Edgar Filing: GENETHERA INC

FORM 10-KSB

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2003

Commission file No. 000-27237

GeneThera, Inc.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Florida 66-0622463
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

3930 Youngfield Street, Wheat Ridge, CO 80033
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (303) 463-6371

Securities registered pursuant to Section 12(b) of the Exchange Act: NONE

Securities registered pursuant to Section 12(g) of the Exchange Act: Common
Stock, $.001 per share

Check whether the issuer: (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 | |

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained herein, and no disclosure will 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-KSB or any amendment to
this Form 10-KSB. | |

State the issuer's revenues for its most recent fiscal year: $96

State the aggregate market value of the issuer's voting stock held by
non-affiliates of the issuer as of February 27, 2004 was $8,886,287.

State the number of shares outstanding as of the issuer's common stock as of
February 27, 2004 was 5,378,674.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Transitional Small Business Disclosure Format:
Yes |_| No |X|

FORWARD-LOOKING AND CAUTIONARY STATEMENTS

Sections of this Form 10-KSB, including the Management's Discussion and Analysis
or Plan of Operation, contain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
Section 21E of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), and the Private Securities Litigation Reform Act of 1995, as
amended. These forward-looking statements are subject to risks and uncertainties
and other factors that may cause our actual results, performance or achievements
to be materially different from the results, performance or achievements
expressed or implied by the forward-looking statements. You should not unduly
rely on these statements. Forward-looking statements involve assumptions and
describe our plans, strategies, and expectations. You can generally identify a
forward-looking statement by words such as "may," "will," "should," "would,"
could," "plan," "goal," "potential," "expect," "anticipate," "estimate,"
"believe," "intend," "project," and similar words and variations thereof. This
report contains forward-looking statements that address, among other things,

* our financing plans,
* regulatory environments in which we operate or plan to operate, and
* trends affecting our financial condition or results of operations, the impact
of competition, the start-up of certain operations and acquisition
opportunities.

Factors, risks, and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements ("Cautionary
Statements") include, among others,

* our ability to raise capital,
* our ability to execute our business strategy in a very competitive
environment,
* our degree of financial leverage,
* risks associated with our acquiring and integrating companies into our own,
* risks relating to rapidly developing technology,
* regulatory considerations;
* risks related to international economies,
* risks related to market acceptance and demand for our products and services,
* the impact of competitive services and pricing, and
* other risks referenced from time to time in our SEC filings.

All subsequent written and oral forward-looking statements attributable to us,
or anyone acting on our behalf, are expressly qualified in their entirety by the
cautionary statements. We do not undertake any obligations to publicly release
any revisions to any forward-looking statements to reflect events or
circumstances after the date of this report or to reflect unanticipated events
that may occur.

PART I.

Item 1. Description of Business

GeneThera, Inc. ("we" or "the Company"), formerly known as Hand Brand
Distribution, Inc., was incorporated in November 1995, under the laws of the
State of Florida. Our Common Stock currently trades on the Over-the-Counter
Bulletin Board ("OTC") under the symbol GTHA. Our executive offices are located
at 3930 Youngfield Street, Wheat Ridge, Colorado 80033 and our telephone number
is 303-463-6371.

For the fiscal year 2003 the Company had two subsidiaries, GeneThera, Inc., a
Colorado corporation,("GeneThera"), and Family Health News, Inc.("FHNI"), a
Florida Corporation. GeneThera's business is based on its Integrated Technology
Platform (ITP) that combines a proprietary diagnostic solution called Gene
Expression Assay (GEA(TM)) with PURIVAX(TM), its system for analyzing
large-scale DNA sequencing. FHNI publishes a quarterly magazine, Family Health
News ("FHNews"), that contains articles on health, nutrition, lifestyle and
innovative health products and therapies. FHNI also distributes a select line of
products related to these topics. FHNI's business is not at the core of our
ongoing business model and as a result the Board of Directors is seeking to
divest the Company of FHNI or to dissolve and liquidate FHNI's assets. FHNI has
produced negligible revenues in its history and has been operating at a loss. We
will seek to resolve this issue in a timely manner.

The Company is a biotechnology company that, through GeneThera, develops
molecular assays and is currently in the process of developing therapeutic
vaccines for the detection and prevention of food contaminating pathogens,
veterinary diseases, and diseases affecting human health.

GeneThera, Inc. was considered to be in the development stage for the year ended
December 31, 2003, and the accompanying comparative financial statements
represent those of a development stage company for that year. Activity during
the development stage included organization of the Company, and implementation
and revision of our business plan.

GeneThera's business is based on its Integrated Technology Platform (ITP) that
combines a proprietary diagnostic solution called Gene Expression Assay
(GEA(TM)) with PURIVAX(TM), its system for analyzing large-scale DNA sequencing.
The first part of this platform is the ongoing development of molecular
diagnostic assays solutions using Real Time Fluorogenic Polymerase Chain
Reaction (F-PCR) technology to detect the presence of infectious disease from
the blood of live animals. The second part of the ITP is the development of
therapeutic vaccines using RNA interference technology. It also allows for the
efficient, effective, and continuous testing, management and treatment of animal
populations. These facts distinguish the technology from any alternative testing
and management methodology available to agriculture today -- all of which
require the destruction of individual animals and even entire herds. Our testing
and data analysis processes also allow us not only to separate infected from
clean animals, but also to gain knowledge vital to development of preventative
vaccines.

Government Regulations

GeneThera's unique approach to the testing for various diseases allows it to
begin commercialization of its diagnostic tests without the need for a long and
enduring approval process from the USDA. All tests are done utilizing the blood
of animals that can be collected in the field using the Company's proprietary
Field Collection System (FCS). The collected blood is then sent to GeneThera's
laboratory for testing. Since all of the testing for the diseases is done "in
house," meaning tested at laboratories operated by GeneThera and using GeneThera
developed testing methods, the USDA deems GeneThera's test to be under the
category of Veterinary Services. The regulations on Veterinary Services are much
different than that of third party testing. GeneThera's test is not a kit.

The Center for Biologics Evaluation and Research (CBER) regulates human gene
therapy products - products that introduce genetic material into the body to
replace faulty or missing genetic material, thus treating or curing a disease or
abnormal medical condition. CBER uses both the Public Health Service Act and the
Federal Food Drug and Cosmetic Act as enabling statutes for oversight. FDA has
not yet approved any human gene therapy product for sale. However, the FDA is
actively involved in overseeing this activity.

Family Health News, Inc.

In October 1996, the Company acquired FHNI (formerly known as The Family News,
Inc.), which publishes FHNews. FHNews is a subscription-based newsletter and
digest, published quarterly since 1990, that focuses on health, nutrition, and
alternative medical therapies. FHNI also distributes a small line of products,
including dietary supplements and health and nutrition related equipment, books
and tapes. The Company pays a nominal royalty to the author of the books. FHNI's
business is not at the core of GeneThera's ongoing business model and as a
result the Board of Directors is seeking to divest the Company of FHNI or to
dissolve FHNI and liquidate FHNI's assets. FHNI has produced negligible revenues
in its history and has been operating at a loss. We will seek to resolve this
issue in a timely manner. The Company has entered into a Stock Purchase
Agreement to sell FHNI (the "FHNI Stock Sale") to John Taggart, a former officer
and director of the Company. The FHNI Stock Sale has never been completed due to
the matter not having been submitted to the shareholders as required under the
Stock Purchase Agreement. The Company believes that the sale does not currently
constitute substantially all of the assets of the Company and that shareholder
approval is not required under Florida law. The Company is now considering other
options before completing the FHNI Stock Sale such as ceasing the FHNI
operations and winding up FHNI's affairs and liquidating its assets.

Product Selection and Supply

FHNI seeks to identify products that represent effective science-based formulas
and technologies. However, as with most vitamins, herbals and nutritional
supplements, such products do not undergo the vigorous scientific validation of
safety and effectiveness and pre-market approval by the United States Food and
Drug Administration ("FDA") required of pharmaceutical products. All products
are manufactured by established manufacturers, including Baywood
Pharmaceuticals, Enguard Health Products, Proper Nutrition, Inc., Neutraceutics,
Lentek and Martek. These products are standard formulations and are generally
sold under the brand name of the manufacturer, but some are labeled under the
Company name.

FHNI does not have any long term supply contracts with the manufacturers of our
products. We believe that virtually all of the products we offer are available
from several sources and have not experienced any inability to obtain products
in the past.

FHNI depends upon the manufacturers of our products to conduct adequate quality
control and compliance with applicable manufacturing and labeling regulations.
FHNI does not undertake independent quality testing of our products after they
are received from the manufacturer. Each manufacturer provides FHNI with
certificates of insurance evidencing their policies of general and product
liability coverage in amounts that conform to industry standards.

Distribution

FHNI distributes its products through a sales force of six to twelve independent
distributors. The sales force is recruited primarily though our catalog and
through FHNews' web site. The primary channels of distribution for our products
are: (i) mass market retailers, which include drug stores, supermarkets, mass
merchandisers and discount stores; (ii) health food stores; (iii) direct sales
organizations; (iv) mail order; and (v) the Internet. The Company does not rely
on any one customer or a few major customers for a significant part of its
revenues.

Competition

Our market is highly competitive. We believe the narrow focus of our product
line and the information that we provide to our customers through FHNews and our
World Wide Web site avoid the confusion of the typical retail location, which
carries a vast selection of products, but generally offers little information on
the products.

We compete against a variety of retail organizations including supermarkets,
drug stores, chain stores and bookstores that carry competing products. There
are also competing mail order and Internet retailers that carry competing
products. These competitors compete on the basis of selection, price, physical
location and personal service availability at some locations. Most of these
competitors have vastly greater resources than the Company.

Government Regulation

The Dietary Supplement Health and Education Act of 1994 (the "DSHEA") was
enacted on October 25, 1994. The DSHEA amends the Federal Food Drug and Cosmetic
Act by defining dietary supplements, which include vitamins, minerals,
nutritional supplements and herbs, as a new category of food, separate from
conventional food. The DSHEA provides a regulatory framework to ensure safe,
quality dietary supplements and the dissemination of accurate information about
such products. Under the DSHEA, the FDA is generally prohibited from regulating
the active ingredients in dietary supplements as drugs unless product claims,
such as claims that a product may heal, mitigate, cure or prevent an illness,
disease or malady, trigger drug status.

On November 18, 1998, the Federal Trade Commission (FTC) issued its "Dietary
Supplements: An Advertising Guide for Industry." Such guide provides an
application of FTC law to dietary supplement advertising and includes examples
of how principles of advertisement interpretation and substantiation apply in
the context of dietary supplement advertising. Such Guide provides additional
explanation but does not substantively change the FTC's existing policy that all
supplement marketers have an obligation to ensure that claims are presented
truthfully and to verify the adequacy of the support behind such claims. The
Company believes that its current advertising is in compliance with the
requirements of the FTC Guide, although no assurances can be given in this
regard.

Product Liability Insurance

FHNI, like other distributors and retailers of products that are ingested, faces
an inherent risk of exposure to product liability claims if, among other things,
the use of its products results in injury. FHNI does not currently have product
liability insurance for these products. FHNI requires that each of our suppliers
provide the Company with certificates of insurance evidencing policies of
product liability insurance that are adequate in scope and amount based upon
industry standards. Nevertheless, such policies of insurance do not extend such
coverage to the Company and the Company's agreements with such suppliers do not
provide indemnification by the suppliers of any losses incurred by the Company
arising out of any product liability claims.

Employees

As of February 27, 2004, the Company had a total of three (3) full-time
employees and three (3) part-time employees who devote substantial effort on the
Company's behalf. None of the employees of the Company are represented by a
collective bargaining unit.

Risk Factors

We encounter various risks related to our business and our industry. These
include the following risks.

Development Stage Company

We have a history of losses and may never become profitable. Our primary
subsidiary, GeneThera, Inc., is a development stage company. As such, GeneThera,
Inc. will continue to incur high research and development expenses and may not
generate significant revenue with the Company's launch of its CWD and Mad Cow
Disease diagnostic assay. There can be no assurance that the Company will become
profitable.

The Loss of Key Personnel Could Adversely Affect the Company

The Company depends to a large part on the efforts and continued employment of
Antonio Milici, M.D., Ph.D., our President and Chief Executive Officer. The loss
of the services of Dr. Milici could adversely affect our business.

Rapid Growth May Place Significant Demands on our Resources

We expect significant expansion of our operations. Our anticipated future growth
will place a significant demand on our managerial, operational and financial
resources due to:

* the need to manage relationships with various strategic partners and other
third parties;

* difficulties in hiring and retaining skilled personnel necessary to support
our business;

* the need to train and manage a growing employee base; and

* pressures for the continued development of our financial and information
management systems.

If we have not made adequate allowances for the costs and risks associated with
this expansion or if our systems, procedures or controls are not adequate to
support our operations, our business could be harmed.

Government Regulation
The Company is subject to or affected by laws and regulations that govern, for
example: (i) the vaccination of animals for certain diseases. The failure to
comply with these laws and regulations, or to obtain applicable governmental
approvals, could result in the imposition of penalties, cause delays in, or make
impossible, the marketing of our products and services.

Item 2. Description of Property

The Company leases a 5,730 square foot biotechnology laboratory located at 3930
Youngfield Street, Wheat Ridge, Colorado. The lease expires in January 2005 and
the rent is $5,278.05 per month.

Item 3. Legal Proceedings

GeneThera Inc. has commenced a civil action against individuals Milton and Keith
Dailey d/b/a "Hunting Lease Magazine" based upon a commercial transaction. The
Company is seeking compensatory and exemplary damages. It is too early in the
proceeding to determine any likelihood of an unfavorable outcome.

Item 4. Submission of Matters to a Vote of Security Holders

None

PART II.

Item 5. Market for Common Equity, Related Stockholder Matters, and Small
Business Issuer Purchases of Equity Securities

Our common stock currently trades on the Over The Counter Bulletin Board under
the symbol GTHA. The following sets forth the range of high and low bid
quotations for the periods indicated as reported by AlphaTrade. Such quotations
reflect prices between dealers, without retail mark-up, markdown or commission,
and may not represent actual transactions.

Year Quarter High Low
---- ------- ---- ---

2003 Fourth 3.42 1.55
Third 2.40 0.89
Second 1.78 0.35
First 1.55 0.60

2002 Fourth 3.10 0.95
Third 3.48 1.00
Second 2.325 0.70
First 2.30 0.32

*Source AlphaTrade

There are no restrictions on the payment of dividends. We have paid no dividends
to date and none are anticipated. There were approximately 582 record holders of
common stock as of February 27, 2004.

At various times prior to December 31, 2001, the former President of the
Company, John Taggart, made loans to the Company in the aggregate principal
amount of $15,300. The loans were evidenced by convertible promissory notes that
may be converted into shares of Common Stock. As of December 31, 2003, the notes
were converted to common stock.

At various times prior to December 31, 2001, various third parties made loans to
the Company in the aggregate principal amount of $69,500, which amount remained
outstanding on December 31, 2001. The loans were evidenced by convertible
promissory notes that may be converted into shares of Common Stock.

On January 10, 2002, 2,365,950 shares of common stock valued at $0.105 per share
were issued to an unrelated party for $83,262 in cash.

On August 13, 2002, certain holders exercised their option to convert $10,500 in
convertible notes payable pursuant to an agreement dated August 12, 2002. After
a 2:1 forward stock split, 21,000 shares of common stock were issued.

On December 12, 2002, the Company issued a convertible promissory note bearing
interest at the rate of 8% per annum in the principal amount of Fifty Thousand
Dollars ($50,000) to Fidra Holdings Ltd. Under the terms of the convertible
promissory note, the holder of the note is entitled to convert all sums due
under the December 12 Note for $.50 per share. As of April 14, 2003, the
December 12 Note has not been converted.

On December 24, 2002, the Company issued a Convertible Promissory Note bearing
interest at the rate of 8% per annum in the principal amount of One Thousand
Dollars ($1,000). Under the terms of the Convertible Promissory Note, the holder
of the Note is entitled to convert all sums due under the December 24 Note for
$0.50 per share. As of April 14, 2002, the December 24 Note has not been
converted.

On December 27, 2002, the Company issued a Convertible Promissory Note bearing
interest at the rate of 8% per annum in the principal amount of Ten Thousand
Dollars ($10,000). Under the terms of the Convertible Promissory Note, the
holder of the Note is entitled to convert all sums due under the December 27
Note for $0.50 per share. As of April 14, 2002, the December 27 Note has not
been converted.

In October and November, 2003, the Company made separate offerings of an
aggregate of $750,000 in principal amount of convertible promissory notes, all
bearing interest at the rate of 8% per annum. The maturity dates of these notes
are one year from the date of purchase by the investor. To date the Company has
raised an aggregate principal amount of $715,000 from these offerings, $30,000
as of December 31, 2003 and $685,000 between January 1 and February 1, 2004. The
notes are convertible into shares of the Company's common stock at the
conversion rate of one share for each $1.00 in principal and accrued interest
thereon converted. As of February 27, 2004, an aggregate of $698,000 in
principal and accrued interest had been converted into 698,000 shares of the
Company's common stock.

Item 6. Management's Discussion and Analysis or Plan of Operation

The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto that appear elsewhere herein.

GENETHERA DISCUSSION

Background

GeneThera is a development stage company (as such term is defined by the
Securities and Exchange Commission ("SEC") and Generally Accepted Accounting
Principles and has had negligible revenues from operations in the last two
years. As a development stage company, its research and development expenditures
have not been capitalized as of this date. The Company acquired 100% of the
outstanding stock of GeneThera Inc., a Colorado corporation, for the issuance of
1,960,000 shares of the Company's common stock.

GeneThera has developed proprietary diagnostic assays for use in the
agricultural and veterinary markets. Specific assays for Chronic Wasting Disease
(among elk and deer) and Mad Cow Disease (among cattle) have been developed and
are available currently on a limited basis. E.coli (predominantly cattle) and
Johne's disease (predominantly cattle and bison) diagnostics are in development.

GeneThera provides genetics-based diagnostic and is currently working on vaccine
solutions to meet the growing demands of today's veterinary industry and
tomorrow's agriculture and healthcare industries. The company is organized and
operated both to continually apply its scientific research to more effective
management of diseases and, in so doing, realize the commercial potential of
molecular biotechnology.

The Company believes it will require significant additional funding in order to
achieve its business plan. Over the next 12 months, in order to have the
capability of achieving its business plan, the Company will require at least
$1,000,000. There are no guarantees whether the Company will be able to secure
such a financing, and if the financing is secured, there are no guarantees
whether the Company can achieve the goals laid out in its business plan fully.

RESULTS OF OPERATIONS

The Company does not have an automated financial and accounting reporting system
for reporting financial results of its subsidiaries to the Company. In addition,
FHNI has refused to provide the Company with its financial statements for the
fiscal year ending December 31, 2003. Accordingly, the Company is unable to
obtain the financial statements of FHNI without unreasonable effort or expense
within the meaning of Rule 12b-21 adopted by the SEC. The following discussion
and analysis, therefore, relates only to the financial condition and results of
operations of GeneThera, Inc.

Revenues for the three-month period ended December 31, 2003 were $96 compared to
$5,000 for the same period last year. The decrease is attributable to reduced
research fees at GeneThera. Sales for the year ended December 31, 2003 were $96.

General and administrative expenses more than doubled for the current period as
compared to the prior period. The increase is primarily attributable to
increased expenses involved in consolidating the operations of GeneThera with
the parent Company.

Personnel and professional expenses (consulting and professional fees and
salaries) increased from $304,220 for the prior fiscal year ending December 31,
2002 to $1,419,589 for the year ending December 31, 2003. Comparing the year
ended December 31, 2002 to the year ended December 31, 2003, expenses grew
substantially from $634,413 to $2,555,346. Most of this increase relates to the
development of the Company's management team, as well as professional, legal
fees, and consulting fees incurred as part of the acquisition and preparation of
the Company's periodic and other filings with the Securities and Exchange
Commission.

The Company recorded a loss of $2,431,761 compared to $627,984 for the year
ended December 31, 2002.

Total assets of the Company for the year ended December 31, 2003 were $806,762.

Total current liabilities at December 31, 2003 were $1,300,283.

RESEARCH AND DEVELOPMENT

R&D serves is the source for both assay development and vaccine
design/development. As assays for different diseases are developed, the Company
plans to formalize the procedure into a commercial application through a series
of laboratories to be owned and operated by GeneThera. To date, we have
introduced our diagnostic solution for Chronic Wasting disease and Mad Cow
disease on a very limited basis. We cannot assure you that we will be successful
in developing or validating any new assays or, if we are successful in
developing and validating any such assays, that we can successfully
commercialize them or earn profits from sales of those assays. Furthermore, we
cannot assure you that we will be able to design, develop, or successfully
commercialize any vaccines.

COMMERCIAL DIAGNOSTIC TESTING

The Diagnostic Testing labs are the second division of the Company. The Company
intends to locate laboratories geographically proximate to the primary sources
of individual diseases and/or according to specific available operating
efficiencies. The specific number of labs to be built and operated will be based
on assay demand (demand facilitated by the number of specific disease assays
GeneThera develops), our ability to obtain the capital to build the labs, and
our ability to successfully manage them from our principal office.

LICENSING

Through our third division, Licensing, we intend to manage the marketing and
sale of the vaccines developed by GeneThera's Research & Development division.
As GeneThera does not intend to be a vaccine manufacturer, we plan to use our
Licensing division to license the technology related to any vaccines that may be
developed and to manage the revenue potential available from the successful
development and validation of specific vaccines. We cannot assure you 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.

R&D SERVICES

Molecular, Cellular, Viral Biology Research and Consulting Services:

GeneThera Inc. is committed to providing global access to cutting edge
biotechnology services to fellow scientists in academia, the pharmaceutical
industry, and the biotechnology industry. Primarily, GeneThera's expertise
focuses on technology relevant to animal and human immunotherapy. GeneThera is
dedicated to furnishing dependable, high quality, cost-effective and prompt
client consulting services. These services are backed by the cumulative
experiences of greater than 100 years of research and development in both
government and industry by GeneThera's senior scientists. GeneThera develops a
commercial-scale implementation of Adenovector Purification Process to support
R&D material production. Furthermore, GeneThera evaluates and tests commercially
available expression vectors and incorporates them into its vector repertoire.
These technologies are well established within the repertoire of GeneThera's
scientific staff.

Research & Development Services:

Molecular Biology:

o Synthetic cDNA Construction
o Prokaryotic Expression Vector Construction & Development
o E. coli Expression Strain Evaluation
o Pilot Scale Fermentation
o Mammalian Expression Vector Construction & Development
o Baculovirus Expression
o Protein Isolation
o Protein Engineering: Complement Determining Region Conjugated Proteins
Monoclonal Antibody Production Chimerization & Humanization
o Vector design for Prokaryotic Expression of Antibody Fragments (Fab) and
Single Chain Antibody (ScFv)
o Pilot Scale- up Development
o Process Purification & Characterization
o Assay Development & Quality Control Pharmaceutical Dosage and Formulation

Molecular Biology Potential Agreement Structure

Stage (I): cDNA Construction & Expression Vector Development Stage (II):
Pilot Scale Expression & Protein Purification Stage (III): Assay
Development & Quality Control Development Stage (IV): Bioprocess
Development & Optimization Stage (V): Dosage & Formulation

Gene Therapy Testing services

Genethera Services offers GLP testing programs for somatic cell, viral and
naked DNA-based gene therapies. With over eight years experience in
providing fully integrated bio-safety testing programs for the cell and
gene therapy fields, we have supported a number of successful BLA and IND
applications.

Replication-Competent Viral Vector Testing

Sensitive in vitro cell culture assays are used to detect
replication-competent retroviruses or adenoviruses. GeneThera can work with
clients to provide custom replication-competent virus detection assays for
the particular vector construct.

Complete Somatic Cell and Viral Vector Packaging and Producer Cell Line
Characterization

GeneThera offers all of the assays mandated by regulatory authorities
worldwide for the bio-safety analysis and characterization of cells and
cell lines used in gene therapy products.

Vector Stock Characterization

Custom purity and potency testing is available for gene therapy viral
vector stocks.

Vector Purification Process Validation for Viral Clearance

Most biopharmaceuticals require viral clearance studies to validate the
removal of potential contaminants, such as those from bovine components or
from helper viruses (adenovirus in AAV production). GeneThera can provide
custom design and performance of viral studies for various vector
purification processes.

Custom Bio-safety Testing Programs for Somatic Cell, Ex Vivo Cell, and
Tissue Therapies

GeneThera can guide our clients through the unique process of designing and
implementing a bio-safety testing program that meets the needs of each
specific project.

GeneThera is currently seeking contracts for these services. There is no
assurance that any contracts will be signed or that the company will generate
significant profits from these contracts.

Business Model

GeneThera's business is based on its Integrated Technology Platform (ITP) that
combines a proprietary diagnostic solution called Gene Expression Assay
(GEA(TM)) with PURIVAX(TM), its system for analyzing large-scale DNA sequencing.
The first part of this platform is the ongoing development of molecular
diagnostic assays solutions using real time Fluorogenic Polymerase Chain
Reaction (F-PCR) technology to detect the presence of infectious disease from
the blood of live animals. The second part of the ITP is the development of
therapeutic vaccines using RNA interference technology. It also allows for the
efficient, effective, and continuous testing, management and treatment of animal
populations. These facts distinguish the technology from any alternative testing
and management methodology available to agriculture today -- all of which
require the destruction of individual animals and even entire herds. Our testing
and data analysis processes also allow us not only to separate infected from
clean animals, but also to gain knowledge vital to development of preventative
vaccines.

Each individual assay utilizes the proprietary Field Collection System (FCS) for
the collection and transportation of blood samples to GeneThera's laboratory.
The FCS allows GeneThera to maintain the integrity of each sample by the
addition of specific reagents to test tubes contained in the system. GeneThera's
FCS is designed to be an easy-to-use method of gathering blood samples from
harvested or domesticated animals. It ensures consistency of samples as well as
increased assurance of each sample's integrity.

To date, GeneThera has successfully developed the ability to detect Chronic
Wasting Disease, a disease affecting elk and deer in North America. The release
of commercialized Field Collection Systems and laboratory diagnostic testing
occurred in October of 2003. GeneThera has also successfully developed an assay
for the detection of Mad Cow Disease, a disease recently found in the United
States, but has been in Europe for many years. The Field Collection Systems are
available for purchase from the Company. Chronic Wasting Disease and Mad Cow
Disease are both in the family of diseases called Transmissible Spongiform
Encephalopathy (TSE). Diagnostic assays for E.coli O157:H7 and Johnne's Disease
are in the final stages of development. Vaccines for Chronic Wasting Disease and
E.coli O157:H7 are in advanced stages of development. The Company will need the
approval of the USDA before the vaccines can be sold. There are no assurances
that such an approval will be granted, or if granted, whether the Company will
be able to produce and sell such vaccines following such an approval in
commercial quantities or to make a profit from such production and sales.

INTEGRATED TECHNOLOGY PLATFORM (ITP)

GeneThera's integrated technology platform is the foundation for "fast-track"
rDNA vaccine development. ITP is the assembly of GEA(TM) and PURIVAX(TM) rAD and
rAAV systems. This integrated technology platform yields fast-track vaccine
development. Leveraging its ITP, GeneThera can develop a prototype vaccine
within 4 to 6 months versus the current standard of 18 to 24. The GEA(TM)
applied modular unit system utilizes robotics and is based on nucleic acid
extraction in conjunction with F-PCR technology to develop gene expression
assays. Using GEA(TM) assays, vaccine efficacy can be measured in real time.
This means not having to wait for the antibody response to measure how well the
vaccine is working. F-PCR allows effective quantification of the precise number
of viral or bacterial genetic particles before, during and after vaccine
injection(s). The more effective the vaccine is, the stronger the decrease of
the infectious disease particles will be.

GEA(TM) SYSTEM

GEA(TM) is a proprietary assay development system. The core of GEA(TM) is
Fluorogenic Polymerase Chain Reaction technology (F-PCR). GeneThera solves the
technical problems related to the use of conventional PCR in molecular
diagnostics via our modular unit concept. Specifically, the modular unit
consists of an Automated Nucleic Acid Workstation (ANAW) and a Sequence
Detection System (SDS) that are fully integrated, allowing an operator to
perform the entire procedure of DNA extraction and F-PCR analysis within a
closed computerized system. This system results in minimal intervention and no
post-PCR manipulation.

The Automated Nucleic Acid Workstation is a highly flexible robotic system that
extracts and purifies acids from a variety of complex samples, preparing them
for F-PCR analysis. Data management system software includes a database to
manage all run phases and record sample processing.

The Sequence Detection System detects the fluorescent signal generated by the
cleavage of the reporter dye during each PCR cycle. This process confers
specificity without the need of post-PCR hybridization. Most important, the SDS
offers the advantage of monitoring real time increases in fluorescence during
PCR. Specifically, monitoring real-time progress of the PCR completely changes
the approach to PR-based quantitation of DNA and RNA, most particularly in
improving the precision in both detection and quantitation of DNA and RNA
targets.

GeneThera currently faces no competition in the use of F-PCR technology and the
modular unit concept for commercial testing of either infectious disease in
animals or food pathogen contamination. Currently, most labs utilize
conventional microbiology, immunological or conventional PCR methods for either
veterinary diseases or food pathogen contamination detection. Specific to
microbiology and immunological techniques, the drawbacks of these approaches
are:

1. the antibodies-based culture media used to detect the presence of
infectious diseases has a low level of sensitivity;
2. high background due to non-specific binding of antibodies and/or
culture contamination;
3. sample preparation and storage creates artifacts; and
4. long, cumbersome protocols necessary to perform these tests.

A major technical limitation of conventional PCR is the risk of contaminating a
specimen with the products of previously amplified sequences. Known as
cross-contamination, this phenomenon represents a constant challenge to any lab
using conventional PCR. Managing these challenges is cumbersome and difficult to
streamline.

Fluorogenic PCR (F-PCR) overcomes these drawbacks by making it possible for PCR
to efficiently test large numbers of samples even when major laboratory
facilities are not readily available. A novel methodology, F-PCR allows
quantitative and qualitative detection of specific nucleic acid sequences in a
very sensitive, highly accurate and rapid fashion.

PURIVAX(TM)TECHNOLOGY

GeneThera has developed a large-scale process for highly purified and high viral
titer Adenovirus and AAV recombinant vectors. This technology enables GeneThera
to develop Adenovirus and AAV based recombinant DNA vaccines for veterinary
diseases and food pathogens.

GeneThera's PURIVAX(TM) is a multi-resin anion exchange chromatography system
that dramatically improves biological purity and viral titer of recombinant
Adenovirus and AAV vectors. PURIVAX(TM) completely eliminates toxic side effects
associated with adenoviruses and AAV vectors thereby making it possible to
develop highly immunogenic and safe recombinant DNA vaccines. Importantly,
recombinant DNA (rDNA) vaccine technology represents a powerful tool for an
innovative vaccine design process known as "genetic immunization."

Recombinant Adenovirus (rAD) and AAV (rAAV) vectors are the ideal candidates for
a gene delivery system. These viruses can efficiently deliver genetic material
to both dividing and non-dividing cells, thereby overcoming some of the
obstacles encountered with first generation retroviral vectors.

Equally important, rAd and rAAV are engineered virus genomes that contain no
viral gene. One of the key features for rAd and rAAV is their ability to
transduce 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;
2. low viral titer

Traditional technologies and first generation chromatography processes are
inadequate both in terms of purity and yield. And, due to the limitation of
these purification technologies, adequate viral titers cannot be achieved. The
result is no efficient system to deliver immuonogenic genetic sequences into
cells.

This is the significance of GeneThera's PURIVAX(TM), rAD and rAAV system for
rDNA vaccine development. Succinctly stated, it is able to achieve both high
purity and high viral titer (up to 10e16 viral particles/eulate) based on its
proprietary multi-resin anion exchange chromatography system. Biological
contaminants such as endogenous retrovirus, bacterial, mycoplasma, non-specific
nucleic acids, lipids, proteins, carbohydrates and endotoxins are eliminated
during the purification process.

FIELD COLLECTION SYSTEM

GeneThera's Field Collection System (FCS) is a commercial product designed to
permit a standardized manner for drawing, stabilizing and handling blood samples
intended for GeneThera's diagnostic assay testing. Each package is referred to
as a "System" because it is just that. There are two different FCS packages: one
for hunters and one for breeders or ranchers. GeneThera's FCS is designed to be
an easy-to-use method of gathering blood samples from harvested or domesticated
animals. It ensures consistency of samples as well as increased assurance of
each sample's integrity.

Common to each FCS are two test tubes, each containing a separate reagent. The
process, as described in the packaging, ensures that each individual sample of
blood will be stabilized, thereby increasing the integrity of that sample for
diagnostic testing. Additionally, this common method of receiving blood samples
at the GeneThera laboratory(s) increases the efficiency of handling the volume
of samples received. We believe this will enable us to provide a fast, efficient
process, capable of posting results within 24 hours of receipt at a low cost to
the consumer. All testing using the FCS must be done by GeneThera and no third
parties can test the blood collected. The Company is currently offering the FCS
for hunters, breeders, or ranchers directly through the Company on a limited
basis. The Company intends to begin a marketing campaign through the addition of
key personnel to achieve higher volumes of sales for the FCS. The Company
projects that no capital will be needed to hire the additional personnel as they
will be hired on a strictly commission based.

FHNI DISCUSSION AND ANALYSIS

FHNI has had a long history of losses and flat to negative growth in revenues.
FHNI's business is not at the core of our ongoing business model. The Company's
belief is that the GeneThera business holds greater promise for long-term growth
and value. As a result, the Board of Directors is seeking to divest the Company
of FHNI or to dissolve and liquidate FHNI's assets.

As stated numerous times in this report, the Company has been unable to obtain
financial information from FHNI. Management of FHNI has refused to provide the
Company with the financial information necessary for the Company to discuss the
financial condition and results of operations of FHNI, despite several attempts
on the part of the Company to obtain such information.

Liquidity and Capital Resources

The Company had a cash balance of $-0- as of December 31, 2003. It is estimated
that it will require outside capital for the year 2004 for the commercialization
of GeneThera's molecular assays as well as the development of their therapeutic
vaccines. The Company intends to raise these funds by means of one or more
private offerings of debt or equity securities or both. As discussed in this
filing, the Company has raised $715,000 through Convertible Notes to certain
individuals in late 2003 and early 2004. These individuals have converted as of
the date of this filing. Currently the company is in discussions with two groups
to obtain financing through either debt and/or equity. No definitive agreements
have been signed. There are no guarantees whether the Company will be able to
secure such a financing, and if the financing is secured, there are no
guarantees whether the Company can achieve the goals laid out in its business
plan fully.

Convertible Notes

To relieve its cash flow crisis, the Company has issued convertible notes to
certain individuals.

On December 12, 2002, the Company issued a convertible promissory note bearing
interest at the rate of 8% per annum in the principal amount of Fifty Thousand
Dollars ($50,000) to Fidra Holdings Ltd. Under the terms of the convertible
promissory note, the holder of the note is entitled to convert all sums due
under the December12 Note for $.50 per share. As of April 14, 2003, the December
12 Note has not been converted.

On December 24, 2002, the Company issued a Convertible Promissory Note bearing
interest at the rate of 8% per annum in the principal amount of Ten Thousand
Dollars ($10,000). Under the terms of the Convertible Promissory Note, the
holder of the Note is entitled to convert all sums due under the December 24
Note for $0.50 per share. As of April 14, 2002, the December 24 Note has not
been converted.

On December 27, 2002, the Company issued a Convertible Promissory Note bearing
interest at the rate of 8% per annum in the principal amount of One Thousand
Dollars ($1,000). Under the terms of the Convertible Promissory Note, the holder
of the Note is entitled to convert all sums due under the December 27 Note for
$0.50 per share. As of April 14, 2003, the December 27 Note has not been
converted.

Between October 2003 and January 2004, the Company issued 2 separate Convertible
Promissory Notes bearing interest at the rate of 8% per annum. An aggregate
amount of Seven Hundred and Fifteen Thousand Dollars ($715,000) were raised.
Under the terms of the Convertible Promissory Notes, the holder of the Note is
entitled to convert all sums due under the Note for $1.00 per share with the
notes maturing one year from the date the money is received by the Company. The
Company received Thirty Thousand Dollars ($30,000) as of December 31, 2003 and
the balance of Six Hundred Eighty-Five Thousand Dollars ($685,000) was received
as of February 1, 2004. As of February 27, 2004, Six Hundred Ninety-Eight
Thousand Dollars ($698,000) was converted into 698,000 shares, $17,000 still
remains outstanding under the Note.

Item 7. Financial Statements

GENETHERA, INC.
AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2003 AND 2002

GENETHERA, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002

TABLE OF CONTENTS

Page No.

Independent Auditors' Report F-2

Consolidated Balance Sheets F-3

Consolidated Statements of Operations F-5

Consolidated Statements of Changes in Stockholders' Deficit F-6

Consolidated Statements of Cash Flows F-9

Notes to Consolidated Financial Statements F-10

F-1

INDEPENDENT AUDITORS' REPORT
----------------------------

To the Board of Directors
GeneThera, Inc. and Subsidiary
Wheat Ridge, CO

We have audited the accompanying consolidated balance sheets of GeneThera, Inc.
and Subsidiary (the "Company") as of December 31, 2003 and 2002, 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 audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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, 2003 and 2002, and the
consolidated results of its operations, and its cash flows for the years then
ended, in conformity with accounting principles generally accepted in the United
States of America.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 16 to the
consolidated financial statements, the Company has no established source of
revenue, recurring losses from operations, cash used in operations and
accumulated deficit. This raises substantial doubt about its ability to continue
as a going concern. Management's plan in regard to these matters is also
described in Note 16. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ KANTOR, SEWELL & OPPENHEIMER, PA
------------------------------------
KANTOR, SEWELL & OPPENHEIMER, PA

Hollywood, Florida
February 15, 2004

F-2

GENETHERA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,

Assets

2003 2002
-------- --------

Current assets
Cash $ -- $ --
-------- --------
Total current assets -- --

Property and equipment, net 702,199 214,434

Other assets
Deposits 5,278 5,278
Goodwill and trademark, net 25,825 --
Investment in subsidiary 39,146 --
Other assets 34,314 30,001
-------- --------
104,563 35,279
-------- --------

$806,762 $249,713
======== ========

The notes to consolidated financial statements are
an integral part of the above statement.

F-3

GENETHERA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,

Liabilities and Stockholders' Deficit

2003 2002
----------- -----------

Current liabilities
Bank overdraft $ 35,487 $ 42
Accounts payable 122,513 98,069
Accrued expenses 569,088 237,633
Due to related company 849 339,043
Lease payable 18,715 32,900
Loan payable - related party 50,000 50,000
Notes payable 193,405 131,683
Convertible notes payable 310,227 --
----------- -----------
Total current liabilities 1,300,284 889,370

Stockholders' deficit
Preferred stock, $0.001 par value, 20,000,000 shares authorized;
no shares issued and outstanding -- --
Common stock $.001 par value, authorized 100,000,000 shares;
4,749,976 and 1,960,000 shares issued and outstanding at
December 31, 2003 and 2002 respectively 4,750 1,960
Additional paid in capital 4,300,500 691,040
Accumulated deficit (4,798,772) (1,332,657)
----------- -----------
(493,522) (639,657)
----------- -----------

$ 806,762 $ 249,713
=========== ===========

The notes to consolidated financial statements are
an integral part of the above statement.

F-4

GENETHERA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,

2003 2002
----------- -----------

Revenue $ 96 $ 5,000
----------- -----------

Expenses
Salaries 1,386,000 296,206
Professional fees 33,589 8,014
General and administrative 312,944 122,428
Leases 95,525 89,511
Laboratory 25,286 50,560
Consulting 607,750 22,665
Depreciation and amortization 73,494 30,532
Insurance 20,758 14,497
----------- -----------

2,555,346 634,413
----------- -----------

Loss from operations (2,555,250) (629,413)

Other income (expenses)
Other income 150,000 83,262
Other expenses -- (77,776)
Interest expense (26,511) (4,057)
----------- -----------

Net loss $(2,431,761) $ (627,984)
=========== ===========

Loss per common share
Basic and dilutive $ (0.78) $ (0.32)

Basic and diluted weighted average
number of shares outstanding 3,116,607 1,960,000

The notes to consolidated financial statements are
an integral part of the above statement.

F-5

GENETHERA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 2003 AND 2002

Common Stock Paid in Accumulated
Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- -----------

Issuance of common stock to founders for consulting
services rendered 420,000 $ 420 $ 35,580 $ -- $ 36,000

Issuance of common stock in exchange for equipment
supplies and cash 100,000 100 99,900 -- 100,000

Issuance of common stock according to a contract for
computer services and financing 60,000 60 59,940 -- 60,000

Issuance of common stock in exchange for cash 5,000 5 4,995 -- 5,000

Net loss 1999 -- -- -- (154,750) (154,750)
----------- ----------- ----------- ----------- -----------

Balance December 31, 1999 585,000 585 200,415 (154,750) 46,250

Issuance of common stock in exchange for consulting
services rendered 25,000 25 24,975 -- 25,000
----------- ----------- ----------- ----------- -----------

sub-total 610,000 $ 610 $ 225,390 $ (154,750) $ 71,250
sub-total 610,000 $ 610 $ 225,390 $ (154,750) $ 71,250

The notes to consolidated financial statements are an integral part of the above statement.

F-6

GENETHERA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 2003 AND 2002

Common Stock Paid in Accumulated
Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- -----------

Issuance of common stock in exchange for an agreement
for management and financing 40,000 40 39,960 -- 40,000

Issuance of common stock in exchange for a consulting
agreement 10,000 10 11,990 -- 12,000

Net loss 2000 -- -- -- (156,259) (156,259)
----------- ----------- ----------- ----------- -----------

Balance December 31, 2000 660,000 660 277,340 (311,009) (33,009)

Issuance of common stock to an officer in lieu of salary 1,125,000 1,125 238,875 -- 240,000

Issuance of common stock to an employee in lieu of salary 60,000 60 59,940 -- 60,000

Issuance of common stock to an employee in lieu of salary 15,000 15 14,985 -- 15,000

Issuance of common stock in exchange for consulting
services 100,000 100 99,900 -- 100,000

Net loss, 2001 -- -- -- (393,664) (393,664)
----------- ----------- ----------- ----------- -----------

Balance December 31, 2001 (as restated see Note 14) 1,960,000 $ 1,960 $ 691,040 $ (704,673) $ (11,673)
sub-total 1,960,000 $ 1,960 $ 691,040 $ (704,673) $ (11,673)

The notes to consolidated financial statements are an integral part of the above statement.

F-7

GENETHERA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 2003 AND 2002

Common Stock Paid in Accumulated
Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- -----------

Net loss, 2002 (as restated see Note 14) -- -- -- (627,984) (627,984)
----------- ----------- ----------- ----------- -----------

Balance December 31, 2002 (as restated see Note 14) 1,960,000 1,960 691,040 (1,332,657) (639,657)

Recapitalization on March 23, 2003 778,176 778 1,041,122 (1,034,354) 7,546

Additional paid in capital contributed as equipment -- -- 450,000 -- 450,000

Shares issued in exchange for services 715,000 715 607,035 -- 607,750

Shares issued to officer 600,000 600 1,163,400 -- 1,164,000

Shares issued on conversion 696,800 697 347,903 -- 348,600

Net loss, 2003 -- -- -- (2,431,761) (2,431,761)
----------- ----------- ----------- ----------- -----------

Balance December 31, 2003 4,749,976 $ 4,750 $ 4,300,500 $(4,798,772) $ (493,522)
=========== =========== =========== =========== ===========

The notes to consolidated financial statements are an integral part of the above statement.

F-8

GENETHERA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,

2003 2002
----------- -----------

Cash flows from operating activities:
Net loss $(2,431,761) $ (627,984)
----------- -----------

Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 73,494 30,532
Compensation in exchange for common stock 1,164,000
Consulting in exchange for common stock 607,750
(Increase) decrease in other assets (69,284) (5,172)
Increase (decrease) in accounts payable
and accrued liabilities 23,205 734,637
Increase (decrease) in other payables (15,348) --
----------- -----------

Total adjustments 1,783,817 759,997
----------- -----------

Net cash provided by (used in) operating activities (647,944) 132,013
----------- -----------

Cash flows from investing activities:
Cash payments for the purchase of lab equipment (97,907) (11,534)
----------- -----------

Net cash used in investing activities (97,907) (11,534)
----------- -----------

Cash flows from financing activities:
Bank overdraft 35,486 42
Payments on lease payable (14,185) (11,407)
Principal payment on note payable (9,000) (27,000)
Capital contributed as equipment 450,000
Forgiveness of debt (150,000) (83,262)
Proceeds from convertible loans 356,550 --
Proceeds from notes payable 77,000 --
----------- -----------

Net cash provided by (used in) financing activities 745,851 (121,627)
----------- -----------

Net increase in cash and cash equivalents -- (1,148)

Cash and cash equivalents, beginning of year -- 1,148
----------- -----------

Cash and cash equivalents, end of year $ -- $ --
=========== ===========

Supplemental disclosures of cash flow information:
a) Cash paid during the period for:
Interest expense $ 3,462 $ 1,616
----------- -----------

The notes to consolidated financial statements are
an integral part of the above statement.

F-9

GENETHERA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002

NOTE 1 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACOUNTING POLICIES

Nature of Operations
--------------------
GeneThera, Inc. (the Company), formerly known as Hand Brand Distribution, Inc.,
was incorporated in November 1995, under the laws of the State of Florida. On
January 23, 2002, the Company entered into a stock purchase agreement with
GeneThera, Inc. (Colorado) to acquire approximately 91% of its stock in a
transaction accounted for as a recapitalization of GeneThera, Inc. This
agreement was rescinded and a new agreement signed on March 23, 2003 (See Note
13). GeneThera, Inc. (Colorado) is a biotechnology company that develops
molecular assays for the detection of food contaminating pathogens, veterinary
diseases and genetically modified organisms. The Company also owns Family Health
News, a wholly own subsidiary, located in Florida.

GeneThera, Inc. (Colorado) was considered to be in the development stage for the
year ended December 31, 2002, and the accompanying comparative financial
statements represent those of a development stage company for that year.
Activity during the development stage included organization, and implementation
and revision of the business plan. GeneThera, Inc. (Colorado) has also provided
research services to unrelated parties.

Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, GeneThera, Inc. (Colorado). All
significant inter-company balances and transactions have been eliminated. The
accounts of Family Health News have not been consolidated because the Company
expects control over Family Health News to be temporary.

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.

Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method based on the estimated useful lives of the assets, which is
5 - 10 years.

Revenue Recognition
-------------------
Revenues are recognized when services are rendered.

Loss per Share
--------------
Basic loss 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, 2003 and 2002 all common stock equivalents
were antidilutive and therefore diluted loss per share equaled basic loss per
share.

F-10

GENETHERA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002

NOTE 1 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACOUNTING POLICIES -
continued

Advertising
-----------
Advertising costs are charged to operations in the year incurred. There were no
advertising expenses for the years ended December 31, 2003 and 2002.

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.

Accounting Pronouncements
-------------------------
The Financial Accounting Standards Board has recently issued several new
accounting pronouncements, which may apply to the Company. Statement No. 141,
Business Combinations (SFAS 141) establishes revised standards for accounting
for business combinations. Specifically, the statement eliminates the pooling
method, provides new guidance for recognizing intangible assets arising in a
business combination, and calls for disclosure of considerably more information
about a business combination. This statement is effective for business
combinations initiated on or after July 1, 2001. The adoption of this
pronouncement on July 1, 2001 did not have a material effect on the Company's
financial position, results of operations or liquidity. Statement No. 142,
Goodwill and Other Intangible Assets (SFAS 142) provides new guidance concerning
the accounting for the acquisition of intangibles, except those acquired in a
business combination, which is subject to SFAS 141, and the manner in which
intangibles and goodwill should be accounted for subsequent to their initial
recognition. Generally, intangible assets with indefinite lives, and goodwill,
are no longer amortized; they are carried at lower of cost or market and subject
to annual impairment evaluation, or interim impairment evaluation if an interim
triggering event occurs, using a new fair market value method. Intangible assets
with finite lives are amortized over those lives, with no stipulated maximum,
and an impairment test is performed only when a triggering event occurs. This
statement is effective for all fiscal years beginning after December 15, 2001.
The Company believes that the implementation of SFAS 142 on April 1, 2002 did
not have a material effect on the Company's financial position, results of
operations, or liquidity.

Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets supercedes Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of (SFAS 121). Though it retains
the basic requirements of SFAS 121 regarding when and how to measure an
impairment loss, SFAS 144 provides additional implementation guidance. SFAS 144
excludes goodwill and intangibles not being amortized among other exclusions.
SFAS 144 also supersedes the provisions of APB 30, Reporting the Results of
Operations, pertaining to discontinued operations. Separate reporting of a
discontinued operation is still required, but SFAS 144 expands the presentation
to include a component of an entity, rather than strictly a business segment as
defined in SFAS 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS 144 also eliminates the current exemption to consolidation
when control over a subsidiary is likely to be temporary. This statement is
effective for all fiscal years beginning after December 15, 2001. The Company
believes that the implementation of SFAS 144 on April 1, 2002 did not have a
material effect on the Company's financial position, results of operations or
liquidity.

F-11

GENETHERA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002

NOTE 2 CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to credit risk
include cash on deposit with three financial institutions. Financial
institutions insure depositors for up to $100,000 through the U.S. Federal
Deposit Insurance Corporation. The Company had a bank overdraft at December 31,
2003, and 2002.

NOTE 3 PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2003 and 2002 consisted of the following:

2003 2002
--------- ---------

Computers $ 32,523 $ 12,372
Telephone system 5,119 3,400
Furniture & fixtures 1,465 --
Laboratory equipment 811,017 277,194
--------- ---------

850,124 292,966
Less accumulated depreciation (147,925) (78,532)
--------- ---------

$ 702,199 $ 214,434
========= =========

Depreciation expense for the years ended December 31, 2003 and 2002 was $70,223
and $30,532, respectively.

During the year ended December 31, 2003, the Company entered into capital lease
agreements to acquire laboratory equipment and a computer. (See Note 4)

NOTE 4 LEASES

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

2003 2002
-------- --------

Laboratory Equipment $ 31,574 $ 31,574
Computer 2,672 2,672
-------- --------
34,246 34,246
Less: Accumulated depreciation (6,441) (1,306)
-------- --------

Net assets under capital leases $ 27,805 $ 32,940
-------- --------

F-12

GENETHERA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002

NOTE 4 LEASES - continued

Operating Leases
----------------
The Company leases office space and vehicles under non-cancelable operating
leases for its Colorado facility, which have initial terms in excess of one
year.

Total lease expense for the years ended December 31, 2003 and 2002 was $95,525,
and $89,511, respectively.

Future minimum lease payments under these non-cancelable operating leases and
capital leases at December 31, 2003 were as follows:

Operating Capital
Leases Leases
--------- ----------

2004 $ 63,337 $ 12,135
2005 0 1,035
2006 0 691
2007 0 0
2008 and thereafter 0 0
--------- ----------
$ 63,337 $ 13,861
========= ==========

Total interest expense, including late fees, under capital leases was $2,510 and
$634 for the years ended December 31, 2003 and 2002, respectively.

NOTE 5 LOAN PAYABLE

The Company has an outstanding loan payable at December 31, 2003 and 2002 as
follows:

2003 2002
-------- --------
Loan payable with no interest,
due on demand, unsecured $ 50,000 $ 50,000
Less current portion (50,000) (50,000)
-------- --------

Total long-term loan payable $ 0 $ 0
======== ========

There was no interest expense for the years ended December 31, 2003 and 2002.

F-13

GENETHERA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002

NOTE 6 NOTES PAYABLE

The Company has outstanding notes payable at December 31, 2003 and 2002 as
follows:

2003 2002
--------- ---------

Note payable with an interest rate of 7% per annum, payable
in 5 payments of $1,500 and a lump sum balance on December
1, 2001, guaranteed jointly by the Company and its
President. The note is in default as of the date of this
report. $ 16,388 $ 23,474

Note payable with an interest rate of 14% per annum, payable
principal and interest on August 31, 2001, unsecured. The
note is in default as of the date of this report. 16,900 15,209

Note payable with no interest, due June 30, 2004. In January
2004, $57,000 was repaid. 77,000 0

Note payable with no interest rate, payable $9,000 per month
beginning July 2, 2002, due August 2, 2003; secured by
equipment. (See Note 3) 83,117 93,000
--------- ---------

193,405 131,683
Less current portion: (193,405) (131,683)
--------- ---------

Total long-term note payable $ 0 $ 0
========= =========

Total interest expense for the year ended December 31, 2003 and 2002 was $1,692
and $3,404, respectively.

F-14

GENETHERA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002

NOTE 7 CONVERTIBLE NOTES PAYABLE
2003 2002
--------- ---------

A convertible note payable to an individual, with interest
at 8%; due May 12, 2003; convertible into shares of common
stock at a price of $0.50 per share. As of the balance sheet
date, the option to convert into shares of common stock was
not exercised. $ 55,500 $ 0

Various convertible notes payable to individuals, with
interest at 8%; due at various dates from April 14, 2003
through June 18, 2004; convertible into shares of common
stock at a price of $0.50 per share. As of the balance sheet
date, the option to convert into shares of common stock was
not exercised. 190,977 0

A convertible note payable to an individual, with interest
at 10%; due May 16, 2004; convertible into shares of common
stock at a price of $0.25 per share. As of the balance sheet
date, the option to convert into shares of common stock was
not exercised. 63,750 0
--------- ---------

310,227 0
Less: current portion (310,227) (0)
--------- ---------

Total long-term convertible notes payable $ 0 $ 0
========= =========

Interest expense for the years ended December 31, 2003 and 2002 was $15,677 and
$0, respectively.

NOTE 8 EQUITY LINE OF CREDIT

During 2002, the Company entered into an agreement to obtain a private equity
line of credit for up to $30,000,000, in exchange for common stock and warrants,
for a period of 36 months.

The Company agreed to pay a commission fee of $300,000, plus legal fees totaling
$30,000, with rights to convert into shares of common stock at $1 per share on
or before September 15, 2002. On September 28, 2002, 660,000 shares (after 2:1
forward stock split) were issued pursuant to the agreement. On May 12, 2003, the
board of directors resolved to nullify the transaction due to failure of
consideration, following General Counsel's advice. Consequently, the 660,000
shares were canceled and the financial statements were adjusted to reflect the
cancellation.

F-15

GENETHERA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002

NOTE 9 STOCKHOLDERS' DEFICIT

Common Stock
------------
On March 5, 1999, the Company issued 420,000 (after recapitalization - See Note
13) of common stock valued at $36,000 according to an employment agreement,
approved by the board of directors, to a founder for services rendered during
1999. Accordingly, consultant expense of $36,000 was charged to operations.

On March 5, 1999, 100,000 shares (after recapitalization - See Note 13) of
common stock were issued in exchange for used equipment with a fair market value
of $34,586, supplies, and other items totaling $25,414, and $40,000 in cash from
an unrelated party. Accordingly, lab equipment was recorded at $34,586, supplies
at $21,414, and glassware at $4,000 - the market value for these items.

On April 1, 1999, according to a contract agreement to provide computer
services, the Company issued 60,000 shares (after recapitalization - See Note
13) of common stock valued at $60,000, in exchange for computer & consulting
services in the amount of $55,000, and $5,000 in cash. Accordingly, consultant
expense of $55,000 was charged to operations.

On April 1, 1999, 5,000 shares (after recapitalization - See Note 13) of common
stock valued at $1.00 per share were issued to an unrelated party for $5,000 in
cash.

On January 1, 2000, 25,000 shares (after recapitalization - See Note 13) of
common stock valued at $1.00 per share were issued in exchange for services
rendered. Accordingly, consultant expense of $25,000 was charged to operations.

On April 10, 2000, according to a contract agreement to provide management
services, the Company issued 40,000 shares (after recapitalization - See Note
13) of common stock valued at $40,000, in exchange for management services.
Accordingly, consultant expense of $40,000 was charged to operations.

On May 15, 2000, according to a contract agreement to provide consulting
services, the Company issued 10,000 shares (after recapitalization - See Note
13) of common stock valued at $12,000. Accordingly, consultant expense of
$12,000 was charged to operations.

On February 15, 2001, the Company issued 1,125,000 shares (after
recapitalization - See Note 13) of common stock valued at $240,000 according to
an employment agreement, approved by the board of directors, to an officer in
lieu of salary for services rendered during 2000 & 2001. Accordingly, salary
expense of $120,000 was charged to operations at December 31, 2001 and $120,000
in 2000.

On February 15, 2001, the board of directors of the Company approved the
issuance of 60,000 shares (after recapitalization - See Note 13) of common stock
valued at $60,000 to an officer in lieu of salary for services rendered.
Accordingly, salary expense of $60,000 was charged to operations.

F-16

GENETHERA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002

NOTE 9 STOCKHOLDERS' DEFICIT - continued

On February 15, 2001, the board of directors of the Company approved the
issuance of 15,000 shares (after recapitalization - See Note 13) of common stock
valued at $15,000 to an officer in lieu of salary for services rendered.
Accordingly, salary expense of $15,000 was charged to operations.

On October 1, 2001, according to a contract agreement to provide consulting
services, the Company issued 100,000 shares (after recapitalization - See Note
13) of common stock valued at $100,000. Accordingly, consultant expense of
$100,000 was charged to operations.

In June 2003, the Company issued 715,000 shares of common stock in exchange for
consulting services. The fair market value of the shares was $.85 on the date of
issuance. Accordingly, consultant expense of $607,750 was charged to operations.

On November 15, 2003, the Company issued 600,000 shares of common stock as
"officer incentive" to an officer of the Company following a resolution of the
board of directors. The fair market value of the shares was $1.94 on the date of
issuance. Accordingly, salary expense of $1,164,000 was charged to operations.

During 2003, certain holders exercised their option to convert $348,400 in
convertible notes payable per various agreements dated in 2002 and 2003. As a
result, 696,800 shares of common stock were issued.

Other Capital Transactions
--------------------------
On January 10, 2002, 788,560 shares (after recapitalization - See Note 13) of
common stock valued at $0.105 per share were issued to an unrelated party for
$83,262 in cash. During 2003 the board of director resolved to cancel the
shares. Consequently, the financial statements were adjusted to reflect the
cancellation.

In May 2002, certain holders exercised their option to convert $315,700 in
convertible notes payable into 631,400 shares (after a 2:1 forward stock split)
of common stock at $1 per share. Subsequently, during 2003 the board of
directors resolved to cancel 571,400 shares. Consequently, the financial
statements were adjusted to reflect the cancellation.

On August 13, 2002, certain holders exercised their option to convert $10,500 in
convertible notes payable per agreement dated August 12, 2002. After a 2:1
forward stock split, 21,000 shares of common stock were issued.

On September 28, 2002, the Company issued 660,000 shares of common stock in
connection with the conversion of a line of credit commitment fee plus legal
expenses. These shares were subsequently canceled. (See Note 8)

On March 23, 2003, the Company acquired GeneThera, Inc. (Colorado). The
acquisition of GeneThera, Inc. (Colorado) has been treated as an acquisition of
the Company by GeneThera, Inc. (Colorado), and a recapitalization of GeneThera,
Inc. (Colorado). A total of 1,960,000 shares of common stock of the Company,
equivalent to 100% of GeneThera, Inc. (Colorado), were issued as a result of the
transaction. (See Note 13)

F-17

GENETHERA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002

NOTE 10 INCOME TAXES

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

The Company has a federal net operating loss carryforward at December 31, 2003
and 2002 of approximately $4,369,000 and $1,125,000, respectively, subject to
annual limitations prescribed by the Internal Revenue Code, that are available
to offset future taxable income through 2023. 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.

The provision (benefit) for income taxes is comprised of the following:

2003 2002
----------- -----------

Current taxes $ 0 $ 0

Deferred tax benefit:
Net operating loss carryforward 690,000 145,000
Accrued wages 76,000 72,000
Recapitalization loss carryforward 356,000
Change in valuation allowance (1,122,000) (217,000)
----------- -----------

Total provision (benefit) for income taxes $ 0 $ 0
=========== ===========

Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the net deferred tax assets (liabilities) were as follows:

2003 2002
----------- -----------
Deferred tax assets
Loss carryforward, including recapitalization $ 1,438,000 $ 390,000
Accrued wages 148,000 74,000
----------- -----------

Total deferred tax assets 1,586,000 464,000

Valuation allowance (1,586,000) (464,000)
----------- -----------

Net deferred tax assets $ 0 $ 0
=========== ===========

F-18

GENETHERA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002

NOTE 11 UNCONSOLIDATED SUBSIDIARY

On January 14, 2002, the board of directors voted to sell the stock of The
Family Health News, Inc., subject to stockholder approval. This has not been
accomplished as of December 31, 2003. The subsidiary has not been consolidated
because the Company considers control to be temporary.

NOTE 12 AMENDMENT TO ARTICLES OF INCORPORATION

Following a resolution of the board of directors, the Company amended its
articles of incorporation effective June 16, 2003, to change the Company's name
from Hand Brand Distribution, Inc. to GeneThera, Inc., and to provide for a
maximum of 100,000,000 shares of common stock and 20,000,000 shares of preferred
stock.

NOTE 13 ACQUISITION, RESCISSION, AND ACQUISITION

On January 23, 2002, the Company entered into stock purchase agreements with ten
stockholders of GeneThera, Inc. (Colorado) to acquire approximately 91% of its
outstanding stock in exchange for the Company's common stock. For accounting
purposes, the acquisition was to be treated as a capital transaction and as a
recapitalization of GeneThera, Inc. (Colorado). At the time of the closing of
the acquisition of GeneThera, Inc. (Colorado), the Company did not have
sufficient authorized shares of common stock to issue such shares. Consequently,
under Florida law, the issuance of such shares would be void. In May 2002,
substantially all of the former stockholders of GeneThera, Inc. (Colorado)
agreed to accept shares of the Company's common stock immediately upon
stockholders' approval to increase the number of authorized shares of common
stock. If approval was not received by December 31, 2002, former GeneThera
(Colorado) stockholders could elect to forego their rights to receive shares of
the Company's common stock, and have their shares of GeneThera (Colorado)
returned to them. This agreement was rescinded on March 23, 2003, and a new one
signed on the same date. Under this new agreement the Company was to issue
enough shares to acquire 100% of the outstanding stock of GeneThera, Inc.
(Colorado). Consequently 1,960,000 shares of the Company were issued.

The assets of GeneThera, Inc. (f/k/a Hand Brand Distribution, Inc.) and
GeneThera, Inc. (Colorado) are at historical cost as of December 31, 2002. The
value of the net assets of GeneThera, Inc. at the time of the acquisition is the
same as the historical book value of $7,546. For the recapitalization, equity
accounts of GeneThera, Inc. (Colorado) have been restated, based on the ratio of
exchange of 1 (one) share of the Company for 1 (one) share of GeneThera, Inc.
(Colorado).

The financial statements became those of GeneThera, Inc. (Colorado), with
adjustments to reflect the changes in equity structure. The operations are those
of GeneThera, Inc. (Colorado) for all periods presented, and those of GeneThera,
Inc. (f/k/a Hand Brand Distribution, Inc.) from the recapitalization date.

F-19

GENETHERA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002

NOTE 14 RESTATEMENT

GeneThera, Inc. (Colorado) had 3,039,050 shares of common stock issued and
outstanding at the time of the January 23, 2003 acquisition, as previously
reported. Prior to the rescission and new acquisition agreement GeneThera, Inc.
(Colorado), by board resolution, canceled 1,079,050 shares of the total shares
of common stock outstanding. The financial statements presented have been
restated as follows:

2003 2002
----------- -----------
Accumulated deficit at beginning of year
As previously reported $ 1,415,919 $ 995,073
Adjustment (83,262) (290,400)
----------- -----------
As restated 1,332,657 704,673

Recapitalization 1,034,354
Net loss 2,431,761 711,246
----------- -----------

Accumulated deficit at end of year $ 4,798,772 $ 1,415,919
=========== ===========

NOTE 15 CONTINGENCIES & LITIGATIONS

In the normal course of business, GeneThera, Inc. had a dispute with a company
for failing to perform services, and is pursuing damages relating to the
non-performance. The Company has reserved $10,000 to resolve this matter.

Family Health News has made a claim against the Company. To date, no litigation
has been initiated, and the Company is attempting to negotiate a settlement.

The ultimate outcome of these and other matters is unknown at this time. In the
opinion of management, the outcome will have no adverse effect on the financial
statements.

NOTE 16 GOING CONCERN UNCERTAINTY

These financial statements are presented assuming the Company will continue as a
going concern. For the years ended December 31, 2003 and 2002, the Company
showed operating losses of $2,431,761 and $627,984 respectively. The
accompanying financial statements indicate that current liabilities exceed
current assets by $1,300,283 and $889,370 for the years ended December 31, 2003
and 2002 respectively.

In addition, the Company is in default for payments on notes payable in the
amount of $116,405 including accrued interest. 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 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.

F-20

Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

As stated in the November 20, 2003 8-K filing with the Securities and Exchange
Commission, on September 10, 2003, Sewell & Company, PA ("S&O") declined to
stand for re-election as independent auditor of GeneThera, Inc. (the "Company"),
formerly known as Hand Brand Distribution, Inc. (Commission File No. 000-27237).

During the most recent two fiscal years, S&O's reports on the financial
statements of the Company contained no adverse opinion or disclaimer of opinion
and were not qualified as to uncertainty, audit scope or accounting principles;
with the exception of a "going concern" qualification for the two most recent
fiscal years preceding the date hereof.

During the last two fiscal years and the subsequent interim period, there were
no disagreements (material or immaterial) with the Company on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to S&O's satisfaction,
would have caused S&O to make reference thereto in connection with its reports.

None of the "reportable events" described in Item 304(a)(1)(ii) of Regulation
S-K occurred with respect to the Company within the last two fiscal years and
the subsequent interim period to the date of S&O's decision to decline to stand
for re-election.

Subsequently, on February 12, 2004, Kantor, Sewell & Oppenheimer, P.A., the
successor to Sewell & Company, PA agreed to become the Company's auditors. The
attached financials have been certified by Kantor, Sewell & Oppenheimer, P.A.

Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act

Item 8A. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the
"Exchange Act"), we carried out an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures within the 90 days prior
to the filing date of this report. This evaluation was carried out under the
supervision and with the participation of our Chief Executive Officer and Chief
Financial Officer. Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that due to recent developments within FHNI
which are beyond the control of the Company as more fully explained below, our
disclosure controls and procedures are ineffective in timely alerting management
to material information relating to us that is required to be included in our
periodic SEC filings. In connection with the preparation and filing of this
report, management of FHNI has refused to provide the Company with the financial
information of FHNI necessary for the Company to prepare consolidated financial
statements that include the financial condition and results of operations of
FHNI, despite several attempts on the part of the Company to obtain such
information. Consequently, the Company is prevented from being able to obtain
the necessary financial information regarding FHNI. As is discussed elsewhere in
this report, the Board of Directors of the Company is seeking to divest the
Company of FHNI or to dissolve and liquidate FHNI's assets.

There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the date
we carried out our evaluation.

Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in our reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act is
accumulated and communicated to management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure.

Item 9. Directors, Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act

Below are the names and biographies of our Executive Officers, Directors and
Nominees for Directors as of December 31, 2003:

Directors and Executive Officers

The following persons are currently serving as GeneThera's officers and
directors. Each of the directors below will be elected to serve until the next
annual meeting of stockholders and his successor has been elected and has been
qualified, or until his earlier death, resignation or removal.

Name Age Principal Positions and Directorships
---- --- -------------------------------------

Dr. Antonio Milici............... 46 Chairman of the Board
and Chief Executive Officer
Tannya Irizarry.................. 39 Chief Administrative Officer
Dr. Thomas Slaga................. 53 Director
Richard Bryans................... 47 Director
Loretta Zapp (1)................. 37 Director

(1) Ms. Zapp resigned as a member of the Board of Directors in February 2004.

Dr. Antonio Milici founded GeneThera Inc. in 1999 and has served as its chairman
and CEO since inception. Prior to GeneThera, Dr. Milici was CEO and President of
Genetrans, Inc., a genetic diagnostic company. Dr. Milici was also an assistant
professor in the department of Molecular Pathology at the University of Texas
M.D. Anderson Cancer Center.

Tannya Irizarry has a Bachelor in Business Administration from the University of
Puerto Rico. She was an Administrative Manager and Project Coordinator at
University of Texas M.D. Anderson Cancer Center. Ms. Irizarry has over 15 years
experience in the field of biotechnology and medical administration.

Dr. Thomas Slaga has served on GeneThera's Board of Directors since 2003. Dr.
Slaga has investigated cancer causation and prevention for more than thirty-five
years. His current position is Scientific Director of the AMC Cancer Research
Center in Denver, Colorado. He chairs the Center for Cancer Causation and
Prevention at AMC and also serves as Deputy Director of the University of
Colorado Cancer Center. Previously, he served as Director of the Science Park -
Research Division of The University of Texas M. D. Anderson Cancer Center. Dr.
Slaga was co-founder of Molecular Carcinogenesis in 1987 and served as
editor-in-chief until early 2003.

Richard Bryans has served on GeneThera's Board of Directors since 2003. Mr.
Bryans is corporate counsel for GeneThera and manages his own private law firm
in Denver, Colorado.

Loretta Zapp served on GeneThera's Board of Directors in 2003. Ms. Zapp is CEO
and President of Oncology Sciences Corporation (OSC). OSC is a biopharmaceutical
company focused on the discovery, maturation and licensing of novel and
non-toxic drug technologies for the treatment of cancer and related illnesses.
Prior to joining OSC, Zapp was President of Industrial Laboratories Company,
Inc., an independent testing laboratory based in Denver, Colorado. During her
tenure at Industrial Labs, she founded the Institute for Nutriceutical
Advancement (INA) and designed a program to support and promote the production
of consistent, high quality herbal products. In February 2004, Ms. Zapp tendered
her resignation as a member of the Board of Directors to focus her efforts on
other ventures.

It is the Board's intent to increase the size of the Board of Directors in the
near future and to create an Audit Committee and a Compensation Committee
comprised of certain members of the Board. Each Director is elected at the
Company's Annual Meeting of Shareholders and holds office until the next Annual
Meeting of Shareholders, or until the successors are elected and qualified. At
present, the Company's bylaws provide for not less than three or more than seven
Directors. Currently, we have four Director positions. The bylaws permit the
Board of Directors to fill any vacancy and such director may serve until the
next Annual Meeting of Shareholders or until his successor is elected and
qualified. Officers are elected by the Board of Directors and their terms of
office are, except to the extent governed by employment contracts, at the
discretion of the Board. The officers of the Company devote full time to the
business of the Company.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
Executive Officers, Directors and 10% Shareholders to file reports regarding
initial ownership and changes in ownership with the SEC. Executive Officers,
Directors, and 10% shareholders are required by SEC regulations to furnish us
with copies of all Section 16(a) forms they file. Our information regarding
compliance with Section 16(a) is based solely on a review of the copies of such
reports furnished to us by our Executive Officers, Directors and 10%
shareholders. These forms include (i) Form 3, which is the Initial Statement of
Beneficial Ownership of Securities, (ii) Form 4, which is a Statement of Changes
in Beneficial Ownership, and (iii) Form 5, which is an Annual Statement of
Changes in Beneficial Ownership. Based upon this information, Antonio Milici,
M.D. Ph.D. and Tannya Irizarry had not filed a Form 3 required by the Security
and Exchange Commission for the shares acquired during fiscal year ended
December 31, 2003. Each of the officers has filed these required forms as of
March 19, 2004.

The Company's Board of Directors does not currently have an audit committee
financial expert on its Board. The Company is currently reviewing potential
candidates to be the audit committee financial expert. The Company cannot
guarantee when or if such a candidate will be found. The Board of Directors is
currently acting as the audit committee for the Company.

The Company has recently adopted a Code of Ethics applicable to its principal
executive officer, principal financial officer, and principal accounting
officer. Our Code of Ethics can be obtained by calling the company at
303-463-6371.

Item 10. Executive Compensation

The following table sets forth certain summary information for the fiscal year
ended December 31, 2003 concerning the compensation awarded to, earned by, or
paid to those persons serving as executive officers during fiscal year 2003.
Antonio Milici, M.D., Ph.D., and Tannya L. Irizarry were the only executive
officers during the fiscal year ended December 31, 2003.

SUMMARY COMPENSATION TABLE

The following table summarizes compensation earned in 2003 and 2002 by the named
officers.

Annual Compensation

Long-Term Compensation

Name and Securities
Principal Position Year Salary Bonus All Other Restricted Underlying All Other
------------------ ---- ------ ----- --------- ---------- ---------- ---------

Antonio Milici M.D. Ph.D. (1) 2003 $-0- $-0- $-0- $-0- $-0-
Chief Executive Officer 2002 $144,000 $-0- $-0- $-0- $-0- $-0-

Tannya Irizarry (2) 2003 $78,000 $-0- $-0- $-0- $-0- $-0-
Chief Administrative Officer 2002 $78,000 $-0- $-0- $-0- $-0- $-0-

Annual Stock Options/
Compensation Award(s) ($) SARs (#) Compensation ($)-
------------ ------------ -------- -----------------

Antonio Milici M.D. Ph.D. (1) 2003 $144,000 $144,000 $-0- $-0- $-0-
Chief Executive Officer 2002 $144,000 $144,000 $-0- $-0- $-0-

Tannya Irizarry (2) 2003 $78,000 $78,000 $-0- $-0- $-0-
Chief Administrative Officer 2002 $78,000 $78,000 $-0- $-0- $-0-

----------
(1) Dr. Milici was only paid $42,350 for the year 2002 and $-0- in 2003
(2) Ms. Irizarry was only paid $19,500 for the year 2002 and $-0- in 2003

Stock Option Grants in Last Fiscal Year

During the fiscal year ended December 31, 2003, no options were granted to the
Executive Officer.

Option Exercises and Year End Values

No options were exercised in the fiscal year ended December 31, 2003 by the
Executive Officer who owns no options.

Compensation of Directors and Executive Officers

The Company entered into an employment agreement with Antonio Milici, M.D.,
Ph.D, to serve as the Chief Executive Officer of GeneThera and Chairman of the
Board of Directors and Chief Scientific Officer of the Company through January
7, 2007. In consideration for his services, Dr. Milici will receive a base
salary of $144,000 per annum plus bonuses as may be determined by the Board of
Directors in its sole discretion. As part of his Employment Agreement, Dr.
Milici is subject to non-disclosure and non-competition obligations and has
transferred to the Company of all his interests in any idea, concept, technique,
invention or written work.

The Company entered into an Employment Agreement with Tannya L. Irizarry to
serve as Chief Administrative Officer of GeneThera Inc. through January 1, 2007.
Ms Irizarry's base salary is $78,000 per annum.

Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

The following table shows, as of February 27, 2004, the Common Stock owned
beneficially by (i) each of our Executive Officers, (ii) each of our current
Directors, (iii) all Executive Officers and Directors as a group, and (iv) each
person known by us to be the beneficial owner of more than five percent of our
Common Stock.

(1) (2) (3) (4)
Name and Address Amount and Nature Percent
Title of Class of Beneficial Owner of Beneficial Owner of Class
-------------- ------------------- ------------------- --------

Common Dr. Antonio Milici 1,545,000 30.86%
Stock

Common Tannya Irrizary 660,000 13.18%
Stock

All current executive
officers and directors
as a group 2,205,000 44.04%

POTENTIAL CHANGE IN CONTROL

The Company has entered into a series of consulting agreements with The Regency
Group, a Denver-based public relations consultant, pursuant to which the Company
agreed to issue shares of its common stock or warrants to purchase shares of its
common stock in consideration for services to be provided by The Regency Group.
The dates of the agreements and the consideration payable by the Company are as
follows:

April 25, 2002 600,000 shares of common stock

April 24, 2003 warrant, issuable on April 24, 2003, to purchase 300,000
shares of common stock; warrant, issuable on November 1,
2003, to purchase 300,000 shares of common stock; warrant,
issuable on May 1, 2004, to purchase 300,000 shares of
common stock

February 24, 2004 warrant, issuable on February 24, 2004, to purchase
1,500,000 shares of common stock

In addition, each of the consulting agreements provides that the Company will
register for resale under the Securities Act the common stock to be issued on
April 25, 2002 and the shares of common stock that may be issued pursuant to the
exercise of the warrants described above. Finally, the April 24, 2003 and the
February 24, 2004 consulting agreements provide that the warrants to be issued
thereunder shall contain cashless exercise provisions.

If The Regency Group exercises all of the warrants described above and does not
elect to utilize the cashless exercise features of the warrants, the Company
would be required to issue a total of 2,400,000 shares of its common stock. When
added to the 600,000 shares we issued pursuant to the April 25, 2002 agreement,
The Regency Group could own up to 3,000,000 shares of our common stock. If we do
not issue any additional shares of our common stock other than the shares
described above that were issued or that can be issued to The Regency Group, the
3,000,000 shares would represent approximately 37% of our total common stock
outstanding at that time. Although such ownership would not be sufficient, under
our corporate bylaws, to control the election of our board of directors, it
would represent the largest single block of stock ownership in the Company.

The Company intends to issue additional shares of its common stock to certain
officers of the Company in lieu of salary. The anticipated issuance would then
represent the largest single block of stock ownership in the Company.

Item 12. Certain Relationships and Related Transactions

At various times prior to December 31, 2003, the former President of the
Company, John Taggart, made loans to the Company in the aggregate principal
amount of $15,300, which amount remained outstanding on December 31, 2002. The
loans were evidenced by convertible promissory notes that may be converted into
shares of Common Stock. As of December 31, 2003, the notes were converted to
common stock.

On December 2, 2003, GeneThera, Inc. and Oncology Sciences Corporation signed a
letter of intent for the use of the genetic coding for the P-65 gene. OSC owns
the licensing rights to the genetic sequence for the P-65 gene. There are strong
evidences that the P65 gene has correlation to certain types of cancers. Loretta
Zapp, the President and CEO of Oncology Sciences Corporation, served as a
director of the Company from March 2003 until February 2004.

Researchers have studied this gene extensively with respect to its role in
breast and prostate cancer. Studies have shown that in a high percentage of
cancer cases, there is an increase in the expression of the P-65 gene. GeneThera
plans to use P-65 to attempt to develop a blood test for breast and prostate
cancer. Future plans include attempting to use GeneThera's PURIVAX(TM)
technology to develop a therapeutic vaccine for breast and prostate cancer. We
cannot give any assurance, however, that GeneThera will be successful in
developing a blood test for either breast or prostate cancer or, if it is
successful in developing one or both of these vaccines, that it will be able to
successfully market and sell them profitably.

GeneThera's plan will utilize their F-PCR technology, which is currently being
used to test the blood of elk and deer for Chronic Wasting Disease, to amplify
and quantify the P-65 gene. This will enable GeneThera to not only test for
breast and prostate cancer with a single drop of blood, but may be able to
detect it much earlier than the current methods.

This letter of intent will be for GeneThera to prove their concept of molecular
identification and quantitation of the target gene in human blood samples to
Oncology Sciences Corporation. After the initial proof of concept period,
GeneThera and OSC will team up to continue the research and development of the
diagnostic test for breast and prostate cancer. They will also further research
the development of therapeutics for these cancers.

The Company will need significant additional capital in order to bring a vaccine
to market. There are no assurances that the Company will be able to raise
sufficient capital to develop a blood test for breast or prostate cancer or to
develop a vaccine for either of these diseases. Furthermore, even if sufficient
capital is raised, we cannot provide any assurance we will be able to validate
such a vaccine. Vaccines, especially for human use, can potentially have a long
and difficult approval process. The FDA has strict guidelines for the validation
of vaccines.

A Reverse Acquisition Agreement was executed on March 28, 2003. One million
(1,000,000) common shares were issued from the Company's authorized shares to
acquire 51% of the ownership of GeneThera from Antonio Milici M.D., Ph.D. On
November 6, 2003, an additional 960,000 shares were issued to shareholders of
GeneThera (Colorado) which includes an additional 545,000 shares issued to
Antonio Milici M.D., Ph.D. Upon completion of the issuance of these additional
shares, GeneThera has become a 100% wholly owned subsidiary of the Company.

Item 13. Exhibits and Reports on Form 8-K

(a) Exhibits

The following documents are filed herewith or have been included as exhibits to
previous filings with the SEC and are incorporated herein by this reference:

3.1.1 Articles of Incorporation filed November 8, 1995.
3.1.2 Amendment to the Articles of Incorporation filed on February
4, 1999, to effectuate a 1 for 2 reverse stock split
3.1.3 Amendment to the Articles of Incorporation filed January 15,
2002, to effectuate a 1 for 8 reverse stock split (1)
3.2 Bylaws
4.1.1 Private Equity Line of Credit Agreement between the Company
and the Investor dated January 16, 2002 (2)
4.1.2 Registration Rights Agreement between the Company and the
Investor dated January 16, 2002 (2)
4.1.3 Warrant Agreement with respect to the shares underlying the
Private Equity Line of Credit Agreement (2)
4.1.4 Amendment to Private Equity Line of Credit Agreement between
the Company and the Investor dated March 4, 2002 (3)
4.2 Registration Rights Agreement between the Company and Vantage
dated January 23, 2002 (2)
4.3 Form of Convertible Notes bearing interest at the rate of 6%
and maturing on January 15, 2005 (4)
4.4 Amendment #2 to Private Equity Line of Credit Agreement
between the Company and the Investor dated June 1, 2002 (5)
10.1 FHNI Stock Sale Agreement between the Company, FHNI and John
Taggart, as amended (3)
10.2.1 Form of Common Stock Purchase Agreement among the Company and
various original holders of the common stock of GeneThera,
Inc. (2)
10.2.2 Form of Letter Agreement between the Company and various
original holders of the common stock of GeneThera, Inc. (4)
10.4 Employment Agreement between Antonio Milici, M.D., and the
Company dated January 23, 2002 (4)
10.5 Employment Agreement between Nicolas Wollner and the Company
dated February 25, 2002 (2)
10.6 Letter of Intent between the Company and Oncology Sciences
Corporation, November 6, 2003
21 List of Subsidiaries (6)
31.1 Certification of the President and Chief Executive Officer
pursuant to Rule 13a-14
31.2 Certification of the Interim Chief Financial Officer pursuant
to Rule 13a-14
32.1 Certification of the President and Chief Executive Officer
pursuant to Section 1350
32.2 Certification of the Interim Chief Financial Officer pursuant
to Section 1350
----------
22

(1) Incorporated by reference from an Exhibit to the Current Report on
Form 8-K, as filed with the SEC on January 17, 2002.
(2) Incorporated by reference from an Exhibit to the Company's Current
Report on Form 8-K, as filed with the SEC on March 4, 2002.
(3) Incorporated by reference from an Exhibit to the Company's Schedule
14-C Preliminary Information Statement, as filed with the SEC on May
23, 2002.
(4) Incorporated by reference from an Exhibit to the Company's Current
Report on Form 10KSB, as filed with the SEC on June 4, 2002.
(5) Incorporated by reference from an Exhibit to the Company's Report on
Form 10QSB as filed with the SEC on June 14, 2002.
(6) Incorporated by reference to Exhibit 21 filed with the Company's
Annual Report on Form 10-KSB filed with the SEC on May 19, 2003.

(b) Reports on Form 8-K

The Company did not file any reports on Form 8-K with the SEC during the last
quarter of the fiscal year ended December 31, 2003.

Item 14. Principal Accounting Fees and Services

Audit Fees

The aggregate fees billed for each of the last 2 fiscal years for professional
services rendered by our principal accountant for the audit of the Company's
annual financial statements and review of financial statements included in the
registrant's Form 10-Q was as follows:

2002 $47,000
2003 $30,000

Audit-Related Fees

The aggregate fees billed in each of the last 2 fiscal years for assurance and
related services by our principal accountant that are reasonably related to the
performance of the audit and not reported in Audit Fees was $-0-.

Tax Fees

The aggregate fees billed in each of the last 2 fiscal years for services
rendered by our principal accountant for tax compliance, tax advice, and tax
planning was $-0-.

All Other Fees

The aggregate fees billed in each of the last 2 fiscal years for products and
services provided by our principal accountant other than those described above
was $-0-.

The Company's audit committee, which consists of all directors, approved the
services described above.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

GeneThera, Inc.

By: /s/ Antonio Milici
----------------------
Antonio Milici, M.D., Ph.D.
President

By: /s/ Tannya L. Irizarry
--------------------------
Tannya L. Irizarry
Interim Chief Financial Officer

In accordance with the Exchange Act, 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 President April 14, 2004
Antonio Milici, M.D., Ph.D.

/s/ Tannya L. Irizarry Interim Chief April 14, 2004
Tannya L. Irizarry Financial Officer

/s/ Tannya L. Irizarry Principal Accounting April 14, 2004
Tannya L. Irizarry Officer

/s/ Antonio Milici Director April 14, 2004
Antonio Milici, M.D., Ph.D.

/s/ Richard Bryans Director April 14, 2004
Richard Bryans

/s/ Dr. Thomas Slaga Director April 14, 2004
Dr. Thomas Slaga