Edgar Filing: GENETHERA INC

GENETHERA, INC

GENETHERA, INC.

AND SUBSIDIARY

(A Development Stage Company)

FINANCIAL STATEMENTS

FOR THE PERIOD FROM

OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2007

GENETHERA, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD FROM

OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2007

TABLE OF CONTENTS

Page No.

Independent Registered Public Accounting Firm’s Report

Consolidated Balance Sheets – December 31, 2007 and 2006

Consolidated Statements of Operations for the

Period from October 5, 1998 (Inception) to December 31, 2007

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the

Period from October 5, 1998 (Inception) to December 31, 2007

Consolidated Statements of Cash Flows for the

Period from October 5, 1998 (Inception) to December 31, 2007

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

GeneThera, Inc., and Subsidiaries

Wheat Ridge, Colorado

We have audited the accompanying consolidated balance sheets of GeneThera, Inc. (a development stage company) and Subsidiary as of December 31, 2006 and 2005, and the related consolidated statements of operations, changes in stockholders' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of GeneThera, Inc. and Subsidiary as of December 31, 2006 and 2005, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 11 to the consolidated financial statements, the Company has no established or sufficient sources of revenue, and has incurred significant losses from its operations. This raises substantial doubt about its ability to continue as a going concern. Management's plan in regards to these matters is also described in Note 11. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Jaspers + Hall, PC

April 15, 2008

Denver, CO

Balance Sheet -




		2007	2007	2007
		Quickbooks - CO	Quickbooks - FL	Quickbooks Total	Notes
Income
	#
Sales		$ 97,900	$ -	$ 97,900
Research fees			-	$ -
Total income		97,900		97,900

Cost of sales			-	$ -

Gross profit		97,900	-	97,900

Expenses
Other compensation			-	-
Consulting		-	236,757	236,757
General and administrative expenses		345,634	570	346,204
Payroll expenses		234,000	1,350	235,350
Depreciation and amortization		72,451	-	72,451
Dividend Payment		-	15,980	15,980
Impairment of long-lived asset		-	-	-
Lab expenses		223	-	223
Total expenses		652,308	254,657	906,965

Loss from operations		(554,408)	(254,657)	(809,065)

Other income (expenses)
Beneficial conversion expense		-	-	-
Interest expense		-	-	-
Gain on settlements			-	-
Other income (expenses), net		100	-	100

Net loss from continuing operations		(554,308)	(254,657)	(808,965)

Loss from discontinued operations			-	-
Loss from disposal of discontinued operations		-	-	-

Net loss		$ (554,308)	$ (254,657)	$ (808,965)

Stmt of Operations




			For the period from
	Year End December 31,		October 5, 1998		12/31/2003	31-Dec
	2007	2006	(inception) to
			December 31, 2007
Income
Sales	$ 97,900	$ 150,000	$ 516,649	418,749.00	197,057	34346.79
Research fees	-	-	188,382	188,382.00	188,382
Total income	97,900	150,000	705,031	607,131.00	385,439

Cost of sales	-	-	(30,352)	(30,352.00)	(64,099)	-18949

Gross profit	97,900	150,000	674,679	576,779.00	321,340

Expenses
Other compensation	-	-	3,283,009	3,283,009.00	1,164,000
Consulting	236,757	444,420	4,820,594	4,583,837.00	824,384
General and administrative expenses	346,204	739,529	3,853,823	3,507,619.00	1,087,668
Payroll expenses	235,350	306,890	2,104,619	1,869,269.00	864,639
Depreciation	72,451	77,014	475,567	403,116.00	161,727
Settlement expense		25,132	82,625	82,625.00
Dividend Payment	15,980		15,980	-
Lab expenses	223	39,592	294,740	294,517.00	178,082
Total expenses	906,965	1,632,578	14,986,671	14,079,706.00	4,280,500

Loss from operations	(809,065)	(1,482,577)	(14,311,992)	(13,502,927.00)	(3,959,160)

Other income (expenses)
Beneficial conversion expense	-	-	(1,987,991)	(1,987,991.00)	(319,221)
Interest expense	-	-	(46,758)	(46,758.00)	(40,606)
Gain on settlements	-	-	58,203	58,203.00
Other income (expenses), net	100	6	33,675	33,575.00	(36,565)

Net loss	$ (808,965)	$ (1,482,570)	$ (16,376,928)	(15,567,963)	$(4,468,578)


Loss per common share	$ (0.016)	$ (0.065)	$ (0.46)	-1
Diluted Weight Average	$ -	$ -	$ -
Weight Average	50,475,480	22,923,273	-
Diluted Per Share	$ -	$ 0.065	$ -




									Development
									Stage
	Preferred Stock A		Preferred Stock B		Common Stock		Paid in	Subscription	Accumulated
	Shares	Amount	Shares	Amount	Shares	Amount	Capital	Agreement	Deficit	Total


Balance December 31, 2004	-	$ -	-	$ -	18,732,534	$ 18,733	$ 10,146,977	$ (100,040)	$ (10,413,571)	(347,901)

Shares issued in exchange for convertible notes payable					19,000	19	18,981			19,000

Shares issued for consulting services					2,050,000	2,050	1,965,952			1,968,002

Shares issued to officers					90,000	90	73,260			73,350

Cancillation of Previously issued consulting shares					(15,204)	(15)	(15,945)			(15,960)

Beneficial conversion feature							367,397			367,397

Preferred stock issued	11,000	11					1,099,989			1,100,000

Preferred dividends paid									(46,338)	(46,338)

Repurchase of Common stock					(1,400)	(1)	(1,609)			(1,610)

Shares issued upon conversion of Preferred Shares	(1,400)	(1)			318,182	318	(317)

Additional Paid in capital- related party - note payment							20,000			20,000

Shares issued to employees					15,000	15	12,285			12,300

Shares issued upon conversion of Preferred Shares	(5,000)	(5)			1,086,957	1,087	(1,082)

Satisfaction of Subscription Receivable								100,040		100,040

Net loss for the year 2005									(3,625,483)	(3,625,483)

Balance December 31, 2005	4,600	$ 5			22,295,069	$ 22,296	$ 13,685,888	$ -	$ (14,085,392)	(377,203)

Shares issued to officers
in lieu of salary					90,000	$ 90	$ 12,510			12600

Shares issued to replace					40,000	$ 40	$ 7,160			7200
cancelled certificate-settlement

Shares issued for consulting services					700,000	700	87,300			88,000

Share issued to officer			1,500,000	1,500			58,500			60,000

Shares issued for consulting services					5,796,667	5,797	326,003			331,800

Share issued to officer			750,000	750			29,250			30,000

Shares issued for Settlement					600,000	600	35,400			36,000

Shares issued to officers
in lieu of accrued salary					1,600,000	1,600	114,400			116,000

Shares issued for consulting services					4,353,000	4,353	150,017			154,370


Net Loss December 31, 2006									(1,482,571)	(1,482,571)

Balance December 31, 2006	4,600	$ 5	2,250,000	$ 2,250	35,474,736	$ 35,476	$ 14,506,428	$ -	$ (15,567,963)	$(1,023,804)

Shares issued for consulting services					2,336,500	2,337	87,623			89,960
										-
Shares issued to officers
in lieu of salary					1,485,000	1,485	71,865			73,350

Shares issued for consulting services					7,912,001	7,912	255,504			263,416

Shares Sold Officers			750,000	750			14,250			15,000
						-				-
Shares issued for consulting services					1,855,390	1,855	35,252			37,107

Shares issued for consulting services					2,462,222	2,462	46,782			49,244


Net Loss December 31, 2007									(808,965)	(808,965)

Balance December 31, 2007	4,600	5	3,000,000	3,000	51,525,849	51,527	15,017,704	-	(16,376,928)	(1,304,692)




			For the period from
	Year End December 31,		October 5, 1998
			(inception) to
	2007	2006	December 31, 2007
				2006

Cash flows from operating activities:
Net loss	$ (808,965)	$ 1,482,571	$ (15,724,796)	$ (14,915,831)

Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization	72,451	77,014	$ 238,031	165,580
Compensation in exchange for common stock	439,727	629,970	$ 8,960,311	8,520,584
Beneficial conversion feature			$ 1,987,990	1,987,990
Changes in operating assets and liabilities
(Increase) Decrease in:
Accounts receivable	(61,467)	(90,990)	$ (129,734)	(68,267)
Accounts receivable Related Parties	17,390	(17,390)	$ 17,390	-
Reserve for Uncollectible	-	90,000	$ 90,000	90,000
Inventory	-	-	$ -	-
Prepaid expenses	1,890	8,661	$ (110)	(2,000)
Other assets	-	9,736	$ 7,278	7,278
Increase in accounts payable
and accrued liabilites	324,846	417,669	$ 1,692,050	1,367,204

Total adjustments	794,837	1,124,670	12,863,206	11,978,369

Net cash used in operating activities	(14,128)	(357,901)	(2,861,590)	(2,937,462)

Cash flows from investing activities:
Cash payments for the purchase of property	-	-	(299,072)	(299,072)


Cash flows from financing activities:
Bank overdraft			-	-
Capital contributed as equipment			272,376	272,376
Principal payments on notes & leases payable			(240,119)	(240,119)
Payment of lease payable	(10,942)	(2,311)	121,441	132,383
Payment for Accrued Salaries	73,350	116,000	189,350	116,000
Proceeds from issuance of stock	15,000	90,000	1,908,882	1,893,882
Proceeds from loans payable	(63,318)	152,777	1,627,734	1,691,052
Proceeds from Subscription Recievable	-		100,040	100,040
Repurchase of Common Stock	-		(1,610)	(1,610)
Reciept of APIC	-		20,000	20,000
Payment of Perfered Dividends	-		(46,338)	(46,338)



Net cash provided by financing activities	14,090	356,466	3,951,756	3,937,666

Net increase (decrease) in cash	(38)	(1,435)	791,094	701,132

Cash, beginning of year	234	1,669	-	-

Cash, end of year	$ 196	$ 234	$ 196	$ 871,596


Supplemental disclosures of cash flow information:
Cash paid during the period for interest expense	$ -		$ 46,758	$ 46,758
Cash paid during the period for Taxes	$ -	$ -	$ -	$ -

GENETHERA, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007

NOTE 1

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”)

GeneThera, Inc., formerly known as Hand Brand Distribution, Inc., was incorporated in November 1995, under the laws of the State of Florida. On February 25, 2002, GeneThera, Inc. acquired 100% of the outstanding shares of GeneThera, Inc. (Colorado). A total of 16,611,900 shares of common stock were issued for the acquisition. For accounting purposes, the acquisition has been treated as a reversed merger and as a recapitalization of GeneThera, Inc. (Colorado).

GeneThera, Inc. (Colorado) is a biotechnology company that develops molecular assays for the detection of food contaminating pathogens, veterinary diseases and genetically modified organisms.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of GeneThera, Inc. (Florida) and GeneThera, Inc. (Colorado). All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration risks are cash and accounts receivable. At various times during the year, the Company had deposits in excess of the federally insured limits. The Company maintains its cash with high quality financial institutions, which the Company believes limits these risks.

GENETHERA, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued

RELATED PARTY TRANSACTIONS

Setna Holdings, LLC is a related party to the Company with a promissory note of $145,234. Mr. Anthony J. Milici is the Managing Director of Setna Holdings. GTI Corporate Transfer Agents, LLC is the Company’s transfer agent. After the death of the original Managing Director, Ms. Juanita Pagan sometime in March 2006, Ms. Tannya L. Irizarry became the Managing Director (Interim) of GTI Corporate Transfer Agents, LLC with a one third ownership and/or interest.

Ms. Irizarry is also the Chief Administrative Officer and Chief Financial Officer (Interim) of the Company, hence making the accounts receivable transaction of $17,390 to be a related party.GTI Corporate Transfer Agents LLC does not share employer identification number with GeneThera, Inc. Elia, Inc. was paid 500,000 common shares in exchange for services rendered on May 2^nd 2006. Elia is partially owned by an independent contractor of GeneThera, Inc. Elia has paid $78,202 of GeneThera, Inc. expenses.

Property and Equipment

Property and equipment are stated at cost. Equipment under capital leases is stated at the present value of minimum lease payments. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, which is 5 to 10 years. Betterments, which extend the life of the asset, are capitalized, and maintenance and repairs are expensed as incurred.

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

Our Research and Development contracts are on a pre-paid basis in order to reflect our milestones during the research investigation. Revenues from sales are recognized when services are completed.

Loss per Share

Basic loss per share for each year is computed by dividing loss for the year by the weighted average number of common shares outstanding during the year. Diluted loss per share includes the effects of common stock equivalents to the extent they are dilutive. At December 31, 2007 and 2006 all common stock equivalents were antidilutive and therefore diluted loss per share equaled basic loss per share. The total outstanding warrants of 597,826 and the CEO exercisable option of 300,000 would be added into the weighted average common shares if not antidilutive in calculating diluted loss per share.

GENETHERA, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Fair Value of Financial Instruments

The respective carrying value of certain on-balance sheet financial instruments approximated their fair value. These instruments include cash, accounts receivable and accounts payable. Fair values were assumed to approximated carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.

Net Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Recent Accounting Pronouncements

In March 2005, the FASB issued FASB interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (“FIN 47”). FIN 47 provides guidance relating to the identification of and financial reporting for legal obligations to perform an asset retirement activity. The Interpretation requires recognition of a liability for the fair value of a conditional asset retirement obligation when incurred if the liability’s fair value can be reasonably estimated. FIN 47 also defines when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. The provision is effective no later than the end of fiscal years ending after December 15, 2005. The Company will adopt FIN 47 beginning the first quarter of fiscal year 2006 and does not believe the adoption will have a material impact on its consolidated financial position or results of operations or cash flows.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”) which replaces Accounting Principles Board Opinions No. 20 ‘Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements –An Amendment of APB Opinion No. 28.” SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting changes and a correction of errors made in fiscal years beginning after December 15, 2005 and is required to be adopted by the company in the first quarter of 2006. The Company is currently evaluating the effect that the adoption of SFAS 154 will have on its results of operations and financial condition but does not expect it to have a material impact.

In June 2005, the Emerging Issues Task Force, or EITF, reached a consensus on Issue 05-6, Determining the Amortization Period for Leasehold Improvements, which requires that leasehold improvements acquired in a business combination or purchased subsequent to the inception of a lease be amortized over the lesser of the useful life of the assets or a term that includes renewals that are reasonably assured at the date of the business combination or purchase. EITF 05-6 is effective for periods beginning after July 1, 2005. We do not expect the provisions of this consensus to have a material impact on the financial position, results of operations or cash flows.

In February 2006, the FASB issued SFAS 155, Accounting for Certain Hybrid Financial Instruments, which amends SFAS 133, Accounting for Derivative Instruments and Hedging Activities, and SFAS

GENETHERA, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Recent Accounting Pronouncements - continued

140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a replacement of FASB Statement No. 125. SFAS 155 will be effective for the Company for all financial instruments issued or acquired after the beginning its fiscal year ending December 31, 2006. The Company not yet evaluated and determined the likely effect of SFAS 155 on future financial statements.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109, (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return that results in a tax benefit. Additionally, FIN 48 provides guidance on de-recognition, income statement classification of interest and penalties, accounting in interim periods, disclosure, and transition. This interpretation is effective for the Company for its fiscal year ending December 31, 2007. The Company has not yet evaluated the effect that the application of FIN 48 may have, if any, on its future results of operations and financial condition.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for the Company for its fiscal year beginning on July 1, 2008. The Company is currently assessing the impact the adoption of SFAS No. 157 will have on its financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin (SAB) No. 108 in order to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements. In SAB 108, the SEC staff established an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the Company’s financial statements and the related financial statement disclosures. SAB No. 108 is effective for the Company for its current fiscal year. The adoption of SAB No. 108 did not have an impact on the Company’s financial statements.

On February 15, 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115.” This standard permits an entity to measure many financial instruments and certain other items at estimated fair value. Most of the provisions of SFAS No. 115 (“Accounting for Certain Investments in Debt and Equity Securities) applies to all entities that own trading and available-for-sale securities. The fair value option created by SFAS No. 159 permits an entity to measure eligible items at fair value as of specified election dates. Among others, eligible items exclude (1) financial instruments classified (partially or in total) as permanent or temporary stockholders’ equity (such as a convertible debt security with a non-contingent beneficial conversion

GENETHERA, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Recent Accounting Pronouncements – continued

feature) and (2) investments in subsidiaries and interests in variable interests that must be consolidated. A for-profit business entity will be required to report unrealized gains and losses on items for which the fair value option has been elected in its statements of operations at each subsequent reposting date. The fair value option (a) may generally be applied instrument by instruments, (b) is irrevocable unless a new elections date occurs, and (c) must be applied to the entire instrument and not to only a portion of the instrument. SFAS No. 159 is effective as of the beginning of the first fiscal year that begins after November 15, 2007. The Company has not yet evaluated the effect that the application of SFAS No. 159, may have, if any, on its future results of operations and financial condition.

NOTE 2 ACCOUNTS RECEIVABLE

The Company has an outstanding Accounts Receivable to a related party as follows:

2007

2006

Receivable with no interest, due on demand, unsecured.

$ 0

$ 17,390

Less current portion

(0)

(17,390)

Total Accounts Receivable – related party

$ 0

There was no interest revenue related to this obligation for the years ended December 31, 2006 and 2005. This transaction is with a related party as an officer of GeneThera, Inc. is a one-third owner of GTI Corporate Transfer Agents, LLC. GTI paid GeneThera operations expenses in the beginning of 2007. The receivable of $90,000 for Xpention Genetics was written off to bad debt and reserve for uncollectible debt.

NOTE 3

PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2007 and 2006 consisted of the following:

2007

2006

Office equipment

$ 84,344 $ 84,344

Laboratory equipment

643,084

Total

727,428

Less: Accumulated depreciation

(436,864)

(364,413)

Net Property & Equiment

$ 290,564

$ 363,015

Depreciation expense for the years ended December 31, 2007 and 2006 was $72,451 and $77,014, respectively.

GENETHERA, INC. AND SUBSIDIARY

(A DEVELPOMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007

NOTE 4

LEASE OBLIGATIONS

Operating Leases

The Company leases its office, warehouse, laboratory space and vehicle under non-cancelable operating leases, which have initial terms in a month-to-month basis. We sub-lease 700 square foot office space to GTI Corporate Transfer Agents, LLC located on the 3924 unit of our lease space reflected as 3930 Youngfield Street, Suite #2, Wheat Ridge, CO 80033. The Lease is on a month-to-month basis and the rent is $500.00 per month. The rent is paid out in Common Stock.

Total lease expense for the years ended December 31, 2007 and 2006 was $54,405, and $62,823, respectively.

Capital Leases

The Company’s property under capital leases is included in property and equipment (See Note 3) and is summarized as follows:

2007

2006

Laboratory Equipment

$31,574

$ 31,574

Computer

2,672

Total

34,246

34,264

Less: Accumulated depreciation

(23,077)

Net assets under capital leases

$11,169

$ 12,760

Future annual minimum lease payments under these non-cancelable operating and capital leases at December 31, 2007 were as follows:

Operating

Capital

Leases

2008

1,098

2009

2010 and thereafter

$ 1,098

Less amount representing interest

Present value of minimum lease payments

Less current portion

(0)

Long-term portion of capital lease payable

$ 0

Total interest expense, including late fees, under capital leases was $0 and $3,828 for the years ended December 31, 2007 and 2006, respectively.

GENETHERA, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007

NOTE 5

LOAN PAYABLE

The Company has an outstanding loan payable to a related party as follows:

2007

2006

Loan payable with no interest, due on demand, unsecured.

$ 145,234

$ 107,552

Less current portion

(0)

Total Current loan payable – related party

$ 145,234

$ 107,552

There was no interest expense related to this obligation for the years ended December 31, 2007 and 2006. Setna Holdings is a shareholder and is managed by Anthony J. Milici. Setna is advancing the company funds for their operational expense until pending contracts are finalized.

GENETHERA, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007

NOTE 6

STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock Transactions

On December 31, 2007, the Company authorized 100,000,000 shares of $.001 par value common stock; 51,525,849 are outstanding at December 31, 2007.

In January 2005, the Company issued 2,000 shares of common stock valued at $2,200 pursuant to conversion rights exercised by a holder.

In January 2005, the Company cancelled 15,204 shares of common stock valued at $15,960 from a consultant. Accordingly, $15,960 for consultant expense was charged to operations.

In January 2005, the Company cancelled 1,400 shares of common stock valued at $1,610 from a consultant. Accordingly, $1,610 for consultant expense was charged to operations.

In March 2005, the Company issued 1,475,000 shares valued at $1,489,999 to a marketing consultant and resulted in an immediate charge to operations.

In March 2005, the Company issued 175,000 shares valued at $182,000 to two consultants assisting the Company in the development of operations in Mexico and resulted in immediate charges to operations.

In March 2005, the Company issued 45,000 shares valued at $46,350 to an officer in lieu of salary and resulted in an immediate charge to operations.

In May 2005, the Company issued 45,000 shares valued at $27,000 to an officer in lieu of salary and resulted in an immediate charge to operations.

In May 2005, the Company issued 17,000 shares of common stock valued at $12,580 pursuant to conversion rights exercised by a holder. In June 2005, the Company issued 318,182 shares of common stock in exchange for 1,400 of its Series A Preferred Stock.

In July 2005, the Company issued 15,000 shares of common stock valued at $12,300 to employees and resulted in an immediate charge to operations.

In July 2005, the Company issued 400,000 shares valued at $296,000 to a marketing consultant and resulted in an immediate charge to operations.

In March 2006, the Company issued 40,000 shares valued at $7,200 in settlement of a lawsuit previously filed by OR Surgical and resulted in an immediate charge to operations.

In March 2006, the Company issued 90,000 shares valued at $12,600 to two officers in lieu of salary and resulted in an immediate charge to operations.

In May 2006, the Company issued 500,000 shares valued at $65,000 to a marketing consulting group and resulted in an immediate charge to operations.

GENETHERA, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007

NOTE 6

STOCKHOLDERS’ EQUITY (DEFICIT) - continued

Common Stock - continued

In May 2006, the Company issued 50,000 shares valued at $6,500 to consulting services for lab work and resulted in an immediate charge to operations.

In June 2006, the Company issued 750,000 shares valued at $82,500 to consulting services of operations and resulted in an immediate charge to operations.

In August 2006, the Company issued 2,130,000 shares valued at $131,800 to consulting services of operations and resulted in an immediate charge to operations.

In August 2006, the Company issued 625,000 shares valued at $37,500 to the line of credit fees of operations and resulted in an immediate charge to operations.

In September 2006, the Company issued 3,041,667 shares valued at $162,500 to consulting services of operations and resulted in an immediate charge to operations.

In September 2006, the Company issued 600,000 shares valued at $36,000 to a settlement and resulted in an immediate charge to operations.

In September 2006, the Company issued 1,000,000 shares valued at $50,000 to lieu of salary and resulted in an immediate charge to operations.

In October 2006, the Company issued 2,400,000 shares valued at $96,750 to consulting services of operations and resulted in an immediate charge to operations.

In November 2006, the Company issued 678,000 shares valued at $29,870 to consulting services of operations and resulted in an immediate charge to operations.

In November 2006, the Company cancelled 200,000 shares valued at $10,000 to consulting services.

In December 2006, the Company issued 1,100,000 shares valued at $34,000 to consulting services of operations and resulted in an immediate charge to operations.

In January 2007, the Company issued 1,100,000 shares valued at $33,000 to consulting services of operations and resulted in an immediate charge to operations.

In February 2007, the Company issued 400,000 shares valued at $16,000 to consulting services of operations and resulted in an immediate charge to operations.

In March 2007, the Company issued 836,500 shares valued at $40,960 to consulting services of operations and resulted in an immediate charge to operations.

In April 2007, the Company issued 1,399,706 shares valued at $59,835 to consulting services of operations and resulted in an immediate charge to operations.

In April 2007, the Company issued 1,440,000 shares valued at $.05/share, $72,000 for lieu salary.

In May 2007, the Company issued 5,295,331 shares valued at $160,356 to consulting services of operations and resulted in an immediate charge to operations.

In May 2007, the company issued 45,000 shares valued at S.03/share, $1,350 for lieu of salary.

In June 2007, the company issued 1,216,964 shares valued at $43,225 to consulting services of operations and resulted in an immediate charge to operations.

In July 2007, the company issued 534,928 shares valued at $10,699 to consulting services of operations and resulted in an immediate charge to operations.

In August 2007, the company issued 738,438 shares valued at $14,769 to consulting services of operations and resulted in an immediate charge to operations.

In September 2007, the company issued 582,024 shares valued at $11,640 to consulting services of operations and resulted in an immediate charge to operations.

In October 2007, the company issued 1,211,347 shares valued at 24,226 to consulting services of operations and resulted in an immediate charge to operations.

In November 2007, the company issued 523,526 shares valued at 10,471 to consulting services of operations and resulted in an immediate charge to operations.

In December 2007, the company issued 727,349 shares valued at 14,547 to consulting services of operations and resulted in an immediate charge to operations.

Preferred Stock

On December 31, 2007, the Company authorized 20,000,000 shares of $0.001 par value preferred stock; 4,600 shares of Series A, Convertible Preferred Stock (“Series A”) and 3,000,000 Shares of Series B, Convertible Preferred Stock (“Series B”) were issued and outstanding at December 31, 2007.

Preferred Stock (“Series A”) shall be convertible into Common Stock any time at the holder’s sole discretion in part or in whole by dividing the Purchase Price per Share by a price (the “Conversion Price”) equal to 110% of the Market Value on the Closing Date. “Market Value” on any given date shall be defined as the average of the lowest three intra-day trading prices of the Company’s common stock during the 15 immediately preceding trading days.

GENETHERA, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007

NOTE 6

STOCKHOLDERS’ EQUITY (DEFICIT) – continued

Common Stock - continued

Pursuant to the Registrant's Certificate of Designation establishing the Series B Preferred Stock, each share of the currently issued and outstanding Series B Preferred Stock may be converted into ten (10) fully paid and non-assessable shares of the Registrant's common stock. On all matters submitted to a vote of the holders of the common stock, including, without limitation, the election of directors, a holder of shares of the Series B Preferred Stock is entitled to the number of votes on such matters equal to the number of shares of the Series B Preferred Stock held by such holder multiplied by twenty (20).

On January 18, 2005, the Company issued 11,000 shares of its Series A Preferred Stock to Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP and Monarch Pointe Fund, Ltd. (the “Purchasers”), for $100 per share, or an aggregate of $1,100,000. The Company also issued warrants to purchase an aggregate of 597,826 shares of common stock at an exercise price of $0.92 per share, in consideration for the aggregate proceeds of $1,100,000 to the Purchasers and Mercator Advisory Group, LLC, an affiliate of the Purchasers. In connection with the sale of the shares, the Company paid a due diligence fee of $88,000 and legal expenses of $10,000 to Mercator Advisory Group, LLC. All warrants expire on January 18, 2008.

In June 2005, 1,400 shares of Series A Preferred Stock were cancelled and converted into 318,182 common shares of the company

In July 2005, 5,000 shares of Series A Preferred Stock were cancelled and converted into 1,086,957 common shares of the company.

The adjustment to shareholder equity was due to the reclassification in common stock in the amount of 49,658.

On May 5, 2006, GeneThera, Inc. (the "Registrant") entered into a subscription agreement and issued 1,500,000 shares of the Registrant's Series B convertible, preferred stock, par value $0.001 per share (the "Series B Preferred Stock"), to Antonio Milici, Registrant's Chief Executive Officer and Chairman of the Board of Directors. The Series B Preferred Stock was issued to Dr. Milici for cash consideration of $.04, per share, or an aggregate of Sixty Thousand ($60,000) Dollars.

On September 1, 2006, GeneThera, Inc. (the "Registrant") entered into a subscription agreement and issued 750,000 shares of the Registrant's Series B convertible, preferred stock, par value $0.001 per share (the "Series B Preferred Stock"), to Tannya L. Irizarry, Registrant's Chief Administrative Officer. The Series B Preferred Stock was issued to Ms. Irizarry for cash consideration of $.04, per share, or an aggregate of Thirty Thousand ($30,000) Dollars.

In April 2007, the company issued 750,000 perferred B shares valued at $.06/share to adjust 9/1/06 issued Preferred Stock. To Tannya L. Irizarry, Registrant’s Chief Administrative officer.

Warrants

The Company has warrants to purchase an aggregate of 597,826 shares of common stock at an exercise price of $0.92 per share outstanding at December 31, 2007. Warrants expire on January 18^th 2008.

GENETHERA, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007

NOTE 7

INCOME TAXES

The Company has no current or deferred income tax due to its operating losses.

The Company has a federal net operating loss carry forward at December 31, 2007 and 2006 of approximately $16,376,928 and $15,567,963, respectively, subject to annual limitations prescribed by the Internal Revenue Code, that are available to offset future taxable income through 2025. A 100% valuation allowance has been recorded to offset the net deferred taxes due to uncertainty of the Company’s ability to generate future taxable income.

NOTE 09

CONTINGENCIES

The Company is involved in claims arising during the ordinary course of business resulting from disputes with vendors and shareholders over various contracts and agreements. While the ultimate outcome of these matters has yet to be determined, management has included a provision for these claims based on known facts and circumstances as of December 31, 2007 in the amount of $55,000.

NOTE 10

GOING-CONCERN UNCERTAINTY

These financial statements are presented assuming the Company will continue as a going concern. For the years ended December 31, 2007 and 2006, the Company showed operating losses of $8808,965 and $1,482,570, respectively. The accompanying financial statements indicate that current liabilities exceed current assets by $1,600,534 and $1,392,097 at December 31 2007 and 2006, respectively.

These factors raise substantial doubt about its ability to continue as a going concern. Management’s plan with regard to these matters includes raising working capital and significant assets and resources to assure the Company’s viability, through private or public equity offering, and/or debt financing, and/or through the acquisition of new business or private ventures. The Company will bring in contract work and start the operation in Mexico to bring in revenue.

NOTE 11 RESEARCH AND DEVELOPMENT COSTS

All research and development costs are charged to expense when incurred. The following table illustrates the types of expenses imbedded in the financial statements as costs related to laboratory research, formulation, design and testing of products and processes as related to the business plan.

2007

2006

Consulting

0 $ 0

Salaries

144,000

Lease expense

63,217 63,217

Depreciation

11,751

Lab expenses

223

39,592

Totals

$ 219,191

$ 258,560