during PCR processing. Specifically, monitoring real-time progress of the PCR completely changes the approach to PCR-based quantitation of DNA and RNA, most particularly, in improving the precision in both detection and quantitation of DNA and RNA targets.
GeneThera currently faces limited competition in the use of F-PCR technology and the modular unit concept for commercial testing of either infectious disease in animals or food pathogen contamination. Currently, most labs utilize conventional microbiology, immunological or conventional PCR methods for either veterinary diseases or food pathogen contamination detection. Specific to microbiology and immunological techniques, the drawbacks of these approaches are:
1.
The antibodies-based culture media used to detect the presence of infectious
diseases has a low level of sensitivity; and
2. High background due to non-specific binding of antibodies and/or culture
contamination; sample preparation and storage creates artifacts; and long, cumbersome protocols necessary to perform these tests.
A major technical limitation of conventional PCR is the risk of contaminating a specimen with the products of previously amplified sequences. Known as cross-contamination, this phenomenon represents a constant challenge to any lab using conventional PCR. Managing these challenges is cumbersome and difficult to streamline. Fluorogenic PCR (F-PCR) attempts to overcome these drawbacks by making it possible for PCR to
efficiently test large numbers of samples even when major laboratory facilities are not readily available. A novel methodology, F-PCR allows quantitative and qualitative detection of specific nucleic acid sequences in a sensitive, accurate, and rapid fashion.
PURIVAX TECHNOLOGY
GeneThera has developed a large-scale process for highly purified and high viral titer (viral concentration) Adenovirus and AAV genetically engineered viruses. This technology enables GeneThera to develop Adenovirus and AAV-based recombinant DNA vaccines for veterinary diseases and food pathogens. GeneThera
s 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.
Recombinant Adenovirus (rAD) and AAV (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
2. Low viral titer.
Traditional technologies and first generation chromatography processes are limited both in terms of purity and yield. And, due to the limitation of these purification technologies, adequate viral titers cannot 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 GeneThera
s 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/eulate) based on its propriety multi-resin anion exchange chromatography system. GeneThera believes 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
GeneThera provides a comprehensive Johne
s solution that allows diagnosing, treating and managing herds at risk or already infected with Johne
s disease.
Our proprietary Integrated Product Development Platform (IPDP) 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 the GeneThera platform can prevent the spread of the Mycobacterium into the food chain. An important part of this strategy is GeneThera
s ability to detect the presence of a low number of infected particles in milk tested for the presence of the Mycobacterium Paratuberculosis. Therefore, our IPDP not only is able to detect Johne
s infected animals, but can also prevent potential human infections.
HERD GUARD
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 a GeneThera laboratory for
processing.
The major features of the testing system are:
High throughput system.
Capable of more than 20,000 tests per month.
Highly defined and structured testing system.
Proprietary Real Time PCR technology.
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. (PURIVAX)
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.
DEVELOPMENTS TO DATE
HerdCheck
GeneThera has developed a molecular system for the detection of Johne
s disease in milk, blood and feces of dairy cows infected with the Mycobacterium paratuberculosis sub. Avium. (MAP). Samples from milk obtaining from supermarket shelves were either
spiked
with different concentrations of MAP 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 MAP 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.
HerdSoft
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.
HerdSafe
We are currently developing a vaccine for Johne
s disease. GeneThera
s approach for developing this vaccine is based on the use of PURIVAX technology, genetically engineered Adenoviral and AVV, and silencing RNA technology (iRNA). To date, we have modified the Adenovirus by inserting a gene of the MAP bacterium responsible for triggering the infection in blood cell.
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.
Disease and
FUTURE DEVELOPMENT PLANS
We anticipate that research and development (R&D) will be the source for both assay development and vaccine design/development. If we are able to develop assays for different diseases, we intend to formalize the procedure into a commercial application through a series of laboratories to be owned and operated by GeneThera. To date, we
have introduced our diagnostic solution for Chronic Wasting 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 GeneThera
s intention to continue with the research and development and validation of the molecular tests and DNA vaccines. Future plans comprises in 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 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 18-36 months.
R&D SERVICES
Molecular, Cellular, Viral Biology Research and Consulting Services
: We provide independent research services to scientists in academia, the pharmaceutical industry, and the biotechnology industry. Primarily, GeneThera expertise focuses on technology relevant to animal and human immunotherapy. These services are backed by the cumulative experiences of greater than 50 years of research and development in both government and industry by GeneThera senior scientists. GeneThera intends to develop a commercial-scale implementation of Adenovector Purification Process to support R&D material production. Furthermore, GeneThera intends to evaluate and test commercially available expression vectors and incorporate them into its vector repertoire. These technologies are well established within the repertoire of GeneThera scientific staff. We cannot provide any assurance, however, that we will be able to successfully offer these services or that, if offered, we can provide them profitably.
Research & Development Services
:
Molecular Biology:
Synthetic cDNA Construction
Prokaryotic Expression Vector Construction & Development
E. coli Expression Strain Evaluation
Pilot Scale Fermentation
Mammalian Expression Vector Construction & Development
Baculovirus Expression
Protein Isolation
Protein Engineering: Complement Determining Region Conjugated Proteins
Monoclonal Antibody Production Chimerization & Humanization
Vector design for Prokaryotic Expression of Antibody Fragments (Fab) and Single Chain
Antibody (ScFv)
Pilot Scale-up Development
Process Purification & Characterization
Assay Development & Quality Control Pharmaceutical Dosage and Formulation
Gene Therapy Testing Services
: GeneThera offers GLP (Good Laboratory Procedure) testing programs for somatic cell, viral and naked DNA-based gene therapies. Our scientists have over twenty years of experience in providing fully integrated bio-safety testing programs for the cell and gene therapy fields. To date, the Company has not generated any revenues with regard to these services, and there is no assurance that we will generate any revenues from such services.
Replication-Competent Viral Vector Testing
: Sensitive in vitro cell culture assays are used to detect replication-competent retroviruses or adenoviruses. GeneThera can work with clients to provide custom replication-competent virus detection assays for the particular vector construct.
Complete Somatic Cell and Viral Vector Packaging and Producer Cell Line Characterization
: GeneThera offers all of the assays mandated by regulatory authorities worldwide for the bio-safety analysis and characterization of cells and cell lines used in gene therapy products.
Vector Stock Characterization
: Custom purity and potency testing is available for gene therapy viral vector stocks.
Vector Purification Process Validation for Viral Clearance
: Most biopharmaceuticals require viral clearance studies to validate the removal of potential contaminants, such as those from bovine components or from helper viruses (adenovirus in AAV production). GeneThera can provide custom design and performance of viral studies for various vector purification processes.
Custom Bio-safety Testing Programs for Somatic Cell, Ex Vivo Cell, and Tissue Therapies
: GeneThera can guide our clients through the unique process of designing and implementing a bio-safety testing program that meets the needs of each specific project.
GeneThera is currently seeking contracts for these services to be performed on an annual basis. There is no assurance that any contracts will be signed or that the Company will generate significant revenues or profits from any such contracts.
MARKETING STRATEGY
GeneThera
s goal is to focus on the international markets, primarily Pacific Rim and Europe, for the commercialization of its animal testing platform. The company has 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.
SALES AND MARKETING
Our sales and marketing efforts will be primarily in Europe and Pacific Rim (New Zealand and Australia).
COMMERCIAL DIAGNOSTIC TESTING
In the event that we are able to develop assays for the detection of diseases in animals, we intend to establish a series of diagnostic testing laboratories geographically proximate to the primary sources of individual diseases and/or according to specific available operating efficiencies. The specific number of labs to be built and operated will be based on assay demand (demand facilitated by the number of specific disease assays GeneThera develops), our ability to obtain the capital to build the labs, and our ability to successfully manage them from our principal office. As of the date of this filing, we are in 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 GeneThera does not intend to be a vaccine manufacturer, we plan to use our licensing division to license the technology related to any vaccines that may be developed and to manage the revenue potential available from the successful development and validation of specific vaccines. We cannot provide any assurance that we will develop any vaccines or that, if they are developed, we will be able to license them successfully or that any such license will produce significant revenues.
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 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., 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. We do not intent to manufacture, sell, and distribute any diagnostic or therapeutic product in the United States in the foreseeable future.
PRODUCT LIABILITY
The testing, manufacturing, and marketing of the Company
s 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 its diagnostic tests without the need for a long and enduring approval process from the USDA. However, it is our intention not to seek, in the foreseeable future, any approval either from the USDA or the FDA 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. Validation studies will be conducted in collaboration with each country
s government guidelines. We expect to communicate with the public about the validation study
s commencement and completion within the next 18-36 month period.
ITEM 1A: RISK FACTORS
We encounter various risks related to our business and our industry. While the Company is optimistic about its long term prospects, the following risk factors should be considered in evaluating its outlook
.
There is a substantial doubt about GeneThera
s ability to continue as an on-going concern
.
GeneThera has had negligible revenues since inception, had a negative working capital deficit and an accumulated deficit of $6,477,341 and $25,034,821, respectively as of December 31, 2015, and had a net loss of $1,085,471 for the year ended December 31, 2015. Because of these circumstances, GeneThera will require additional working capital to develop business operations. There is no assurance that GeneThera will reach a level of revenues adequate to generate sufficient cash flow from operation or
obtain additional financing necessary to support GeneThera operating expense requirements. If financing is available, it may involve issuing securities senior to our common stock. In addition, in the event we do not raise additional capital from conventional sources, such as our existing investors or commercial banks, there is a likelihood that our growth will be restricted and we may be forced to scale back or curtail implementing our business plan.
If a Loss of Key Personnel Will Occur This Event Could Adversely Affect the Company.
The Company depends 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 will have a material adverse effect on the business, results of operations (if any) and financial condition of the Company. In addition, the loss of Dr. Milici may force the Company 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, which could force the Company to curtail its operations and/or cause any investment in the Company to become worthless. The Company has an employment agreement with Dr. Milici, which ends on January 7, 2017.
If the
Company fails to attract and retain additional highly skilled personnel, operations will suffer.
Finding qualified personnel in the biotechnology industry is very challenging. Smaller biotechnology companies are always at a disadvantage because of its limited financial resources. The Company has been unable at this time to hire any additional qualified personnel. If the Company is unable to hire additional personnel, this may result in a substantial delay of its R&D and commercial operations.
If the Company fails to attract significant additional capital, the Company may be unable to continue developing its products.
From the beginning of its operation, GeneThera has obtained limited funding to implement its business strategy. The Company believes it will require significant additional funding in order to achieve its business plan. Over the next 12 months, in order to have the capability of achieving its business plan, the Company will require at least $10,000,000 in additional funding. There are no guarantees that the Company will be able to secure such financing, and if the financing is secured, there are no guarantees whether the Company can fully achieve the goals laid out in its business plan. If financing is available, it may involve issuing securities senior to our common stock. In addition, in the event we do not raise additional capital from conventional sources, such as our existing investors or commercial banks, there is a likelihood that our growth will be restricted and we may be forced to scale back or curtail implementing our business plan.
Rapid growth may place significant demands on our resources.
We expect significant expansion of our operations, funding permitting, moving forward. Our anticipated future growth will place a significant demand on our managerial, operational and financial resources due to:
* The need to manage relationships with various strategic partners and other third parties.
* Difficulties in hiring and retaining skilled personnel necessary to support our business.
* The need to train and manage a growing employee base.
* Pressures for the continued development of our financial and information management systems.
If we have not made adequate allowances for the costs and risks associated with this expansion or if our systems, procedures, or controls are not adequate to support our operations, our business could be harmed.
The Company may not be able to comply with Government regulations.
The Company is subject to or affected by laws and regulations that govern, for example: the vaccination of animals for certain diseases. The failure to comply with these laws and regulations, or to obtain applicable governmental approvals, could result in the imposition of penalties, cause delays in, or make impossible, the marketing of our products and services.
The Company may be unable to compete against other more establish biotech of pharmaceutical companies.
The Company operates in a very
competitive and difficult area. Biotechnology business is notoriously challenging and risky. The Company competes with other more established and better funded companies in the United States and overseas 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 which will make the Company
s products less valuable or unmarketable.
The Company has limited Government Regulatory Experience.
The Company has never successfully undertaken a clinical trial for animal testing. Our experience in this area is limited. The Company has never obtained regulatory approvals for any of its products. As such, the Company may be unable to ever successfully undertake a clinical trial of its products, and may be forced to curtail or abandon its current business plan.
The Company has a history of operating losses.
We have generated no revenues to date from our operations. Historically, we have had net operating losses each year since our inception. Additionally, even if we are able to commercialize our technology or any products, it is not certain that will result in revenues
or profitability.
The Company relies on third parties for sale, distribution and manufacturing.
We do not have any
in house
sale, distribution or manufacturing capabilities. The success of our operations mostly depends by the ability of marketing entities.
.
The Company has a limited operating history on which investors may evaluate our operation and prospects for profitable operations
If we continue to suffer losses as we have in the past, investors may not receive any return on their investments. Our prospects must be consider speculative in light of the risks, expenses and difficulties frequently encountered by companies in their early stages of development. A substantial risk is involved in investing in the company because we have fewer resources than established companies.
The company depends on new and rapidly evolving technologies
We are engaged in activities in the biotechnology field, which is characterized by extensive research effort and rapid technological progress. If we fail to anticipate or respond adequately to technological developments, our ability to operate profitably 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 these technologies do not produce satisfactory results, our business may be harmed.
Over the last year we have narrowed our potential product development to focus on the molecular testing of Johne
s disease.
Due to the increase cost of R&D and the very challenging economic environment we have decided to concentrate our efforts in the development of a commercial platform for the diagnostic of Johne
s disease. As a result, the success of the company depends entirely on being able to commercialize our product. If we are unable to achieve this goal, the Company
s operations could greatly suffer and any investment in the Company could be lost.
The Company may not obtain foreign regulatory approval to market any of our products.
If we fail to obtain regulatory approval of any of our products, we will not be permitted to market our products and may be forced to cease operations.
Our technology is not protected by patents.
Our technology and know-how is not patented. We rely on trade secrets to protect our intellectual property. We cannot assure, however, that these trade secrets 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.
The Company may not be able to raise the required capital to conduct our operations and develop and commercialize our products.
We require substantial additional
resources in order to conduct our operations and develop and commercialize our products and run our facilities. We will need significant additional funds or a collaborative partner, or both, finance research and development activities of our potential products. Accordingly, we are continuing to pursue additional sources of financing. Additional financing through strategic collaborations, public or private equity financing sources may not be available on accepted terms. Additionally, equity financing could result in significant dilution to our shareholders. Further, if additional funds are obtained through arrangements with collaborative partners, these arrangements may require us to relinquish rights to some of our technologies, or products that we would otherwise seek to develop and commercialize on our own. If sufficient capital is not available, we may be required to delay, reduce the scope of or eliminate one or more of our programs or potential products any of which could have a material adverse effect on our financial condition or business prospect
We have incurred, and expect to continue to incur, increased costs and risks as a result of being a public company.
As a public company, we are required to comply with the Sarbanes-Oxley Act of 2002, or SOX, as well as rules and regulations implemented by the SEC. Changes in the laws and regulations affecting public companies, including the provisions of SOX and rules adopted by the SEC, have resulted in, and will continue to result in, increased costs to us as we respond to these requirements. Given the risks inherent in the design and operation of internal controls over financial reporting, the effectiveness of our internal controls over financial reporting is uncertain. If our internal controls are not designed or operating effectively, we may not be able to issue an evaluation of our internal control over financial reporting as required or we or our independent registered public accounting firm may determine that our internal control over financial reporting was not effective. In addition, our registered public accounting firm may either disclaim an opinion as it relates to management
s assessment of the effectiveness of our internal controls or may issue an adverse opinion on the effectiveness of our internal controls over financial reporting. Investors may lose confidence in the reliability of our financial statements,
which could cause the market price of our common stock to decline and which could affect our ability to run our business as we otherwise would like to. New rules could also make it more difficult or costlier for us to obtain certain types of insurance, including directors
and officers
liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the coverage that is the same or similar to our current coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board committees, and as executive officers. We cannot predict or estimate the total amount of the costs we may incur or the timing of such costs to comply with these rules and regulations.
Compliance with Section 404 of the Sarbanes-Oxley Act will continue to strain our limited financial and management resources.
We incur significant legal, accounting and other expenses in connection with our status as a fully reporting public company. The Sarbanes-Oxley Act and new rules subsequently implemented by the SEC have imposed various new requirements on public companies, including requiring changes in corporate governance practices. As such, our management and other personnel need to devote a substantial amount of time to these new compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and made some activities more time-consuming and costly. In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure of controls and procedures. Our testing may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 requires that we incur substantial accounting expense and expend significant management efforts. We may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.
Investors May Face Significant Restrictions On The Resale Of Our Common Stock Due To Federal Regulations Of Penny Stocks.
Our common stock will be subject to the requirements of Rule 15g-9, promulgated under the Securities Exchange Act as long as the price of our common stock is below $5.00 per share. Under such rule, broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser's consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990, also requires additional disclosure in connection with any trades involving a stock
defined as a penny stock. Generally, the Commission defines a penny stock as any equity security not traded on an exchange or quoted on NASDAQ that has a market price of less than $5.00 per share. The required penny stock disclosures include the delivery, prior to any transaction, of a disclosure schedule explaining the penny stock market and the risks associated with it. Such requirements could severely limit the market liquidity of the securities and the ability of purchasers to sell their securities in the secondary market.
In addition, various state securities laws impose restrictions on transferring "penny stocks" and as a result, investors in the common stock may have their ability to sell their shares of the common stock impaired.
Shareholders May Be Diluted Significantly Through Our Efforts To Obtain Financing And Satisfy Obligations Through The Issuance Of Additional Shares Of Our Common Stock.
We have no committed source of financing. Wherever possible, our Board of Directors will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock. Our Board of Directors has authority, without action or vote of the shareholders, to issue all or part of the authorized but unissued shares of common stock. In addition, if a trading market develops for our common stock, we may attempt to raise capital by selling shares of our common stock, possibly at a discount to market. These actions will result in dilution of the ownership interests of existing shareholders, may further dilute common stock book value, and that dilution may be material. Such issuances may also serve to enhance existing management
s ability to maintain control of the Company because the shares may be issued to parties or entities committed to supporting existing management.
The market price of our common stock historically has been volatile.
The market price of our common stock historically has fluctuated significantly based on, but not limited to, such factors as general stock market trends, announcements of developments related to our business, actual or anticipated variations in our operating results, and our ability or inability to generate new revenues.
Our common stock is traded on the OTC pink market under the symbol
GTHR.
In recent years, the stock market in general has experienced extreme price fluctuations that have oftentimes been unrelated to the operating performance of the affected companies. Similarly, the market price of our common stock may fluctuate significantly based upon factors unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market price of our common stock.
We currently have a sporadic, illiquid, volatile market for our common stock, and the market for our common stock may remain sporadic, illiquid, and volatile in the future.
We currently have a highly sporadic, illiquid and volatile market for our common stock, which market is anticipated to remain sporadic, illiquid and volatile in the future and will likely be subject to wide fluctuations in response to several factors, including, but not limited to:
·
actual or anticipated variations in our results of operations;
·
our ability or inability to generate revenues;
·
the number of shares in our public float;
·
increased competition; and
·
conditions and trends in the market for our services.
Furthermore, because our common stock is traded on the OTC pink market, our stock price may be impacted by factors that are unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market price of our common stock. Shareholders and potential investors in our common stock should exercise caution before making an investment in our Company, and should not rely on the publicly quoted or traded stock prices in determining our common stock value, but should instead determine the value of our common stock based on the information contained in our public reports, industry information, and those business valuation methods commonly used to value private companies.
ITEM 2:
DESCRIPTION OF PROPERTY
We sub-lease 1,800 square feet for our administrative office, which is located at 9101 Harlan Street Suite 130 in Westminster, Colorado 80031. The lease is for 38 months and it terminates on January 31, 2018. The rent was no cost during Months 1 and 2; Months 3-14, the rent was $2,394.75 per month; Months 15-26 months, the rent is $2,472.52; Months 27-38, the rent will be $2,549.25 per month. We sub-leased 500 square feet of office space to GTI Corporate Transfer Agents, LLC, and a related party, located in Suite 130-D. The lease is on a three-year basis and the rent is $500 per month until January 2018. Moreover, we may sub-lease laboratory and office space for several biotechnology and holdings companies. These lessees will have their lab equipment in our new laboratory space for their research and development work. The Company is permitted to utilize their lab equipment, which will enhance the R&D collaboration among scientific peers. We do not own any real estate property as of yet. If we are able to develop assays for different diseases, we intend to formalize the procedure into a commercial application through a series of laboratories to be owned and operated by GeneThera. Currently, we are setting our new laboratory space. Forthcoming through our investors, we will have the funds to purchase or construct new laboratories. It will take time; therefore, the Company opted to lease a 7,900 sf lab space while the 27,000 sf laboratory building is completed when the funds are secured for such laboratory. On May 28, 2015, our CEO and CFO met for mediation with the owner
s legal team for a reasonable settlement for
past due rent, for a past landlord, please see Item 3 for a more detailed discussion of this mediation.
ITEM 3:
LEGAL PROCEEDINGS
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.
On August 12, 2015, the Company entered into a settlement agreement with Litchfield Church Ranch, LLC (
LCR
), and its former landlord, related to back rent in the amount of $325,000. The Company is required to pay $15,000 on or before September 12, 2015 as a good-faith down payment, on August 21, 2015, the Company paid $13,348 towards this down payment. The Company, at its option, can satisfy the judgment in the following ways and as of March 31, 2016, no payments had been made toward the settlement:
·
If paid on or before February 12, 2016, the judgment shall be deemed paid-in-full if the Company delivers $100,000 to LCR
·
If not paid off prior to February 12, 2016, the Company judgment shall be deemed satisfied if the Company delivers $150,000 to LCR on or before August 12, 2016.
·
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
In June 2009, James Tufts filed a complaint at the Small Claims Court in Jefferson County CO in the amount of $4,000 plus expenses from a London trip. The Company has not satisfied the judgment.
On June 26, 2009, Enterprise Leasing Company of Denver filed a Civil Judgment at the Jefferson County District Court in the State of Colorado in the amount of $78,178. The Company has not satisfied the judgment.
On August 17, 2010, Banc of America Leasing filed a Civil Judgment at the Oakland County District in Troy, Michigan in the amount of $24,002. The Company has not satisfied the judgment.
On September 23, 2010, Liberty Acquisitions filed a Civil Judgment at the Jefferson County Court in the State of Colorado in the amount of $3,300. The Company has not satisfied the judgment.
On February 10, 2009, Centennial Credit Corporation filed a Civil Judgment at the Jefferson County Court in the amount of $967. The Company has not satisfied the judgment.
On August 29, 2011, GeneThera had a court hearing concerning a litigation filed by The Park III related to unpaid rent according to the lease agreement. The District Court of
Boulder entered a judgment against the Company in the amount of $77,000. The Company has not satisfied the judgment.
On November 26, 2012, the Internal Revenue Service filed a Federal Tax Lien in the amount of $1,275. The Company has not satisfied the lien.
ITEM 4:
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5:
MARKET FOR COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock currently trades on the OTC Pink Market under the symbol
GTHR
. The following sets forth the rank of high and low bid quotations for the periods indicated. Such quotations reflect prices between dealers, without retail markup, markdown or commission, and may not represent actual transactions.
|
|
| |
|
|
|
|
Year
|
Quarter
|
High
|
Low
|
2015
|
Fourth
|
$ 0.06
|
$ 0.03
|
|
Third
|
0.07
|
0.04
|
|
Second
|
0.09
|
0.007
|
|
First
|
0.08
|
0.015
|
2014
|
Fourth
|
$ 0.03
|
$ 0.015
|
|
Third
|
0.03
|
0.006
|
|
Second
|
0.04
|
0.006
|
|
First
|
0.03
|
0.007
|
ITEM 6:
SELECTED FINANCIAL DATA
Not applicable for smaller reporting companies.
ITEM 7:
MANAGEMENT
S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sections of this Form 10-K, including the Management
s Discussion and Analysis or Plan of Operation, contain
forward-looking statements
. These forward-looking statements are subject to risks and uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. You should not unduly rely on these statements. Forward-looking statements involve assumptions and describe our plans, strategies, and expectations. You can generally identify a forward-looking statement by words such as
may,
will,
should,
would,
could,
plans,
goal,
potential,
expect,
anticipate,
estimate,
believe,
intent,
project,
and similar words and variations thereof. This report contains forward-looking statements that address, among other things,
* Our financing plans
* Regulatory environments in which we operate or plan to operate
* Trends affecting our financial condition or results of operations
* The impact of competition, the start-up of certain operations and acquisition opportunities.
Factors, risks, and uncertainties that could cause actual results to differ materially from those in the forward-looking statements (
Cautionary Statements
) include, among others,
* Our ability to raise capital
* Our ability to execute our business strategy in a very competitive environment
* Our degree of financial leverage
* Risks associated with our acquiring and integrating companies into our own
* Risks relating to rapidly developing technology
* Regulatory considerations
* Risks related to international economies
* Risks related to market acceptance and demand for our products and services
* The impact of competitive services and pricing
* Other risks referenced from time to time in our SEC filings
All subsequent written and oral forward-looking statements attributable to us, or anyone acting on our behalf, are expressly qualified in their entirety by the cautionary statements. We do not undertake any obligations to publicly release any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect unanticipated events that may occur.
You should read the following discussion of our results and plan of operation in conjunction with the consolidated financial statements and the notes thereto appearing elsewhere in this Form 10-K. Statements in this Management
s Discussion and Analysis
or Plan of Operation that are not statements of historical or current objective fact are
forward-looking statements.
OVERVIEW
We have developed proprietary diagnostic assays for use in the agricultural and veterinary markets. Specific assays for Chronic Wasting Disease (CWD) (among elk and deer) and Mad Cow Disease (among cattle) have been developed and are available currently on a limited basis. E. coli (predominantly cattle) and Johne
s disease (predominantly cattle and bison) diagnostics are in development. We are also working on vaccine solutions to meet the growing demands of today
s veterinary industry and tomorrow
s agriculture and healthcare industries. The Company is organized and operated both to continually apply its scientific research to more effective management of diseases and, in so doing, realize the commercial potential of molecular biotechnology.
We have not generated significant operating revenue as of December 31, 2015. Our ability to generate substantial operating revenue will depend on our ability to develop and obtain approval for molecular assays and developing therapeutic vaccines for the detection and prevention of food contaminating pathogens, veterinary diseases, and diseases affecting human health.
Our independent auditors have expressed substantial doubt about our ability to continue as a going concern in their report on our consolidated financial statements for December 31, 2015. For 2015 and 2014, our operating losses were $1,085,471 and $546,071, respectively. Our current liabilities exceeded current assets by $6,477,341 and $5,738, 840 as of December 31, 2015 and 2014, respectively.
Although, we completed an equity financing with gross proceeds of approximately $1.1 million in 2005, 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 believe that we will require at least $10,000,000 in additional funding. We will attempt to raise these funds by both means of one or more private offerings of debt or equity securities and prospective revenues generated by our commercial labs, once the renovations are completed. At this time, we have commitments for additional capital funds. This amount may exceed an additional $2,500,000 depending on cost involved in the further development and commercialization of our products. In such event, we may need immediate additional funding. Our capital requirements will depend on many factors including, but not limited to, the timing of further development of assays to detect the presence of infectious disease from the blood of live animals, our hiring of additional personnel, the applications for, and receipt of, regulatory approvals for any veterinary vaccines that we may develop, and other factors. Our ability to raise capital will increase our ability to implement our business plan.
Over the next 12 months, we expect significant purchases and/or sales of plant or equipment and significant changes in the number of our employees for any off-balance sheet arrangements that will have current and future effect on our financial condition.
We also expect to spend a significant amount of our capital on research and development activities for commercialization relating to development and vaccine design/development. When we are able to develop assays for different diseases, we intend to formalize the procedure into a commercial application through a series of laboratories to be owned and operated by GeneThera. To date, we have introduced our diagnostic solution for Chronic Wasting Disease (CWD) and Mad Cow Disease on a very limited basis. We anticipate that significant funds will be spent on research and development throughout 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 may be successful in developing or validating any new assays and, when we are successful in developing and validating any such assays, we may be able to successfully commercialize them or earn profits from sales of those assays. Furthermore, we may be able to design, develop, or successfully commercialize vaccines as a result of our research and development efforts.
RELATED PARTY TRANSACTIONS
The Company has an outstanding loan payable to Antonio Milici, its President and shareholder amounting to $660,869 and $645,271 as of December 31, 2015 and 2014, respectively. This outstanding loan to the Company is unsecured and has 2.14% interest bearing. During the year ended December 31, 2015, the Company has recorded interest expense on this loan in the amount of $15,598.
GTI Corporate Transfer Agents, LLC is the Company
s transfer agent. Ms. Michelle Torres is the Managing Director of GTI Corporate Transfer Agents, LLC with 34% ownership and/or interest. Ms. Daisy Garcia continues to be the Board Member and Assistant Managing Director of GTI Corporate Transfer Agents, LLC with a one-third ownership and/or interest. Ms. Tannya Irizarry has a one-third ownership and/or interest.
In May 2015, the Company invested $110,000 in Galtheron Molecular Solutions AG, a Swiss entity under common control. See Note 5 of the consolidated financial statements.
As of December 31, 2015, the Company has the following outstanding liabilities due to related parties:
1.
Setna Holdings LLC
$150,705
2.
Kalos, Holdings
86,896
3.
Tannya Irizarry
23,356
4.
Elia Holdings, LLC
7,325
Total
$268,282
The Company has amounts receivable from separate related parties of $22,492 and $15,331 as of December 31, 2015 and 2014, respectively.
RES
ULTS OF OPERATIONS
Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
For 2015, the Company has a net loss of $1,085,471 or net loss per share of $0.03, and $0 of revenue as compared with a net loss of $546,071, or $0.02 per share, and revenue of $0 for 2014.
General and Administrative Expenses:
General and administrative expenses increased to $426,898 for 2015 compared to $211,843 for 2014.
Depreciation and Amortization Expense:
Depreciation and amortization expenses decreased to $0 for 2015 compared to $12,762 for 2014.
LIQUIDITY AND CAPITAL RESOURCES
We had an overdrawn checking account in the amount of $(33) as of December 31, 2015 and a cash balance of $94 as of December 31, 2014. Our current cash balance is not sufficient to fund our business objectives and we will need significant additional capital over the next 12-18 months in order to fund our planned operations. We may be unable to secure any additional financing on terms that are acceptable to us, if at all.
We will require significant additional funding in order to achieve our business plan. Specifically, we intend to spend significant funds on validating and testing our products, seeking necessary regulatory approvals and focusing on international expansion. Over the next 12 months, in order to have the capability of achieving our business plan, we believe that we will require at least $10,000,000. We will attempt to raise these funds by means of one or more private offerings of debt or equity securities or both. We may not be able to secure the financing that we believe is necessary to implement our strategic objectives and, even if additional financing is secured, we may not achieve our strategic objectives. As of the date of this Report, we do not have any firm commitments from any investors for any additional funding.
Our longer-term working capital and capital requirements will depend upon numerous factors, including revenue and profit generation, pre-clinical studies and clinical trials, the timing and cost of obtaining regulatory approvals, the cost of filing, prosecuting, defending, and enforcing patent claims and other intellectual property rights, competing technological and market developments, collaborative arrangements. Additional capital will be required in order to attain such goals. Such additional funds may not become
available on acceptable terms and we cannot give any assurance that any additional funding that we do obtain will be sufficient to meet our needs in the long term.
CRITICAL ACCOUNTING POLICIES
In December 2001, the SEC requested that all registrants discuss their most
critical accounting policies
in Management
s Discussion and Analysis of Financial Condition or Plan of Operation. The SEC indicated that a
critical account policy
is one which is both important to the portrayal of the Company
s financial condition and results and requires management
s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our significant accounting policies are described in Note 1 to our consolidated financial statements included in this Report.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant effect on its consolidated financial position or results of operations (see Note 1 of the consolidated financial statements).
EMPLOYEES
As of December 31, 2015, we had a total of two full-time employees who devoted substantial effort on our behalf. None of our employees are represented by a collective bargaining unit. We entered into an employment agreement with Antonio Milici, M.D., Ph.D., to serve as our Chief Executive Officer and Chief Scientific Officer through January 7, 2017. In consideration for his services, Dr. Milici will receive a base salary of $216,000 per annual plus bonuses as may be determined by the Board of Directors in its sole discretion. As part of his employment agreement, Dr. Milici is subject to non-disclosure and non-competition obligations and has transferred to the Company all of his interests in any idea, concept, technique, invention or written work. We also entered into an employment agreement with Tannya L. Irizarry to serve as our Chief Administrative Officer and Chief Financial Officer (Interim) through January 7, 2017. Ms. Irizarry
s base salary is $168,000 per annum. An additional $45,000 is provided either in Preferred B stock and/or common stock. The above salaries have been accrued to be paid in equity from the Company. There are no employee issues at this time.
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.
COMMERCIAL DIAGNOSTIC TESTING
In the event that we are able to develop assays for the detection of diseases in animals, we intend to establish a series of diagnostic testing laboratories geographically proximate to the primary sources of individual diseases and/or according to specific available operating efficiencies. The specific number of labs to be built and operated will be based on assay demand (demand facilitated by the number of specific disease assays GeneThera develops), our ability to obtain the capital to build the labs, and our ability to successfully manage them from our principal office.
PROPERTIES
We have a temporary office where the automated receptionist takes our messages. Once our lab space is completed and renovated, we will move to the renovated lab and office space. It is approximately 7, 900 square feet for which 4,000 square feet will be allocated for our biotechnology laboratory space in Denver, Colorado. GTI Corporate Transfer Agents, LLC will not be part of our new laboratory space. GTI Corporate Transfer Agents, LLC; a related party, is located at 9101 Harlan Street in Westminster, CO. The Company will continue to sub-lease laboratory and office spaces to several biotechnology and holdings companies. These entities will also have their laboratory equipment to be located at our prospective premises for their R&D scientific work. If we are able to develop assays for different diseases, we intend to formalize the procedure into a commercial application through a series of laboratories to be owned and operated by GeneThera. Once the laboratory building is completed, it will be thanks to our current investors providing the land and constructing the building.
ITEM 8:
FINANCIAL STATEMENT
GENETHERA, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
TABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2015 and 2014
Consolidated Statements of Operations for the years ended December 31, 2015 and 2014
Consolidated Statements of Stockholders
Equity (Deficit) for the years ended December 31, 2015 and 2014
Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of
GeneThera, Inc.
We have audited the accompanying
consolidated
balance sheets of
GeneThera, Inc.
as of
December 31, 2015
and 2014
, and the related
consol
idated
statements of
operations,
stockholdersâ equity, and cash flows for
the two
years ended
December 31,
20
15
.
GeneThera, Inc.
âs management is responsible for these financial statements.
Our responsibility is to express an opinion on these financial stat
ements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether t
he financial statements are free of material misstatement. The company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial r
eporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
companyâs internal control over financial reporting. Accordingly, we express no such
opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overal
l financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of
GeneThera, Inc.
as of
December 31
, 20
15
and 20
14
, and the results of its operations and its cash
flows for each of
the
two years
ended
December 31
, 20
15
, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying consolidated
financial statements have been prepared assuming the Company will continue
as a going concern.
As discussed in Note 2 to the consolidated financial statements, the Company incurred a net
loss during the period and has no history of profitability, currentl
y generates
no
revenue, and its viability is
dependent upon its ability to meet future financing requirements, all of which raise substantial doubt about the
Companyâs ability to continue as a going concern.
The consolidated financial statements do not in
clude any
adjustment that might result from the outcome of this uncertainty
Fruci & Associates II, PLLC
(f/k/a MartinelliMick PLLC)
Spokane, WA
May 13, 2016
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