UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/A
(Amendment
No. 1)
(Mark
One)
x ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For
the fiscal year ended: December 31, 2019
OR
o
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission
File No. 000-27237
 |
|
|
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GeneThera,
Inc. |
|
(Exact
name of registrant as specified in its charter) |
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Nevada |
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65-0622463 |
(State
or other jurisdiction of
incorporation) |
|
(I.R.S.
Employer Identification No.) |
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3051
W 105th Ave. #350251, Westminster, CO |
|
80035 |
|
(Address
of principal executive offices) |
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(Zip
Code) |
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(720)
587-5100 |
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(Registrant’s
telephone number, including area code) |
|
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Securities
registered pursuant to Section 12(b) of the Act:
None.
Securities
registered pursuant to Section 12(g) of the Act: Common Stock,
par value $0.001 per share
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes
o
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
o
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
o
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for
such shorter period that the registrant was required to submit such
files). Yes x No
o
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.
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company, or emerging growth company. See the definitions of “large
accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
|
Large
Accelerated Filer o |
Accelerated
Filer o |
|
Non-Accelerated
Filer o |
Smaller
reporting company x |
|
|
Emerging
growth company o |
|
|
|
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. o
Indicate
by check mark whether registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes o No
x
As of June 28, 2019, the last business day of the Registrant’s most
recently completed second fiscal quarter, the market value of our
common stock held by non-affiliates was $67,871.
The
number of shares of the Registrant’s common stock, $0.001 par value
per share, outstanding as of May 31, 2020, was
35,902,602.
Documents
incorporated by reference: NONE
EXPLANATORY NOTE:
This Amendment No. 1 to the annual report on Form 10-K for the
period ended December 31, 2019, filed with the Securities and
Exchange Commission on June 10, 2020 (the “Original Filing”), is
being filed for the purpose of correcting a date in Item 9A.
Controls and Procedures on page 23, and correcting the name of the
Company in the Report of Independent Registered Public Accounting
Firm on page F-3. Otherwise, this Amendment No. 1 is the same as
the Original Filing.
FORM 10-K
TABLE OF CONTENTS
Forward-Looking
Statements
CERTAIN STATEMENTS IN THIS ANNUAL REPORT MAY CONSTITUTE “FORWARD
LOOKING STATEMENTS”. WHEN THE WORDS “BELIEVES,” “EXPECTS,” “PLANS,”
“PROJECTS,” “ESTIMATES” AND SIMILAR EXPRESSIONS ARE USED, THEY
IDENTIFY FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING
STATEMENTS ARE BASED ON MANAGEMENT’S CURRENT BELIEFS AND
ASSUMPTIONS AND INFORMATION CURRENTLY AVAILABLE TO MANAGEMENT AND
INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS
WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE
FORWARD-LOOKING STATEMENTS. INFORMATION CONCERNING FACTORS THAT
COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THESE
FORWARD-LOOKING STATEMENTS CAN BE FOUND IN OUR PERIODIC REPORTS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. WE UNDERTAKE NO
OBLIGATION TO PUBLICLY RELEASE REVISIONS TO THESE FORWARD-LOOKING
STATEMENTS TO REFLECT FUTURE EVENTS OR CIRCUMSTANCES OR REFLECT THE
OCCURRENCE OF UNANTICIPATED EVENTS.
Unless otherwise indicated, references in this report to “we,” “us,
“our”, “GeneThera”, and the “Company” refer to, collectively,
GeneThera, Inc., a Nevada corporation, and its consolidated
subsidiary, GeneThera, Inc., a Colorado
corporation.
Special
Note Regarding Forward Looking Statements
This
Annual Report on Form 10-K contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995,
which are subject to the “safe harbor” created by those sections /
acts. Forward-looking statements are based on our management’s
beliefs and assumptions and on information currently available to
our management. All statements other than statements of historical
facts are “forward-looking statements” for purposes of these
provisions. In some cases, you can identify forward-looking
statements by terms such as “anticipate,” “believe,” “could,”
“estimate,” “expect,” “intend,” “may,” “plan,” “potential,”
“predict,” “project,” “should,” “will,” “would” and similar
expressions intended to identify forward-looking
statements.
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Our
ability to raise capital; |
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Our
ability to execute our business strategy in a very competitive
environment; |
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Our
degree of financial leverage, risks associated with our acquiring
and integrating companies into our own; |
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Our
ability to attract and retain the necessary personnel with the
expertise needed to ensure that we can operate the Company
effectively; |
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Risks
relating to rapidly developing technology, and regulatory
considerations; |
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Actions
or inactions of third-party contractors and vendors; |
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Risks
related to international economies; |
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Our
ability to successfully patent and protect our intellectual
property; |
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Risks
related to market acceptance and demand for our products and
services; |
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The
potential that our competitors will get their products to market
ahead of us; |
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The
impact of competitive services and pricing; |
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General
economic conditions; and |
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Other
risks referenced from time to time in our SEC filings. |
These
statements involve known and unknown risks, uncertainties and other
factors, which may cause our actual results, performance, time
frames or achievements to be materially different from any future
results, performance, time frames or achievements expressed or
implied by the forward-looking statements. We discuss many of these
risks, uncertainties and other factors in this Annual Report on
Form 10-K in greater detail under the heading “Risk Factors.” Given
these risks, uncertainties and other factors, you should not place
undue reliance on these forward-looking statements. Also, these
forward-looking statements represent our estimates and assumptions
only as of the date of this filing. You should read this Annual
Report on Form 10-K completely and with the understanding that our
actual future results may be materially different from what we
expect. We hereby qualify our forward-looking statements by these
cautionary statements. Except as required by law, we assume no
obligation to update these forward-looking statements publicly, or
to update the reasons actual results could differ materially from
those anticipated in these forward-looking statements, even if new
information becomes available in the future.
Potential
investors should not place undue reliance on any forward-looking
statements. Except as expressly required by the federal securities
laws, there is no undertaking to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events, changed circumstances or any other
reason.
The
specific discussions herein about the Company include financial
projections and future estimates and expectations about our
business. The projections, estimates and expectations are presented
in this report only as a guide about future possibilities and do
not represent actual amounts or assured events. All the projections
and estimates are based exclusively on our management’s own
assessment of our business, the industry in which we work and the
economy at large and other operational factors, including capital
resources and liquidity, financial condition, fulfillment of
contracts and opportunities. The actual results may differ
significantly from the projections. Potential investors should not
make an investment decision based solely on our projections,
estimates or expectations.
PART I
Company
Overview
We
are a biotechnology company dedicated to eradicating zoonotic
diseases such as COVID-19 (Novel Coronavirus), Paratuberculosis
(Johne’s disease), Mad Cow Disease, Chronic Wasting Disease, and
E.coli and Salmonella infections, by applying our advanced
proprietary molecular sciences and technologies. Diseases of
terrestrial, avian and aquatic life animals influence a number of
economic and global security issues, including food for an
increasing world population, access to international trade, species
conservation and protection of those endangered, and economic
growth in developing and re-organizing nations. Because more than
80% of animal bacteria and viruses are zoonotic (i.e. transmissible
between humans and animals, causing infection in both species),
their management and prevention are crucial to improving public
health on a global scale. Zoonotic diseases are the major cause of
global pandemics throughout human history. These diseases are
capable of altering human history by causing significant loss of
life, and major economic and social upheaval. We focus on
developing novel molecular diagnostic tests, therapeutics, and
vaccines through our proprietary robotic technologies with the
belief that improved technologies and methodologies must be
developed and implemented in order to aid mankind’s control of
emerging diseases in animals and in humans. We believe that, if not
properly addressed, diseases in animals will continue to cause
serious and growing global problems with respect to economics,
human health and biodiversity.
We
previously developed proprietary diagnostic assays for use in the
agricultural and veterinary markets, and we intent to develop
proprietary, genetics-based diagnostic assays and vaccine solutions
through our robotic technologies with the goal of controlling the
spread of zoonotic infection in the human population. Our mission
is to continually apply our scientific research to the more
effective management of zoonotic diseases and, in so doing, realize
the commercial potential of our molecular
biotechnologies.
We
will require significant additional funding in order to implement
our business plan. There is no guarantee that we will be successful
in securing the required financing, and if such financing is
secured, there is no guarantee that we will fully achieve our
business goals.
Target
Zoonotic Diseases
COVID-19
COVID-19 is an infectious disease caused by SARS- CoV-2. Common
symptoms include fever, cough and shortness of breath. Other
symptoms may include muscle pain, diarrhea, sore throat, and loss
of smell. The majority of cases result in mild symptoms. However,
some cases progress to viral pneumonia and multi-organ failure.
SARS-Cov-2 coronavirus is the latest example of a long list of
viruses and bacteria that can cause widespread global infection in
humans. As of early June , 2020, the number of infectious cases
worldwide were close to seven and a half million with more than
415,000 deaths. In December 2019, SARS- Cov-2 was first discovered
in the city of Wuhan, China. In February 2020, the World Health
Organization (WHO) declared COVID-19 a global pandemic. The
SARS-Cov-2 is a genetically mutated strain of the SARS-Cov-1 virus
that caused SARS in 2003-2004 epidemic. Coronaviruses are
opportunistic viruses that are harbor in the Asian bat population.
Pangolins, nocturnal mammals, native to Asia and Africa especially
tropical forests, are the most likely intermediate carriers of the
SARS-Cov-2 between bats and humans. In 2002–03, Civet cats, nocturnal mammals
found in Asia and Africa sold for meat in local markets of
China’s Yunnan province carried the SARS
virus
from bats to
humans.
SARS-CoV-1 and 2’s abilities to genetically mutate through passages
into humans is one of the reasons of their enhanced virulence.
Coronaviruses are easily transmitted by human-to-human close
contact primarily through saliva droplets. Coronaviruses are
“positive single stranded (ss) RNA virus. These types of viruses
can replicate into human cells without using the host DNA as a
template. Positive single stranded RNA viruses have genetic
material that can function both as genome and messenger RNA. This
feature allows the Coronaviruses to work more efficiently once it
infects its target. SARS-Cov-2 is the etiological cause of
COVID-19, a highly infectious respiratory disease causing an
atypical pneumonia.
The
mechanism of infections to humans is through saliva droplets caused
by persistent cough and sneezing. Indirect contact with
contaminated surfaces is another way of infection although it is
not a very efficient way of transmission. Viral RNA is also being
found in the stools of infected patients. SARS-Cov-2 is able to
enter human cells by binding to the ACE2 cell receptor. Once inside
the cells, the virus starts the process of replication by using its
own RNA polymerase enzyme. The incubation time COVID-19 varies
between 2-14 days. It is not clear if during the incubation period,
the virus is able to infect humans.
Major
clinical symptoms and epidemiological risk factors related to
COVID-19:
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Pneumonia
(severe cases) |
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Organ
failure (terminal cases) |
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Higher
mortality rate compared to influenza (>0.1-1%) |
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Pre-existing
medical conditions (cancer, cardiovascular diseases, diabetes,
immunodeficiency diseases) |
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Mortality
Age factor (individuals >65yrs old) |
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Saliva
droplets transmission |
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Virus
can survive in the air up to 3 hours and on surfaces up to 72
hours |
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Unknown
asymptomatic transmission |
Epidemiological
evidences support the hypothesis that SARS-CoV-2 neuronal cells in
the medulla oblongata region of the brain could become infected
with the virus. Anosmia (loss of smell) and ageusia (loss of taste)
are reported to be early signs of COVID-19. In some cases the
neuronal infection of the medulla oblongata can contribute to a
patient’s breathing problems and respiratory failure within five
days from the infection. SARS-CoV-2 enters human cell by binding
the ACE2 receptor. The ACE2 protein regulates cardiovascular
function and is express in many human cells including lung, heart, kidney, intestine,
and brain tissue. There are multiple ways the virus could
invade the central nervous system. A possible mechanism of action
is that the SARS-CoV-2 is in the blood of infected patients and
through this infectious route binds to ACE2 receptors in the
endothelial cells of the blood capillaries in the brain, breaching
the blood-brain barrier and invading neurons through that route. A
breached blood-brain barrier could also cause brain swelling,
compressing the brain stem and affecting respiration. The cells
innervating the lungs could also become infected, making
involuntary respiration more difficult.
Evidence
from experiments in mice also suggest that the virus might target
the nervous system through the olfactory bulb. A study published in
2008 (Netland et al. J Virology 2008 Aug (15): 7264-7275) showed
that SARS-CoV-1 — the virus that caused the SARS outbreak in 2003 —
entered the brains of transgenic mice expressing human ACE2 through
neurons in the nose. The virus then rapidly spread to connecting
nerve cells. The extensive nerve damage was the major cause of
death, even though, low levels of the virus were detected in the
animals’ lungs. It is therefore possible that the respiratory
failure in patients with COVID-19 could be caused from the
extensive neuronal damages in the cardiorespiratory area of the
medulla oblongata.
Diagnostics assays and Treatment of COVID -19
Nasopharyngeal,
oropharyngeal swabs and saliva specimen are collected from patients
to detect the SARS-Cov-2 viral infection. Viral RNA is extracted
from the swab and amplified using the Real Time Polymerase Chain
reaction (RT-PCR) technology. The COVID-19 detection molecular
assay is a multi-step procedure that requires up to 72 hours to
obtain a result. Because of the complexity of the assay, a limited
number of samples can be manually processed daily. Limitations in
the number of samples to be process is the main reason of the
spreading of the COVID-19. Automated systems such as the Roche COBA
8800 are capable of processing up to 4,000 samples/daily. However,
due to the sheer number of potentially infected people globally,
this system could not fully meet assay demand.
Currently,
no treatment is available to treat COVID-19. Influenza vaccines are
not effective to stop the spread of COVID-19 infection. Several
COVID-19 vaccines are currently in Phase I clinical trials.
Estimated development time is between 15-18 months. Alternatively,
“off label” drug combination protocols have been used, with various
degree of success, to treat COVID-19 patients.
Paratuberculosis
Paratuberculosis,
also known as Johne’s disease in Stage III clinical phase, is a
worldwide problem in domestic livestock animals including dairy
cattle, sheep and goats. A significant public health concern is
associated with Paratuberculosis, which results from an infection
with the Mycobacterium Avium Sub Paratuberculosis (MAP) bacteria.
This bacterial organism grows very slowly, causes a gradually
worsening disease condition, and is highly resistant to the
infected animal’s immune defenses. Therefore, infected animals
harbor the organism for years before they test positive or develop
disease signs.
Major
factors related to a MAP infection include:
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Global
widespread infection |
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Reduction
in milk production to 25%+ |
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High
culling rate which increases costs |
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Link
between MAP infection and Immunodeficiency Diseases |
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Highest
at-risk animals are young calves or pre-born |
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Bacterium
can survive pasteurization process |
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MAP
present in infant formula products |
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MAP
present in contaminated soil, water, dairy products |
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Spread
in herds can occur by fecal contamination, colostrum, milk, and
trans placental |
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● |
For
every “clinical stage” animal in a herd, there are 15-20 silently
infected plus an additional 6-8 carriers |
Seventy
to ninety percent of the herds worldwide are infected with MAP.
Most of the infected animals do not show any clinical signs of the
disease. The majority of infected animals are capable of shedding
billions of bacteria mostly in the soil and milk without ever
developing clinical signs of paratuberculosis and are responsible
for the spreading of the disease to other animals and for the
transmission of MAP to humans, mostly through milk. Lack of routine
testing has resulted in the inability of managing MAP infection
worldwide. MAP is resistant to conventional pasteurization
protocols. Therefore, many of the dairy products, infant formula,
and milk sold in stores are contaminated with the
bacterium.
Stage I: Silent, subclinical, non-detectable infection.
Typically, this stage occurs in all calves, heifers, and young
stock less than two years of age and many adult animals exposed to
small doses of disease-causing organisms. Infected animals at this
early stage are rarely detected with currently available diagnostic
tests, including fecal culture or serologic tests (ELISA). This
stage progresses slowly over many months or years to stage
II.
Stage
II: Subclinical infection. Typically, this stage occurs in
older heifers or adults. Animals at this stage appear healthy, but
are shedding adequate numbers of Mycobacterium Avian Para
tuberculosis organisms in their manure to be detected on fecal
culture. Blood tests will detect some, but not all animals at this
stage. Blood test (ELISA) positive animals should be confirmed
positive by fecal culture.
Stage
III: Clinical Johne’s disease. It is categorized as any animal
with advanced infection, the onset of which is often associated
with a period of stress such as recent calving. Cattle at this
stage have intermittent, watery pea-soup manure. Animals lose
weight and gradually drop in milk production, but continue to
maintain a healthy appetite. Some animals appear to recover but
often relapse in the next stress period. Most of these animals are
shedding billions of organisms and are positive on culture. Most
are positive on serologic tests (ELISA). Clinical signs often last
several weeks to months before the animals are sent to slaughter in
a thin, emaciated condition. In the final and terminal aspects of
stage III of the fatal disease, animals become emaciated with fluid
diarrhea and develop “bottle jaw.” The carcass may not pass meat
inspection for human consumption in the later phases of stage
III.
MAP and Immunodeficiency Diseases
A
large number of studies show that several immunodeficiency diseases
including, Crohn’s Disease (CD) a chronic inflammatory disease of
the intestine and colon, Type 1 Diabetes and Multiple Sclerosis can
be triggered by MAP. The bacterium is therefore a zoonotic
infectious organism which can be transmitted through contaminate
milk, infant formula and water.
MAP
Related Immunodeficiency Diseases
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Systemic
Lupus Erythematosus |
|
● |
Hashimoto’s
Thyroiditis |
Crohn’s Disease
Crohn’s
disease is an inflammatory disease of the intestines that may
affect any part of the gastrointestinal tract from anus to mouth,
causing a wide variety of symptoms. It primarily causes abdominal
pain, diarrhea (which may be bloody), vomiting, or weight loss, but
may also cause complications outside of the gastrointestinal tract
such as skin rashes, arthritis, and inflammation of the
eye.
Crohn’s
disease is an immunodeficiency disease, in which the body’s immune
system attacks the gastrointestinal tract, causing inflammation. It
is classified as a type of inflammatory bowel disease. There has
been evidence of a genetic link to Crohn’s disease, putting
individuals with siblings afflicted with the disease at higher
risk. It is understood to have a large environmental component as
evidenced by the higher number of cases in western industrialized
nations. Males and females are equally affected. Smokers are three
times more likely to develop Crohn’s disease than non-smokers.
Crohn’s disease affects between 400,000 and 600,000 people in North
America. Prevalence estimates for Northern Europe have ranged from
27–48 per 100,000. Crohn’s disease tends to present initially in
the teens and twenties, with another peak incidence in the fifties
to seventies; although, the disease can occur at any
age.
Histological
alterations found in Crohn’s patients intestinal tract, closely
resembles similar tissue changes observed in the intestine of
Johne’s disease cattle.
Similar
to Paratuberculosis in cattle, no known pharmaceutical or surgical
cure for Crohn’s disease currently exists for humans. Furthermore,
Mycobacterium Avian Paratuberculosis have been found in human
patients and we believe that individuals that are genetically
predisposed could be contracting the disease through digestion of
MAP - infected dairy products.
Business
Model
Molecular Robotic Artificial Intelligence (AI) Integrated Platform
(MORAP)
It has become evident from the COVID-19 global pandemic that
current systems and related technologies are not capable of
preventing or successfully controlling the spreads of zoonotic
infectious agents. One of the features of these infectious
organisms is their ability to infect both people and animals while
some carriers remain asymptomatic for a period of time or for the
entire duration of the infection. We believe it is imperative that
during pandemic outbreaks the entire population must be tested for
the presence of infection agents. In addition, we believe that AI
models should be developed to analyze data and forecast zoonotic
diseases outbreak and ultimately prevent epidemics and pandemics
from occurring in the future. GeneThera’s goal is to develop the
infrastructure of a nationwide zoonotic infectious agents “alert
shield” which would operate to predict, detect and manage the
spread of pandemics and ultimately prevent pandemics from
developing, similar to a “nuclear shield,” which is designed to
detect incoming nuclear warheads and destroy them before they can
be deployed. We believe that a nationwide network of AI controlled
laboratory robotic systems may be able to perform such a task.
Our business model is based on an Ultra High Throughput Molecular
Robotic/AI Platform (MORAP) which combines the use of advance
robotic integrated systems with AI and Machine Learning (ML)
software systems. Upon development, MORAP would encompass a
nationwide network of interactive molecular laboratories operated
using advanced integrated robotic and machine learning cloud-based
software systems, which would be able to share data and interact
with each other. We believe the MORAP would be capable of
processing millions of samples and collecting, storing and
analyzing data. We believe that the MORAP nationwide communications
network could be accomplished through advanced cloud-based software
systems, machine learning and Internet-of-Things (IoT) networks.
MORAP could be readily replicated and scaled utilizing identical
instrumentation and software.
We have designed the MORAP’s second generation molecular robotic/AI
laboratory system prototype. Upon development subject to securing
the requisite funding, each individual MORAP system would be
capable, in a full-scale commercial platform, to perform over
100,000 samples/daily with minimal human intervention.
We envision the MORAP’s cloud-based AI-integrated software system
with a dual purpose: 1) data obtained from each individual robotic
laboratory system would be sent to the cloud to be stored where
data could be analyzed and risk factors could be evaluated; and 2)
each individual robotic laboratory system as part of the MORAP
network could be configured in the cloud. The individual robotic
laboratory systems, identical in each location, would be controlled
and operated through MORAP’s cloud-based software.
The
MORAP’s cloud software architecture would:
|
1) |
Collect
and analyze data from each run performed by each robotic
clone; |
|
2) |
Compare
data between runs from individual robotic clones and determined
risk factors; |
|
3) |
Send
commands to operate each robotic clone; and |
|
4) |
Run
diagnostics for each clone and alert and possibly fix any software
or hardware problem the system may experience. |
Each
individual robotic unit is composed of different equipment
controlled by the integrated software. The MORAP cloud-base system
would be function as the ‘brain’ of the entire network.
Our
MORAP system is designed to targeted zoonotic diseases in general;
however, we intend to focus our robotic/AI and therapeutic vaccine
technologies on SARS-Cov-2 and MAP related diseases.
Zoonotic Diseases Vaccine Development
Our
therapeutic vaccine technology is based on the use of CRISPR gene
editing technology. CRISPR technology is a new technique that is
based on the use of short RNA sequences complementary to a specific
target gene. Once the RNA sequence binds to the gene, the gene is
deactivated or “silenced” and no longer able to produce the
specific protein. It also allows for the efficient, effective, and
continuous testing, management and treatment of animal populations.
We plan to deliver CRISPR modified RNA sequences motif using our
proprietary PURIVAX technology. Our focus will be to develop CRISPR
based vaccines for SARS-COV-2 and MAP. Our strategy is to silence
the expression of gene pathways, which are activated by the
infectious agents to gain entry into the host cells.
PURIVAX Technology
We
have developed a large-scale process for highly purified and high
viral titer (viral concentration) Adenovirus and AAV genetically
engineered viruses. This technology enables us to develop
Adenovirus and AAV-based recombinant DNA vaccines for zoonotic
pathogens. Our PURIVAX is a purification system that dramatically
improves biological purity and viral titer of recombinant
Adenovirus and AAV vectors. PURIVAX is intended to completely
eliminate toxic side effects associated with Adenoviruses and AAV
vectors, thereby making it possible to develop highly immunogenic
and safe recombinant DNA vaccines. Importantly, recombinant DNA
(rDNA) vaccine technology represents a powerful tool for an
innovative vaccine design process known as “genetic
immunization.”
rAD
and rAAV vectors are the ideal candidates for a gene delivery
system. These viruses can efficiently deliver genetic material to
both dividing and non-dividing cells, thereby overcoming some of
the obstacles encountered with first generation retroviral
vectors.
Equally
important, rAD and rAAV are engineered virus genomes that contain
no viral gene. One of the key features for rAD and rAAV is their
ability to infect a large variety of cells. However, two technical
challenges had to be overcome to fully utilize rAD and rAAV in the
development of rDNA vaccines:
|
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 the result is that there is currently no
efficient system to deliver immunogenic genetic sequences into
cells.
This
is the significance of our PURIVAX, rAD and rAAV system for rDNA
vaccine development. Succinctly stated, it is designed to be able
to achieve both high purity and high viral titer (up to 10e16 viral
particles/eluate) based on its propriety multi-resin anion exchange
chromatography system. We believe that biological contaminants such
as endogenous retrovirus, bacterial, mycoplasma, non-specific
nucleic acids, lipids, proteins, carbohydrates and endotoxins are
eliminated during the purification process.
Product Development
We
provide a comprehensive solution that allows diagnosing, treating
and managing zoonotic diseases in animals and humans. Our
proprietary Molecular Robotic/AI Platform and Therapeutic strategy
(MORAPAT) is design to prevent the spread of disease from animals
and at the same time, allow to better control of zoonotic
infectious agents. More importantly, we believe that our platform
could prevent the spread of viruses and bacteria into the food
chain and subsequent infection of human population. An important
part of this strategy is our ability to detect the presence of a
low number of infected particles in different specimen tested for
the presence of zoonotic virus and bacteria such as SARS- CoV-2 and
MAP. Consequentially, our platform is not only able to detect
infected animals, but can also prevent human infections.
We
have developed a molecular system for the detection of
Mycobacterium Avian Paratuberculosis in the milk of infected dairy
cows. Samples from milk obtained from supermarket shelves were
either ’spiked’ with different concentrations of Mycobacterium
Avian Para tuberculosis or ‘naturally processed.’ The bacterial DNA
was isolated using both, manual and robotic-based DNA extraction
procedures and analyzed using the real time PCR technology. Using
this methodology, we can detect between two (2) and twenty (20)
bacterial particles from 10 ml of milk. We believe that our test
will be very useful for early detection of Mycobacterium Avian Para
tuberculosis, both in milk samples and in infected cows.
We
are currently evaluating several robotic systems for nucleic acid
extraction. We believe that we can further increase the sensitivity
of the molecular assay by using robotic driven DNA and RNA
extraction methods.
We
are currently developing a vaccine for MAP infection. Our approach
for developing this vaccine is based on the use our Molecular
Robotic/AI Platform and Therapeutic (MORAPAT) technology which also
includes our PURIVAX technology, genetically engineered Adenoviral
and AVV, and CRISPR technology.
At
the present time, we do not have sufficient financial resources to
implement further development work; therefore, we will need to
secure substantial funding to continue the development of the MAP
vaccine.
To
date, we have developed a prototype computer program to track
samples that will be received and processed in our planned
commercial laboratory. This program will initially be used to track
samples that will be sent out and received by our laboratory. Upon
raising the additional requisite funding, of which there is no
guarantee, we will then work on improving the system in order to
track samples during the different phases of DNA and RNA extraction
procedures. In addition, we will continue to develop a database
system to store and analyze data collected during sample
analysis.
Future Development Plans
We
anticipate that research and development, or R&D, will be the
source for both assay development and vaccine design/development.
If we are successful in developing assays for different diseases,
we intend to formalize the procedure into a commercial application
through a series of laboratories to be owned and operated by us. We
anticipate that R&D will be ongoing during the life of the
Company, as this is the source for new products to be introduced to
the market. Our plan is to seek new innovations in the
biotechnology field. We cannot assure that we will be successful in
developing or validating any new assays or, if we are successful in
developing and validating any such assays, that we can successfully
commercialize them or earn profits from sales of those assays.
Furthermore, we cannot assure that we will be able to design,
develop, or successfully commercialize any vaccines as a result of
our research and development efforts.
It is
our intention to continue with the research and development and
validation of the molecular tests and DNA vaccines. Future plans of
the Company include initiating validation procedures for MAP and
SARS-CoV-2 molecular tests.
In
parallel, we will continue R&D phases for the MAP vaccine. We
intend to initiate development of a SARS-CoV-2 vaccine. We plan on
initiating an experimental animal protocol to determine the safety
of our vaccines. Moreover, upon raising the necessary capital, we
plan to initiate the experimental animal studies within 12-18
months.
Research
and Development
We
anticipate that R&D will be the source for both assay
development and vaccine design/development. If we are able to
develop assays for different diseases, we intend to formalize the
procedure into a commercial application through a series of
laboratories to be owned and operated by us. We anticipate that
R&D will be ongoing during the life of the Company, as this is
the source for new products to be introduced to the market. Our
plan is to seek new innovations in the biotechnology field. We
cannot assure that we will be successful in developing or
validating any new assays or, if we are successful in developing
and validating any such assays, that we can successfully
commercialize them or earn profits from sales of those assays.
Furthermore, we cannot assure that we will be able to design,
develop, or successfully commercialize any vaccines as a result of
our research and development efforts.
Marketing
Strategy
Our
goal is to focus on both the domestic and international markets for
the commercialization of our MORAP and MORAPAT systems.
Our
marketing approach is to align ourselves with both the private
sector and government agencies.
Commercial
Diagnostic Testing
In
the event that we are able to develop assays for the detection of
diseases in animals, we intend to establish a series of diagnostic
testing laboratories geographically proximate to the primary
sources of individual diseases and/or according to specific
available operating efficiencies. The specific number of labs to be
built and operated will be based on assay demand (demand
facilitated by the number of specific disease assays we develop),
our ability to obtain the capital to build the labs, and our
ability to successfully manage them from our principal
offices.
Licensing
We
intend to manage the marketing and sales of our vaccines developed
as through our R&D. As we do not intend to be a vaccine
manufacturer, we plan to use our licensing division to license the
technology related to any vaccines that may be developed and to
manage the revenue potential available from the successful
development and validation of specific vaccines. We cannot provide
any assurance that we will develop any vaccines or that, if they
are developed, we will be able to license them successfully or that
any such license will produce significant revenues.
Intellectual
Property
We do
not own any patents on any of our technology and have not filed any
applications for patents in any country. We cannot give any
assurance that we will be able to file any patent applications or
that, if we file one or more applications for patents, any patents
will issue or that, if issued, the claims granted in any such
patents will afford us adequate protection against competitors with
similar technology.
We
believe that we own common law proprietary rights with respect to
our technologies and we intend to use our best efforts to protect
such rights through maintaining trade secret protections and
entering into confidentiality agreements.
We
also depend upon the skills, knowledge, and experience of our
scientific and technical personnel, none of which is patentable. To
help protect our proprietary know-how, which is not patentable, and
for inventions for which patents may be difficult to endorse, we
rely on trade secret protection to shield our interests.
Competition
We
face competition from many companies, universities, and research
institutions in the United States and abroad. Virtually all of our
competitors have substantially greater resources, experience in
product commercialization, and obtaining regulatory approvals for
their products, operating experience, research and development,
marketing capabilities, and manufacturing capabilities that we do.
We will face competition from companies marketing existing products
or developing new products for diseases targeted by our
technologies. The development of new products for those diseases
for which we are attempting to develop products could render our
product candidates noncompetitive and obsolete.
Our
current competitors include primarily, Roche Diagnostics, Abbott
Laboratories, IDEXX Laboratories, Inc., and academic and government
institutions are also carrying out a significant amount of research
in the field of health, particularly in the field zoonotic
diseases. We anticipate that these institutions will become more
aggressive in pursuing patent protection and negotiating licensing
arrangements to collect royalties for the use of technologies they
have developed and to market commercial products similar to those
that we seek to develop, either on their own or in collaboration
with our competitors. Any resulting increase in the cost or
decrease in the availability of technology or product candidates
from these institutions may affect our business.
Competition
with respect to our robotic technologies and potential products is
and will be based, among other things, on effectiveness, safety,
reliability, availability, price, and patent protection. Another
important factor will be the timing of market introduction of
products that we may develop and for which we may receive
regulatory approval. Accordingly, the speed with which we can
develop products, complete the required animal studies or trials
and approval processes and ultimately supply commercial quantities
of the products to the market is expected to be an important
competitive factor. Our competitive position will also depend upon
our ability to attract and retain qualified personnel, to obtain
patent protection or otherwise develop propriety products or
processes, and to secure sufficient capital resources for the
often-substantial period between technological conception and
commercial sales.
Several
attempts have been made to develop technologies that compete with
Real-time-PCR (RT-PCR). To our knowledge none of these technologies
have resulted to date in any product available on the market. The
field of biotechnology is very dynamic. The possibility that more
advanced technologies could be developed into products that may
compete with ours is very strong. However, it is very difficult to
predict the length of time necessary for this scenario to take
place.
Manufacturing
We do
not manufacture any products. We do not intend to establish a
manufacturing facility to manufacture any products that we may
develop anywhere in the world.
Product
Liability
The
testing, manufacturing, and marketing of our proposed products
involves an inherent risk of product liability attributable to
unwanted and potentially serious health effects in animals that may
receive any vaccines that we may develop and market. To the extent
we elect to test, manufacture, or market veterinary vaccines and
other products, we will bear the risk of product liability
directly. We do not currently have product liability insurance.
There is no guarantee that we can obtain product liability
insurance at a reasonable cost, or at all, or that the amount of
such insurance will be adequate to cover any liability that we may
be exposed to. In the absence of such insurance, one or more
product liability lawsuits against us can be expected to have a
material adverse effect on our business and could result in our
ceasing operations.
Government
Regulation
Our
unique approach to the testing for zoonotic diseases allows us to
begin commercialization of our diagnostic tests without the need
for a long and enduring approval process from the USDA. USDA
approval will be required for commercialization of animal vaccines.
However, it is our intention not to seek, in the foreseeable
future, any approval either from the USDA or the U.S. Food &
Drug Administration for any of the products we develop both,
diagnostic or therapeutic. It is our intention to perform any
validation or clinical trials of our product both domestically and
abroad. Our commercial laboratories will require a validation study
to be performed to demonstrate the effectiveness of the system.
Validation studies will be performed according to each country’s
guidelines .It is expected that validation studies will be
conducted in collaboration with each country’s government
guidelines over the next 18-36 month period. We will need the
approval of the U.S. Department of Agriculture, or USDA, before the
vaccines can be manufactured or sold. The approval process for
animal vaccines is time-consuming and expensive. We anticipate that
such approval, if it is obtained, may require more than $75 million
and may require more than two years for each vaccine for which
approval is sought. Currently, we do not have the capital necessary
to seek approval of any of our candidate vaccines, and we cannot
provide any assurance that we will be able to raise the capital
necessary for such approval on terms that are acceptable to us, if
at all. Failure to raise the necessary capital will likely cause us
to curtail or cease operations. In addition, even if we are
successful in raising the capital necessary to seek approval of any
vaccine, there are no assurances that such an approval will be
granted, or if granted, whether we will be able to produce and sell
such vaccines following such an approval in commercial quantities
or to make a profit from such production and sales.
Employees
We
had a total of two full-time employees as of December 31, 2019. 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 Business
Our success depends on our ability to resume development of our
MORAP technology.
We
focused on the development of MORAP technology for zoonotic disease
diagnostic detection and vaccine development. As a result, our
success depends entirely on our ability to finalize the development
and commercialize the of molecular robotic/AI laboratory platform.
If we are unable to achieve this goal, we may not be able to earn
sufficient revenue to continue our business.
Business interruptions, including any interruptions resulting from
COVID-19, could significantly disrupt our operations and could have
a material adverse impact on the Company if the situation
continues. Under Colorado Updated Public Health Order 20-24
Implementing Stay At Home Requirements (the “Order”), GeneThera
falls under the definition of a “Critical Business”, as, pursuant
to the Order “Critical Business” means (1) research and laboratory
services, and (2) pharmaceutical and biotechnology
companies.
Further, all employees, including our specialized scientific and
technical staff, are working from home or in a virtual environment.
The Company always maintains the ability for team members to work
virtual and we will continue to stay virtual, until the State and
or the Federal government indicate the environment is safe to
return to work.
The
ongoing coronavirus outbreak which began in China at the beginning
of 2020 has impacted various businesses throughout the world,
including travel restrictions and the extended shutdown of certain
businesses in impacted geographic regions. If the coronavirus
outbreak situation should worsen, we may experience disruptions to
our business including, but not limited to equipment, to our
workforce, or to our business relationships with other third
parties.
The
extent to which the coronavirus impacts our operations or those of
our third-party partners will depend on future developments, which
are highly uncertain and cannot be predicted with confidence,
including the duration of the outbreak, new information that may
emerge concerning the severity of the coronavirus and the actions
to contain the coronavirus or treat its impact, among others. Any
such disruptions or losses we incur could have a material adverse
effect on our financial results and our ability to conduct business
as expected.
Our recurring operating losses have raised substantial doubt
regarding our ability to continue as a going concern, and our
auditors issued a “going concern” audit opinion in their report on
our financial statements.
Our
independent auditors have indicated in their report on our audited
consolidated financial statements as of December 31, 2019, which
are included in this report, that there is substantial doubt about
our ability to continue as a going concern. A “going concern”
opinion indicates that the financial statements have been prepared
assuming we will continue as a going concern and do not include any
adjustments to reflect the possible future effects on the
recoverability and classification of assets, or the amounts and
classification of liabilities that may result if we do not continue
as a going concern. As of this Annual Report on Form 10-K, the
circumstances have not been changed, and therefore, the
aforementioned going concern situation remains current. Therefore,
you should not rely on our consolidated balance sheet as an
indication of the amount of proceeds that would be available to
satisfy claims of creditors and potentially be available for
distribution to shareholders in the event of
liquidation.
We need to raise additional capital in 2020 to continue operations.
If we fail to obtain additional financing, we would be forced to
delay the development of our MORAP or liquidate the
Company.
We
are a development stage company with limited operating history. We
will need significant, additional capital to continue development
of the molecular robotic/AI laboratory platform and to develop
diagnostic assays and vaccine product candidates. As of December
31, 2019, we had cash and cash equivalents (excluding restricted
cash) of $5,309 and negative working capital of
$6,936,8393.
Based
on our current operating plan, we expect that our existing cash and
cash equivalents as of December 31, 2019, will enable us to
maintain our operating expenses in 2020. However, we will need to
raise additional capital in 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 of the
MORAP; |
|
■ |
Seek
corporate partners for the development of our diagnostic assays and
vaccine product candidates than other wise desirable or on terms
that are less favorable than might otherwise be available;
or |
|
■ |
Significantly
curtail, or cease operations. |
If we
are unable to raise additional capital in sufficient amounts or on
terms acceptable to use, we will be prevented from pursuing
development and commercialization efforts, which will have a
material adverse impact on our business operating results and
prospects, including possible liquidation of the
company.
In
addition, we may secure additional capital using credit facilities
and other debt and may substantially increase our reliance on such
debt in the future. Such debt may be secured by a portion or
substantially all of our assets. If we do not repay such
indebtedness in a timely fashion, secured lenders could declare a
default and foreclose upon our assets, which would result in
harmful disruption to our business, the sale of assets for less
than their fully realizable value, and possible bankruptcy. Such
credit facilities also typically include several operational and
financial covenants. If we fail to comply with the covenants and
our other obligations under any credit facility, the secured
lenders would be able to accelerate the required repayment of
amounts due and, if they are not repaid, could foreclose upon our
assets, which would result in harmful disruption to our business,
the sale of assets for less than their fully realizable value, and
possible bankruptcy. In addition, future credit facilities may
limit our ability to incur incremental debt without our lenders’
permission.
Future sales and issuances of our common stock or rights to
purchase common stock by us will result in additional dilution of
the percentage ownership of our shareholders and may cause our
share price to decline.
Until
such time, if ever, as we can generate substantial product
revenues, we expect that significant additional capital will be
needed to continue our planned operations, including securing
regulatory approvals, commercialization efforts, expanding research
and development activities and costs associated with operating as a
public company. We may sell shares of our common stock, convertible
securities or other equity securities in one or more transactions
at prices and in a manner that we determine from time to time. If
we sell shares of our common stock, convertible securities or other
equity securities in more than one transaction, investors may be
materially diluted by subsequent sales. Such sales may also result
in material dilution to our existing shareholders and new
investors. In addition, new shareholders could gain rights superior
to our existing shareholders.
We have identified material weaknesses in our internal control over
financial reporting. If we fail to develop or maintain an effective
system of internal controls, we may not be able to accurately
report our financial results and prevent fraud. As a result,
current and potential shareholders could lose confidence in our
financial statements, which would harm the trading price of our
common shares.
We
are subject to the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002, or SOX 404. SOX 404 requires management
to establish and maintain a system of internal control over
financial reporting and annual reports on Form 10-K filed under the
Securities Exchange Act of 1934, as amended, or the Exchange Act,
to contain a report from management assessing the effectiveness of
a company’s internal control over financial reporting. During its
evaluation of the effectiveness of internal control over financial
reporting, the Company’s management identified material weaknesses.
These material weaknesses were associated with our lack of
sufficient accounting resources and internal personnel with GAAP
knowledge. We are undertaking remedial measures, which measures
will take time to implement and test, to address these material
weaknesses. We cannot assure you that such measures will be
sufficient to remedy the material weaknesses identified or that
additional material weaknesses or other control or significant
deficiencies will not be identified in the future. If we continue
to experience material weaknesses in our internal controls or fail
to maintain or implement required new or improved controls, such
circumstances could cause us to fail to meet our periodic reporting
obligations or result in material misstatements in our financial
statements, or adversely affect the results of periodic management
evaluations and, if required, annual auditor attestation reports.
Each of the foregoing results could cause investors to lose
confidence in our reported financial information and lead to a
decline in our stock price.
Our technology is not protected by patents.
Our
technology and know-how are not patented. We rely on trade secret
protections and confidentiality agreements to protect our
intellectual property. We cannot assure you that these trade
secrets and confidentiality agreements will provide meaningful
protection for our intellectual property. Furthermore, in absence
of patent protection, competitors who independently develop
substantially equivalent technology may harm our
business.
Loss of key personnel will adversely affect the
Company.
We
depend in large part on the efforts and continued employment of Dr.
Antonio Milici, M.D., Ph.D., our President, Chairman and Chief
Executive Officer. The loss of Dr. Milici would have a material
adverse effect on our business, results of operations and financial
condition. In addition, the loss of Dr. Milici would force us to
seek a replacement, who may have less experience, fewer contacts,
or less understanding of the business. Further, we may be unable to
find a suitable replacement for Dr. Milici. Finding qualified
personnel in the biotechnology industry is very challenging.
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 OTC Markets, which may have an
unfavorable impact on our stock price and
liquidity.
Our
common stock is quoted on the OTC Markets under the symbol “GTHR.”
The OTC Markets is a significantly more limited market than the New
York Stock Exchange or the NASDAQ stock market. The quotation of
our shares on the OTC Markets may result in a less liquid market
available for existing and potential stockholders to trade shares
of our common stock, could depress the trading price of our common
stock and could have a long-term adverse impact on our ability to
raise capital in the future.
We cannot predict the extent to which an active public trading
market for our common stock will develop or be sustained. If an
active public trading market does not develop or cannot be
sustained, you may be unable to liquidate your investment in our
common stock.
Currently
there is minimal public trading in our common stock. We cannot
predict the extent to which an active public market for our common
stock will develop or be sustained due to a number of factors,
including the fact that we are a small company that is relatively
unknown to stock analysts, stock brokers, institutional investors,
and others in the investment community that generate or influence
sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to
follow an unproven company such as ours or purchase or recommend
the purchase of our shares of common stock until such time as we
became more seasoned and viable. As a consequence, there may be
periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which
has a large and steady volume of trading activity that will
generally support continuous sales without an adverse effect on
share price. We cannot assure you that an active public trading
market for our common stock will develop or be sustained. If such a
market cannot be sustained, you may be unable to liquidate your
investment in our common stock.
Our common stock may be subject to significant price volatility,
which may have an adverse effect on your ability to liquidate your
investment in our common stock.
The
market for our common stock may be characterized by significant
price volatility when compared to seasoned issuers, and we expect
that our share price will be more volatile than a seasoned issuer
for the indefinite future. The potential volatility in our share
price is attributable to a number of factors. First, our shares of
common stock may be sporadically and/or thinly traded. As a
consequence of this lack of liquidity, the trading of relatively
small quantities of shares by our stockholders may
disproportionately influence the price of those shares in either
direction. The price for our shares could, for example, decline
precipitously in the event that a large number of our shares of
common stock are sold on the market without commensurate demand, as
compared to a seasoned issuer that could better absorb those sales
without adverse impact on its share price. Secondly, an investment
in us may be considered a speculative investment due to our lack of
profits to date and uncertainty of future profits. As a consequence
of this enhanced risk, more risk-adverse investors may, under the
fear of losing all or most of their investment in the event of
negative news or lack of progress, be more inclined to sell their
shares on the market more quickly and at greater discounts than
would be the case with the stock of a seasoned issuer.
We are subject to penny stock regulations and restrictions and you
may have difficulty selling shares of our common
stock.
The
United States Securities and Exchange Commission, or SEC, has
adopted regulations which generally define so-called “penny stocks”
to be an equity security that has a market price less than $5.00
per share or an exercise price of less than $5.00 per share,
subject to certain exemptions. Our common stock is a “penny stock”
and is subject to Rule 15g-9, or the Penny Stock Rule, under the
Securities Exchange Act of 1934, as amended, or the Exchange Act.
This rule imposes additional sales practice requirements on
broker-dealers that sell such securities to persons other than
established customers and “accredited investors” (generally,
individuals with a net worth in excess of $1,000,000 or annual
incomes exceeding $200,000, or $300,000 together with their
spouses). For transactions covered by the Penny Stock Rule, a
broker-dealer must make a special suitability determination for the
purchaser and have received the purchaser’s written consent to the
transaction prior to sale. As a result, this rule may affect the
ability of broker-dealers to sell our securities and may affect the
ability of purchasers to sell any of our securities in the
secondary market, thus possibly making it more difficult for us to
raise additional capital.
For
any transaction involving a penny stock, unless exempt, the rules
require delivery, prior to any transaction in penny stock, of a
disclosure schedule prepared by the SEC relating to the penny stock
market. Disclosure is also required to be made about sales
commissions payable to both the broker-dealer and the registered
representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price
information for the penny stock held in the account and information
on the limited market in penny stock.
We
cannot assure you that our common stock will qualify for exemption
from the Penny Stock Rule. In any event, even if our common stock
were exempt from the Penny Stock Rule, we would remain subject to
Section 15(b)(6) of the Exchange Act, which gives the SEC the
authority to restrict any person from participating in a
distribution of penny stock, if the SEC finds that such a
restriction would be in the public interest.
We have never paid cash dividends on our stock and do not intend to
pay dividends for the foreseeable future.
We
have paid no cash dividends on any class of our stock to date and
we do not anticipate paying cash dividends in the near term. For
the foreseeable future, we intend to retain any earnings to finance
the development and expansion of our business, and we do not
anticipate paying any cash dividends on our common stock.
Accordingly, investors must be prepared to rely on sales of their
common stock after price appreciation to earn an investment return,
which may never occur. Investors seeking cash dividends should not
purchase our common stock. Any determination to pay dividends in
the future will be made at the discretion of our board of directors
and will depend on our results of operations, financial condition,
contractual restrictions, restrictions imposed by applicable law
and other factors our board deems relevant.
Fluctuations in our quarterly or annual results may cause our stock
price to decline.
Our
operating results could fluctuate due to a number of factors,
including changes in our accounting estimates; litigation and
claim-related expenditures; increase in the number and type of
competitors; changes in competitors’ product offerings; and other
matters. Similarly, our future operating results may vary
significantly from quarter to quarter or year to year due to these
and other factors, many of which are beyond our control. If our
operating results or projections of future operating results do not
meet the expectations of securities analysts or investors in future
periods, our stock price may fall.
|
|
ITEM 1B. |
UNRESOLVED
STAFF COMMENTS |
None.
Our
previous offices and laboratory premises, which included our
headquarters and our research and development facilities, were
located in Denver, Colorado, where we subleased approximately 7,990
square feet of office and laboratory space. Effective April 29,
2019, we terminated our sublease with the facilities in Denver,
Colorado. In connection with such termination, we entered into a
Sublease Termination Agreement that, among other things, terminated
any and all of our future rent and other financial commitments
under the sublease arrangement. The lease deposit related to the
sublease termination was written off in the amount of $12,000. The
lease terminated on April 29, 2019.
Presently,
we are in negotiations to lease a new laboratory space, and we are
currently reviewing the terms of lease agreements for three (3)
prospective laboratory spaces located in Lafayette, Westminster,
and Lakewood, CO. We intend to enter into a lease agreement and
secure a laboratory space in Q2 2020. We believe that any of these
three facilities are more than adequate for our needs and for the
immediate future and that, should it be required, additional space
can be leased to accommodate any future growth.
|
ITEM 3. |
LEGAL
PROCEEDINGS |
From
time to time, we may be involved in litigation relating to claims
arising out of our operations. We are not currently a party to, and
our property is not subject to, any material legal
proceedings.
Beginning
in November 2010 and through July 2011, Gold X Change, Inc. (“GXC”)
invested approximately $132,000 in the aggregate in the Company’s
convertible notes. In July 2011, a dispute arose between the
Company and GXC as to the number of shares issuable upon conversion
of the convertible notes. In order to resolve this dispute, the
Company and GXC agreed to issue a total of 24 million shares of the
Company’s common stock in the name of GXC; provided that GXC
deposit such shares into an escrow account with an escrow agent.
Under the terms of the escrow agreement, these shares would only be
released to GXC if GXC invested an additional $1 million into the
Company within one year, which ended on September 30, 2012. During
the one year period, GXC only invested $880,162. As a result of
GXC’s failure to invest the full $1 million within the one year
time period as required by the escrow agreement, GXC was in default
under the escrow agreement and the 24 million shares were
cancelled. The $880,162 paid by GXC to the Company was deemed to
be the cost of the 4,003,860 shares of the Company’s common
stock that was originally issued to GXC. The Company adjusted the
note payable balance and reclassified the note balance to
additional paid in capital to include such in the original
transaction in which 4,003,860 shares of common stock were issued.
Currently, GXC holds 1,189,300 shares of common stock after the
President distributed 2,814,560 shares to different people and
entities. The President disclaims beneficial ownership of such
securities except to the extent of his pecuniary interest in such
securities, if any.
On
November 14, 2014, Litchfield Church Ranch, LLC filed a Summons in
Forcible Entry and Detainer against the Company after the owner was
unable to sell the building to us because he was upended for over
$800,000 in his mortgage. As per the Summons, the plaintiff claimed
$364,968.69 in past due rent. As per our accounting records, the
Company had accrued $242,000 in rent expense with the offer to
purchase such property at $1,850,000 plus scheduled payments for
the past due rent. The owner’s bank did not allow him to sell the
property. We participated in a mediation resulting in a settlement
for $115,000 with the contingency to pay the goodwill amount of
$15,000 by September 12, 2015. The Company had an additional six
months to complete the remaining $100,000 settlement. If not paid
off prior to August 12, 2016, there will be no discount and the
Company shall owe the judgment balance in the amount of $325,885.
The mediator, a retired judge, found in our favor. Therefore, the
settlement was agreed upon by both parties. The Company did not pay
the settlement agreement as of December 31, 2019 and default
interest of 18% was accrued on the outstanding judgment balance
through December 31, 2018. In July 2019, Litchfield Church Ranch,
LLC was dissolved after the ownership sold the property. The
Company claims that no money is owed.
Milestones Investment Agreement
In
March 2018, we entered into a Milestones Investment Agreement with
FOGT, LLC (in part controlled by a former member of the Board of
Directors), pursuant to which FOGT, LLC had agreed to invest and
purchase up to $5 million of Series A Convertible Preferred Stock
pending completion of certain milestones. As of December 31, 2018,
FOGT, LLC has invested $550,000 and we agreed to issue 5,500 shares
of Series A Convertible Preferred Stock. FOGT, LLC had agreed to
invest additional amounts as follows: (i) $1,500,000 upon
completion of design, assembly and validation of an advanced
robotic system; and (ii) $1,750,000 upon entering into a commercial
agreement with a government organization or private entity. A
dispute arose between FOGT, LLC and the Company. As a result, FOGT,
LLC ceased further investments in the Company.
On
September 6, 2019, FOGT, LLC and GeneThera, Inc. reached a
settlement in the amount of $425,000. The legal team received
$171,000 from this settlement resulting in net proceeds to the
Company of approximately $254,000.
|
ITEM 4. |
MINE
SAFETY PROCEDURES |
Not
applicable.
PART II
|
|
ITEM 5. |
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES. |
Market
Information
Our
common stock currently eligible for quotation on the OTC Markets
under the symbol “GTHR.” The following table sets forth, for the
periods indicated, the high and low closing prices of our common
stock as reported by OTC Markets, Inc. These prices reflect
inter-dealer prices, without retain mark-up or commission, and may
not represent actual transactions.
| |
|
High |
|
|
Low |
|
|
Year Ended December 31, 2018: |
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
0.01700 |
|
|
$ |
0.00900 |
|
|
Second Quarter |
|
|
0.01700 |
|
|
|
0.00820 |
|
|
Third Quarter |
|
|
0.01700 |
|
|
|
0.00830 |
|
|
Fourth Quarter |
|
|
0.01750 |
|
|
|
0.00830 |
|
| |
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019: |
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
0.01680 |
|
|
$ |
0.00600 |
|
|
Second Quarter |
|
|
0.01680 |
|
|
|
0.00270 |
|
|
Third Quarter |
|
|
0.00910 |
|
|
|
0.00270 |
|
|
Fourth Quarter |
|
|
0.00700 |
|
|
|
0.00250 |
|
|
|
|
|
|
|
|
|
|
|
Holders
of our Common Stock
As of
December 31, 2019, there were approximately 279 holders of record
of our common stock. This number excludes the shares owned by
stockholders holding shares under nominee security position
listings.
Dividends
We
have not declared or paid a cash dividend. We currently intend to
retain and use any future earnings for the development and
expansion of our business and do not anticipate paying any cash
dividends in the foreseeable future, if at all. Any future
determination to declare dividends will be made at the discretion
of our board of directors and will depend on our financial
condition, operating results, capital requirements, general
business conditions and other factors that our board of directors
may deem relevant.
Securities
Authorized for Issuance under Equity Compensation
Plans
We do
not have any compensation plans under which our securities are
authorized for issuance.
Recent
Sales of Unregistered Securities
We
did not sell any unregistered securities during the year ended
December 31, 2019.
Purchases
of Equity Securities by Issuer and Affiliated
Purchasers
There
were no purchases of our common stock by us or on our behalf, or by
or on behalf of any of our affiliates, during the year ended
December 31, 2019.
|
|
ITEM 6. |
SELECTED
FINANCIAL DATA |
As a
smaller reporting company, the Company is not required to provide
the information under this item.
|
|
ITEM 7. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS |
The
following discussion and analysis of our financial condition and
result of operations should be read in conjunction with our
financial statements and the notes thereto and the other financial
information appearing elsewhere in this report on Form 10-K. This
discussion contains forward-looking statements that relate to
future events or our future financial performance. These statements
involve known and unknown risks, uncertainties and other factors
that may cause our actual results, levels of activity, performance
or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or
implied by these forward-looking statements. These risks and other
factors include, among others, those listed under “Forward-Looking
Statements” and “Risk Factors” and those included elsewhere in this
report. Our financial statements are prepared in U.S. dollars and
in accordance with United States generally accepted accounting
principles, or GAAP.
Overview
We
are a biotechnology company dedicated to eradicating “cross-over”
zoonotic diseases such as COVID-19 (Novel Coronavirus),
Paratuberculosis (Johne’s disease), Mad Cow Disease, Chronic
Wasting Disease, E.coli and Salmonella infections, by applying our
advanced proprietary molecular sciences and technologies. We focus
on developing molecular diagnostic tests, therapeutics, and
vaccines through our proprietary robotic technologies with the
belief that improved technologies and methodologies must be
developed and implemented in order to aid mankind’s control of
emerging diseases in animals and in humans. We believe it has
become increasingly evident that, if not properly addressed,
diseases in animals may continue to cause serious and growing
global problems with respect to economics, human health and
biodiversity.
We
previously developed proprietary diagnostic assays for use in the
agricultural and veterinary markets, and we are currently
developing proprietary, genetics-based diagnostic assays and
vaccine solutions through our robotic technologies with the goal of
controlling the spread of zoonotic infection in the human
population. Our mission is to continually apply our scientific
research to the more effective management of zoonotic diseases and,
in so doing, realize the commercial potential of our molecular
biotechnologies.
We
will require significant additional funding in order to implement
and achieve our business plan. There is no guarantee that we will
be successful in securing the required financing, and if such
financing is secured, there is no guarantee that we will fully
achieve our business goals. We provide a comprehensive solution
that allows diagnosing, treating and managing zoonotic diseases in
animals and humans.
Our business model is based on the development of a proprietary
Molecular Robotic/AI Laboratory Platform (“MORAP”), which would
combine the use of advanced robotic laboratory systems integrated
with AI software systems on a global scale. Upon development, MORAP
would encompass a nationwide network of interactive molecular
laboratories operated using advanced integrated robotic and machine
learning cloud-based software systems, which would be able to share
data and interact with each other. We believe MORAP would be
capable of processing millions of samples and collecting, storing
and analyzing data. We believe that MORAP nationwide communications
network could be accomplished through advanced cloud-based software
systems, machine learning and Internet-of-Things (IoT) networks.
Upon development, MORAP could be readily replicated and scaled
utilizing identical instrumentation and software.
Our
proprietary Molecular Robotic and Therapeutic Platform (MORAPAT) is
designed to prevent the spread of disease from animals and; at the
same time, allow to better control of zoonotic infectious agents.
More importantly, we believe that our platform can prevent the
spread of viruses and bacteria in animals and /or food products and
subsequent infection of human population. We have developed a
molecular system for the detection of Mycobacterium Avian
Paratuberculosis in the milk of infected dairy cows.
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 by our laboratory. We anticipate
that research and development, or R&D, will be the source for
both assay development and vaccine design/development. If we are
successful in developing assays for different diseases, we intend
to formalize the procedure into a commercial application through a
series of laboratories to be owned and operated by us. We
anticipate that R&D will be ongoing during the life of the
Company, as this is the source for new products to be introduced to
the market.
Our
plan is to seek new innovations in the biotechnology field. Our
goal is to focus on both the domestic and international markets for
the commercialization of our zoonotic molecular robotics and AI
integrated platform. Our current competitors include primarily,
Roche Diagnostics, Abbott Laboratories, IDEXX Laboratories, Inc.,
and academic and government institutions are also carrying out a
significant amount of research in the field of health, particularly
in the field zoonotic diseases. We anticipate that these
institutions will become more aggressive in pursuing patent
protection and negotiating licensing arrangements to collect
royalties for the use of technologies they have developed and to
market commercial products similar to those that we seek to
develop, either on their own or in collaboration with our
competitors. Any resulting increase in the cost or decrease in the
availability of technology or product candidates from these
institutions may affect our business.
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. Our unique approach to the testing
for zoonotic diseases allows us to begin commercialization of our
diagnostic tests without the need for a long and enduring approval
process from the USDA. USDA approval will be required for
commercialization of animal vaccines. However, it is our intention
not to seek, in the foreseeable future, any approval either from
the USDA or the U.S. Food & Drug Administration for any of the
products we develop both, diagnostic or therapeutic. 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 had a
total of two full-time employees as of December 31, 2019. No
changes in full-time employees have occurred
subsequently.
Liquidity
and Capital Resources – Going Concern
As of
December 31, 2019, we had cash and cash equivalents of $5,309. We
have historically financed activities with cash from the private
placement of equity and debt securities and advances from related
parties. Our auditors have issued a going concern opinion. This
means that our auditors believe there is a substantial doubt that
we can continue as an on-going business for the next twelve months
unless we obtain additional capital to pay our bills. We have had
negligible revenues since inception and had an accumulated deficit
of $30,485,499 and negative working capital of $ 6,936,839 as of
December 31, 2019.
Our
current cash balance is not sufficient to fund our business
objectives and we will need significant additional capital over the
next 12-18 months in order to fund our planned operations.
Specifically, we intend to spend significant funds on completing
our robotic prototype system, validating and testing our products,
seeking necessary regulatory approvals and focusing on
international expansion. We will attempt to raise capital through
one or more private offerings of debt or equity securities or both.
We may not be able to secure the financing that we believe is
necessary to implement our strategic objectives and, even if
additional financing is secured, we may not achieve our strategic
objectives. As of the date of this report, we do not have any firm
commitments from any investors for any additional
funding.
Our
longer-term working capital and capital requirements will depend
upon numerous factors, including revenue and profit generation,
pre-clinical studies and clinical trials, the timing and cost of
obtaining regulatory approvals, the cost of filing, prosecuting,
defending, and enforcing patent claims and other intellectual
property rights, competing technological and market developments,
collaborative arrangements. Additional capital will be required in
order to attain such goals. Such additional funds may not become
available on acceptable terms and we cannot give assurance that any
additional funding that we do obtain will be sufficient to meet our
needs in the long term.
The
accompanying consolidated financial statements do not include any
adjustments to reflect the possible future effects on
recoverability and classification of liabilities that may result
from the outcome of this uncertainty. If we are unable to obtain
additional working capital, our business may fail. Accordingly, we
must raise cash from sources other than operations. To date, we
have financed our operations primarily through cash flow from
limited operations, augmented by cash proceeds from financing
activities, short-term borrowings and equity contributions by our
stockholders. We must raise cash to implement our projected plan of
operations. Failure to obtain capital to fund short-term and
long-term needs will likely result in the curtailment of our
operations or cessation of certain aspects of our business
strategy.
Capital
Expenditures and Resources
Our
operations require capital expenditures primarily for lab equipment
and software development. Capital expenditures for the years ended
December 31, 2019 and 2018 were $0 and $26,400,
respectively.
Results
of Operations
The
following table sets forth key components of our results of
operations during the years ended December 31, 2019 and
2018.
| |
|
Years
Ended December 31, |
|
| |
|
2019 |
|
|
2018 |
|
| Expenses |
|
|
|
|
|
|
|
General and administrative expenses |
|
$ |
138,152 |
|
|
$ |
529,124 |
|
|
Payroll expenses |
|
|
601,000 |
|
|
|
3,397,643 |
|
|
Research and development |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
Total operating expenses |
|
|
739,152 |
|
|
|
3,296,767 |
|
| Loss
from operations |
|
|
(739,152 |
) |
|
|
(3,296,767 |
) |
|
Other expenses |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(28,582 |
) |
|
|
(117,970 |
) |
|
Proceeds from settlement |
|
|
250,083 |
|
|
|
- |
|
|
Loss on write off of vendor receivable |
|
|
|
|
|
|
- |
|
|
Total other expense |
|
|
(221,501 |
) |
|
|
(117,970 |
) |
|
Other Income |
|
|
|
|
|
|
|
|
|
Gain on extinguishment of liabilities |
|
|
- |
|
|
|
648,349 |
|
|
Total other income |
|
|
- |
|
|
|
648,349 |
|
| Net
loss before income taxes |
|
|
(517,651 |
) |
|
|
(3,396,389 |
) |
|
Provision for income taxes |
|
|
|
|
|
|
- |
|
|
Net loss |
|
$ |
(517,651 |
) |
|
$ |
(3,396,389 |
) |
Revenue. We did not generate any revenue for the years
ended December 31, 2019 or December 31, 2018.
General and administrative expenses. Our general and
administrative expenses consist primarily of office lease,
overhead, insurance, professional advisor fees, and other expenses
incurred in connection with general operations. Our total general
and administrative expenses decreased by $390,972 to $138,152 for
the year ended December 31, 2019 from $529,124 for the year ended
December 31, 2018. Such decrease was primarily due to decreased
professional fees, legal, consulting and termination of the
laboratory and offices lease agreement.
Payroll expenses. Our payroll expenses include employee
salaries and bonuses plus related payroll taxes. Our accrued
payroll expenses were $601,000 for the year ended December 31, 2019
compared to $ 3,397,643 for the year ended December 31, 2018.
Stock-based compensation recorded for the two comparative periods
were $0 and $2,931,643, respectively. The entire amount of accrued
payroll expense incurred in 2019 and 2018 was deferred due to lack
of funds.
Total other expenses. We had $28,582 in other expenses for
the year ended December 31, 2019, as compared to $111,790 for the
year ended December 31, 2018. The amounts for both years relate to
accrued interest expense on related party and other notes
payable.
Total other income. The Company recorded a gain on the
settlement with FOGT LLC of approximately $250,000 for the year
ended December 31, 2019, as compared $648,349 for the year ended
December 31, 2018, which consisted of a gain on extinguishment of
aged debt or other liabilities.
Net loss. As a result of the cumulative effect of the
factors described above, our net loss decreased by $ 2,878,738 to
$517,651 for the year ended December 31, 2019 from $3,396,389 for
the year ended December 31, 2018. Share-based compensation for the
year ended December 31, 2019 was $0 compared to $2,931,643 for the
year ended December 31, 2018. The officers did not receive shares
of Series B Preferred Stock in the current year per their
employment contracts as the share amount would have exceeded the
total authorized shares for this series of preferred stock of
30,000,000 shares authorized.
Summary of Cash Flow
Net
cash provided by operating activities was $269 for the year ended
December 31, 2019, as compared to cash used in operating activities
of $462,613 for the year ended December 31, 2018. For the year
ended December 31, 2019, the net loss of $ 517,651 was offset by
accounts payable and accrued expenses and depreciation expense. For
the year ended December 31, 2018, the net loss of $ 3,396,389 and
extinguishment of liabilities in the amount of $648,349 were offset
in part by stock-based compensation in the amount of
$2,931,643.
Net
cash provided by financing activities was $ 0 for the year ended
December 31, 2019, as compared to $300,000 for the year ended
December 31, 2018, which was received from an investment from FOGT,
LLC.
Contractual
Obligations and Commitments
There
were no contractual obligations or commitments of any
kind.
Convertible Notes
In
previous years we borrowed money from investors and issued
convertible notes due on demand and bearing interest at an annual
rate of 8%. The notes are convertible into shares our common stock
at a conversion price of $0.01 to $0.05 per share. As of December
31, 2019 and 2018, the outstanding aggregate principal and interest
on these notes was $54,500 and $420,500, respectively.
The
Company has approximately $366,000 of convertible notes whose
holders have presented conversion notices. The Company’s Stock
Transfer Agent has not been able to issue shares for these notes
due to the noncompliance status of the Company with its public
filings. The $366,000 is included in accrued
liabilities.
Related Party Loans
From
time to time, certain directors, officers and stockholders have
made loans to the Company.
As of
December 31, 2019 and 2018, the Company has outstanding loan
payables to Dr. Antonio Milici, its Chairman, Chief Executive
Officer and principal stockholder, in the amounts of $679,783 and
$673,092, respectively. This loan is unsecured, due on demand, and
bears interest at 2.41%.
As of
December 31, 2019 and 2018, the Company has outstanding loan
payables to Tannya Irizarry, its Chief Administrative Officer and
stockholder, in the amounts of $61,995 and $90,523, respectively.
This loan is unsecured, due on demand, and bears interest at
8%.
Investment Agreement
In
March 2018, the Company entered into a Milestone Investment
Agreement (the “Agreement”) with FOGT, LLC (an entity controlled in
part by a former member of the Company’s Board of Directors),
pursuant to which FOGT, LLC (“FOGT”) agreed to invest in and
purchase from the Company up to $5 million of Series A Convertible
Preferred Stock pending the Company’s completion of certain
operational milestones. As of December 31, 2018, FOGT had invested
$550,000 and the Company issued 5,500 shares of Series A
Convertible Preferred Stock to FOGT pursuant to the terms of the
Agreement. Subsequently, FOGT agreed to invest additional amounts
as follows: (i) $1,500,000 upon the Company’s completion of design,
assembly and validation of an advanced robotic system; and (ii)
$1,750,000 upon the Company entering into a commercial agreement
with a government organization or private entity. Subsequently, a
dispute arose between the parties. FOGT ceased any further
investments in the Company resulting in litigation.
The
Board member resigned. In 2019 the Company received a net
settlement of approximately $250,000, which was included in Other
Income, and the 10,350 shares of Series A Convertible Preferred
Stock were canceled.
Accrued Liabilities
During
the year ended December 31, 2018, the Company has written off
approximately $648,349 from accounts payable resulting in a gain,
which has been recorded in Other Income on the Statement of
Operations. The amounts written off consist of miscellaneous old
accounts payable, which were invalid accounts or already paid.
Additionally, the Company has removed from its accounts payable and
accrued liabilities certain judgments that have not been collected
for which, the Colorado statute of limitations has lapsed. The
Company has contacted these entities and has not received any
correspondence from these entities acknowledging the existence of
the debts. The Company’s UCC-1 filings and lien searches in the
various states, including Colorado, showed no results or lien
filings on record. These items consist of the following:
|
Description |
|
Date of Judgment |
|
Amount |
|
| Banc of America Leasing –
judgment |
|
August 17, 2010 |
|
$ |
24,183 |
|
| Enterprise Leasing of Denver –
judgment |
|
June 26, 2009 |
|
|
84,432 |
|
| Mercator Momentum Fund III LP –
judgment |
|
June 6, 2008 |
|
|
80,621 |
(1) |
| The Park III – office space rent
expense recorded |
|
|
|
|
83,160 |
|
| Thermo Fisher Scientific, Inc. –
amount recorded |
|
|
|
|
360,952 |
|
| Other accounts
payable |
|
|
|
|
15,001 |
|
|
Total amount written off |
|
|
|
$ |
648.349 |
|
| |
|
|
|
|
|
|
|
(1) |
Mercator
Momentum Fund III LP was dissolved December 12, 2008. |
Capital
Expenditures
Our
operations require capital expenditures primarily for lab equipment
and software development. The Company lost its lab equipment and
other capital assets when the office space lease was terminated in
April 2019. The equipment was fully depreciated. The Company
removed these assets from its books in 2019. The Company’s fixed
assets include a vehicle purchased in 2017 in the amount of $26,400
with a net book value of $15,480 as of December 31,
2019.
Inflation
Inflation
and changing prices have not had a material effect on our business
and we do not expect that inflation or changing prices will
materially affect our business in the foreseeable future. However,
our management will closely monitor price changes in our industry
and continually maintain effective cost control in
operations.
Seasonality
Our
operating results and operating cash flows historically have not
been subject to significant seasonal variations. This pattern may
change, however, as a result of new market opportunities or new
product introductions.
Off-Balance
Sheet Arrangements
We do
not have any off balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity or capital expenditures
or capital resources that is material to an investor in our
securities.
Effect
of Inflation and Market Prices on Net Sales and
Revenues
Inflation
and changing prices have not had a material effect on our business
and we do not expect that inflation or changing prices will
materially affect our business in the foreseeable future. However,
our management will closely monitor price changes in our industry
and continually maintain effective cost control in
operations.
Critical
Accounting Policies and Estimates
The
preparation of financial statements in conformity with accounting
principles GAAP requires our management to make assumptions,
estimates and judgments that affect the amounts reported, including
the notes thereto, and related disclosures of commitments and
contingencies, if any. We have identified certain accounting
policies that are significant to the preparation of our financial
statements. These accounting policies are important for an
understanding of our financial condition and results of operation.
Critical accounting policies are those that are most important to
the portrayal of our financial condition and results of operations
and require management’s difficult, subjective, or complex
judgment, often as a result of the need to make estimates about the
effect of matters that are inherently uncertain and may change in
subsequent periods. Certain accounting estimates are particularly
sensitive because of their significance to financial statements and
because of the possibility that future events affecting the
estimate may differ significantly from management’s current
judgments. We believe the following critical accounting policies
involve the most significant estimates and judgments used in the
preparation of our financial statements:
Property and Equipment, Net.
Property
and equipment consist primarily of office and laboratory equipment,
leasehold improvements, vehicle, and is stated at cost.
Depreciation is computed on a straight-line basis over the
estimated useful lives ranging from three to seven years. The
Company has one vehicle recorded in property and equipment with a
net book value of $15,840 as of December 31, 2019.
Impairment of Long-Lived Assets.
We
review the recoverability of long-lived assets to determine whether
events or changes in circumstances occurred that indicate the
carrying value of the asset may not be recoverable. The assessment
of possible impairment is based on the ability to recover the
carrying value of the asset from the expected future cash flows of
the related operations. If these cash flows are less than the
carrying value of such asset, an impairment loss is recognized for
the difference between the estimated fair value and carrying value.
The measurement of impairment requires management to make estimates
of these cash flows related to long-lived assets, as well as other
fair value determinations.
Stock-Based Compensation.
Stock-based
compensation is accounted for under FASB ASC Topic No. 718 –
Compensation – Stock Compensation. The guidance requires
recognition in the financial statements of the cost of employee
services received in exchange for an award of equity instruments
over the period the employee is required to perform the services in
exchange for the award (presumptively the vesting period). The
guidance also requires measurement of the cost of employee services
received in exchange for an award based on the grant-date fair
value of the award. We account for non-employee share-based awards
in accordance with guidance related to equity instruments that are
issued to other than employees for acquisition, or in conjunction
with selling, goods or services.
Fair Value of Financial Instruments.
The
carrying value of cash, accounts payable, accrued expenses and
notes payable approximates fair value due to the short-term nature
of these accounts.
Recently Issued Accounting Standards
In
October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic
740): Intra-Entity Transfers of Assets Other than Inventory”,
which eliminates the exception that prohibits the recognition of
current and deferred income tax effects for intra-entity transfers
of assets other than inventory until the asset has been sold to an
outside party. The updated guidance is effective for annual periods
beginning after December 15, 2019, including interim periods within
those fiscal years. Early adoption of the update is permitted. The
Company is currently evaluating the impact of the new
standard.
In
June 2018, the FASB issued Accounting Standards Update 2018-07,
“Compensation – Stock Compensation (Topic 718): Improvements to
Nonemployee Share-Based Payment Accounting (“ASU 2018-07”)”.
ASU 2018-07 expands the scope of Topic 718 to include share-based
payment transactions for acquiring goods and services from
nonemployees. ASU 2018-07 also clarifies that Topic 718 does not
apply to share-based payments used to effectively provide (1)
financing to the issuer or (2) awards granted in conjunction with
selling goods or services to customers as part of a contract
accounted for under Revenue from Contracts with Customers
(Topic 606). ASU 2018-07 is effective for fiscal years beginning
after December 15, 2018, including interim periods within those
fiscal years. Early adoption is permitted. The Company adopted the
provisions of ASU 2018-07 in the quarter beginning January 1, 2019.
The adoption of ASU 2018-07 did not have a material impact on the
Company’s financial statement presentation or
disclosures.
In
August 2018, the FASB issued Accounting Standards Update (ASU)
2018-13, “Fair Value Measurement (Topic 820): Disclosure
Framework - Changes to the Disclosure Requirements for Fair Value
Measurement”, which changes the fair value measurement
disclosure requirements of ASC 820. This update is effective
for fiscal years beginning after December 15, 2019, and for interim
periods within those fiscal years. The Company does not expect the
adoption of ASU 2018-13 to have a material impact on its
consolidated financial statements.
Management
has evaluated all recent accounting pronouncements as issued by the
FASB in the form of Accounting Standards Updates (“ASU”) through
the date these financial statements were available to be issued and
found no recent accounting pronouncements issued, but not yet
effective accounting pronouncements, when adopted, will have a
material impact on the financial statements of the
Company.
|
|
ITEM 7A. |
QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
As a
smaller reporting company, we are not required to provide the
information required by this Item.
|
|
ITEM 8. |
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA |
The
financial statements required by this item are set forth beginning
on page F-1 of this Annual Report on Form 10-K and are incorporated
herein by reference.
|
|
ITEM 9. |
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE |
There
have been no changes in our independent registered public
accounting firm or disagreements with our accountants on matters of
accounting and financial disclosure.
|
|
ITEM 9A. |
CONTROLS
AND PROCEDURES |
Evaluation
of Disclosure Controls and Procedures
We
are responsible for maintaining disclosure controls and procedures,
as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.
Disclosure controls and procedures are controls and other
procedures designed to ensure that the information required to be
disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized, and reported
within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file or
submit under the Exchange Act is accumulated and communicated to
our management, including our principal executive officer and our
principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.
Based
on our management’s evaluation (with the participation of our
principal executive officer and our principal financial officer) of
our disclosure controls and procedures as required by Rule 13a-15
under the Exchange Act, our principal executive officer and our
principal financial officer have concluded that our disclosure
controls and procedures were not effective to achieve their stated
purpose as of December 31, 2019, the end of the period covered by
this Annual Report on Form 10-K, because of the material weaknesses
described below.
Management’s
Annual Report on Internal Control over Financial
Reporting
Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting for the Company. Internal
control over financial reporting refers to the process designed by,
or under the supervision of, our principal executive officer and
principal financial and accounting officer, and effected by our
board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of our financial
reporting and the preparation of financial statements for external
purposes in accordance with GAAP, and includes those policies and
procedures that:
|
(1) |
Pertain
to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of our
assets; |
|
(2) |
Provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP,
and that our receipts and expenditures are being made only in
accordance with the authorization of our management and directors;
and |
|
(3) |
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial
statements. |
Our
management evaluated the effectiveness of our internal control over
financial reporting as of December 31, 2019. In making this
evaluation, management used the framework established in Internal
Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission, or COSO. The
COSO framework summarizes each of the components of a company’s
internal control system, including (i) the control environment,
(ii) risk assessment, (iii) control activities, (iv) information
and communication, and (v) monitoring. Based on our evaluation, we
determined that, as of December 31, 2019 , our internal control
over financial reporting was not effective due to the following
material weaknesses.
|
● |
Insufficient
accounting resources. Management had insufficient accounting
resources, which insufficiency resulted in delays associated with
our reporting of our operating results. |
|
● |
Lack
of GAAP knowledge. We lack internal personnel with GAAP
knowledge. While management has engaged an external consultant to
counter the lack of internal GAAP knowledge, the work of the
external consultant does not entirely compensate for this internal
deficiency. |
To
cure the foregoing material weakness, we will look to increase our
personnel resources, including those with GAAP knowledge, as funds
become available. Management believes that hiring additional
knowledgeable personnel with technical accounting expertise and
GAAP knowledge will remedy the foregoing weakness.
We
intend to complete the remediation of the material weaknesses
discussed above as soon as practicable, but we cannot assure you
that we will be able to do so. Designing and implementing an
effective disclosure controls and procedures is a continuous effort
that requires us to anticipate and react to changes in our business
and the economic and regulatory environments and to devote
significant resources to maintain a financial reporting system that
adequately satisfies our reporting obligations. The remedial
measures that we intend to take may not fully address the material
weaknesses that we have identified, and material weaknesses in our
disclosure controls and procedures may be identified in the future.
Should we discover such conditions, we intend to remediate them as
soon as practicable. We are committed to taking appropriate steps
for remediation, as needed.
All
internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to
be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Also, projections
of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting
during the year ended December 31, 2019, that have materially
affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
|
|
ITEM 9B. |
OTHER
INFORMATION |
Effective
April 29, 2019, we terminated our sublease arrangement with GTI
Research, Inc. for our prior facilities in Denver, Colorado. In
connection with such termination, we entered into a Sublease
Termination Agreement that, among other things, terminated any and
all of our future rent and other financial commitments under the
sublease arrangement. The lease deposit related to the sublease
termination was written off in the amount of $12,000.
The
Company lost its lab equipment and other assets when the lease was
terminated. The lab equipment and capital assets were fully
depreciated, and the Company removed the amounts from its records
in 2019. There was no impact to the net loss.
PART III
|
|
ITEM 10. |
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Directors
and Executive Officers
The
following sets forth information about our directors and executive
officers as of the date hereof:
|
Name |
|
Age |
|
Position |
| Antonio
Milici |
|
65 |
|
Chairman
of the Board, Chief Executive Officer and Chief Scientific
Officer |
| Tannya
L. Irizarry |
|
61 |
|
Chief
Administrative Officer and Interim Chief Financial
Officer |
| Jeremiah
Bartley |
|
65 |
|
Director |
| |
|
|
|
|
Officers
are elected annually by the Board of Directors (subject to the
terms of any employment agreement), to hold such office until an
officer’s successor has been duly appointed and qualified, unless
an officer sooner dies, resigns or is removed by the
Board.
The
principal occupation and business experience during at least the
past five years for our executive officers and directors is as
follows:
Antonio Milici. Dr. Milici founded the Company in 1998 and
has served as its Chairman and Chief Executive Officer since
inception. Prior to founding the Company, Dr. Milici served as
Chief Executive Officer and President of Genetrans, Inc., a genetic
diagnostic company from 1993 to 1998. Dr. Milici was also an
assistant professor in the department of Molecular Pathology at the
University of Texas M.D. Anderson Cancer Center. Dr. Milici was
selected to serve on our board of directors due to his tenure,
having founded the Company and served as its Chief Executive
Officer since inception, as well as his extensive experience in the
industry in which we operate.
Tannya L. Irizarry. Ms. Irizarry has served as our Interim
Chief Financial Officer since May 2006 and as our Chief
Administrative Officer since 1999. Ms. Irizarry has over 22 years
of experience in medical technology and biotechnology industries.
She was the Vice President of Genetrans, Inc. from 1994 to 1998.
Ms. Irizarry worked at the University of Texas M.D. Anderson Cancer
Center in the department of Neuro-Oncology with Dr. William S.
Fields and the Office of Education with Dr. James Bowen. She also
worked at the Medical College of Georgia and subsequently, at the
St. Joseph Hospital in the biotechnology division.
Jeremiah Bartley. Dr. Bartley has served as a member of our
board of directors since April 2, 2018. He has served as the
Director of Women’s Health Care at Rocky Mountain Internal Medicine
in Denver, Colorado since 1990. He is a past President of the
Colorado Section of the American College of Obstetrics and
Gynecology. Dr. Bartley was a member of the Hospital Provider Fee
Oversight and Advisory Board from 2009 to 2016. Dr. Bartley
received a BA degree from Yale University and MD degree from
University of Miami. He completed his residency in Obstetrics and
Gynecology at Case Western University. Dr. Bartley was selected to
serve on our board of directors due to his extensive medical
experience.
There
are no arrangements or understandings known to us pursuant to which
any director was or is to be selected as a director or nominee.
There are no agreements or understandings for any of our executive
officers or directors to resign at the request of another person
and no officer or director is acting on behalf of; nor will any of
them act at the direction of any other person. The Company has a
Code of Conduct which provides specific expectations from each
director and senior management officers, and the penalty of
permanent dismissal from any public traded company in his/her
future.
Except
as set forth in our discussion below in Item 13 “Certain
Relationships and Related Transactions, and Director
Independence—Transactions with Related Persons,” none of our
directors, director nominees or executive officers has been
involved in any transactions with us or any of our directors,
executive officers, affiliates or associates which are required to
be disclosed pursuant to the rules and regulations of the
SEC.
Family
Relationships
Dr.
Antonio Milici and Ms. Tannya L. Irizarry are married.
Involvement
in Certain Legal Proceedings
To
the best of our knowledge, with no exceptions, except as described
below, none of our directors or executive officers has, during the
past ten years:
|
● |
been
convicted in a criminal proceeding or been subject to a pending
criminal proceeding (excluding traffic violations and other minor
offences); |
|
● |
had
any bankruptcy petition filed by or against the business or
property of the person, or of any partnership, corporation or
business association of which he was a general partner or executive
officer, either at the time of the bankruptcy filing or within two
years prior to that time; |
|
● |
been
subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction or federal or state authority, permanently or
temporarily enjoining, barring, suspending or otherwise limiting,
his involvement in any type of business, securities, futures,
commodities, investment, banking, savings and loan, or insurance
activities, or to be associated with persons engaged in any such
activity; |
|
● |
been
found by a court of competent jurisdiction in a civil action or by
the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities
or commodities law, and the judgment has not been reversed,
suspended, or vacated; |
|
● |
been
the subject of, or a party to, any federal or state judicial or
administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated (not including any
settlement of a civil proceeding among private litigants), relating
to an alleged violation of any federal or state securities or
commodities law or regulation, any law or regulation respecting
financial institutions or insurance companies including, but not
limited to, a temporary or permanent injunction, order of
disgorgement or restitution, civil money penalty or temporary or
permanent cease-and-desist order, or removal or prohibition order,
or any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or |
|
● |
been
the subject of, or a party to, any sanction or order, not
subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act
(15 U.S.C. 78c(a)(26))), any registered entity (as defined in
Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C.
1(a)(29))), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or
persons associated with a member. |
Compliance
with Section 16(A) of the Exchange Act.
Section
16(a) of the Exchange Act requires our directors and executive
officers and beneficial holders of more than 10% of our common
stock to file with the SEC initial reports of ownership and reports
of changes in ownership of our equity securities. We believe, based
solely on a review of the copies of such reports furnished to us,
that all reports required to be filed have been timely filed for
the year ended December 31, 2019.
Code
of Ethics
We
have adopted a Code of Conduct that applies to all of our directors
and senior management, including our principal executive officer,
principal financial officer and principal accounting officer. Such
code of conduct addresses, among other things, honesty and ethical
conduct, conflicts of interest, compliance with laws, regulations
and policies, and reporting of violations of the code. This Code of
Conduct is incorporated by reference to the Company’s Form 10-K
filed on February 27, 2020. In addition, we intend to post on our
website all disclosures that are required by law or the listing
standards of our applicable trading platform or market concerning
any amendments to, or waivers from, any provision of the code. The
reference to our website address does not constitute incorporation
by reference of the information contained at or available through
our website, and you should not consider it to be a part of this
report.
Material
Changes to Director Nomination Procedures
There
have been no material changes to the procedures by which
stockholders may recommend nominees to our board of directors since
such procedures were last disclosed.
Audit
Committee and Audit Committee Financial Expert
We do
not have an audit committee or an audit committee financial expert
serving on the audit committee. Our board of directors is currently
responsible for the functions that would otherwise be managed by an
audit committee.
|
|
ITEM 11. |
EXECUTIVE
COMPENSATION |
Compensation
of Executive Officers
The
following table sets forth information concerning all compensation
awarded to, earned by or paid to the named Executive Officers for
services rendered in all capacities during the fiscal year ended
December 31, or who earned compensation exceeding $100,000 during
fiscal year 2019, for services as executive officers for the last
two fiscal years.
Summary Compensation Table
|
Name and Principal Position |
|
Year |
|
Salary
($) |
|
|
Stock Awards
($) |
|
|
Total
($) |
|
| Antonio Milici, Chief
Executive Officer |
|
2019 |
|
|
348,000 |
|
|
|
- |
|
|
|
348,000 |
|
| |
|
2018 |
|
|
258,000 |
|
|
|
135,000 |
|
|
|
393,000 |
|
| Tannya L. Irizarry, Interim Chief
Financial Officer |
|
2019 |
|
|
253,000 |
|
|
|
- |
|
|
|
253,000 |
|
| |
|
2018 |
|
|
207,996 |
|
|
|
45,000 |
|
|
|
252,996 |
|
On
January 8, 2017, we entered into an employment agreement with
Antonio Milici, M.D., Ph.D., to serve as the Chief Executive
Officer and Chief Scientific Officer of the Company through January
31, 2022. Unless either party provides notice to terminate the
agreement at least thirty days prior to expiration of the
agreement, the agreement will automatically be extended for an
additional two-year period. In consideration for his services, Dr.
Milici receives a base salary of $258,000 per annum, plus $90,000
worth of Series B Convertible Preferred Stock in March of each
year. We also agreed to pay Dr. Milici bonus compensation or a lump
sum equal to two (2) times the salary at the time we have net
income of at least $2,000,000 dollars each year based on
performance. In addition, we agreed to pay a onetime payment of
$26,900 at the renewal of the employment agreement. We are also
required to pay all living expenses to Dr. Milici during the time
his deferred salary is not entirely released during the term of his
employment agreement. Once deferred salary is entirely released to
Dr. Milici, he is responsible for his taxes. However, during
deferred salary, we are obligated to accrue deferred tax debt in
our balance sheet. Dr. Milici is also entitled to a leased Company
vehicle of his selection. At the end of aforementioned lease, Dr.
Milici is authorized to either purchase the vehicle and/or exchange
leased vehicle for another vehicle. The Company did not issue
$90,000 worth of Series B Preferred Stock in 2019 as the Company
did not have enough authorized shares of Series B Preferred stock.
The Company included $90,000 in the annual salary accrual for Dr.
Milici. For the years ended December 31, 2019 and 2018, all salary
was deferred.
On
January 8, 2017, we entered into an employment agreement with
Tannya L. Irizarry to serve as the Chief Administrative Officer and
Interim Chief Financial Officer of the Company through January 31,
2022. Unless either party provides notice to terminate the
agreement at least thirty days prior to expiration of the
agreement, the agreement will automatically be extended for an
additional two-year period. In consideration for her services, Ms.
Irizarry receives a base salary of $208,000 per annum, plus $45,000
worth of Series B Convertible Preferred Stock in March of each
year. We also agreed to pay Ms. Irizarry bonus compensation or a
lump sum equal to two (2) times the salary at the time we have net
income of at least $2,000,000 dollars each year based on
performance. In addition, we agreed to pay a onetime payment of
$18,000 at the renewal of the employment agreement. We are also
required to pay all living expenses to Ms. Irizarry during the time
her deferred salary is not entirely released during the term of her
employment agreement. Once deferred salary is entirely released to
Ms. Irizarry, she is responsible for her taxes. However, during
deferred salary, we are obligated to accrue deferred tax debt in
its balance sheet. Ms. Irizarry is also entitled to a leased
Company vehicle of her selection. At the end of aforementioned
lease, Ms. Irizarry is authorized to either purchase the vehicle
and/or exchange leased vehicle for another vehicle. The Company did
not issue $45,000 worth of Series B Preferred Stock in 2019 as the
Company did not have enough authorized shares of Series B Preferred
stock. The Company included $45,000 in the annual salary accrual
for Ms. Irizarry. During fiscal years 2019 and 2018, all salary was
deferred.
Outstanding
Equity Awards Value at Fiscal Year-End
There
were no unexercised options or unvested shares of restricted stock
previously awarded to the executive officers named above at the
fiscal year ended December 31, 2019.
Securities
Authorized for Issuance under Equity Compensation
Plans
We do
not have any compensation plans in effect under which our equity
securities are authorized for issuance.
Director
Compensation
No
member of our board of directors received any compensation for his
services as a director during the fiscal year ended December 31,
2019.
|
|
ITEM 12. |
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDERS MATTERS |
Security
Ownership of Certain Beneficial Owners and
Management
The
following table sets forth information regarding beneficial
ownership of our voting stock as of May 26, 2020, by (i) each of
our officers and directors; (ii) all of our officers and directors
as a group; and (iii) each person who is known by us to
beneficially own more than 5% of each class of our voting stock.
Unless otherwise indicated, the address of each person or entity
named below is c/o GeneThera, Inc., 3051 W. 105th Ave., #350251,
Westminster, CO 80035.
|
|
|
Amount of Beneficial
Ownership(1) |
|
|
|
|
|
Percent of |
|
|
Percent of |
|
|
Percent of |
|
| |
|
|
|
|
Series A |
|
|
Series B |
|
|
Percent |
|
|
Series A |
|
|
Series B |
|
|
Total |
|
| |
|
Common |
|
|
Preferred |
|
|
Preferred |
|
|
of Common |
|
|
Preferred |
|
|
Preferred |
|
|
Voting |
|
|
Name and Address of Beneficial
Owner |
|
Stock |
|
|
Stock |
|
|
Stock |
|
|
Stock(2) |
|
|
Stock(3) |
|
|
Stock(4) |
|
|
Stock(5) |
|
|
Antonio Milici (6) |
|
|
2,519,567 |
|
|
|
0 |
|
|
|
17,559,593 |
|
|
|
7.0 |
% |
|
|
* |
|
|
|
67.0 |
% |
|
|
67.0 |
% |
|
Tannya L. Irizarry (7) |
|
|
2,519,567 |
|
|
|
0 |
|
|
|
8,478,979 |
|
|
|
7.0 |
% |
|
|
* |
|
|
|
33.0 |
% |
|
|
32.0 |
% |
|
Jeremiah Bartley |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
All directors and officers as a group
(3 persons named above) |
|
|
5,039,134 |
|
|
|
0 |
|
|
|
26,038,572 |
|
|
|
14.0 |
% |
|
|
* |
|
|
|
100.0 |
% |
|
|
99.0 |
% |
|
Other (8)(9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Beneficial
Ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to
securities. Except as set forth below, each of the beneficial
owners listed above has direct ownership of and sole voting power
and investment power with respect to the shares of its stock. For
each beneficial owner above, any options exercisable within 60 days
have been included in the denominator. |
|
(2) |
Based
on 35,902,602 shares of common stock outstanding as of December 31,
2019. |
|
(3) |
It
was based on 10,350 shares of Series A Convertible Preferred Stock,
which were cancelled as of December 31, 2019. Shares of Series A
Convertible Preferred Stock were, upon the occurrence of certain
events, convertible into shares of common stock on the basis of 400
shares of common stock for each share of Series A Preferred Stock.
Holders of Series A Convertible Preferred Stock would have voted
with the holders of common stock on all matters on an as converted
to common stock basis. As of December 31, 2019, all shares were
cancelled, and there were no issued and outstanding shares of
Series A Convertible Preferred Stock. |
|
(4) |
Based
on 26,038,572 shares of Series B Convertible Preferred Stock
outstanding as of December 31, 2019. Shares of Series B Convertible
Preferred Stock are, upon the occurrence of certain events,
convertible into shares of common stock on the basis of 10 shares
of common stock for each share of Series B Preferred Stock. Holders
of Series B Convertible Preferred Stock are entitled to 20 votes
per share and vote with the holders of common stock on all
matters. |
|
(5) |
Percentage
of Total Voting Stock represents total ownership with respect to
all shares of common stock, Series A Convertible Preferred Stock
and Series B Convertible Preferred Stock, as a single
class. |
|
(6) |
Includes
2,519,567 shares of common stock held by Kalos Holdings, LLC. Dr.
Milici’s son was the managing director of Kalos Holdings, LLC until
2014 and has no voting and dispositive power over the securities
held by it. Dr. Milici has no beneficial ownership of such
securities; neither does Tannya L. Irizarry, Dr. Milici’s
wife. |
|
(7) |
Includes
shares held by Antonio Milici, Ms. Irizarry’s husband. |
|
(8) |
A
total of 4,003,860 shares of common stock was issued to Gold X
Change, Inc. and Pavel Kolesnikov, the President. Currently, Gold X
Change, Inc. holds 1,189,300 shares of common stock. Mr. Kolesnikov
disbursed much of the remaining shares to other parties and has no
voting and dispositive power over the securities held by these
parties. Mr. Kolesnikov disclaims beneficial ownership of such
securities except to the extent of his pecuniary interest in such
securities, if any. |
|
(9) |
GeneThera,
Inc. holds 7,064,967 shares of common stock controlled by the Board
of Directors. These shares were cancelled in the second quarter of
2020. |
Changes
in Control
We do
not currently have any arrangements which, if consummated, may
result in a change of control of the Company.
|
|
ITEM 13. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE |
Transactions
with Related Persons
The
following includes a summary of transactions since the beginning of
the 2019 fiscal year, or any currently proposed transaction, in
which we were or are to be a participant and the amount involved
exceeded or exceeds the lesser of $120,000 or one percent of the
average of our total assets at year-end for the last two completed
fiscal years, and in which any related person had or will have a
direct or indirect material interest (other than compensation
described under “Item 11. Executive Compensation”).
From
time to time, certain directors, officers and stockholders have
made loans to the Company. As of December 31, 2019, and 2018, the
Company has outstanding loan payables to Antonio Milici, its
Chairman, Chief Executive Officer and stockholder, in the amounts
of $679,783 and $673,092, respectively. These loans are unsecured,
due on demand, and bear interest at 2.41%. As of December 31, 2019,
and 2018, the Company has outstanding loan payables to Tannya
Irizarry, its Chief Administrative Officer and stockholder, in the
amounts of $61,995 and $90,523, respectively. These loans are
unsecured, due on demand, and bear interest at 8%.
Tannya
Irizarry owns one-third of GTI Corporate Transfer Agents, LLC, the
Company’s transfer agent. During the years ended December 31, 2019,
and 2018, the Company made payments to GTI Corporate Transfer
Agents, LLC in the amounts of $23,616 and $4,170,
respectively.
The
Company utilizes Elia Holding, LLC for construction and other
maintenance services to maintain the Company’s office and lab
space. Elia Holding, LLC is controlled by Tannya Irizarry’s
brother. Costs incurred related to such services were $5,715 and
$12,245 for the years ended December 31, 2019, and 2018,
respectively.
|
|
ITEM 14. |
PRINCIPAL
ACCOUNTING FEES AND SERVICES |
Independent
Auditors’ Fees
The
following is a summary of the fees billed to us by our principal
accountants during the years ended December 31, 2019 and
2018.
| |
|
Year Ended December 31, |
|
| |
|
2019 |
|
|
2018 |
|
| Audit Fees |
|
$ |
27,000 |
|
|
$ |
55,970 |
|
| Audit-Related Fees |
|
|
- |
|
|
|
- |
|
| Tax Fees |
|
|
- |
|
|
|
- |
|
| All Other
Accounting Fees |
|
|
- |
|
|
|
20,850 |
|
| TOTAL |
|
$ |
27,000 |
|
|
|
$76,
820 |
|
“Audit
Fees” consisted of fees billed for professional services rendered
by the principal accountant for the audit of our annual financial
statements and review of the financial statements included in our
Form 10-K and 10-Q or services that are normally provided by the
accountant in connection with statutory and regulatory filings or
engagements.
“Audit-Related
Fees” consisted of fees billed for assurance and related services
by the principal accountant that were reasonably related to the
performance of the audit or review of our financial statements and
are not reported under the paragraph captioned “Audit Fees”
above.
“Tax
Fees” consisted of fees billed for professional services rendered
by the principal accountant for tax returns preparation.
“All
Other Fees” consisted of fees billed for products and services
provided by the principal accountant, other than the services
reported above under other captions of this Item 14.
Pre-Approval
Policies and Procedures
Under
the Sarbanes-Oxley Act of 2002, all audit and non-audit services
performed by our auditors must be approved in advance by our board
of directors to assure that such services do not impair the
auditors’ independence from us. In accordance with its policies and
procedures, our board of directors pre-approved the audit service
performed by BF Borgers CPA PC for our financial statements as of
and for the year ended December 31, 2018. On March 9, 2020 the
Company engaged the audit firm MaughanSullivan LLC to audit its
financial statements for the year ended December 31,
2019
PART IV
|
|
ITEM 15. |
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES |
|
(a) |
The
following documents are filed as part of this Annual Report on this
Form 10-K: |
|
(1) |
Financial
Statements. The financial statements required by this item are set
forth beginning at F-1 of this Annual Report on this Form 10-K and
are incorporated herein by reference. |
|
(2) |
Financial
Statement Schedules. None. Financial statement schedules have been
omitted because they are not applicable. |
|
(3) |
Exhibits:
See Item 15(b) below. |
|
(b) |
Exhibits. The following
exhibits are included herein or incorporated herein by
reference: |
| |
† |
Executive Compensation Plan or
Agreement |
|
|
ITEM 16. |
FORM
10-K SUMMARY |
None.
FINANCIAL
STATEMENTS
GENETHERA,
INC.
AND
SUBSIDIARY
CONSOLIDATED FINANCIAL
STATEMENTS
December
31, 2019 and 2018
REPORT OF REGISTERED INDEPENDENT
PUBLIC ACCOUNTING FIRM
To
the Stockholders and the Board of Directors of GeneThera
Inc.:
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of
GeneThera , Inc. (the “Company”) as of December 31, 2019 and 2018,
the related consolidated statements of operations, changes in
stockholders’ equity, and cash flows for each of the years in the
two-year period ended December 31, 2019, and the related notes
(collectively referred to as the “financial statements”). In our
opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31,
2019 and 2018, and the results of its operations and its cash flows
for each of the two years in the two-year period ended December 31,
2019, in conformity with U.S. generally accepted accounting
principles.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s consolidated financial statements based on our audits. We
are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are
required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the
purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly,
we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Going
Concern
The
accompanying financials have been prepared assuming the Company
will continue as a going concern. As of December 31, 2019, the
Company had an accumulated deficit of approximately $30,485,499 and
may experience losses in the near term. These factors and the need
for additional financing in order for the Company to meet its
business plan, raise substantial doubt about its ability to
continue as a going concern. Management’s plan to continue as a
going concern is also described in Note 2. The financial statements
do not include any adjustments that might result from the outcome
of this uncertainty.
/s/
MaughanSullivan LLC
We
have served as the Company’s auditor since 2020.
Manchester,
VT
June
10, 2020
GeneThera,
Inc.
Consolidated Balance
Sheets
December
31,
|
|
|
2019 |
|
|
2018
(Restated) |
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
5,309 |
|
|
$ |
5,040 |
|
|
Total current assets |
|
|
5,309 |
|
|
|
5,040 |
|
|
Office and laboratory equipment and leasehold improvements |
|
|
- |
|
|
|
729,859 |
|
|
Automobile & trucks |
|
|
26,400 |
|
|
|
26,400 |
|
|
Less: Accumulated depreciation |
|
|
(10,560 |
) |
|
|
(735,139 |
) |
|
Total property and equipment, net |
|
|
15,840 |
|
|
|
21,120 |
|
|
Other assets - deposit |
|
|
- |
|
|
|
12,000 |
|
|
TOTAL ASSETS |
|
$ |
21,149 |
|
|
$ |
38,160 |
|
| |
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
27,705 |
|
|
$ |
127,671 |
|
|
Accrued expenses |
|
|
6,092,364 |
|
|
|
5,096,781 |
|
|
Notes payable |
|
|
25,800 |
|
|
|
25,800 |
|
|
Convertible notes payable, net of discount |
|
|
54,500 |
|
|
|
420,500 |
|
| Loan
from shareholder |
|
|
741,778 |
|
|
|
770,753 |
|
|
Contingency |
|
|
- |
|
|
|
- |
|
|
Total liabilities |
|
|
6,942,147 |
|
|
|
6,441,505 |
|
| |
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
Stockholders’ deficit: |
|
|
|
|
|
|
|
|
| Series A
preferred stock, par value $0.001 per share, 20,000,000 shares
authorized, 0 shares and 10,350 shares to be issued as of December
31, 2019 and December 31, 2018, respectively |
|
|
- |
|
|
|
12 |
|
| Series B
preferred stock, par value $0.001 per share, 30,000,000 shares
authorized, 26,038,572 shares issued and outstanding as of December
31, 2019 and December 31, 2018, respectively |
|
|
26,039 |
|
|
|
26,039 |
|
| Common
stock, par value $0.001 per share, 300,000,000 shares authorized,
35,902,602 shares issued and outstanding as of December 31, 2019
and December 31, 2018, respectively |
|
|
35,904 |
|
|
|
35,904 |
|
|
Common stock to be issued |
|
|
53,572 |
|
|
|
53,572 |
|
|
Additional paid-in capital |
|
|
23,448,986 |
|
|
|
23,448,977 |
|
|
Accumulated deficit |
|
|
(30,485,499 |
) |
|
|
(29,967,849 |
) |
|
Total stockholders’ deficit of GeneThera, Inc. |
|
|
(6,920,998 |
) |
|
|
(6,403,345 |
) |
|
TOTAL LIABILITIES & STOCKHOLDERS’ DEFICIT |
|
$ |
21,149 |
|
|
$ |
38,160 |
|
See
accompanying notes to the consolidated financial
statements.
GeneThera,
Inc.
Consolidated Statements of
Operations
| |
|
For the Years Ended
December 31, |
|
| |
|
2019 |
|
|
2018
(Restated) |
|
|
Expenses |
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
$ |
138,152 |
|
|
$ |
529,124 |
|
|
Payroll expenses |
|
|
601,000 |
|
|
|
3,397,643 |
|
|
Total operating expenses |
|
|
739,152 |
|
|
|
3,296,767 |
|
| Loss
from operations |
|
|
(739,152 |
) |
|
|
(3,296,767 |
) |
|
Other expenses |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(28,582 |
) |
|
|
(117,970 |
) |
|
Proceeds from settlement |
|
|
250,083 |
|
|
|
- |
|
|
Loss on write off of related party receivable |
|
|
- |
|
|
|
- |
|
|
Total other expense |
|
|
221,501 |
|
|
|
(117,970 |
) |
|
Other income |
|
|
|
|
|
|
|
|
|
Gain recognized on write off of liabilities |
|
|
- |
|
|
|
648,349 |
|
|
Total other income |
|
|
- |
|
|
|
648,349 |
|
| Net
loss before income taxes |
|
|
(517,651 |
) |
|
|
(3,396,389 |
) |
|
Provision for income taxes |
|
|
- |
|
|
|
- |
|
|
Net loss |
|
$ |
(517,651 |
) |
|
$ |
(3,396,389 |
) |
|
|
|
|
|
|
|
|
|
|
|
Loss per common share - basic and diluted |
|
$ |
(0.01 |
) |
|
$ |
(0.09 |
) |
|
Weighted average common shares outstanding - basic and diluted |
|
|
35,902,602 |
|
|
|
38,97,887 |
|
See
accompanying notes to the consolidated financial
statements.
GeneThera,
Inc.
Consolidated Statements of
Stockholders’ Equity (Deficit)
For
the years ended December 31, 2019 and 2018
(Restated)
|
|
|
Series A |
|
|
Series B |
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Stock to be |
|
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Issued |
|
|
Total |
|
|
Balance at December 31,
2017 |
|
|
7,350 |
|
|
$ |
9 |
|
|
|
16,374,286 |
|
|
$ |
16,374 |
|
|
|
40,064,983 |
|
|
$ |
40,065 |
|
|
$ |
19,274,214 |
|
|
$ |
(26,571,461 |
) |
|
$ |
53,572 |
|
|
$ |
(7,187,227 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock to be
issued |
|
|
3,000 |
|
|
|
3 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
299,997 |
|
|
|
- |
|
|
|
- |
|
|
|
300,000 |
|
|
Stock issued for officer
wages |
|
|
- |
|
|
|
- |
|
|
|
9,664,286 |
|
|
|
9,664 |
|
|
|
- |
|
|
|
- |
|
|
|
2,921,979 |
|
|
|
- |
|
|
|
- |
|
|
|
2,931,643 |
|
|
Cancellation of common
stock |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,662,351 |
) |
|
|
(4,662 |
) |
|
|
4,662 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Stock issued for convertible
debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000 |
|
|
|
500 |
|
|
|
9,500 |
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
Stock to be issued for convertible
debt |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
58,460 |
|
|
|
- |
|
|
|
- |
|
|
|
58,460 |
|
|
Note payable to equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
880,162 |
|
|
|
|
|
|
|
|
|
|
|
880,162 |
|
| Adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
(30 |
) |
|
|
1 |
|
|
|
3 |
|
|
|
1 |
|
|
|
|
|
|
|
5 |
|
|
Net Loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,396,389 |
) |
|
|
- |
|
|
|
(3,396,389 |
) |
|
Balance at December 31,
2018 |
|
|
10,350 |
|
|
$ |
12 |
|
|
|
26,038,572 |
|
|
$ |
26,039 |
|
|
|
35,902,602 |
|
|
$ |
35,904 |
|
|
$ |
23,448,977 |
|
|
$ |
(29,967,849 |
) |
|
$ |
53,572 |
|
|
$ |
(6,403,349 |
) |
| |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Cancellation of preferred
stock |
|
|
(10,350 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
Net Loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(517,651 |
) |
|
|
- |
|
|
|
(517,651 |
) |
|
Balance at December 31,
2019 |
|
|
- |
|
|
$ |
- |
|
|
|
26,038,572 |
|
|
$ |
26,039 |
|
|
|
35,902,602 |
|
|
$ |
35,904 |
|
|
$ |
23,448,986 |
|
|
$ |
(30,485,499 |
) |
|
$ |
53,572 |
|
|
$ |
(6,920,998 |
) |
See
accompanying notes to the consolidated financial
statements.
GeneThera,
Inc.
Consolidated Statements of Cash
Flows
|
|
|
For the Years Ended December 31, |
|
|
|
|
2019 |
|
|
2018
(Restated) |
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(517,651 |
) |
|
$ |
(3,396,389 |
) |
|
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
- |
|
|
|
2,931,643 |
|
|
Depreciation expense |
|
|
5,280 |
|
|
|
5,280 |
|
|
Shares issued for services |
|
|
- |
|
|
|
- |
|
|
Extinguishment of liabilities |
|
|
- |
|
|
|
648,349 |
|
| Loss
on abandonment |
|
|
- |
|
|
|
- |
|
| Loss
on investment |
|
|
- |
|
|
|
- |
|
| Loss
on write off of vendor receivables |
|
|
- |
|
|
|
- |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Deposit |
|
|
12,000 |
|
|
|
- |
|
|
Accounts receivable - related parties |
|
|
- |
|
|
|
- |
|
|
Accounts payable and accrued expenses - related parties |
|
|
(28,976 |
) |
|
|
(23,574 |
) |
|
Accounts payable and accrued expenses |
|
|
529,616 |
|
|
|
668,775 |
|
|
|
|
|
- |
|
|
|
- |
|
|
Net cash provided by (used in) operating activities |
|
|
(269 |
) |
|
|
(462,613 |
) |
| |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
Purchase of fixed asset |
|
|
- |
|
|
|
- |
|
|
Net cash used in investing activities |
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
Proceeds from issuance of stock |
|
|
- |
|
|
|
300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
- |
|
|
|
300,000 |
|
| |
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash |
|
|
269 |
|
|
|
(162,613 |
) |
|
Cash at the beginning of the year |
|
|
5,040 |
|
|
|
167,653 |
|
|
Cash at the end of the year |
|
$ |
5,309 |
|
|
$ |
5,040 |
|
| |
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
- |
|
|
$ |
- |
|
|
Cash paid for income taxes |
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
|
Non-cash investing and financing transactions: |
|
|
|
|
|
|
|
|
|
Conversion of convertible notes payable to common stock |
|
$ |
- |
|
|
$ |
(68,460 |
) |
| Cancellation
of common stock shares |
|
$ |
12 |
|
|
$ |
4,662 |
|
See
accompanying notes to the consolidated financial
statements.
GeneThera,
Inc.
Notes to Consolidated Financial
Statements
December
31, 2019
Note
1 – Organization, Nature of Operations and Summary of Significant
Accounting Policies
Organization and Nature of Operations
The
consolidated financial statements include GeneThera, Inc. and its
wholly owned subsidiary GeneThera, Inc. (Colorado) (collectively,
the “Company”). The Company has a long-standing research
collaboration with GTI Research. GTI Research is assisting the
Company in managing the robotic technology project. The Company’s
CEO is also collaborating with this project in order for the
Company’s research and development to finally become commercial in
order to generate revenues.
The
Company is a biotechnology company that develops molecular assays
and therapeutics for the detection and treatment of zoonotic
diseases.
Restatement of 2018 financial statements
The
financial statements for the year ended December 31, 2018 were
audited by the successor auditors, and the Company has restated the
2018 financial statements. The successor auditors were not able to
review the predecessor auditor’s workpapers as required by auditing
and PCAOB standards. Due to the COVID-19 issue, the predecessor
auditor provided some documentation, but did not provide access to
all their workpapers as their office was closed. The financial
statements are labeled (“Restated”) to reflect this situation.
There were no disagreements or disputes between the Company and the
predecessor auditors.
Use of Estimates
The
preparation of financial statements in accordance with U.S.
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Certain prior
period amounts in the consolidated financial statements and
accompanying notes have been reclassified to conform to the current
period’s presentation.
Principles of Consolidation
The
consolidated financial statements include the accounts of the
Company, it is a controlled subsidiary. Intercompany accounts are
eliminated upon consolidation.
Cash and Cash Equivalents
Cash
equivalents are highly liquid investments with an original maturity
of three months or less.
Fair Value of Financial Instruments
For
purpose of this disclosure, the fair value of a financial
instrument is the amount at which the instrument could be exchanged
in a current transaction between willing parties, other than in a
forced sale or liquidation. The carrying amount of the Company’s
short-term financial instruments approximates fair value due to the
relatively short period to maturity for these
instruments
Property and Equipment, Net
Property
and equipment consist primarily of office and laboratory equipment
and leasehold improvements and is stated at cost. Depreciation is
computed on a straight-line basis over the estimated useful lives
ranging from five to seven years. Leasehold improvements are
amortized over the shorter of their economic lives or lease
terms.
Fair Value Measurements
The
Company follows ASC 820-10 of the FASB Accounting Standards
Codification to measure the fair value of its financial instruments
and disclosures about fair value of its financial instruments. ASC
820-10 establishes a framework for measuring fair value in
accounting principles generally accepted in the United States of
America (U.S. GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair
value measurements and related disclosures, ASC 820-10 establishes
a fair value hierarchy which prioritizes the inputs to valuation
techniques used to measure fair value into three (3) broad levels.
The three (3) levels of fair value hierarchy defined by ASC 820-10
are described below:
|
Level
1 |
Quoted
market prices available in active markets for identical assets or
liabilities as of the reporting date. |
|
Level
2 |
Pricing
inputs other than quoted prices in active markets included in Level
1, which are either directly or indirectly observable as of the
reporting date. |
|
|
|
|
Level
3 |
Pricing
inputs that are generally unobservable inputs and not corroborated
by market data. |
Financial
assets are considered Level 3 when their fair values are determined
using pricing models, discounted cash flow methodologies or similar
techniques and at least one significant model assumption or input
is unobservable.
The
fair value hierarchy gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. If the inputs used
to measure the financial assets and liabilities fall within more
than one level described above, the categorization is based on the
lowest level input that is significant to the fair value
measurement of the instrument.
The
carrying amounts of the Company’s financial assets and liabilities,
such as cash, accounts receivable, inventory, prepaid expenses and
other current assets, accounts payable and accrued expenses
approximate their fair values because of the short maturity of
these instruments.
Transactions
involving related parties typically cannot be presumed to be
carried out on an arm’s-length basis, as the requisite conditions
of competitive, free-market dealings may not exist.
Reclassifications
Certain
prior period amounts have been reclassified to conform to current
period presentation.
Impairment of Long-Lived Assets
The
Company reviews the recoverability of its long-lived assets to
determine whether events or changes in circumstances occurred that
indicate the carrying value of the asset may not be recoverable.
The assessment of possible impairment is based on the ability to
recover the carrying value of the asset from the expected future
cash flows of the related operations. If these cash flows are less
than the carrying value of such asset, an impairment loss is
recognized for the difference between the estimated fair value and
carrying value. The measurement of impairment requires management
to make estimates of these cash flows related to long-lived assets,
as well as other fair value determinations.
Revenue Recognition
There
were no revenues during the years ended December 31, 2019 and
2018.
The
Company follows the FASB Accounting Standards Codification ASC 606
– Revenues from Contracts with Customers for revenue recognition.
The Company considers revenue realized or realizable and earned
when all the following criteria are met:
|
1) |
Identification
of the contract with a customer; |
|
2) |
Identification
of the performance obligations in the contract; |
|
3) |
Determination
of the transaction price; |
|
4) |
Allocation
of the transaction price to the performance obligations in the
contract; and |
|
5) |
Recognition
of revenue when or as a performance obligation is satisfied.
Revenue is recognized when each performance obligation is satisfied
by the entity. An estimate of the variable consideration or
performance obligations that an entity ultimately expects to be
entitled to is included in the transaction price, and revenue is
recognized upon satisfaction of the related performance
obligation(s). An implicit or explicit significant financing
component is taken into consideration. IP licenses must be
analyzed. Each contract with customers is analyzed for multiple
elements if any element must stand alone. |
Leases
The
Company leased laboratory space from GTIR. The lease agreement was
terminated in April 2019. No right of use asset and liability were
recorded for this lease.
On
January 1, 2019, the Company adopted ASC 842 using the modified
retrospective approach and will recognize a right of use (“ROU”)
asset and liability in the consolidated balance sheet when and if
the Company enters into a qualifying lease agreement. At contract
inception, the Company determines whether an arrangement is or
contains a lease and whether the lease should be classified as an
operating or a financing lease. A contract is or contains a lease
if the contract conveys the right to control the use of the
identified asset for a period of time in exchange for
consideration. Control is determined based on the right to obtain
all of the economic benefits from use of the identified asset and
the right to direct the use of the identified asset. ROU assets for
operating leases represent the right to use an underlying asset for
the lease term, and operating lease liabilities represent the
obligation to make lease payments
Lease
liabilities are recognized based on the present value of the future
minimum lease payments over the lease term at the commencement date
for leases exceeding 12 months. Minimum lease payments include only
the fixed lease component of the agreement, as well as any variable
rate payments that depend on an index, initially measured using the
index at the lease commencement date. Non-lease components are
accounted for separately from the fixed lease component for all
leases. Most of the Company’s leases do not provide an implicit
rate that can readily be determined. Therefore, the applied
discount rate is based on the Company’s incremental borrowing rate,
which is determined using its credit rating and other information
available as of the commencement date and is the rate of interest
it would have to pay on a collateralized basis to borrow an amount
equal to the lease payments under similar terms. Lease terms may
include options to renew, which the Company factors into the
determination of the lease term when it is reasonably certain that
the Company will exercise that option. The ROU asset is measured at
the initial amount of the lease liability adjusted for lease
payments made at or before the lease commencement date, plus any
initial direct costs incurred less any lease incentives
received.
Operating
lease expense is recognized on a straight-line basis over the lease
term and is included in “Cost of sales” and “Selling, general and
administrative” line items in the Company’s consolidated statements
of comprehensive income. Leases with an initial term of 12 months
or less are not recorded on the balance sheet, and the expense for
these short-term leases is recognized on a straight-line basis over
the lease term.
The
Company monitors for events or changes in circumstances that
require a reassessment of its leases. When a reassessment results
in the premeasurement of a lease liability, a corresponding
adjustment is made to the carrying amount of the ROU asset unless
doing so would reduce the ROU asset to an amount less than zero, in
which case the remaining adjustment would be recorded in the
consolidated statements of comprehensive income.
Stock-Based Compensation
Stock-based
compensation is accounted for under FASB ASC Topic No. 718 –
Compensation – Stock Compensation. The guidance requires
recognition in the financial statements of the cost of employee
services received in exchange for an award of equity instruments
over the period the employee is required to perform the services in
exchange for the award (presumptively the vesting period). The
guidance also requires measurement of the cost of employee services
received in exchange for an award based on the grant-date fair
value of the award. The Company accounts for non-employee
share-based awards in accordance with guidance related to equity
instruments that are issued to other than employees for
acquisition, or in conjunction with selling, goods or
services.
Research and development costs
R&D
cost are currently expensed as incurred and primarily include cost
associated with R&D arrangements with external parties in
connection with the Company’s robotic technology
project.
Income Taxes
Income
taxes are accounted for in accordance with the provisions of FASB
ASC Topic No. 740 - Income Taxes. Deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Valuation
allowances are established, when necessary, to reduce deferred tax
assets to the amounts expected to be realized.
Basic and Diluted Net Loss per Common Share
Basic
and diluted net loss per share calculations are presented in
accordance with FASB ASC Topic No. 260 – Earnings per Share
and are calculated on the basis of the weighted average number of
common shares outstanding during the period. Diluted per share
calculations includes the dilutive effect of common stock
equivalents in years with net income. As the Company is in a loss
position, any calculation of the dilutive effects of the Company’s
convertible securities would reduce the loss per share amount, and,
as such, the Company will not perform the calculation.
Shipping and Handling Costs
The
Company accounts for shipping and handling fees in accordance with
paragraph 605-45-45-19 of the FASB Accounting Standards
Codification. While amounts charged to customers for shipping
products are included in revenues, the related costs are classified
in cost of revenue as incurred.
Shipping
and handling costs were $0 and $0 for the years ended December 31,
2019 and 2018, respectively
Recently issued accounting pronouncements
In
October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic
740): Intra-Entity Transfers of Assets Other than Inventory”,
which eliminates the exception that prohibits the recognition of
current and deferred income tax effects for intra-entity transfers
of assets other than inventory until the asset has been sold to an
outside party. The updated guidance is effective for annual periods
beginning after December 15, 2019, including interim periods within
those fiscal years. Early adoption of the update is permitted. The
Company is currently evaluating the impact of the new
standard.
In
June 2018, the FASB issued Accounting Standards
Update 2018-07, “Compensation – Stock Compensation (Topic
718): Improvements to Nonemployee Share-Based Payment Accounting
(“ASU 2018-07”)”. ASU 2018-07 expands the
scope of Topic 718 to include share-based payment transactions for
acquiring goods and services from
nonemployees. ASU 2018-07 also clarifies that Topic
718 does not apply to share-based payments used to effectively
provide (1) financing to the issuer or (2) awards granted in
conjunction with selling goods or services to customers as part of
a contract accounted for under Revenue from Contracts with
Customers (Topic 606). ASU 2018-07 is effective for
fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years. Early adoption is permitted. The
Company adopted the provisions of ASU 2018-07 in the
quarter beginning January 1, 2019. The adoption
of ASU 2018-07 did not have a material impact
on the Company’s financial statement presentation or
disclosures.
In
August 2018, the FASB issued Accounting Standards Update (ASU)
2018-13, “Fair Value Measurement (Topic 820): Disclosure
Framework - Changes to the Disclosure Requirements for Fair Value
Measurement”, which changes the fair value measurement
disclosure requirements of ASC 820. This update is effective
for fiscal years beginning after December 15, 2019, and for interim
periods within those fiscal years. The Company does not expect the
adoption of ASU 2018-13 to have a material impact on its
consolidated financial statements.
Management
has evaluated all recent accounting pronouncements as issued by the
FASB in the form of Accounting Standards Updates (“ASU”) through
the date these financial statements were available to be issued and
found no recent accounting pronouncements issued, but not yet
effective accounting pronouncements, when adopted, will have a
material impact on the financial statements of the
Company.
Note
2 – Going Concern
As
reflected in the accompanying consolidated financial statements,
the Company has an accumulated deficit of $30,485,499 and negative
working capital of $6,936,839 as of December 31, 2019. This raises
substantial doubt about the Company’s ability to continue as a
going concern. The Company’s ability to continue as a going concern
is dependent on its ability to raise additional capital and
implement its business plan. The consolidated financial statements
do not include any adjustments that might be necessary if the
Company is unable to continue as a going concern.
Presently
the Company is considering ways to apply its molecular robotic
technology to address the COVID-19 pandemic. Management believes
that actions presently being taken to obtain additional funding and
implement its strategic plans provide the opportunity for the
Company to continue as a going concern.
Note
3 – Accrued Expenses
The
following is the breakdown of the Company’s accrued expenses as of
December 31, 2019 and 2018:
| |
|
2019 |
|
|
2018 |
|
| Accrued officer
salaries |
|
$ |
4,872,900 |
|
|
$ |
4,271,900 |
|
| Accrued interest |
|
|
192,895 |
|
|
|
164,313 |
|
| Accrued expenses-
other |
|
|
1,026,569 |
|
|
|
660,568 |
|
| Total accrued
expenses |
|
$ |
6,092,364 |
|
|
$ |
5,096,781 |
|
Note
4 – Related Party Transactions
The
Company has an outstanding loan payable and accrued interest to
Antonio Milici, its CEO and stockholder amounting to $679,783 and
$673,092 as of December 31, 2019 and 2018, respectively. This
outstanding loan to the Company is unsecured and bears interest at
2.41%. The Company has an outstanding loan and accrued interest
payable to Tannya Irizarry, its interim CFO interim and
stockholder, amounting to $61,995 and $90,523 as December 31, 2019
and 2018, respectively. This outstanding loan to the Company is
unsecured and bears interest at 8%.
Tannya
Irizarry owns one-third of GTI Corporate Transfer Agents, LLC, the
Company’s transfer agent. During the years ended December 31, 2019
and 2018, the Company made payments to GTI Corporate Transfer
Agents, LLC in the amounts of $23,616 and $4,170,
respectively.
During
2019 and 2018, the Company paid $5,715 and $12,245 to Elia
Holdings, LLC, which entity is controlled by Ms. Irizarry’s
ex-husband. In 2018 Elia Holdings, LLC also converted $14,980 of
convertible notes into shares of common stock at a conversion price
of $.03 per share in 2018.
The
Company will no longer rely on GTI Research, Inc. (“GTIR”), the
Company’s previous scientific robotic technology collaborator, for
conducting research and development activities on the robotic
technology development project. For the year ended December 31,
2018 the Company paid $244,624 to GTI Research Inc. for rent,
scientific license agreement and for other expenses incurred by GTI
Research Inc. The Chairman of the Company signed for the lease on
the laboratory facility. The Company’s relationship with GTI
Research Inc. terminated in April 2019. GTI Research Inc. lost the
lease of laboratory space partially occupied by the
Company.
On
January 1, 2018, the Company entered into a sublease for a 7,990
square foot office and lab space on 6860 Broadway in Denver,
Colorado 80221, with GTI Research, Inc. a related party, the
Company’s scientific robotic technology collaborator, for 75
months. GTI Research, Inc. required payment of $12,000 security
deposit in December of 2017. The Company incurred rent expense of
$54,162 during 2018. In 2019 the Company expensed the $12,000
security deposit, did not pay any rent to GTI Research, Inc. and
applied expenses paid by the Company on behalf of GTI Research,
Inc., all of which resulted in a net expense of $4,861 for
2019.
The
lease terminated on April 29, 2019. No right of use asset and
corresponding liability were included in the Balance
Sheet.
Note
5 – Other Income and Accrued Liabilities
During
the year ended December 31, 2018, the Company has written off
approximately $648,349 from accounts payable resulting in a gain,
which has been recorded in Other Income on the Statement of
Operations. The amounts written off consist of miscellaneous old
accounts payable, which were invalid accounts or already paid.
Additionally, the Company has removed from its accounts payable and
accrued liabilities certain judgments that have not been collected
for which, the Colorado statute of limitations has lapsed. The
Company has contacted these entities and has not received any
correspondence from these entities acknowledging the existence of
the debts. The Company’s UCC-1 filings and lien searches in the
various states, including Colorado, showed no results or lien
filings on record. These items consist of the following:
|
Description |
|
Date of Judgment |
|
Amount |
|
| Banc of America Leasing –
judgment |
|
August 17, 2010 |
|
$ |
24,183 |
|
| Enterprise Leasing of Denver –
judgment |
|
June 26, 2009 |
|
|
84,432 |
|
| Mercator Momentum Fund III LP –
judgment |
|
June 6, 2008 |
|
|
80,621 |
(1) |
| The Park III – office space rent
expense recorded |
|
|
|
|
83,160 |
|
| Thermo Fisher Scientific, Inc. –
amount recorded |
|
|
|
|
360,952 |
|
| Other accounts
payable |
|
|
|
|
15,001 |
|
|
Total amount written off |
|
|
|
$ |
648.349 |
|
|
(1) |
Mercator
Momentum Fund III, LP was dissolved December 12, 2008. |
Note
6 – Convertible Notes Payable
In
previous years the Company borrowed additional money from investors
and issued convertible notes, due on demand, bearing interest at an
annual rate of 8%. The notes are convertible into shares of Company
common stock at a conversion price of $0.01 to $0.05 per share. As
December 31, 2019 and 2018, the outstanding principal and interest
on these notes was $54,500 and $420,500, respectively.
The
following is a list of notes that were converted during
2018.
On
April 18, 2018, Brook Zarecki IRA (Mid-South Retirement Services)
converted an aggregate of $3,000 of convertible notes into shares
of the Company’s common stock, at a conversion price of
$0.015.
On
April 18, 2018, Nichole Zarecki (Mid-South Retirement Services)
converted an aggregate of $7,000 of convertible notes into shares
of the Company’s common stock, at a conversion price of
$0.015.
On
April 18, 2018, Parker Zarecki (Mid-South Retirement Services)
converted an aggregate of $3,000 of convertible notes into shares
of the Company’s common stock, at a conversion price of
$0.015.
On
April 18, 2018, Sierra Zarecki (Mid-South Retirement Services)
converted an aggregate of $3,000 of convertible notes into shares
of the Company’s common stock, at a conversion price of
$0.015.
On
April 24, 2018, Patrick McClure converted an aggregate of $1,500 of
convertible notes into shares of the Company’s common stock, at a
conversion price of $0.020.
On
October 25, 2018, Daniel M. Price converted an aggregate of $20,000
of convertible notes into shares of the Company’s common stock, at
a conversion price of $0.02.
On
November 13, 2018, Elia Holdings, LLC converted $14,980 of
convertible notes into shares of the Company’s common stock, at a
conversion price of $0.03.
On
November 13, 2018, Anthos Holdings, LLC converted $15,980 of
convertible notes into shares of the Company’s common stock, at a
conversion price of $0.03.
On
December 3, 2018, Daniel M. Price was issued 500,000 shares of
common stock for one-half of his total convertible
notes.
As of
December 31, 2019, an analysis of the principal amount of
convertible notes payable that have elected conversion into common
stock amounted to $366,000. The Company’s transfer agent has been
constrained in its efforts to issue the common stock for these
convertible notes due to the noncompliance of the Company’s filing
requirements. The Company has ceased accruing interest on these
convertible notes but continues to accrue interest on the remaining
convertible notes of $54,500. The convertible notes that have
elected conversion without the stock being issued have been
included in ‘Accrued liabilities’ on the Balance Sheet.
Note
7- Stockholders’ Equity
Convertible preferred stock rights
Preferred
Stock (’Series A’) shall be convertible into Common Stock any time
at the holder’s sole discretion. Currently, no Series A Preferred
stock is issued or outstanding. The Company intends to file a
Certificate of Amendment of Certificate of Designation with the
State of Nevada to amend the Series A Preferred Socks class of
shares
Preferred
Stock (“Series B”) shall be convertible into ten common shares at
any time and holders are entitled to 20 common share votes per such
preferred share.
Preferred Stock Series A Convertible
The
Company has authorized 30,000,000 shares of Series A Preferred
Stock, $.001 par value, and 20,000,000 shares of Series B Preferred
Stock, $.001 par value.
As of
December 31, 2019, the Company has issued and outstanding
26,038,572 shares of Series B Preferred Stock to the two officers
per the terms of their employee contracts.
Common Stock
The
Company has authorized 300,000,000 shares of common stock, $.001
par value. As of December 31, 2019 and 2018, there were 35,902,602
shares of common stock issued and outstanding,
respectively.
Paid in Capital
Beginning
in November 2010 and through July 2011, Gold X Change, Inc. (“GXC”)
invested approximately $132,000 in the aggregate in the Company’s
convertible notes. In July 2011, a dispute arose between the
Company and GXC as to the number of shares issuable upon conversion
of the convertible notes. In order to resolve this dispute,
the Company and GXC agreed to issue a total of 24 million shares of
the Company’s common stock in the name of GXC; provided that GXC
deposit such shares into an escrow account with an escrow
agent. Under the terms of the escrow agreement, these shares
would only be released to GXC if GXC invested an additional $1
million into the Company within one year, which ended on September
30, 2012. During the one year period, GXC only invested
$880,162. As a result of GXC’s failure to invest the full $1
million within the one year time period as required by the escrow
agreement, GXC was in default under the escrow agreement and the 24
million shares were cancelled. The $880,162 paid by GXC to the
Company was deemed to be the cost of the 4,003,860 shares of
the Company’s common stock that was originally issued to GXC. The
Company adjusted the note payable balance and reclassified the note
balance to additional paid in capital to include such in the
original transaction in which 4,003,860 shares of common stock were
issued. Currently, GXC holds 1,189,300 shares of common stock after
the President distributed 2,814,560 shares to different people and
entities. The President disclaims beneficial ownership of such
securities except to the extent of his pecuniary interest in such
securities, if any.
Designation of Series A Convertible Preferred
Stock
On
August 29, 2018, the Company filed a certificate of designation
(the “Series A Certificate of Designation”) with the Nevada
Secretary of State to set forth the terms of the Series A
Convertible Preferred Stock. Pursuant to the Series A Certificate
of Designation, the Company designated 20,000,000 shares of its
preferred stock as Series A Convertible Preferred Stock. Following
is a summary of the material terms of the Series A Convertible
Preferred Stock:
|
● |
Dividends.
Holders of shares of Series A Convertible Preferred Stock are not
entitled to dividends. |
|
● |
Liquidation.
Upon any dissolution or winding up of the Company, whether
voluntary or involuntary (a “Liquidation”), holders of Series A
Convertible Preferred Stock shall be entitled to receive out of the
assets of the Company, before any distribution of assets is made to
holders of any other class of capital stock of the Company, an
amount equal to $100 per share (the “Series A Liquidation
Preference”). If upon any Liquidation the amounts payable with
respect to the Series A Convertible Preferred Stock and any other
shares of stock of the Company ranking as to any such distribution
on parity with the Series A Convertible Preferred Stock are not
paid in full, the holders of Series A Convertible Preferred Stock
and of such other shares shall share ratably in any such
distribution in proportion to the full respective preferential
amounts to which they are entitled. After the payment of the Series
A Liquidation Preference shall have been made in full to the
holders of the Series A Convertible Preferred Stock, the remaining
assets of the Company legally available for distribution to its
stockholders shall be distributed among the holders of any junior
capital stock that has a liquidation preference senior to holders
of common stock, and after such holders have received in full their
liquidation preference, the remaining amounts shall be distributed
among the holders of the Series A Convertible Preferred Stock and
the common stock, collectively, as one class. |
|
● |
Voting.
On any matter presented to stockholders for their action or
consideration, each holder of Series A Convertible Preferred Stock
shall be entitled to cast the number of votes equal to the number
of shares of common stock into which the shares of Series A
Convertible Preferred Stock held by such holder are convertible as
of the record date for determining stockholders entitled to vote on
such matter. Except as provided by law or by the other provisions
of the Series A Certificate of Designation, the holders shall vote
together with the holders of shares of common stock as a single
class. However, so long as at least 50% of the shares of Series A
Convertible Preferred Stock originally issued remains outstanding,
the Company may not, without the affirmative vote or the written
consent of the holders of at least 51% of the then outstanding
shares of Series A Convertible Preferred Stock, voting separately
as a class, (i) create, authorize or issue any equity security, or
any security convertible into or exercisable for any equity
security, unless such security is junior to the Series A
Convertible Preferred Stock, in terms of dividend and liquidation
preference; or (ii) increase the total number of authorized shares
of Series A Convertible Preferred Stock. |
|
● |
Conversion.
Each holder of shares of Series A Convertible Preferred Stock may,
at holder’s option and at any time, convert any or all such shares
into shares of common stock. The number of shares of common stock
into which each share of Series A Convertible Preferred Stock may
be converted (the “Conversion Rate”) shall be determined according
to the terms of a stock purchase agreement between the Company and
the holder. In addition, each share of Series A Convertible
Preferred Stock shall automatically convert into shares of common
stock, at the then applicable Conversion Rate, upon the earlier of
(i) the closing of a public offering of equity or equity equivalent
securities resulting in minimum gross proceeds to the Company of
$20 million and (ii) upon the Company’s common stock trading at or
above $6.00 per share for 20 out of 30 consecutive trading days;
provided that prior to the event specified by (ii) above, the
Company shall have (y) an effective registration statement on file
with the SEC registering the resale of the common stock issuable
upon conversion of the Series A Convertible Preferred Stock and
(ii) obtained the approval for listing the common stock on any
national securities exchange. The Conversion Rate is subject to
customary adjustments as described in the Series A Certificate of
Designation. |
|
● |
Redemption.
The Series A Convertible Preferred Stock is not
redeemable. |
The
Company entered in a stock purchase agreement with the holder of
the Series A Convertible Preferred Stock, FOGT, LLC, pursuant which
the parties agreed on the conversion rate of 400 shares of common
stock for each share of Series A Convertible Preferred Stock. As of
December 31, 2019, the purchase agreement, subject to the terms of
a settlement in a dispute with FOGT, LLC has been cancelled along
with 10,350 shares of Series A Convertible Preferred Stock
previously issued.
Designation of Series B Convertible Preferred
Stock
On
August 29, 2018, the Company filed a certificate of designation
(the “Series B Certificate of Designation”) with the Nevada
Secretary of State to set forth the terms of the Series B
Convertible Preferred Stock. Pursuant to the Series B Certificate
of Designation, the Company designated 30,000,000 shares of its
preferred stock as Series B Convertible Preferred Stock. Following
is a summary of the material terms of the Series B Convertible
Preferred Stock:
|
● |
Dividends.
Holders of shares of Series B Convertible Preferred Stock are not
entitled to dividends. |
|
● |
Liquidation.
Upon any Liquidation, holders of Series B Convertible Preferred
Stock shall be entitled to receive out of the assets of the
Company, before any distribution of assets is made to holders of
any other class of capital stock of the Company, an amount equal to
$100 per share (the “Series B Liquidation Preference”). If upon any
Liquidation the amounts payable with respect to the Series B
Convertible Preferred Stock and any other shares of stock of the
Company ranking as to any such distribution on parity with the
Series B Convertible Preferred Stock are not paid in full, the
holders of Series B Convertible Preferred Stock and of such other
shares shall share ratably in any such distribution in proportion
to the full respective preferential amounts to which they are
entitled. After the payment of the Series B Liquidation Preference
shall have been made in full to the holders of the Series B
Convertible Preferred Stock, the remaining assets of the Company
legally available for distribution to its stockholders shall be
distributed among the holders of any junior capital stock that has
a liquidation preference senior to holders of common stock, and
after such holders have received in full their liquidation
preference, the remaining amounts shall be distributed among the
holders of the Series B Convertible Preferred Stock and the common
stock, collectively, as one class. |
|
● |
Voting.
On any matter presented to stockholders for their action or
consideration, each holder of Series A Convertible Preferred Stock
shall be entitled to cast 20 votes per share. Except as provided by
law or by the other provisions of the Series B Certificate of
Designation, the holders shall vote together with the holders of
shares of common stock as a single class. However, so long as at
least 50% of the shares of Series B Convertible Preferred Stock
originally issued remains outstanding, the Company may not, without
the affirmative vote or the written consent of the holders of at
least 51% of the then outstanding shares of Series B Convertible
Preferred Stock, voting separately as a class, (i) create,
authorize or issue any equity security, or any security convertible
into or exercisable for any equity security, unless such security
is junior to the Series B Convertible Preferred Stock, in terms of
dividend and liquidation preference; or (ii) increase the total
number of authorized shares of Series B Convertible Preferred
Stock. |
|
● |
Conversion.
Each holder of shares of Series B Convertible Preferred Stock may,
at holder’s option and at any time, convert any or all such shares
into shares of common stock. The number of shares of common stock
into which each share of Series B Convertible Preferred Stock may
be converted is ten shares of common stock for each share of Series
B Convertible Preferred Stock. |
|
● |
Redemption.
The Series B Convertible Preferred Stock is not
redeemable. |
As of
December 31, 2019, the Company has issued to Dr. Milici, CEO and
Tannya Irizarry, CAO, CFO a total of 26,038,572 shares of Series B
Preferred Stock pursuant to the terms of their employee
agreements.
Note
8 – Commitments and Contingencies
Employment Agreements
On
January 8, 2017, the Company entered into an employment agreement
with Antonio Milici, its chief executive officer and chief
scientific officer, for a five-year term. On the same date, the
Company also entered into an employment agreement with Tannya L.
Irizarry, its chief administrative officer and interim chief
financial officer, for a five-year term.
The
Company agreed to pay Dr. Milici a base salary of $258,000 per
annum, plus $90,000 worth of Series B Convertible Preferred Stock
in March of each year. The Company also agreed to pay Dr. Milici
bonus compensation or a lump sum equal to two (2) times the salary
at the time the Company has net income of at least two million
($2,000,000) dollars each year based on performance. In addition,
the Company agreed to pay a onetime payment of $26,900 at the
renewal of the employment agreement. The Company is also required
to pay all living expenses to Dr. Milici during the time his
deferred salary is not entirely released during the term of his
employment agreement. Once deferred salary is entirely released to
Dr. Milici, he is responsible for his taxes. Dr. Milici is also
entitled to a leased Company vehicle of his selection. At the end
of aforementioned lease, Dr. Milici is authorized to either
purchase the vehicle and/or exchange leased vehicle for another
vehicle. The Company did not issue $90,000 worth of Series B
Preferred Stock in 2019 as the Company did not have enough
authorized shares of Series B Preferred stock. The Company included
$90,000 in the annual salary accrual for Dr. Milici. For the fiscal
years 2019 and 2018, all salary was deferred.
The
Company agreed to pay Ms. Irizarry a base salary of $208,000 per
annum, plus $45,000 worth of Series B Convertible Preferred Stock
in March of each year. The Company also agreed to pay Ms. Irizarry
bonus compensation or a lump sum equal to two (2) times the salary
at the time the Company has net income of at least two million
($2,000,000) dollars each year based on performance. In addition,
the Company agreed to pay a onetime payment of $18,000 at the
renewal of the employment agreement. The Company is also required
to pay all living expenses to Ms. Irizarry during the time her
deferred salary is not entirely released during the term of her
employment agreement. Once deferred salary is entirely released to
Ms. Irizarry, she is responsible for her taxes. Ms. Irizarry is
also entitled to a leased Company vehicle of her selection. At the
end of aforementioned Lease, Ms. Irizarry is authorized to either
purchase the vehicle and/or exchange leased vehicle for another
vehicle. The Company did not issue $45,000 worth of Series B
Preferred Stock in 2019 as the Company did not have enough
authorized shares of Series B Preferred stock. The Company included
$45000 in the annual salary accrual for Ms. Irizarry. For the
fiscal years 2019 and 2018, all salary was deferred.
As of
December 31, 2019, the Company has issued to Dr. Milici, CEO and
Tannya Irizarry, CAO, CFO a total of 26,038,572 shares of Series B
Preferred Stock pursuant to the terms of their employee
agreements.
Legal Contingencies
The
Company is involved in claims arising during the ordinary course of
business resulting from disputes with vendors and stockholders over
various contracts and agreements. The Company has outstanding
judgments that are deemed to be lapsed and passed Colorado’s
statute of limitations. Other than those outstanding judgments
listed below, no other legal claims have been made or are known at
this time.
On
June 6, 2008, a judgment was issued against the Company in the case
of MAG Capital, LLC aka Mercator Momentum Fund III LP, Mercator
Momentum Fund, LP and Monarch Pointe Fund, Ltd. v. the Company in
the Orange County District Court in the State of California in the
amount of $37,721. The Company has not satisfied the judgment. The
total balance on the Company’s records was $80,621, which included
accrued interest. MAG Capital, LLC aka Mercator Momentum Fund III
LP was dissolved August 25. 2008. As of December 31, 2018, the
Company removed the liability from its records. See Note 5 –
Extinguishment of Debt.
On
June 26, 2009, a judgment was issued against the Company in the
case of Enterprise Leasing Company of Denver v. the Company in the
Jefferson County District Court in the State of Colorado in the
amount of $78,178. The Company has not satisfied the judgment. The
total amount recorded on the Company’s books was $84,432 including
interest. As of December 31, 2018, the Company removed the
liability from its records. See Note 5 – Extinguishment of
Debt.
On
August 17, 2010, a judgment was issued against the Company in the
case of Banc of America Leasing v. the Company in the Oakland
County District in Troy, Michigan in the amount of $24,183. The
Company has not satisfied the judgment. As of December 31, 2018,
the Company removed the liability from its records. See Note 5 –
Extinguishment of Debt.
On
February 10, 2009 a judgment was issued against the Company in the
case of Centennial Credit Corporation v. the Company in Jefferson
County district Court in the State of Colorado in the amount of
$967. The Company has not satisfied the judgment, but due to the
explanation above, the liability has been written off.
In
June 2009, a judgment was issued against the Company in the case of
James Tufts v. the Company in Small Claims Court in Jefferson
County Colorado in the amount of $4,000 plus expenses from a London
trip. The Company has not satisfied the judgment, but due to the
explanation included in this Note, the liability has been written
off.
On
September 23, 2010 a judgment was issued against the Company in the
case of Liberty Acquisitions v. the Company in the Jefferson County
District Court in the State of Colorado in the amount of $3,300.
The Company has not satisfied the judgment, but due to the
explanation included in this Note, the liability has been written
off.
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.
On
November 14, 2014, Litchfield Church Ranch, LLC filed a Summons in
Forcible Entry and Detainer against the Company after the owner was
unable to sell the building to us because he was upended for over
$800,000 in his mortgage. As per the Summons, the plaintiff claimed
$364,968.69 in past due rent. As per our accounting records, the
Company had accrued $242,000 in rent expense with the offer to
purchase such property at $1,850,000 plus scheduled payments for
the past due rent. The owner’s bank did not allow him to sell the
property. We participated in a mediation resulting in a settlement
for $115,000 with the contingency to pay the goodwill amount of
$15,000 by September 12, 2015. The Company had an additional six
months to complete the remaining $100,000 settlement. If not paid
off prior to August 12, 2016, there will be no discount and the
Company shall owe the judgment balance in the amount of $325,885.
The mediator, a retired judge, found in our favor. Therefore, the
settlement was agreed upon by both parties. The Company did not pay
the settlement agreement as of December 31, 2019 and default
interest of 18% was accrued on the outstanding judgment balance
through December 31, 2018. In July 2019, Litchfield Church Ranch,
LLC was dissolved after the ownership sold the property. The
Company claims that no money is owed.
Beginning
in November 2010 and through July 2011, Gold X Change, Inc. (“GXC”)
invested approximately $132,000 in the aggregate in the Company’s
convertible notes. In July 2011, a dispute arose between the
Company and GXC as to the number of shares issuable upon conversion
of the convertible notes. In order to resolve this dispute,
the Company and GXC agreed to issue a total of 24 million shares of
the Company’s common stock in the name of GXC; provided that GXC
deposit such shares into an escrow account with an escrow
agent. Under the terms of the escrow agreement, these shares
would only be released to GXC if GXC invested an additional $1
million into the Company within one year, which ended on September
30, 2012. During the one year period, GXC only invested
$880,162. As a result of GXC’s failure to invest the full $1
million within the one year time period as required by the escrow
agreement, GXC was in default under the escrow agreement and the 24
million shares were cancelled. The $880,162 paid by GXC to the
Company was deemed to be the cost of the 4,003,860 shares of
the Company’s common stock that was originally issued to GXC. The
Company adjusted the note payable balance and reclassified the note
balance to additional paid in capital to include such in the
original transaction in which 4,003,860 shares of common stock were
issued. Currently, GXC holds 1,189,300 shares of common stock after
the President distributed 2,814,560 shares to different people and
entities. The President disclaims beneficial ownership of such
securities except to the extent of his pecuniary interest in such
securities, if any. The Company claims that no additional funds are
due to GXC.
Milestones Investment Agreement
In
March 2018, we entered into a Milestones Investment Agreement with
FOGT, LLC (in part controlled by a former member of the Board of
Directors), pursuant to which FOGT, LLC had agreed to invest and
purchase up to $5 million of Series A Convertible Preferred Stock
pending completion of certain milestones. As of December 31, 2018,
FOGT, LLC has invested $550,000 and we agreed to issue 5,500 shares
of Series A Convertible Preferred Stock. FOGT, LLC had agreed to
invest additional amounts as follows: (i) $1,500,000 upon
completion of design, assembly and validation of an advanced
robotic system; and (ii) $1,750,000 upon entering into a commercial
agreement with a government organization or private entity. A
dispute arose between FOGT, LLC and the Company. As a result, FOGT,
LLC ceased further investments in the Company.
On
September 6, 2019, FOGT, LLC and GeneThera, Inc. reached a
settlement in the amount of $425,000. The legal team received
$171,000 from this settlement resulting in net proceeds to the
Company of approximately $254,000.
Lease Agreement
On
January 1, 2018, the Company entered into a sublease for a 7,990
square foot office and lab space on 6860 Broadway in Denver,
Colorado 80221, with GTI Research, Inc. a related party, the
Company’s scientific robotic technology collaborator, for 75
months. GTI Research, Inc. a related party, required payment of
$12,000 security deposit in December of 2017.
The
lease was terminated on April 29, 2019, and the deposit of $12,000
was expensed at the date of the lease termination. No ROU asset or
liability was established or recorded by the Company as of December
31, 2019 and 2018, respectively.
Note
9 – Income Taxes
Deferred Tax Assets
On
December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Reform
Bill”) was signed into law. Prior to the enactment of the Tax
Reform Bill, the Company measured its deferred tax assets at the
federal rate of 34%. The Tax Reform Bill reduced the federal tax
rate to 21% resulting in the re-measurement of the deferred tax
asset as of December 31, 2017. Beginning January 1, 2018, the lower
tax rate of 21% will be used to calculate the amount of any federal
income tax due on taxable income earned during 2018.
At
December 31, 2019, the Company has available for U.S. federal
income tax purposes a net operating loss (“NOL”) carry-forwards of
approximately $13.6 million that may be used to offset future
taxable income through the fiscal year ending December 31, 2036. If
not used, these NOLs may be subject to limitation under Internal
Revenue Code Section 382 should there be a greater than 50%
ownership change as determined under the regulations. The Company
plans on undertaking a detailed analysis of any historical and/or
current Section 382 ownership changes that may limit the
utilization of the net operating loss carryovers. No tax benefit
has been reported with respect to these net operating loss
carry-forwards in the accompanying consolidated financial
statements since the Company believes that the realization of its
net deferred tax asset of approximately $4.6 million was not
considered more likely than not and accordingly, the potential tax
benefits of the net loss carry-forwards are fully offset by a
valuation allowance of $4.6 million.
Deferred
tax assets consist primarily of the tax effect of NOL
carry-forwards. The Company has provided a full valuation allowance
on the deferred tax assets because of the uncertainty regarding its
realizability. In assessing the realization of deferred tax assets,
management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon
future generation for taxable income during the periods in which
temporary differences representing net future deductible amounts
become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income and tax
planning strategies in making this assessment. After consideration
of all the information available, Management believes that
significant uncertainty exists with respect to future realization
of the deferred tax assets and has therefore established a full
valuation allowance. The valuation allowance increased by
approximately $108,707 and $97,597 for the years ended December 31,
2019 and 2018, respectively.
The
Company evaluated the provisions of ASC 740 related to the
accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements. ASC 740 prescribes a
comprehensive model for how a company should recognize, present,
and disclose uncertain positions that the Company has taken or
expects to take in its tax return. For those benefits to be
recognized, a tax position must be more-likely-than-not to be
sustained upon examination by taxing authorities. Differences
between tax positions taken or expected to be taken in a tax return
and the net benefit recognized and measured pursuant to the
interpretation are referred to as “unrecognized benefits.” A
liability is recognized (or amount of net operating loss carry
forward or amount of tax refundable is reduced) for unrecognized
tax benefit because it represents an enterprise’s potential future
obligation to the taxing authority for a tax position that was not
recognized as a result of applying the provisions of ASC
740.
If
applicable, interest costs related to the unrecognized tax benefits
are required to be calculated and would be classified as “Other
expenses – Interest expense” in the statement of operations.
Penalties would be recognized as a component of “General and
administrative.”
No
material interest or penalties on unpaid tax were recorded during
the years ended December 31, 2019 and 2018, respectively. As of
December 31, 2019 and 2018, no liability for unrecognized tax
benefits was required to be reported. The Company does not expect
any significant changes in its unrecognized tax benefits in the
next year.
Net
deferred tax assets consist of the following components as of
December 31:
| |
|
2019 |
|
|
2018 |
|
| Deferred Tax Assets: |
|
|
|
|
|
|
|
|
| NOL
Carryover |
|
$ |
4,620,726 |
|
|
$ |
4,512,019 |
|
| Deferred tax liabilities |
|
|
|
|
|
|
|
|
| Less
valuation allowance |
|
|
(4,620,726 |
) |
|
|
(4,512,019 |
) |
| Net deferred
tax assets |
|
$ |
- |
|
|
$ |
- |
|
Income Tax Provision in the Consolidated Statement of
Operations
A
reconciliation of the federal statutory income tax rate and the
effective income tax rate as a percentage of income before income
taxes is as follows for the years ended December 31,:
| |
|
2019 |
|
|
2018 |
|
| Federal statutory income
tax rate |
|
|
21.0 |
% |
|
|
21.0 |
% |
| Change in
valuation allowance on net operating loss carry-forwards |
|
|
(21.0 |
)% |
|
|
(21.0 |
)% |
| |
|
|
|
|
|
|
|
|
| Effective
income tax rate |
|
|
0.0 |
% |
|
|
0.0 |
% |
Note
10 – Subsequent Events
On
April 3, 2020, GeneThera entered into a preliminary agreement with
Green RV Storage LLC for the purchase of a 16,000 square foot
building located in the planned Northwest 36 Biotechnology Center
in Broomfield, Colorado. The new state of the art facility will be
the Company administrative and R&D facility. The development is
scheduled to be completed in fall of 2021.
The
impact of COVID-19 on the Company is unknown at this time. The
financial consequences of this situation cause uncertainty as to
the future and its effects on the economy and the
Company.
Presently
the Company is considering ways to apply its molecular robotic
technology to address the COVID-19 pandemic
As of
June 10, 2020, no additional conversions have occurred, and no new
convertible notes have been issued.
During
the second quarter, the Company has cancelled 7,064,967 shares of
common stock that have been held in escrow originally issued to
independent contractors for capital raise efforts. The stock
certificates were returned to the Company and has not or will not
be given to the independent contractors.
SIGNATURES
Pursuant
to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
|
Date:
September 21 , 2020 |
GENETHERA,
INC. |
| |
|
| |
/s/
Antonio Milici |
| |
Name:
Antonio Milici |
| |
Title:
Chief Executive Officer |
| |
|
| |
/s/
Tannya L. Irizarry |
| |
Name:
Tannya L. Irizarry |
| |
Title:
Interim Chief Executive Officer |
POWER
OF ATTORNEY
KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Antonio Milici and Tannya L.
Irizarry, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution for
him or her, and in his or her name in any and all capacities, to
sign any and all amendments to this Annual Report on Form 10-K, and
to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and
thing requisite and necessary to be done therewith, as fully to all
intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, and any of them, his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates
indicated.
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
|
|
/s/
Antonio Milici |
|
Chairman
and Chief Executive Officer (Principal Executive
Officer) |
|
September
21 ,
2020 |
|
Antonio
Milici, MD, PhD |
|
|
|
|
|
|
|
/s/
Tannya L. Irizarry |
|
Interim
Chief Financial Officer (Principal Financial and Accounting
Officer) |
|
September
21 ,
2020 |
|
Tannya
L. Irizarry |
|
|
|
|
|
|
|
|
|
|
|
/s/
Jeremiah Bartley |
|
Director |
|
September
21 ,
2020 |
|
Jeremiah
Bartley, MD |
|
|
|
|
