AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 2004.
REGISTRATION NO. 333-118937
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Amendment No. 1 to
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GENETHERA, INC.
(Name of small business issuer in its charter)
FLORIDA 2836 66-0622463
(State or jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
3930 YOUNGFIELD STREET
WHEAT RIDGE, COLORADO 80033
303.463.6371
(Address and telephone number of principal executive offices)
3930 YOUNGFIELD STREET
WHEAT RIDGE, COLORADO 80033
303.463.6371
(Address and telephone number of principal place of business)
TONY MILICI, M.D., PH.D.
3930 YOUNGFIELD STREET
WHEAT RIDGE, COLORADO 80033
303.463.6371
(Name, address and telephone number of agent for service)
COPIES TO:
RICHARD W. BRYANS, JR., ESQ. STEVEN M. GRUBNER, ESQ.
1177 GRANT STREET 3930 YOUNGFIELD STREET
SUITE 308 WHEAT RIDGE, COLORADO 80033
DENVER, COLORADO 80203
303.832.2930 847.366.8058
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement, as shall be
determined by the selling shareholders identified herein.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.[ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities Proposed Maximum Proposed Maximum Amount of
to be Registered Amount to be Offering Price Aggregate Offering Registration
Registered per Unit(1) Price(1) Fee
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Common Stock $0.001 par value 4,249,236 $0.835 $3,548,112 $449.55
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Total Registration Fee: $449.55
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(1) Estimated in accordance with Rule 457(c) solely for the purpose of
calculating the registration fee on the basis of the average of the bid and
asked prices on a day within 5 business days prior to filing.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Information contained in this Prospectus is subject to completion or amendment.
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
PROSPECTUS Dated September 10, 2004
GENETHERA, INC.
Up to 4,249,236 Shares
Common Stock
o The selling shareholders identified on pages 25-26 of this prospectus
are offering on a resale basis up to 4,249,236 shares of common stock. We will
not receive any proceeds from the sale of these shares by the selling
shareholders. This prospectus may be used only in connection with the resale of
those shares of common stock by the selling shareholders.
Brokers or dealers effecting transactions in these shares should
confirm that the shares are registered under applicable state law or that an
exemption from registration is available.
Our common stock is quoted on the Over-the-Counter Bulletin Board under
the symbol "GTHA."
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THE SECURITIES OFFERED BY THIS PROSPECTUS
INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 2.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is September 10, 2004.
SECURITIES OFFERED FOR SALE ARE BEING REGISTERED BY COORDINATION UNDER COLORADO
STATUTE 11-51-303, WISCONSIN STATUTE 551-25, MISSOURI STATUTE 409-003-3, AND
OHIO STATUTE RC 1707.091.
TABLE OF CONTENTS
Prospectus Summary............................................................1
Risk Factors..................................................................2
Note Regarding Forward Looking Statements.....................................8
Dilution......................................................................8
Management's Discussion and Analysis or Plan of Operation.....................9
Business.....................................................................16
Management...................................................................19
Legal Proceedings............................................................19
Executive Compensation.......................................................21
Security Ownership of Certain Beneficial Owners and Management...............22
Certain Relationships and Related Transactions...............................22
Market for Common Equity and Related Shareholder Matters.....................23
Use of Proceeds..............................................................24
Selling Shareholders.........................................................25
Plan of Distribution.........................................................26
Determination of Offering Price................................................
Description of Capital Stock.................................................28
Disclosure Of Commission Position On Indemnification For
Securities Act Liabilities.....................................................
About This Prospectus........................................................28
Where You Can Find More Information..........................................28
Validity of Common Stock.....................................................29
Experts......................................................................29
Financial Statements.........................................................F-1
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus or incorporated by reference in this prospectus. Because it is a
summary, it may not contain all of the information that is important to you.
Accordingly, you are urged to carefully review this prospectus and the documents
incorporated into this prospectus by reference in their entirety.
OUR COMPANY
GeneThera, Inc., a Florida corporation ("we" or the "Company"), is in
the development stage and has produced only nominal revenues. One of our two
subsidiaries, GeneThera, Inc., a Colorado corporation ("GeneThera"), is
developing molecular assays for the detection of diseases in live animals,
notably bovine spongiform encephalopathy ("BSE" or "Mad Cow Disease") and
chronic wasting disease ("CWD"), a disease that affects elk and renders their
meat unsafe for human consumption. GeneThera also currently intends to develop
therapeutic vaccines for the prevention of such diseases. We recently acquired
VDx, Inc., a Wisconsin corporation, as our second subsidiary. VDx is a
veterinary testing company specific to the dairy cattle industry. GeneThera
intends to roll out our Johnnes test to the VDx customer base.
Recent Developments
In May 2004 , we issued an aggregate of $98,000 in principal amount of
promissory notes in a private offering to Mark Kengott, I.Thomas and Barbara G.
Uskup, and Donald and Joyce Guillaume . The notes bear interest at the rate of
6% per annum and mature 6 months after their date of issuance. The holders of
these notes are entitled to convert the principal amount of the notes to shares
of our common stock at the rate of $1.00 per share. As of June 18, 2004, the
principal amount of all of these notes was converted into 98,000 shares of our
common stock. Those shares are included in this offering.
On June 23 2004 , we issued a promissory note in the principal amount
of $25,000 in a private offering to Monte B. Tobin. The note bears interest at
the rate of 6% per annum and matures 6 months after its date of issuance. The
holder of this note is entitled to convert the principal amount of the note to
shares of our common stock at the rate of $0.75 per share. As of June 25, 2004,
all $25,000 in principal amount this note was converted into 33,333 shares of
our common stock. Those shares are included in this offering.
In August 2004 , we issued a promissory note in the principal amount of
$23,000 in a private offering to Mark Herzog, John Marx, Cyndi Ralph, Marvin
Newton, and Ralph Lueders . The note bears interest at the rate of 6% per annum
and matures 6 months after its date of issuance. The holder of this note is
entitled to convert the principal amount of the note to shares of our common
stock at the rate of $1.00 per share. As of August 15, 2004, all $23,000 in
principal amount this note was converted into 23,000 shares of our common stock.
Those shares are included in this offering.
On June 1, 2004 the Company engaged InvestLinc Securities, L.L.C. for
investment banking services. As the Company's investment banker, InvestLinc will
identify potential investors and/or strategic partners, including merger and
acquisition candidates. In this capacity, InvestLinc will also assist the
Company in establishing strategic relationships and in raising additional
capital to finance our growth and further development of our proprietary live
blood test for Mad Cow disease and Chronic Wasting disease.
On June 1, 2004, we hired Steve Grubner as our Chief Financial Officer.
Mr. Grubner was also elected a member of our board of directors. Mr. Grubner has
over twenty years of experience in the technology industry, served as the
president, finance and administration and chief financial officer at HH
Communications, Inc. from 1986 until the completion of its merger with Datatec
Systems, Inc. (DATC) in mid-1996. Until late 1999, he served as Datatec's vice
president and General Counsel, a position that put him in charge of the
company's public SEC filings, vendor contract negotiations, and internal
employee agreements. From 1999 to the present, Mr. Grubner has been in the
private and public equity markets, raising capital for technology, biotech, and
software companies.
OUR FINANCIAL SITUATION
Our independent auditors have expressed substantial doubt about our
ability to continue as a going concern in their report on our consolidated
financial statements for the fiscal year ended December 31, 2003. For the years
ended December 31, 2003 and 2002, our operating losses were $3,080,740 and
$627,984 respectively. Our current liabilities exceeded current assets by
$1,300,284 and $889,370 for the years ended December 31, 2003 and 2002,
respectively. Currently, we have no revenues generated from operations, and, as
of December 31, 2003 we have an accumulated deficit of $5,901,130.
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These factors raise substantial doubt about our ability to continue as
a going concern. If we do not raise sufficient cash from external sources to
satisfy our on-going expenditures, we will be required to materially limit or
discontinue our operations, and your investment in the Company may be lost.
The Offering
This offering relates to the sale of common stock by certain persons
who are, or who are beneficially deemed to be, our shareholders. The selling
shareholders identified on pages 25-26 of this prospectus are offering for
resale a total of up to 4,249,236 shares of our common stock. The sales will be
for the benefit of the selling shareholders, and we will not receive any of the
proceeds of such sales. The selling shareholders consist of:
o Certain investors who invested in our private placements of
convertible promissory notes and who have converted the principal of
those notes to an aggregate of 1,617,257 shares
o Consultants and advisers to whom we issued warrants to purchase an
aggregate of 2,382,979 shares of our common stock, and their employees
and assigns, and who have exercised such warrants
o An officer and director, and his affiliate, who invested in our
private placements of convertible promissory notes and who have
converted the principal of those notes to an aggregate of 249,000
shares
Offering Price Market Price
Common Stock Outstanding
Prior to this Offering(1) 18,049,705 shares
Common Stock Outstanding
After this Offering 18,049,705 shares
Use of Proceeds The shares of common stock
offered pursuant to this prospectus are
offered by the selling shareholders
listed on pages 25 - 26. We will not
receive any proceeds from the sale of
common stock by the selling shareholders.
Risk Factors An investment in our common stock
is highly speculative and involves a high
degree of risk. For a discussion of some
of the risks you should consider before
purchasing shares of our common stock,
you are urged to carefully review and
consider the section entitled "Risk
Factors" beginning on page 2 of this
prospectus.
OTC Bulletin Board Symbol: GTHA
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(1) This represents the number of shares of common stock issued and
outstanding on August 31,2004.
RISK FACTORS
An investment in our common stock is very risky. You may lose the
entire amount of your investment. Prior to making an investment decision, you
should carefully review this entire prospectus and consider the following risk
factors:
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RISKS RELATED TO OUR BUSINESS
OUR STATUS AS A DEVELOPMENT STAGE COMPANY WITH NOMINAL REVENUES
SUBJECTS AN INVESTMENT IN OUR STOCK TO A HIGH DEGREE OF RISK
Our core business, namely, the development of molecular diagnostic
assays to detect the presence of infectious disease from the blood of live
animals, was begun in 1998, and, to date, we have generated only nominal
revenues. We may not ever be able to generate significant revenues for testing
for specific animal diseases.
Another segment of our proposed business, namely, the development of
vaccines for the detection and prevention of food contaminating pathogens,
veterinary diseases, and diseases affecting human health, will require strict
testing, validation, and regulatory approvals. Such vaccines may require 18-24
months or longer and up to $5 million or more to receive regulatory approval and
to bring to market. We cannot assure you that we will be able to develop any
such vaccines, that, if we develop them, we will receive the necessary
regulatory approvals to market them, or that, if we receive such regulatory
approvals, we will be able to market and sell them profitably.
We Are Not Currently Profitable And May Never Become Profitable Thus Our
Auditors Have Issued A "Going Concern" Opinion To That Efffect
We have a history of losses and expect to incur substantial losses and
negative operating cash flow for the foreseeable future, and we may never
achieve or maintain profitability. We incurred net losses of $3,080,740 for the
fiscal year ended December 31, 2003 and $999,663 for the year ended December 31,
2002. Our accumulated deficits were $5,901,130 and $2,820,390 as of December 31,
2003 and December 31, 2002, respectively. We had stockholders' equity of
($781,470) and ($716,529) at December 31, 2003 and December 31, 2002,
respectively. Because of these facts, our auditors have issued a "Going Concern"
opinion as to the future of our business. Even if we succeed in developing and
commercializing one or more of our assays or vaccines, we expect to incur
substantial losses for the foreseeable future and may never become profitable.
Our failure to achieve or maintain profitability or cash flow could negatively
impact the value of our common stock.
We Will Continue To Have Significant Capital Needs And May Not Be Able To
Obtain Sufficient Funding The Result Of Which May Hinder Our Ability To Achieve
The Goals Set Forth In Our Business Plan
We currently have a limited source of funds with which to sustain our
proposed operations. We believe that our current cash needs will be able to
sustain our proposed operations for four to six months. Over the next 12 months,
in order to have the capability of achieving our business plan, we believe that
we will require at least $1,200,000 in additional funding. We will attempt to
raise these funds by means of one or more private offerings of debt or equity
securities or both. At this time, we have no commitments for additional capital
funds. Moreover, depending on the development and activities of our business,
and unforeseen and unanticipated events in our business, we may require
additional funding over the next twelve to eighteen months to develop our
business. This amount may exceed an additional $1,000,000 depending on cost
involved in the further development and commercialization of our products. In
such event, we may need immediate additional funding. Our capital requirements
will depend on many factors including, but not limited to, the timing of further
development of assays to detect the presence of infectious disease from the
blood of live animals, our hiring of additional personnel, the applications for,
and receipt of, regulatory approvals for any veterinary vaccines that we may
develop, and other factors. Our inability to raise capital could impair our
ability to implement our business plan and may ultimately force us to cease
operations.
In the event that we investigate and develop any products intended for
human health applications, such as vaccines, our capital requirements will be
even greater. Any such products, if we are able to develop them at all, are a
number of years away from commercialization. Research and development of any
such product candidates is lengthy and expensive. Our potential human health
product candidates in particular will require substantial funding for us to
complete pre-clinical studies and clinical trials and, if approved, for us to
initiate, or to contract with others for, manufacturing, commercialization,
marketing, and sales. If any such products that we may develop are not
commercially successful, we may be forced to find additional sources of funding
earlier than we anticipated. If we are not successful in obtaining additional
funding on acceptable terms, we may be forced to significantly delay, limit, or
eliminate one or more of our research, development, or commercialization
programs.
We May Not Obtain The Necessary Regulatory Approvals To Commercialize Our
Products And Services Which May Impede On Our Ability To Market Or Sell Our
Products
We will need approval from the USDA to produce, market, and sell any
vaccines that we develop for preventing animal disease. We cannot be sure that
we will ever obtain regulatory clearance for vaccines that we develop, if any.
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Failure to obtain USDA approval of any of our candidate vaccines will severely
undermine our business by reducing our number of salable products and,
therefore, corresponding anticipated product revenues.
In the event that we investigate and develop any products intended for
human health applications, such as vaccines, those products will be subject to
substantial regulatory review and approval processes prescribed by the United
States Food and Drug Administration (the "FDA"). Before we can manufacture or
sell any of such products, we would be required to demonstrate that the product
candidates are safe for humans and effective for their intended uses. These
demonstrations require significant research and animal tests, which are referred
to as pre-clinical studies, as well as human tests, which are referred to as
clinical trials. Satisfaction of the FDA's stringent regulatory requirements
typically takes many years, depends upon the type, complexity, and novelty of
the product candidate, and requires substantial financial and other resources
for research, development, and testing. We cannot predict whether our research
and clinical approaches will result in drugs or vaccines that the FDA may
consider safe for humans and effective for indicated uses. We currently do not
have the resources for conducting such research, development, and testing or for
the preparation and submission of applications to the FDA. The FDA has
substantial discretion in the drug approval process and may require us to
conduct additional pre-clinical studies and/or clinical testing or to perform
post-marketing studies. The approval process may also be delayed by changes in
government regulation, future legislation, or administrative action or changes
in FDA policy that occur prior to or during our regulatory review.
WE HAVE NO EXPERIENCE IN MANUFACTURING VETERINARY OR HUMAN HEALTH CARE
PRODUCTS, OR RESOURCES TO COMMENCE SUCH OPERATIONS, AND WE WILL RELY EXCLUSIVELY
ON THIRD PARTIES TO MANUFACTURE ANY VACCINES THAT WE MAY DISCOVER OR INVENT
We have no experience in drug formulation or manufacturing and do not
intend to establish our own manufacturing facilities. We lack the resources and
expertise to formulate or manufacture our own candidates for vaccine products
that we may discover or invent. We currently have no contract for the
manufacture of any potential products, and we cannot guarantee that we will be
able to enter into any such contract. If any veterinary or human vaccine that we
may discover or invent receives USDA or FDA approval, we will rely on one or
more third-party contractors to manufacture, supply, and store the vaccine. Such
manufacturers might be unable to formulate and manufacture our vaccines in the
volume and of the quality required to meet our clinical needs and commercial
needs, if any. Furthermore, we will not have control over third-party
manufacturers' compliance with good manufacturing practices and other state and
federal standards for formulation and manufacturing. If any third-party
manufacturer makes improvements in the manufacturing process for our products,
we may not own, or may have to share, the intellectual property rights to the
innovation. We may be unable to identify manufacturers on acceptable terms or at
all because the number of potential manufacturers is limited.
We Do Not Have A Sales, Marketing, Or Distribution Capability And No
Experience In Those Areas Thus We May Not Be Able To Commercialize And Sell Our
Products
We currently have no sales, marketing, or distribution capabilities. We do
not anticipate having the resources in the foreseeable future to allocate to the
sales and marketing of any test assays or vaccine products that we may develop.
Our success will depend, in part, on our ability to either (i) enter into and
maintain collaborative relationships with other parties for the marketing,
sales, and distribution of products that we develop, if any, or (ii) hire and
retain our own sales and marketing capabilities. We cannot give any assurances
that we will be able to establish or maintain such collaborative arrangements,
or, if we are able to do so, that our partners will have effective sales forces.
To the extent that we decide not to, or are unable to, enter into collaborative
arrangements with respect to the sales and marketing of its proposed products,
significant capital expenditures, management resources and time will be required
to establish and develop an in-house marketing and sales force with technical
expertise. We are also unable to give any assurance that we will be able to
develop in-house sales and distribution capabilities. To the extent that we
depend on third parties for marketing and distribution, any revenues we receive
will depend upon the efforts of such third parties, and we cannot give any
assurance that such efforts will be successful
Many Of Our Competitors And Potential Competitors Have Resources Superior
To Ours This May Hinder Our Ability To Enter And Gain A Substantial Percentage
Of The Marketplace
Many of our competitors and potential competitors have significant
competitive advantages over us. We will compete against large, integrated
pharmaceutical companies that have superior financial, technical, personnel, and
facilities resources to ours, established customer bases, and greater market
presence and name recognition. As a result, we anticipate that these competitors
and potential competitors will be able to raise capital at a lower cost than we
will be able to, that they may be able to take advantage of acquisition and
other opportunities, and devote greater resources to developing, marketing, and
selling products than we will. In addition, their greater name recognition and
established customer bases may require us to compete with them by lowering our
prices for products and services in order to gain sales and customers. Finally,
the financial advantages that these larger competitors and potential competitors
hold may permit them to reduce their prices for an extended period of time if
they so choose in order to obtain or retain customers.
Our test for Transmissible Spongiform Encephalopathies is a live blood test and
such a test is not available in the market today. Our test is also high
throughput and allows for results within a 24 hour time period. Our competitors
have the ability to test animals only once slaughtered and results may take much
longer than our test. There are numerous other companies which have post mortem
tests for these diseases that may be considered competition. Such companies
include Prionics AG, IDEXX Laboratories, Inc., Beckman Coulter, Inc., and
Bio-Rad Laboratories, Inc. In the United States, the USDA uses an ELISA test,
which is a post mortem test for these diseases as well. The ELISA test is very
labor intensive and results usually take days to receive. We believe our live
blood test has a distinctive advantage in the marketplace by having the ability
to test animals before slaughter on an ongoing basis in order to assure that
herds of animals are not infected. We also have the ability to test thousands of
animals a day with results of all of the tests within 24-48 hours.
We will also compete against smaller or startup companies that are working
toward solutions that compete with our proposed solutions for developing
diagnostic assays and vaccines. We anticipate that these smaller companies may
enter into, or have entered into, collaborative arrangements with larger,
integrated pharmaceutical companies for the development of such competing
solutions. Such collaborative arrangement may result in the creation for the
parties to those arrangements of many of the competitive advantages discussed
above. Furthermore, the parties to such arrangements may be able to develop
products or services that render our products and services obsolete.
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WE WILL DEPEND ON THE PROTECTION OF OUR INTELLECTUAL PROPERTY RIGHTS
FOR OUR SUCCESS; WE CURRENTLY DO NOT HAVE PATENT PROTECTION ON ANY OF OUR
TECHNOLOGY; PATENTS THAT WE OBTAIN, IF ANY, MAY NOT PROVIDE BROAD PROTECTION
AGAINST COMPETITORS MAKING, USING, OR SELLING COMPETING TECHNOLOGY
We do not own any patents on any of our technology and have not filed
any applications for patents in any country. We have only recently engaged a
patent law firm to assist us in the review of our technology, namely,
PURIVAX(TM) and Gene Expression Assay (GEA TM) to determine whether it might be
patentable. We cannot give any assurance that we will be able to file any patent
applications or that, if we file one or more applications for patents, any
patents will issue or that, if issued, the claims granted in any such patents
will afford us adequate protection against competitors with similar
technologies.
Although a patent has a statutory presumption of validity in the United
States, the issuance of a patent is not conclusive as to such validity or as to
the enforceable scope of the claims of the patent. We cannot give any assurance
that any patents that may be issued to or licensed by us will not be
successfully challenged in the future. The validity or enforceability of a
patent after its issuance by the patent office can be challenged in litigation.
The cost of litigation to uphold the validity of patents and to prevent
infringement is often substantial. If we are able to obtain one or more patents,
and the validity of one or more of the claims contained in any such patent is
successfully challenged,, third parties may then be able to use the invention
covered by the patent without payment of license or royalty fees to us. We
cannot give any assurance that patents issued to us, if any, will not be
infringed or successfully avoided through design innovation.
Our Technology May Conflict With Patents Held By Others Which May Obstruct
Our Ability To Enter The Marketplace With Our Products
Competitors, universities, and others may obtain or apply for patents
for technologies that may compete with any technologies that we may develop. If
such patents are obtained by others, the owners of those patents may allege that
we infringe claims in those patents and may bring legal actions against us for
damages or seeking to enjoin us from making, using, or selling allegedly
infringing products. If such actions are successful, in addition to being
required to pay damages, we may be required to obtain a license to make, use, or
sell the products or to redesign, revise, or reconstruct our products. We cannot
give any assurance that we would prevail in any such action or that any license
required under any such patent would be made available on acceptable terms or at
all. Failure to obtain a license could prevent us from making, using or selling
our products or technology. Any litigation involving us could require dedication
of substantial resources and could have a material adverse effect on our
business, financial position and results of operations.
Our Other Intellectual Property May Not Be Adequate To Protect Us Against
Competitors And We May Have To Rely On Trade Secrets Or Unpatented Intellectual
Property Which Could Adversely Affect The Sale Of Our Products
In addition to any patents, patent applications, and licenses that we
may obtain, we will also rely on unpatented technology and trade secrets. We
cannot give any assurance that others will not independently develop
substantially equivalent information and techniques or otherwise gain access to
our technology or disclose such technology, or that we can meaningfully protect
5
our rights in such unpatented technology and trade secrets. We currently have
confidentiality or non-competition agreements with our employees, consultants,
or independent contractors, and we have procedures for requiring that employees,
independent contractors, or consultants sign confidentiality or non-competition
agreements.
We Are Highly Dependent On The Services Of Our Key Personnel For Our
Potential Success The Loss Of Such Personnel May Adversely Affect Our Business
We are highly dependent on our principal scientific and management
staff, including Antonio Milici, M.D., Ph.D., Steven M. Grubner, and Tannya L.
Irizarry. We do not have "key person" life insurance policies for any of our
officers or key personnel.. The loss of the technical knowledge and management
and industry expertise of any of our key personnel might significantly delay or
prevent the achievement of our research, development or business objectives and
could materially adversely affect our business, financial condition and results
of operations. We are not aware of any present intention of any of these
individuals to leave our company. We maintain employment agreements with Dr.
Milici and our Chief Administrative Officer, Tannya L. Irizarry. We are
currently negotiating with our Chief Financial Officer, Steven M. Grubner, in
anticipation of executing an Employment Agreement.
If We Are Unable to Hire Additional Qualified Personnel, We May Not be
Able to Achieve Our Business Plan
We will need to hire additional qualified personnel with expertise in
molecular genetics. We cannot be certain that our search for such personnel will
be successful. Attracting and retaining qualified personnel will be critical to
our success. Our success depends in large part on our ability to attract and
retain qualified scientific and management personnel such as these individuals.
We expect that our potential expansion into areas and activities requiring
additional expertise, such as clinical trials, governmental approvals, contract
manufacturing and sales and marketing, will place additional requirements on our
management, operational and financial resources. We expect these demands will
require us to hire additional management and scientific personnel and will
require our existing management personnel to develop additional expertise. We
face intense competition for personnel. The failure to attract and retain
personnel or to develop such expertise could delay or halt the research,
development and commercialization of our product candidates and materially
adversely affect our prospects for success.
Current Litigation Involving the Company That Could Result In Additional
Expenses To The Company Not Otherwise Provided For In It's Financial Statements
On or about August 5, 2004, the prior Chief Operating Officer of the
Company, Gary Langstaff, the former President of the Company, Nick Wollner, and
Springloose.com,LLC, of which Mr. Langstaff was a member, commenced a civil
action against GeneThera, Inc. in the District Court of Jefferson County,
Colorado for inspection of corporate records, an accounting and declaratory
judgment, and wage claims of approximately $78,000.00. GeneThera, Inc. has not
yet responded to the complaint, but anticipates defending all claims and
responding with counterclaims.
On or about August 5, 2004, Sisu Media commenced a civil action against
GeneThera, Inc. in the District Court of Jefferson County, Colorado for breach
of contract for recovery of damages in the approximate amount of $60,000.00.
GeneThera, Inc. has not yet responded to the complaint, but anticipates
defending all claims and responding with counterclaims.
WE MAY INCUR SUBSTANTIAL LIABILITY AS A RESULT OF PRODUCT LIABILITY
LAWSUITS
Our business will expose us to potential product liability risks which are
inherent in the testing, manufacturing, marketing and sale of animal and human
vaccine and diagnostic and therapeutic products, and we cannot provide any
assurance that we will be able to avoid significant product liability exposure.
Product liability insurance for the biopharmaceutical industry is generally
expensive, if available at all. We have not obtained any product liability
insurance coverage. It is likely that any license or collaborative agreements
that we may enter into in the future may include a requirement that we obtain
6
liability insurance covering our collaborative partner or licensor or licensee,
as the case may be. We cannot provide any assurance that we will be able to
obtain adequate insurance coverage in sufficient amounts or at a reasonable
cost, or that a product liability claim or recall would not have a material
adverse effect on us.
We Are Controlled By Our Officers, Directors, And Principal
Shareholders
Our directors, executive officers and principal shareholder
beneficially own approximately 64.00 percent of our outstanding common stock.
Accordingly, these persons and their respective affiliates will have the ability
to exert substantial influence over the election of our Board of Directors and
the outcome of matters submitted to our shareholders. Currently, there are
18,049,705 shares outstanding of which 1,544,367 are freely tradable and
16,505,338 are subject to Rule 144. Being that our directors, executive officers
and principal shareholders own approximately 64.00 percent of our outstanding
common stock, the market price for our common stock may be influenced by the
future sale of the stock once it becomes freely tradable.
In addition, our Bylaws provide that our Chairman of the Board has the
final authority to approve and ratify all the decisions and resolutions adopted
by the board of directors. He may exercise power of veto on any decision adopted
by the board of directors. This provision would prevent any change in control in
management.
RISKS RELATED TO OUR STOCK
OUR COMMON STOCK OFFERED BY THIS PROSPECTUS IS A "PENNY STOCK." PENNY
STOCK RULES MAY LIMIT YOUR ABILITY TO SELL ANY SHARES OF OUR COMMON STOCK THAT
YOU ACQUIRE
Our common stock is a "penny stock." A "penny stock" is a common stock
that is not listed on a securities exchange and trades for less than $5.00 a
share. Penny stocks in development stage companies are among the riskiest equity
investments. Broker-dealers who sell penny stocks must provide purchasers of
these stocks with a standardized risk-disclosure document prepared by the
Securities and Exchange Commission. The document provides information about
penny stocks and the nature and level of risks involved in investing in the
penny-stock market. A broker must also give a purchaser, orally or in writing,
bid and offer quotations and information regarding broker and salesperson
compensation, make a written determination that the penny stock is a suitable
investment for the purchaser, and obtain the purchaser's written agreement to
the purchase. Many brokers choose not to participate in penny stock
transactions. Because of the penny stock rules, there is less trading activity
in penny stock and you are likely to have difficulty selling your shares of our
stock.
Our Common Stock Has Experienced A High Degree Of Volatility In Price And
Volume And May Experience The Same In The Future
The market price for our common stock in the past two years has experienced a
high degree of volatility both in price and volume. The stock has a two year low
of $0.35 and a two year high of $4.39. Because of this, you may experience the
same volatility in the future. One of the causes for the volatility in our stock
was the first case of Mad Cow disease in the United States in December of 2003.
Because of our extensive research into Transmissible Spongiform Encephalopathy,
the scientific name for the family of diseases in which Mad Cow disease is a
part of, our common stock experienced an influx of attention from investors at
this time. You may or may not experience similar volatility in the future.
YOU MAY EXPERIENCE DILUTION IN YOUR OWNERSHIP OF SHARES OF OUR COMMON
STOCK
Since we completed the reverse merger with Hand Brand Distribution,
Inc., we have financed our operations, in large part, by issuing promissory
notes convertible into our common stock. The prices at which the principal and
interest of the convertible promissory notes are convertible into shares of
common stock are less than the then-current bid price of our common stock. Sales
of shares of our common stock at prices less than prevailing bid prices has had
a dilutive effect on the owners of our common stock immediately prior to such
sales or conversions. To the extent we continue to issue shares of our common
stock at prices less than the then-current bid prices, existing owners of common
stock will continue to suffer dilution of their share ownership. For the
foreseeable future, we do not anticipate being able to issue shares of our
common stock at prices equal, or substantially equal to, their bid prices at the
time of such sales. Furthermore, sales of shares at prices less than the
prevailing bid price of our common stock can be expected to result in downward
pressure on our stock price.
On June 23, 2004, we entered into a Placement Agent Agreement with
InvestLinc Securities, LLC, a registered broker-dealer ("InvestLinc"), pursuant
to which InvestLinc has agreed to use its best efforts to sell, on our behalf,
up to $2,500,000 in shares of our common stock . The Company proposes to offer
and sell exclusively up to $2.5 million in shares, plus the Over-Allotment, (the
"Offering") of its common stock, $0.01 par value per share (the "Securities") in
a registered offering on Form SB-2 under the Securities Act of 1933, as amended
(the "Act"). All Securities are offered subject to the right of the Company to
reject any subscription for Securities in whole or in part for any reason
whatsoever or to sell to any prospective investor less than the number of
Securities subscribed for by such prospective investor and subject to certain
other conditions.
The Company has determined to use the services of the Placement Agent as its
exclusive agent to solicit subscriptions for the Securities in the Offering on a
"best efforts" basis as set forth in Section 3 (b), for as long as the Offering
continues or until the time period set forth in Section 4(b) expires, whichever
first occurs. The Placement Agent hereby agrees to act in such capacity and to
use its best efforts to find purchasers for the Securities in accordance with
the terms and conditions of this Agreement. Placement Agent may engage other
duly licensed agents to perform some or all of the Placement Agent's duties
hereunder ("Placement Agent Syndicate Members"). In such event, all arrangements
as to compensation of other such Placement Agent Syndicate Members shall be
determined by Placement Agent and shall be chargeable against the compensation
due to Placement Agent from the Company. The Company shall be advised of and
shall have the right to approve any other Placement Agent Syndicate Members.
If all of those shares are sold at $1.00 per share, you would experience a
dilution of 12.17% of your purchase price for the shares that you purchase. If
all of those shares are sold at $1.50 per share, you would experience a dilution
of 8.45% of your purchase price for the shares that you purchase. If all of
those shares are sold at $2.00 per share, you would experience a dilution of
6.48 % of your purchase price for the shares that you purchase. We calculated
the dilution as follows: If $2,500,000 were sold at $1.50, an additional
1,666,666 shares would be issued and outstanding. We added these shares to the
current amount outstanding of 18,049,705 for a total of 19,716,371. We divided
the additional 1,666,666 by the new total of 19,716,371 to get a dilution
percentage of 8.45%. We did this same calculation for the other two example
prices and received the above percentages.
We Have Never Paid Dividends On Our Common Stock, And We Do Not Anticipate
Paying Dividends For The Foreseeable Future Therefore Returns On Your Investment
May Only Be Seen By The Appreciation Of The Value In Our Securities
We have never paid dividends on our capital stock and do not anticipate
paying any dividends for the foreseeable future. We intend to retain earnings,
if any, for use in the operation of our business and to fund future growth.
Because of this, investors may only see a return on their investment if the
value of the shares owned appreciates.
DILUTION
On June 23, 2004, we entered into a Placement Agent Agreement with InvestLinc
Securities, LLC, a registered broker-dealer ("InvestLinc"), pursuant to which
InvestLinc has agreed to use its best efforts to sell, on our behalf, up to
$2,500,000 in shares of our common stock . The Company proposes to offer and
sell exclusively up to $2.5 million in shares, plus the Over-Allotment, (the
"Offering") of its common stock, $0.01 par value per share (the "Securities") in
a registered offering on Form SB-2 under the Securities Act of 1933, as amended
(the "Act"). All Securities are offered subject to the right of the Company to
reject any subscription for Securities in whole or in part for any reason
whatsoever or to sell to any prospective investor less than the number of
Securities subscribed for by such prospective investor and subject to certain
other conditions.
The Company has determined to use the services of the Placement Agent as its
exclusive agent to solicit subscriptions for the Securities in the Offering on a
"best efforts" basis as set forth in Section 3 (b), for as long as the Offering
continues or until the time period set forth in Section 4(b) expires, whichever
first occurs. The Placement Agent hereby agrees to act in such capacity and to
use its best efforts to find purchasers for the Securities in accordance with
the terms and conditions of this Agreement. Placement Agent may engage other
duly licensed agents to perform some or all of the Placement Agent's duties
hereunder ("Placement Agent Syndicate Members"). In such event, all arrangements
as to compensation of other such Placement Agent Syndicate Members shall be
determined by Placement Agent and shall be chargeable against the compensation
due to Placement Agent from the Company. The Company shall be advised of and
shall have the right to approve any other Placement Agent Syndicate Members.
If all of those shares are sold at $1.00 per share, you would experience a
dilution of 12.17% of your purchase price for the shares that you purchase. If
all of those shares are sold at $1.50 per share, you would experience a dilution
of 8.45% of your purchase price for the shares that you purchase. If all of
those shares are sold at $2.00 per share, you would experience a dilution of
6.48% of your purchase price for the shares that you purchase. We calculated the
dilution as follows: If $2,500,000 were sold at $1.50, an additional 1,666,666
shares would be issued and outstanding. We added these shares to the current
amount outstanding of 18,049,705 for a total of 19,716,371. We divided the
additional 1,666,666 by the new total of 19,716,371 to get a dilution percentage
of 8.45%. We did this same calculation for the other two example prices and
received the above percentages.
7
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Sections of this Prospectus, 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 prospectus contains forward-looking statements that address, among
other things,
o our financing plans,
o regulatory environments in which we operate or plan to operate, and
o 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,
o our ability to raise capital,
o our ability to execute our business strategy in a very competitive
environment,
o our degree of financial leverage,
o risks relating to rapidly developing technology,
o regulatory considerations;
o risks related to international economies,
o risks related to market acceptance and demand for our products and
services,
o the impact of competitive products, services, and pricing, and
o 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 these cautionary statements.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
You should read the following discussion of our results and plan of
operation in conjunction with the consolidated financial statements and the
notes thereto appearing elsewhere in this prospectus. Statements in this
Management's Discussion and Analysis or Plan of Operation that are not
statements of historical or current objective fact are "forward-looking
statements."
OVERVIEW
We are engaged primarily in research and development activities. We
have not generated significant operating revenues, and as of December 31, 2003,
we had incurred a cumulative net loss from inception of $4,785,076. Our ability
to generate substantial operating revenue will depend on our ability to develop
and obtain approval for molecular assays and developing therapeutic vaccines for
the detection and prevention of food contaminating pathogens, veterinary
diseases, and diseases affecting human health.
Our independent auditors have expressed substantial doubt about our
ability to continue as a going concern in their report on our consolidated
financial statements for the fiscal year ended December 31, 2003. For the years
ended December 31, 2003 and 2002, our operating losses were $3,080,740 and
$999,663 respectively. Our current liabilities exceeded current assets by
$781,470 and $716,529 for the years ended December 31, 2003 and 2002,
respectively. Currently, we have no revenues generated from operations, and, as
of December 31, 2003 we have an accumulated deficit of $5,901,130.
We will require significant additional funding in order to achieve our
business plan. Specifically, we will need to increase our marketing plans to the
dairy cattle industry as a result of the acquisition of VDx. We will need to
hire additional scientists and technical personnel to meet the anticipated
demand of our tests by the dairy industry. Over the next 12 months, in order to
have the capability of achieving our business plan, we believe that we will
require at least $1,200,000. We do not expect any significant infrastructure
changes during this time period or any off-balance sheet arrangements that will
have any current or future effect on the Company's financial condition. We
cannot give any assurance that we will be able to secure such financing, and if
the financing is secured, we can give no assurance that we can achieve the goals
laid out in our business plan.
Table of Contractual Obligations
Contractual Payments due by period
------------ ----------------------
obligations
------------ Less More
than 1 3-5 than 5
Total year 1-3 years years years
-------- ----- -------- ----- ------
[Long-Term Debt 0 0 0 0 0
Obligations]
[Capital Lease $48,715 $715 $48,000 0 0
Obligations]
[Operating Lease 0 0 0 0 0
Obligations]
[Purchase 0 0 0 0 0
Obligations]
[Other Long-Term
Liabilities
Reflected on the
Registrant's 0 0 0 0 0
Balance Sheet under
GAAP]
Total $48,715 $715 $48,000 0 0
-------- ----- -------- ----- ------
We will require significant additional funding in order to achieve our
business plan. Over the next 12 months, in order to have the capability of
achieving our business plan, we believe that we will require at least
$1,200,000. We cannot give any assurance that we will be able to secure such
financing, and if the financing is secured, we can give no assurance that we can
achieve the goals laid out in our business plan.
THREE-MONTH PERIOD ENDING JUNE 30, 2004 COMPARED TO THREE-MONTH PERIOD ENDING
JUNE 30, 2003
RESULTS OF OPERATIONS
Gross profits for the three-month period ended June 30, 2004 were $0.00
compared to $11,953 for the same period last year. In 2003, we received a
one-time contract for research work that was reflected in income. The above
status is due to the research and development stage the company is in at the
present time. The Company still files its financial statements as a Development
Stage Company.
Personnel (salaries) decreased from $74,220 for the prior three month
period ending June 30, 2003 to $42,428 for the three month period ending June
30, 2004. The resultant drop in salaries is due to the CEO and CAO foregoing
their salaries during this quarter due to cash constraints. There is a
$13,805,732 in the expense category due to an accounting entry for a beneficial
conversion as reflected in the financial statements to the Chief Executive
Officer resulting from completion of the reverse merger with Hand Brand
Distribution, Inc. Professional expenses (consulting and professional fees)
comparing the three month period ending June 30, 2003, to the three month period
ending June 30, 2004, expenses increased substantially from $182,619 to 529,610.
This increase is due to accounting for the beneficial conversion feature of
issuance of restricted stock in lieu of cash to the consultants.
FISCAL YEAR ENDING DECEMBER 31, 2003 COMPARED TO FISCAL YEAR ENDING DECEMBER 31,
2002
RESULTS OF OPERATIONS
Personnel and professional expenses (consulting and professional fees
and salaries) increased from $567,111 for the prior fiscal year ending December
31, 2002 to $890,829 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 $959,729 to $2,698,284. Most of this increase relates to the
development of our management team, as well as professional, legal fees, and
consulting fees incurred as part of the acquisition and preparation of our
periodic and other filings with the Securities and Exchange Commission.
We recorded a net loss of $3,080,740 for the year ended December 31,
2003 compared to $999,663 for the year ended December 31, 2002.
9
LIQUIDITY AND CAPITAL RESOURCES
We had a cash balance of $-0- as of December 31, 2003and a cash balance
of $15,740 as of June 30, 2004. Since we completed the reverse merger with Hand
Brand Distribution, Inc., we have financed our operations, in large part, by
private placements of our common stock and promissory notes convertible into our
common stock. We have raised an aggregate of $1,263,900 through such sales.
We will require significant additional funding in order to achieve our
business plan. Over the next 12 months, in order to have the capability of
achieving our business plan, we believe that we will require at least
$1,200,000. We will attempt to raise these funds by means of one or more private
offerings of debt or equity securities or both. We have raised an aggregate of
approximately $1,166,000, through the issuance of promissory notes convertible
to our common stock to certain individuals in 2003 and 2004. As of the date of
this Prospectus, the $1,149,000 has been converted into shares of our common
stock. Those shares are included in the shares being offered pursuant to this
prospectus. We cannot give any assurance that we will be able to secure the
financing that we believe is necessary to implement our business plan, and if
the financing is secured, we can give no assurance that we can achieve the goals
laid out in our business plan. As of the date of this prospectus, we do not have
any firm commitments from any investors for any additional funding.
Our longer-term working capital and capital requirements will depend
upon numerous factors, including revenue and profit generation, pre-clinical
studies and clinical trials, the timing and cost of obtaining regulatory
approvals, the cost of filing, prosecuting, defending, and enforcing patent
claims and other intellectual property rights, competing technological and
market developments, collaborative arrangements. Additional capital will be
required in order to attain such goals. Such additional funds may not become
available on acceptable terms and we cannot give any assurance that any
additional funding that we do obtain will be sufficient to meet our needs in the
long term.
CONVERTIBLE NOTES
To relieve our cash flow crisis, we have issued convertible promissory
notes, in the aggregate principal amount of $1,263,900, to certain individuals.
On December 12, 2002, we issued a convertible promissory note bearing
interest at the rate of 8% per annum in the principal amount of $50,000 to Fidra
Holdings, Ltd. due 180 days after issuance. The holder of the note is entitled
to convert the principal amount of the note at the rate of $.50 per share. As of
June 30, 2004, the principal amount of that note has not been converted. This
note was assigned to The Regency Group on October 13, 2004.
On December 24, 2002, we issued a convertible promissory note bearing
interest at the rate of 8% per annum in the principal amount of $10,000 to Jerry
A. Ulvestad due 180 days after issuance. The holder of the note is entitled to
convert the principal amount of the note at the rate of $.50 per share. As of
June 30, 2004, that note has been converted into 20,000 shares.
On December 27, 2002, we issued a convertible promissory note bearing
interest at the rate of 8% per annum in the principal amount of $1,000 to
Michael Abbondanza due 180 days after issuance. The holder of the note is
entitled to convert the principal amount of the note at the rate of $.50 per
share. As of June 30,2004, that note has been converted into 2,000 shares.
On January 12, 2003,we issued a convertible promissory note bearing
interest at the rate of 8% per annum in the principal amount of $120,000 to John
Taggart. The holder of the note is entitled to convert the principal amount of
the note at the rate of $0.50 per share. An aggregate amount of $36,900 was
raised under this note. As of June 30, 2004, the note has been converted into
80,000 shares per a settlement agreement entered into with Mr. Taggart on
October 1, 2003. The agreement is attached as an exhibit.
On May 16, 2003,we issued a convertible promissory note bearing
interest at the rate of 8% per annum in the principal amount of $60,000 to
Richard Reinisch due 180 days after issuance.. The holder of the note is
entitled to convert the principal amount of the note at the rate of $0.25 per
share. As of March 31, 2004, the note was converted into 240,000 shares of
common stock. These shares are included in this offering.
Between May 17, 2003 and September 19, 2003, we issued convertible
promissory notes bearing interest at the rate of 8% per annum in the aggregate
principal amount of $215,000 to L&B Charitable Trust, Edward and Mary Coyne,
Edward B. Coyne, Christopher Ferry, Dimitrios I. Gountis, George Mastrokostas,
Nikolaos Tripodis, Melvin Wentz, William Rozakis, Tom and Sunny Garrett, and
Michael Mueller. The holders of the Notes are entitled to convert the principal
amount of the notes at the rate of $0.50 per share. As of March 31, 2004, the
notes have been converted into 436,926 shares of common stock which included
$3,463 interest also convertible at $0.50 per share. . These shares are included
in this offering.
Between October 2003 and February 2004,we issued 2 separate convertible
promissory notes bearing interest at the rate of 8% per annum in the aggregate
amount of $745,000 to those shareholders denoted with an asterisk in the Selling
Shareholders table, Kim Koratsky, and Ralli Mottar with a maturity date of one
year from the date of their issuance. The holder of the notes are entitled to
convert the principal amount of the note at the rate of $1.00 per share. As of
February 27, 2004, $728,000 in principal amount of the notes have been converted
into 728,000 shares of common stock, $17,000 in principal amount of these notes
still remains outstanding. The notes of Mr. Koratsky and Mr. Mottar were
assigned to Mark Kengott on October 6, 2004 and converted into 17,000 shares.
In May 2004 , we issued an aggregate of $98,000 in principal amount of
promissory notes in a private offering to Mark Kengott, I.Thomas and Barbara G.
Uskup, and Donald and Joyce Guillaume . The notes bear interest at the rate of
6% per annum and mature 6 months after their date of issuance. The holders of
these notes are entitled to convert the principal amount of the notes to shares
of our common stock at the rate of $1.00 per share. As of June 18, 2004, the
principal amount of all of these notes was converted into 98,000 shares of our
common stock. Those shares are included in this offering.
On June 23 2004 , we issued a promissory note in the principal amount
of $25,000 in a private offering to Monte B. Tobin. The note bears interest at
the rate of 6% per annum and matures 6 months after its date of issuance. The
holder of this note is entitled to convert the principal amount of the note to
shares of our common stock at the rate of $0.75 per share. As of June 25, 2004,
all $25,000 in principal amount this note was converted into 33,333 shares of
our common stock. Those shares are included in this offering.
In August 2004 , we issued a promissory note in the principal amount of
$23,000 in a private offering to Mark Herzog, John Marx, Cyndi Ralph, Marvin
Newton, and Ralph Lueders . The note bears interest at the rate of 6% per annum
and matures 6 months after its date of issuance. The holder of this note is
entitled to convert the principal amount of the note to shares of our common
stock at the rate of $1.00 per share. As of August 15, 2004, all $23,000 in
principal amount this note was converted into 23,000 shares of our common stock.
Those shares are included in this offering.
10
RESEARCH AND DEVELOPMENT
We anticipate that R&D will be the source for both assay development
and vaccine design/development. If we are able to develop assays for different
diseases, we intend to formalize the procedure into a commercial application
through a series of laboratories to be owned and operated by GeneThera. To date,
we have introduced our diagnostic solution for Chronic Wasting Disease and Mad
Cow Disease on a very limited basis. We anticipate that R&D will be ongoing
during the life of the Company, as this is the source for new products to be
introduced to the market. Our plan is to seek new innovations in the
biotechnology field. We cannot assure you that we will be successful in
developing or validating any new assays or, if we are successful in developing
and validating any such assays, that we can successfully commercialize them or
earn profits from sales of those assays. Furthermore, we cannot assure you that
we will be able to design, develop, or successfully commercialize any vaccines
as a result of our research and development efforts.
COMMERCIAL DIAGNOSTIC TESTING
In the event that we are able to develop assays for the detection of
diseases in animals, we intend to establish a series of diagnostic testing
laboratories geographically proximate to the primary sources of individual
diseases and/or according to specific available operating efficiencies. The
specific number of labs to be built and operated will be based on assay demand
(demand facilitated by the number of specific disease assays GeneThera
develops), our ability to obtain the capital to build the labs, and our ability
to successfully manage them from our principal office. As of the date of this
prospectus, we do not have specific plans to establish any given number of
diagnostic testing laboratories. In addition, we currently do not have
sufficient capital to establish any such laboratories. WE cannot provide any
assurances that we would be able to raise the capital necessary to build any
such laboratories or, if we can build them, that they can be operated at a
profit.
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
11
from the successful development and validation of specific vaccines. We cannot
provide any assurance that we will develop any vaccines or that, if they are
developed, we will be able to license them successfully or that any such license
will produce significant revenues.
R&D SERVICES
Molecular, Cellular, Viral Biology Research, and Consulting Services. We
intend to provide independent research services to scientists in academia, the
pharmaceutical industry, and the biotechnology industry. Primarily, GeneThera's
expertise focuses on technology relevant to animal and human immunotherapy.
These services are backed by the cumulative experiences of greater than 50 years
of research and development in both government and industry by GeneThera's
senior scientists. The non-executive employee that makes a significant
contribution to our research and development services is Henry Wei. GeneThera
intends to develop a commercial-scale implementation of Adenovector Purification
Process to support R&D material production. Furthermore, GeneThera intends to
evaluate and test commercially available expression vectors and incorporate them
into its vector repertoire. These technologies are well established within the
repertoire of GeneThera's scientific staff. We cannot provide any assurance,
however, that we will be able to successfully offer these services or that, if
offered, we can provide them profitably.
Research & Development Services:
Molecular Biology:
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
o 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 A specific gene sequence
is cloned in an expression vector and screened by restriction enzyme analysis
Stage II
The expession vector is grown into bacteria and the protein produced is purified
by chromatography techniques
Stage III
Assay for the protein stability and activity
Stage IV
Quantitation of protein yield per each cell line used for protein expression
Stage V
Experimental animal model development for determination of proper biological
active concentration and stability and determination of proper storage.
Gene Therapy Testing Services. GeneThera offers GLP testing
programs for somatic cell, viral and naked DNA-based gene therapies. Our
scientists have over eight years experience in providing fully integrated
bio-safety testing programs for the cell and gene therapy fields and have
supported a number of successful BLA and IND applications. To date, the Company
has not generated any revenues with regard to these services, and there is no
assurance that we will generate any revenues from such services.
Replication-Competent Viral Vector Testing. Sensitive in vitro
cell culture assays are used to detect replication-competent retroviruses or
adenoviruses. GeneThera can work with clients to provide custom
replication-competent virus detection assays for the particular vector
construct.
12
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 ector 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 revenues or profits from any such contracts.
BUSINESS MODEL
Summary. GeneThera's animal disease assay development 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 which has been in Europe for many years. The Field Collection
Systems are available for purchase from the Company. Chronic Wasting Disease and
Mad Cow Disease are both in the family of diseases called Transmissible
Spongiform Encephalopathy (TSE). Diagnostic assays for E.coli O157:H7 and
Johnne's Disease are in the final stages of development.
The Company, through GeneThera, is also developing vaccines for Chronic
Wasting Disease and E.coli O157:H7. The Company will need the approval of the
USDA before the vaccines can be manufactured or sold. The approval process for
animal vaccines is time-consuming and expensive. We anticipate that such
approval, if it is obtained, may require more than $5 million and may require
more than two years for each vaccine for which approval is sought. Currently we
do not have the capital necessary to seek approval of any of our candidate
vaccines, and we cannot provide any assurance that we will be able to raise the
capital necessary for such approval on terms that are acceptable to us, if at
all. In addition, even if we are successful in raising the capital necessary to
seek approval of any vaccine, there are no assurances that such an approval will
be granted, or if granted, whether we will be able to produce and sell such
vaccines following such an approval in commercial quantities or to make a profit
from such production and sales.
13
Though the Company had commercialized product in late 2003, we have
derived no revenues to date in 2004 from the sale of this product. In 2003, we
recorded revenues from our subsidiary Family Health News up until divesture of
the subsidiary on October 1, 2003. After October 1, 2003, no revenues from
Family Health News were recorded as income by GeneThera.
Integrated Technology Platform (ITP)
GeneThera's integrated technology platform is the foundation for
"fast-track" rDNA vaccine development. At the present stage we are working on
the development of a recombinant DNA vaccine for transmissible spongiform
encephalopathy (TSE) and Johnnes disease. Both vaccine developments are in the
"in Vitro" stage. We expect to initiate experimental animal studies for Johnnes
in the next 2-3 months. A longer time frame (6-8 months) will be needed to
initiate experimental animal studies for TSE. 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 believes that it
can develop a prototype vaccine within 4 to 6 months versus the current standard
of 18 to 24. The cost to bring these vaccines to market is $2-5 Million from
start to finish. There is no assurance that we will be able to raise the capital
necessary to bring a vaccine to market and if the capital is raised, that we
will be able to overcome the government regulations involved in bringing such a
product to market. 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 GEATM 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.
GEATM System
GEATM is a proprietary assay development system. GEA was developed in
2001. To date the system has been used to develop our TSE molecular assay. GEA
is a gene expression system to be used solely in our laboratory .The core of
GEATM 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. GEA is a molecular genetic base system that utilizes
fluorogenic polymerase chain reaction (F-PCR). To perform GEA, specific
laboratory equipment is needed. This involves some substantial initial costs to
set up the laboratory operations. However, the use of F-PCR represent a great
advantage over other available systems because of its greater sensitivity ,
speed and accuracy.
The Automated Nucleic Acid Workstation is a highly flexible robotic
system that extracts and purifies acids from a variety of complex samples,
preparing them for F-PCR analysis. Data management system software includes a
database to manage all run phases and record sample processing.
The Sequence Detection System detects the fluorescent signal generated
by the cleavage of the reporter dye during each PCR cycle. This process confers
specificity without the need of post-PCR hybridization. Most 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.
14
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) is intended to completely
eliminate toxic side effects associated with adenoviruses and AAV vectors,
thereby making it possible to develop highly immunogenic and safe recombinant
DNA vaccines. Importantly, recombinant DNA (rDNA) vaccine technology represents
a powerful tool for an innovative vaccine design process known as "genetic
immunization."
Recombinant Adenovirus (rAD) and AAV (rAAV) vectors are the ideal
candidates for a gene delivery system. These viruses can efficiently deliver
genetic material to both dividing and non-dividing cells, thereby overcoming
some of the obstacles encountered with first generation retroviral vectors.
Equally important, rAd and rAAV are engineered virus genomes that
contain no viral gene. One of the key features for rAd and rAAV is their ability
to 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 designed to be
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. GeneThera believes that biological contaminants such as
endogenous retrovirus, bacterial, mycoplasma, non-specific nucleic acids,
lipids, proteins, carbohydrates and endotoxins are eliminated during the
purification process.
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. The Field Collection System was developed
in the middle of 2002. We are currently marketing this system as a "marketing
trial". A very limited number of sales has been achieved to date (less than 15
units).
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(ies) 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.
15
CRITICAL ACCOUNTING POLICIES
In December 2001, the SEC requested that all registrants discuss their
most "critical accounting policies" in Management's Discussion and Analysis of
Financial Condition or Plan of Operation. The SEC indicated that a "critical
accounting policy" is one which is both important to the portrayal of the
company's financial condition and results and requires management's most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain. Our
significant accounting policies are described in Note 1 to our consolidated
financial statements included in this prospectus; our previously filed Annual
Report on Form 10-KSB for the year ended December 31, 2003; however, we believe
that none of them is considered to be critical.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board (FASB) issued SFAS No. 141, Business
Combinations, which establishes revised standards for accounting for business
combinations, eliminating the pooling method, and providing new guidance for
recognizing intangible assets arising in a business combination. Additionally,
SFAS No. 141 requires more prominent and more frequent disclosures in financial
statements 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.
SFAS 142, Goodwill and Other Intangible Assets provides guidance on 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.
This statement is effective for all fiscal years beginning after December 15,
2001. The adoption of SFAS 142 on April 1, 2002 did not have a material effect
on the Company's financial position, results of operations, or liquidity.
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets
provides implementation guidance regarding when and how to measure an impairment
loss, and expands the presentation to include a component of an entity, rather
than strictly a business segment. 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 adoption of SFAS 144 on April 1, 2002 did not have a material effect on the
Company's financial position, results of operations or liquidity.
BUSINESS
OVERVIEW
GeneThera, Inc., a Florida corporation ("we" or "the Company"),was
formerly known as Hand Brand Distribution, Inc., and was incorporated in
November 1995, under the laws of the State of Florida. Up until 2002, GeneThera
was a private Colorado corporation. The Board of Directors at that time
determined it would be in the best interests of the Company to become a publicly
traded company in order to facilitate the business goals and objectives of the
Company. That led to negotiations with the Board of Hand Brand Distribution to
effect a reverse acquisition. The negotiations were on an "arms-length" basis at
the time and resulted in the reverse acquisition being completed in October of
2003 with the distribution of shares to Dr. Milici for the acquisition from him
of GeneThera, Inc. The Company acquired Family Health News as a wholly owned
subsidiary as an asset and no liabilities. Family Health News was subsequently
disposed of in October 2003. We have been in the development stage since the
formation of GeneThera, Inc. in 1999.
We are 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.
We are in the development stage and have not generated significant
revenues since our organization. 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
16
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.
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 which has been in Europe for many years. Chronic Wasting
Disease and Mad Cow Disease are both in the family of diseases called
Transmissible Spongiform Encephalopathy (TSE). We have sent a detailed proposal
to the USDA in order to validate our live blood test for Mad Cow disease and
Chronic Wasting disease as well as our currently under development vaccine for
these diseases. We received a preliminary response from the Director of National
Veterinary Services that the USDA would cooperate with us to validate our test
and vaccine. The USDA has since denied us the opportunity to work along side
them in order to validate our live blood test for Mad Cow disease and Chronic
Wasting disease without giving us any reason. 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.
INTELLECTUAL PROPERTY
We do not own any patents on any of our technology and have not filed
any applications for patents in any country. We have only recently engaged a
patent law firm to assist us in the review of our technology, namely,
PURIVAX(TM)and GEA(TM), to determine whether it might be patentable. We cannot
give any assurance that we will be able to file any patent applications or that,
if we file one or more applications for patents, any patents will issue or that,
if issued, the claims granted in any such patents will afford us adequate
protection against competitors with similar technology.
We also depend upon the skills, knowledge and experience of our
scientific and technical personnel, none of which is patentable. To help protect
our proprietary know-how which is not patentable, and for inventions for which
patents may be difficult to enforce, we rely on trade secret protection to
protect our interests.
MANUFACTURING
We do not currently manufacture any products and do not have any
facilities capable of manufacturing any products. If we are successful in
developing a vaccine for veterinary purposes, we intend to contract with third
parties or a collaborative partner to assist with production. We currently do
not intend to establish a manufacturing facility to manufacture any products
that we may develop. In the event we do decide to establish a commercial
manufacturing facility, we will require substantial additional funds and will be
required to hire and train significant numbers of employees and comply with the
extensive federal and state regulations applicable to such a facility. In
addition, we would be required to apply for a license from the United States
Department of Agriculture's Animal and Plant Health Inspection Service to
manufacture any such vaccines at such facilities.
SALES AND MARKETING
We currently have no sales, marketing, or distribution capabilities,
and we do not anticipate having the resources in the foreseeable future to
allocate to the sales and marketing of any products that we may develop. Our
success will depend, in part, on our ability to either (i) enter into and
maintain collaborative relationships with third parties for the marketing,
sales, and distribution of products that we develop, if any, or (ii) hire and
retain our own sales and marketing capabilities. Initially we plan to market
products that we develop and for which we obtain regulatory approval through
marketing, licensing, distribution, or other arrangements with collaborative
partners. We believe that this approach will both increase market acceptance of
any products that we develop and enable us to avoid expending significant funds
to develop a sales and marketing organization.
COMPETITION
We face competition from many companies, universities, and research
institutions in the United States and abroad. Virtually all of our competitors
have substantially greater resources, experience in product commercialization,
and obtaining regulatory approvals for their products, operating experience,
research and development and marketing capabilities and manufacturing
17
capabilities than we do. We will face competition from companies marketing
existing products or developing new products for diseases targeted by our
technologies. The development of new products for those diseases for which we
are attempting to develop products could render our product candidates
noncompetitive and obsolete.
Academic and government institutions are also carrying out a
significant amount of research in the field of veterinary health, particularly
in the fields of Chronic Wasting Disease and Mad Cow Disease. We anticipate that
these institutions will become more aggressive in pursuing patent protection and
negotiating licensing arrangements to collect royalties for use of technology
that they have developed and to market commercial products similar to those that
we seek to develop, either on their own or in collaboration with competitors.
Any resulting increase in the cost or decrease in the availability of technology
or product candidates from these institutions may affect our business.
Competition with respect to our veterinary technologies and potential
products is and will be based, among other things, on effectiveness, safety,
reliability, availability, price, and patent protection. Another important
factor will be the timing of market introduction of products that we may develop
and for which we may receive regulatory approval. Accordingly, the speed with
which we can develop products, complete the required animal studies or trials
and approval processes and ultimately supply commercial quantities of the
products to the market is expected to be an important competitive factor. Our
competitive position will also depend upon our ability to attract and retain
qualified personnel, to obtain patent protection or otherwise develop
proprietary products or processes, and to secure sufficient capital resources
for the often substantial period between technological conception and commercial
sales.
Several attempts have been made to develop technologies that compete
with F-PCR . To our knowledge none of these technologies have resulted to date
in any product available on the market. Obviously the field of biotechnology is
very dynamic. The possibility that more advanced technologies could be developed
into products that may compete with ours is very strong. However it is very
difficult to predict the length of time necessary for this scenario to take
place.
PRODUCT LIABILITY
The testing, manufacturing and marketing of the Company's proposed
products involves an inherent risk of product liability attributable to unwanted
and potentially serious health effects in animals that may receive any vaccines
that we may develop and market. To the extent we elect to test, manufacture, or
market veterinary vaccines and other products,, we will bear the risk of product
liability directly. We do not currently have product liability insurance There
is no guarantee that we can obtain product liability insurance at a reasonable
cost, or at all, or that the amount of such insurance will be adequate to cover
any liability that we may be exposed to. In the absence of such insurance, one
or more product liability lawsuits against us can be expected to have a material
adverse effect on our business and could result in our ceasing operations.
GOVERNMENT REGULATION
Our unique approach to the testing for various animal diseases allows
us to begin commercialization of its diagnostic tests without the need for a
long and enduring approval process from the USDA. 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
our laboratory for testing. Since all of the testing for the diseases is done
"in house," meaning tested at laboratories operated by us and using our
developed testing methods, the USDA deems our test to be under the category of
Veterinary Services. The regulations on Veterinary Services are much different
than that of third party testing. Our test is not a kit.
In the event that we develop a vaccine based on our research, the
vaccine product and the facility at which commercial quantities of the vaccine
will be produced will be subject to comprehensive regulation by the United
States Department of Agriculture's Animal and Plant Health Inspection Service.
Before any "biological product" (which includes vaccines) can be prepared for
commercial sale, APHIS must approve and license the product and the facility at
which it is proposed to be manufactured. The approval process is lengthy and
expensive. We will be required to submit an application containing, among other
things, an outline of production for the proposed product, characterization
data, and protocols for animal studies and trials of host animal immunogenicity,
safety, efficacy, backpassage, shed/spread, interference, and other studies.
We do not have the capability to conduct our own studies and trials of
any candidate vaccine that we may develop and will rely on collaborative
partners to conduct all such studies. Currently we do not have any such
agreements with any partner, and we cannot give any assurance that we will be
able to enter into such an agreement on terms that are favorable to the Company,
18
if at all. If we do enter into one or more such agreements, we will not be able
to control the timetable for completing such studies. Furthermore, we cannot
give any assurance that any applications that we submit for any vaccine products
will be approved by APHIS. The failure to receive such approval, or the receipt
of approval following the approval of a competing product, would have an adverse
material effect on the Company.
EMPLOYEES
As of July 31, 2004, we had a total of three (3) full-time employees and
three (3) part-time employees who devote substantial effort on our behalf. None
of our employees are represented by a collective bargaining unit. We entered
into an employment agreement with Antonio Milici, M.D., Ph.D, to serve as our
Chief Executive Officer and Chief Scientific Officer through January 7, 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. We also entered into an employment agreement with Tannya L.
Irizarry to serve as our Chief Administrative Officer through January 1, 2007.
Ms Irizarry's base salary is $78,000 per annum. There are no employee issues at
this time.
PROPERTIES
We lease a 5,730 square foot biotechnology laboratory located at 3930
Youngfield Street, Wheat Ridge, Colorado 80033. The lease expires in January
2005 and the rent is $5,278.05 per month. We believe that our existing
facilities are adequate to meet our current requirements. We do not own any real
property. If we are able to develop assays for different diseases, we intend to
formalize the procedure into a commercial application through a series of
laboratories to be owned and operated by GeneThera. Currently we do have the
funds to purchase or construct any such laboratories and do not have a
commitment from any party to provide the funds for a laboratory.
LEGAL MATTERS
On or about August 5, 2004, the prior Chief Operating Officer of the
Company, Gary Langstaff, the former President of the Company, Nick Wollner, and
Springloose.com,LLC, of which Mr. Langstaff was a member, commenced a civil
action against GeneThera, Inc. in the District Court of Jefferson County,
Colorado for inspection of corporate records, an accounting and declaratory
judgment, and wage claims of approximately $78,000.00. GeneThera, Inc. has not
yet responded to the complaint, but anticipates defending all claims and
responding with counterclaims.
On or about August 5, 2004, Sisu Media commenced a civil action against
GeneThera, Inc. in the District Court of Jefferson County, Colorado for breach
of contract for recovery of damages in the approximate amount of $60,000.00.
GeneThera, Inc. has not yet responded to the complaint, but anticipates
defending all claims and responding with counterclaims.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
DIRECTORS AND EXECUTIVE OFFICERS
The following persons are currently serving as the Company'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.
19
Name Age Principal Positions and
Directorships
--------------------------------------------------------------------------------
Dr. Antonio Milici 49 Chairman of the Board and Chief
Executive Officer
Tannya Irizarry 45 Chief Administrative Officer
Steven M. Grubner 46 Chief Financial Officer and Director
Dr. Thomas Slaga 60 Director
Richard Bryans 48 Director
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 from 1993 to 1998.
Dr. Milici was also an assistant professor in the department of Molecular
Pathology at the University of Texas M.D. Anderson Cancer Center.
Tannya Irizarry has a Bachelor in Business Administration from the
University of Puerto Rico. Prior to joining GeneThera in 1999, she was an
Administrative Manager and Project Coordinator at University of Texas M.D.
Anderson Cancer Center from 1984 to 1991. From 1991 to 1999 Ms. Irizarry worked
for Genetrans, Inc. . Ms. Irizarry has over 15 years experience in the field of
biotechnology and medical administration.
Steven M. Grubner joined GeneThera's Board of Directors in June 2004.
Grubner has over twenty years of experience in the technology industry, served
as the president, finance and administration and chief financial officer at HH
Communications, Inc. from 1986 until the completion of its merger with Datatec
Systems, Inc. (DATC) in mid-1996. Until late 1999, he served as Datatec's vice
president and General Counsel, a position that put him in charge of the
company's public SEC filings, vendor contract negotiations, and internal
employee agreements. From 1999 to the present, Grubner has been in the private
and public equity markets, raising capital for technology, biotech, and software
companies.
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. He has held his current position as Scientific Director of
the AMC Cancer Research Center in Denver, Colorado since 1999. 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, from 1983 to
1997, 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 has managed his own private
law firm in Denver, Colorado since 1995
The Company has an Audit Committee comprised of Dr. Milici and Mr.
Grubner and a Compensation Committee comprised of Mr. Bryans and Dr. Slaga. 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. The 2003 Annual Meeting was held December 29, 2003
and we plan on holding our 2004 Annual Meeting on December 27, 2004. 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.
20
EXECUTIVE COMPENSATON
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
Annual Stock Options/ Compen-
Compensation Award(s) ($) SARs (#) sation ($)
-----------------------------------------------------------------------------------------------------------------------------
Antonio Milici M.D. Ph.D. (1) 2003 $-0- $-0- $-0- $-0- -0- $-0-
Chief Executive Officer 2002 $42,350 $-0- $-0- $-0- -0- $-0-
Tannya Irizarry (2) 2003 $19,500 $-0- $-0- $-0- -0- $-0-
Chief Administrative Officer 2002 $-0- $-0- $-0- $-0- -0- $-0-
Stock Option Grants in Last Fiscal Year
During the fiscal year ended December 31, 2003, no options were granted to any
executive officer.
Option Exercises and Year End Values
No options were exercised in the fiscal year ended December 31, 2003 by any
executive officer.
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 throughout the term of the agreement plus
bonuses as may be determined by the Board of Directors in its sole discretion.
The agreement is renewable by mutual agreement on a yearly basis. 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 throughout the term of the
agreement.. As part of her Employment Agreement, Ms. Irizarry is subject to
non-disclosure and non-competition obligations.
No director received compensation for their services to the Company.
21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of July 31, 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
Title of Class of Beneficial Owner of Beneficial Owner Percent of Class
------------------------------------------------------------------------------------------------------
Common Dr. Antonio Milici 10,743,339 59.52%
Stock 3930 Youngfield Street
Wheat Ridge, Colorado 80033
Common Tannya Irrizary 660,000 3.66%
Stock 3930 Youngfield Street
Wheat Ridge, Colorado 80033
Common Steven M. Grubner 149,000(1) .83%
Stock 3930 Youngfield Street
Wheat Ridge, Colorado 80033
All current executive
officers and directors
as a group 11,552,339 64.00%
------------------
(1) Includes 56,000 shares owned by NVO Solutions, Inc. of which Mr.
Grubner is the sole shareholder.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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. 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 colon 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.
22
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.
Mr. Grubner is the President and sole shareholder of NVO Solutions, Inc.,
an Illinois corporation existing to help companies raise capital for growth.
Prior to Mr. Grubner joining the company as a director and Chief Financial
Officer, NVO Solutions was compensated with 56,000 shares of GeneThera for
assisting the Company raise capital in 2004. An agreement was signed in November
2003 retaining NVO Solutions to perform the following services:
1. Professional services and advisory role focused on providing
business-building expertise and execution help,
2. Help develop financial and financing strategies
3. Structure and source investment capital
4. Advise in possible merger with and/or acquisition of businesses,
5. Provide short-term capital infusion through private investor network,
6. Fill management roles on a temporary basis as necessary,
7. Provide secondary legal and business process support.
NVO Solutions raised a total of $453,000 under the Agreement. These 56,000
shares are included in the ownership table for Mr. Grubner and are included in
the shares offered by this prospectus. The value as reflected in the Company's
financial statements for beneficial conversion purposes of these shares was
$88,480. The terms as described in the Agreement were as favorable as those that
could have been obtained from unaffiliated third parties.
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 1,000,000 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. The value as reflected in the Company's financial statements for
beneficial conversion purposes of these shares was $2,441,100.. In June 2004,
the remainder of the shares to complete the agreement were issued to Dr. Milici.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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
---------------------------------------------------------
2004 Second 2.85 .90
First 4.39 2.05
2003 Fourth 3.42 1.55
Third 2.40 0.89
Second 1.7 0.35
First 1.55 0.60
2002
Fourth 3.10 0.95
Third 3.48 1.00
Second 2.325
0.70
*Source AlphaTrade
23
There are no restrictions on the payment of dividends. We have paid no
dividends to date and none are anticipated. There were approximately 578 record
holders of common stock as of June 29, 2004.
DIVIDENDS
We have not paid or declared any dividends on our common stock and we
do not anticipate paying dividends on our common stock in the foreseeable
future.
USE OF PROCEEDS
We will not receive any proceeds from the resale of any of the shares
offered by this prospectus by the selling shareholders.
24
SELLING SHAREHOLDERS
The following table sets forth the number of shares of the common stock
owned by the selling shareholders as of August 23, 2004. Each selling
shareholder identified below is offering for sale all of the shares currently
owned by such shareholder.
Names Number of Shares Percentage
---------------------------------------------------------------------------------------------------------
Brian Cook 138,800 0.77%
The Regency Group 497,879 2.76%
Amanda Lamkin 521,600 2.89%
Jeff Koslosky 521,600 2.89%
Scott Gelbard 517,600 2.87%
John Coutris 46,500 0.26%
Daniel Tessmer 89,000 0.49%
Christopher Rule 50,000 0.28%
Richard Reinisch 240,000 1.33%
L&B Charitable 206,926 1.15%
Larry Cahill * 350,000 1.94%
Edward and Mary Coyne * 25,000 0.14%
Edward B. Coyne * 25,000 0.14%
Christopher Ferry * 5,000 0.03%
Dimitrios I. Gountis * 5,000 0.03%
George Mastrokostas * 5,000 0.03%
Nikolaos Tripodis * 10,000 0.06%
Melvin Wentz * 25,000 0.14%
William Rozakis * 15,000 0.08%
American Physicians Assurance Corp./Frank Freud, CFO * 30,000 0.17%
Michael B. Anastasio * 10,000 0.06%
D. Lynn Boucher * 10,000 0.06%
William B. Carter, Jr. * 1,000 0.01%
Brian D. Goelz * 2,000 0.01%
Randy Grudzinski * 10,000 0.06%
Michael G. Herlehy * 100,000 0.55%
Howard S. Horwitz * 15,000 0.08%
Kevin Hubbell * 10,000 0.06%
Hyatt Johnson Capital L.L.C./Jay D. Johnson, Manging Partner * 50,000 0.28%
Mark A. Levy * 5,000 0.03%
Mark Novaski and Susan M. Novaski, Trustees * 10,000 0.06%
Roy L. Splansky * 10,000 0.06%
Steven M. Grubner (1) 93,000 0.52%
Mark D. Herzog 31,000 0.17%
Steven L. Slaw 41,000 0.23%
Tom and Sunny Garrett 70,000 0.39%
Michael Mueller 40,000 0.22%
I. Thomas Uskup and Barbara G. Uskup 25,000 0.14%
Donald and Joyce Guillaume 30,000 0.17%
Mark Kengott 43,000 0.24%
NVO Solutions, Inc.- (2) 56,000 0.31%
25
Monte Tobin 33,333 0.18%
John Marx 2,000 0.01%
Cyndi Ralph 2,000 0.01%
Marvin Newton 2,000 0.01%
Ralph Lueders 2,000 0.01%
James Huang 20,000 0.11%
Henry Wei 6,650 0.04%
Tannya Irizarry (3) 100,000 0.55%
Richard W. Bryans (4) 75,000 0.42%
Hoadley, Daniel M. & Jadwiga A. 13,348 0.07%
Malinowski, John J. & Kathi L. 2,000 0.01%
Messler, Amy V. & William S. 2,000 0.01%
Malinowski, John J. & Mary K. 2,000 0.01%
4,249,236 23.54%
The selling shareholders consist of:
|_| Certain investors who invested in our private placements of convertible
promissory notes and who have converted the principal of those notes to
an aggregate of 1,617,257shares
|_| Consultants and advisers to whom we issued warrants to purchase an
aggregate of 2,382,979 shares of our common stock, and their employees
and assigns, and who have exercised such warrants
|_| An officer and director, and affiliate, who invested in our private
placements of convertible promissory notes and who have converted the
principal of those notes to an aggregate of 249,000 shares
---------------
(1) Mr. Grubner is currently the Chief Financial Officer and a director of the
Company.
(2) NVO Solutions, Inc. is owned by Mr. Steven Grubner, Chief Financial Officer
and a director of the Company.
(3) Ms. Irizarry is currently the Chief Administrative Officer of the Company.
(4) Mr. Bryans is the father of a director of the company.
PLAN OF DISTRIBUTION
We are registering the shares offered by this prospectus on behalf of the
selling shareholders. The selling shareholders, which as used herein includes
donees, pledgees, transferees or other successors-in-interest selling shares of
common stock or interests in shares of common stock received after the date of
this prospectus from a selling shareholder as a gift, pledge, partnership
distribution or other transfer, may, from time to time, sell, transfer or
otherwise dispose of any or all of their shares of common stock or interests in
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. The Company may
substitute new names for the names of selling stockholders by means of a Rule
424(b) prospectus only if:
|_| The change is not material
|_| The number of securities or dollar amount registered does not change: and
|_| The new owners' securities can be traced to those covered by this
registration statement.
These dispositions may be at fixed prices, at prevailing market prices at
the time of sale, at prices related to the prevailing market price, at varying
prices determined at the time of sale, or at negotiated prices.
The selling shareholders may use any one or more of the following methods
when disposing of shares or interests therein:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
26
o broker-dealers may agree with the selling shareholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling shareholders may, from time to time, pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock, from
time to time, under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act
amending the list of selling shareholders to include the pledgee, transferee or
other successors in interest as selling shareholders under this prospectus. The
selling shareholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.
In connection with the sale of our common stock or interests therein,
the selling shareholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The selling
shareholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
shareholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The aggregate proceeds to the selling shareholders from the sale of the
common stock offered by them will be the purchase price of the common stock less
discounts or commissions, if any. Each of the selling shareholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of common stock to be made directly or
through agents. We will not receive any of the proceeds from this offering.
The selling shareholders also may resell all or a portion of the shares
in open market transactions in reliance upon Rule 144 under the Securities Act
of 1933, provided that they meet the criteria and conform to the requirements of
that rule.
To the extent required, the shares of our common stock to be sold, the
names of the selling shareholders, the respective purchase prices and public
offering prices, the names of any agents, dealer or underwriter, any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.
In order to comply with the securities laws of some states, if
applicable, the common stock may be sold in these jurisdictions only through
registered or licensed brokers or dealers. In addition, in some states the
common stock may not be sold unless it has been registered or qualified for sale
or an exemption from registration or qualification requirements is available and
is complied with.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering, we will have an aggregate of
18,049,055 shares of common stock outstanding. The shares purchased in this
offering will be freely tradable without registration or other restriction under
the Securities Act, except for any shares purchased by an "affiliate" of our
company (as defined in the Securities Act). Any of the 249,000 shares listed in
this offering (approximately 4.5% of the total outstanding) held by officers,
Directors, or persons who currently hold 10% or more of our shares of common
stock may only be sold in compliance with the limitations described below. These
249,000 shares of common stock will be deemed "restricted securities" as defined
27
under Rule 144. Generally, restricted securities may be sold in the public
market only if registered or if they qualify for an exemption from registration
under Rules 144 promulgated under the Securities Act, which is summarized below.
In general, under Rule 144, as currently in effect, a person owning
restricted securities (or persons whose shares are required to be aggregated),
including an affiliate, who has beneficially owned shares for at least one year
is entitled to sell, within any three-month period commencing 90 days after the
date of this prospectus, a number of shares that does not exceed the greater of
1% of the then outstanding shares of common stock or the average weekly trading
volume in the common stock during the four calendar weeks preceding the date on
which notice of such sale is filed, subject to certain restrictions. In
addition, a person who is not deemed to have been an officer, director or person
who holds 10% of our shares of common stock at any time during the 90 days
preceding a sale and who has beneficially owned the shares proposed to be sold
for at least two years would be entitled to sell such shares under Rule 144(k)
without regard to the requirements described above. To the extent that shares
were acquired from an affiliate, such person's holding period for the purpose of
effecting a sale under Rule 144 commences on the date of transfer from the
affiliate.
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our articles of incorporation, as amended to date, authorizes us to
issue up to 100,000,000 shares of common stock and 10,000,000 shares of
preferred stock. As of August 31, 2004, we had 18,049, 055 shares of common
stock issued and outstanding. We are currently using an affiliate of the
Company, GTI Corporate Transfer Agent, LLC, as the transfer agent and registrar
for our common stock.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share on
all matters to be voted on by our shareholders. Holders of our common stock do
not have any cumulative voting rights. Common shareholders are entitled to share
ratably in any dividends that may be declared from time to time on the common
stock by our board of directors from funds legally available for dividends.
Holders of common stock do not have any preemptive right to purchase shares of
common stock. There are no conversion rights or sinking fund provisions for our
common stock.
ABOUT THIS PROSPECTUS
This prospectus is not an offer or solicitation in respect to these
securities in any jurisdiction in which such offer or solicitation would be
unlawful. This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission. The registration statement that contains
this prospectus (including the exhibits to the registration statement) contains
additional information about our company and the securities offered under this
prospectus. That registration statement can be read at the SEC web site or at
the SEC's offices mentioned under the heading "Where You Can Find More
Information." We have not authorized anyone else to provide you with different
information or additional information. You should not assume that the
information in this prospectus, or any supplement or amendment to this
prospectus, is accurate at any date other than the date indicated on the cover
page of such documents.
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires us to file information with the SEC
concerning our business and operations. Accordingly, we file annual, quarterly,
and special reports, proxy statements and other information with the SEC. You
can inspect and copy this information at the Public Reference Facility
maintained by the SEC at Judiciary Plaza, 450 5th Street, N.W., Room 1024,
Washington, D.C. 20549. You can receive additional information about the
operation of the SEC's Public Reference Facilities by calling the SEC at
1-800-SEC-0330. The SEC also maintains a web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding companies that, like us, file information electronically with the SEC.
28
VALIDITY OF COMMON STOCK
Legal matters in connection with the validity of the shares offered by
this prospectus will be passed upon by Richard W. Bryans, Jr., Esq. 1177 Grant
Street Suite 308 Denver, Colorado 80203.
EXPERTS
The consolidated financial statements of GeneThera, Inc., a Florida
corporation, as of December 31, 2003, and for the year then ended included in
this prospectus, have been included herein in reliance on the report, which
includes an explanatory paragraph relating to the Company's ability to continue
as a going concern, of Kantor, Sewell & Oppenheimer, PA, independent public
accountants, given on the authority of that firm as experts in accounting and
auditing.
29
GENETHERA, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM
OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM
OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
TABLE OF CONTENTS
Page No.
Independent Registered Public Accounting Firm's Report F-2
Consolidated Balance Sheets - December 31, 2003 and 2002 F-4
Consolidated Statements of Operations for the
Period From October 5, 1998 (Inception) to December 31, 2003 F-6
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the
Period From October 5, 1998 (Inception) to December 31, 2003 F-7
Consolidated Statements of Cash Flows for the
Period From October 5, 1998 (Inception) to December 31, 2003 F-11
Notes to Consolidated Financial Statements F-12
F-1
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S 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 (a development stage company) as of December 31, 2003 and 2002,
and the related consolidated statements of operations, changes in stockholders'
equity (deficit), and cash flows for the period from October 5, 1998 (inception)
to December 31, 2003. 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 the standards of the Public Company
Accounting Oversight Board (United States). 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 each of the years
in the period ended December 31, 2003, in conformity with U.S. generally
accepted accounting principles.
F-2
As discussed in Note 12 to the accompanying consolidated financial statements,
the Company has restated the consolidated balance sheets as of December 31,
2003, and the related consolidated statements of operations, stockholders'
equity (deficit), and cash flows for the period from October 5, 1998 (inception)
to December 31, 2003.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 15 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 15. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
KANTOR, SEWELL & OPPENHEIMER, PA
Hollywood, Florida
February 15, 2004, except for Note 12, as to which the date is July 20, 2004
F-3
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
Assets
2003 2002
Restated Restated
----------- -----------
Current assets
Cash $ -- $ 9,144
Accounts receivable, net -- 5,517
Inventory -- 24,999
----------- -----------
Total current assets -- 39,660
Property and equipment, net 480,872 238,874
Other assets
Deposits 5,278 5,929
Goodwill and trademark, net -- 32,020
Other assets 1,000 31,960
----------- -----------
6,278 69,909
----------- -----------
$ 487,150 $ 348,443
=========== ===========
The notes to consolidated financial statements are an integral part of the above
statement.
F-4
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
Liabilities and Stockholders' Deficit
2003 2002
Restated Restated
----------- -----------
Current liabilities
Bank overdraft $ 35,486 $ --
Accounts payable 122,514 180,020
Accrued expenses 611,126 342,668
Deferred income -- 5,900
Due to related company 500 --
Lease payable 18,715 6,367
Loan payable - related party -- 50,000
Notes payable 193,405 131,683
Convertible notes payable 286,874 61,000
----------- -----------
Total current liabilities 1,268,620 777,638
Long term lease payable -- 26,534
Long term notes payable -- 25,200
Long term convertible notes payable -- 235,600
----------- -----------
-- 287,334
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;
4,796,478 and 2,738,176 shares issued and outstanding at
December 31, 2003 and 2002 respectively 4,796 2,738
Additional paid in capital 5,114,864 2,101,123
Accumulated deficit (5,901,130) (2,820,390)
----------- -----------
(781,470) (716,529)
----------- -----------
$ 487,150 $ 348,443
=========== ===========
The notes to consolidated financial statements are an integral part of the above
statement.
F-5
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the period from
October 5, 1998
Year ended December 31, (inception) to
2003 2002 December 31, 2003
Restated Restated Restated
----------- ----------- -----------
Income
Sales net of returns $ 119,541 $ 77,516 $ 197,057
Research fees -- 5,000 188,382
----------- ----------- -----------
119,541 82,516 385,439
Cost of sales (33,747) (30,352) (64,099)
----------- ----------- -----------
Gross profit 85,794 52,164 321,340
----------- ----------- -----------
Expenses
Salaries 248,440 301,198 864,639
Professional fees 34,639 218,249 252,888
General and administrative expenses 363,390 164,853 737,628
Lease expense 104,509 98,457 316,498
Lab expenses 58,600 51,606 178,082
Consulting 607,750 47,664 824,384
Depreciation and amortization 69,344 44,383 161,727
Sales expenses 21,576 18,823 40,399
Other compensation 1,164,000 -- 1,164,000
Insurance 26,036 14,496 56,753
----------- ----------- -----------
2,698,284 959,729 4,596,998
----------- ----------- -----------
Loss from operations (2,612,490) (907,565) (4,275,658)
Other income (expenses)
Other income (expenses), net (9,492) (78,003) (36,565)
Interest expense (345,732) (14,095) (359,827)
----------- ----------- -----------
Net loss from operations (2,967,714) (999,663) (4,672,050)
Loss from discontinued operations (113,026) -- (113,026)
----------- ----------- -----------
Net loss $(3,080,740) $ (999,663) $(4,785,076)
=========== =========== ===========
Loss per common share, basic and diluted $ (0.98) $ (0.39) $ (2.92)
The notes to consolidated financial statements are an integral part of the above
statement.
F-6
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
Common Stock Paid in Accumulated
Shares Amount Capital Deficit Total
---------- ------ ---------- -------------- -----------
Issuance of common stock to founders for consulting
services rendered at an aggregate of $36,000 $ 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 ~ ~ ~ (84,350) (84,350)
---------- ------ ---------- -------------- -----------
Balance December 31, 1999 585,000 585 200,415 (84,350) 116,650
Issuance of common stock in exchange for consulting
services rendered 25,000 25 24,975 ~ 25,000
---------- ------ ---------- -------------- -----------
sub-total 610,000 $ 610 $ 225,390 $ (84,350) $ 141,650
F-7
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
Common Stock Paid in Accumulated
Shares Amount Capital Deficit Total
---------- ------ ---------- -------------- -----------
sub-total 610,000 $ 610 $ 225,390 $ (84,350) $ 141,650
Issuance of common stock in exchange for an agreement
for management and financing for $80,000 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 ~ ~ ~ (226,659) (226,659)
---------- ------ ---------- -------------- -----------
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 1,960,000 $1,960 $ 691,040 $ (704,673) $ (11,673)
F-8
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
Common Stock Paid in Accumulated
Shares Amount Capital Deficit Total
---------- ------ ---------- -------------- -----------
sub-total 1,960,000 $1,960 $ 691,040 $ (704,673) $ (11,673)
Additional paid in capital - related party -- -- 83,262 ~ 83,262
---------- ------ ---------- -------------- -----------
Balance before recapitalization 1,960,000 1,960 774,302 (704,673) 71,589
Recapitalization on February 25, 2002 697,176 697 1,000,702 (1,116,054) (114,655)
---------- ------ ---------- -------------- -----------
Balance after recapitalization February 25, 2002 2,657,176 2,657 1,775,004 (1,820,727) (43,066)
Issuance of shares of common stock in connection
with convertible notes payable 21,000 21 10,479 ~ 10,500
Issuance of shares of common stock in connection
with conversion 60,000 60 29,940 ~ 30,000
Additional paid in capital - related party -- -- 285,700 ~ 285,700
Net loss, 2002 ~ ~ ~ (999,663) (999,663)
---------- ------ ---------- -------------- -----------
Balance December 31, 2002, Restated 2,738,176 2,738 2,101,123 (2,820,390) (716,529)
Additional paid in capital contributed as equipment -- -- 201,976 ~ 201,976
---------- ------ ---------- -------------- -----------
sub-total 2,738,176 $2,738 $2,303,099 $ (2,820,390) $ (514,553)
F-9
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
Common Stock Paid in Accumulated
Shares Amount Capital Deficit Total
---------- ------ ---------- -------------- -----------
sub-total 2,738,176 $2,738 $2,303,099 $ (2,820,390) $ (514,553)
Additional paid in capital - related party -- -- 200,000 ~ 200,000
Beneficial conversion feature ~ ~ 319,221 ~ 319,221
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 663,302 663 330,989 ~ 331,652
Shares issued on conversion 80,000 80 191,120 ~ 191,200
Net loss, 2003 ~ ~ ~ (3,080,740) (3,080,740)
---------- ------ ---------- -------------- -----------
Balance December 31, 2003, Restated 4,796,478 $4,796 $5,114,864 $ (5,901,130) $ (781,470)
F-10
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the period from
October 5, 1998
Year ended December 31, (inception) to
2003 2002 December 31, 2003
Restated Restated Restated
----------- ----------- -----------
Cash flows from operating activities:
Net loss $(3,080,740) $ (999,663) $(4,785,076)
----------- ----------- -----------
Adjustments to reconcile net
loss to net cash used in operating activities:
Depreciation and amortization 69,344 44,383 161,727
Compensation in exchange for common stock 1,771,750 -- 2,238,750
Beneficial conversion feature 319,221 -- 319,221
(Increase) decrease in accounts receivable 5,517 (5,517) --
(Increase) decrease in inventory 24,999 (24,999) --
(Increase) decrease in other assets 44,090 (39,802) 36,748
Increase (decrease) in accounts payable
and accrued liabilities 205,553 495,564 734,140
----------- ----------- -----------
Total adjustments 2,440,474 469,629 3,490,586
----------- ----------- -----------
Net cash used in operating activities (640,266) (530,034) (1,294,490)
----------- ----------- -----------
Cash flows from investing activities:
Cash payments for the purchase of property (8,735) (11,535) (35,069)
----------- ----------- -----------
Net cash used in investing activities (8,735) (11,535) (35,069)
----------- ----------- -----------
Cash flows from financing activities:
Bank overdraft 35,486 -- 35,486
Capital contributed as equipment 201,976 -- 272,376
Principal payments on note/leases payable (31,155) (34,807) (70,815)
Proceeds from capital contributions -- 418,962 443,962
Proceeds from loans payable 433,550 165,410 648,550
----------- ----------- -----------
Net cash provided by financing activities 639,857 549,565 1,329,559
----------- ----------- -----------
Net increase in cash and cash equivalents (9,144) 7,996 --
Cash and cash equivalents, beginning of year 9,144 1,148 --
----------- ----------- -----------
Cash and cash equivalents, end of year $ -- $ 9,144 $ --
=========== =========== ===========
Supplemental disclosures of cash flow information:
a) Cash paid during the period for:
Interest expense $ 3,462 $ 1,666 $ 6,744
----------- ----------- -----------
F-11
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM
OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
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. During 2002, the Company acquired GeneThera, Inc. (Colorado).
GeneThera, Inc. (Colorado) is a biotechnology company that develops molecular
assays for the detection of food contaminating pathogens, veterinary diseases
and genetically modified organisms. The Company also owned Family Health News, a
subsidiary that was sold in 2003.
GeneThera, Inc. (Colorado) is considered to be in the development stage.
Activity during the development stage includes organization, and implementation
and revision of the business plan. GeneThera, Inc. (Colorado) also provides
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 been consolidated
through September 30, 2003.
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 per share for each year is computed by dividing loss
for the year by the weighted average number of common shares outstanding during
the year. Diluted loss per share includes the effects of common stock
equivalents to the extent they are dilutive. At December 31, 2003 and 2002 all
common stock equivalents were antidilutive and therefore diluted loss per share
equaled basic loss per share.
F-12
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM
OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
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. 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. SFAS 144 was
implemented on these consolidated financial statements as explained in Note 13.
F-13
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM
OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
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.
NOTE 3 PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2003 and 2002 consisted of the following:
2003 2002
--------- ---------
(As Restated) (As Restated)
Computers $ 32,523 $ 12,372
Office equipment 0 5,414
Telephone system 5,119 3,400
Furniture & fixtures 1,465 76,743
Laboratory equipment 578,041 277,194
--------- ---------
617,148 375,123
Less accumulated depreciation (136,276) (136,249)
--------- ---------
$ 480,872 $ 238,874
========= =========
Depreciation expense for the years ended December 31, 2003 and 2002 was $66,093
and $40,824, respectively.
During the year ended December 31, 2002, the Company entered into capital lease
agreements to acquire laboratory equipment and a computer. (See Note 4)
NOTE 4 LEASES
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 $104,509,
and $98,457, respectively.
F-14
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM
OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
NOTE 4 LEASES - continued
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
-------- --------
(As Restated) (As Restated)
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
======== ========
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 to a related party as follows:
2003 2002
-------- --------
(As Restated) (As Restated)
Loan payable with no interest, due on demand, unsecured $ 0 $ 50,000
Less current portion (0) (50,000)
-------- --------
Total long-term loan payable $ 0 $ 0
======== ========
There was no interest expense for the years ended December 31, 2003 and 2002.
F-15
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM
OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
NOTE 6 NOTES PAYABLE
The Company has outstanding notes payable at December 31, 2003 and 2002 as
follows:
2003 2002
--------- ---------
(As Restated) (As Restated)
Various notes payable with interest rates ranging from 0% to 14%; various
terms; secured by equipment and personal guarantees $ 193,405 $ 156,883
Less current portion: (193,405) (131,683)
--------- ---------
Total long-term note payable $ 0 $ 25,200
========= =========
Total interest expense for the year ended December 31, 2003 and 2002 was $1,692
and $3,404, respectively.
NOTE 7 CONVERTIBLE NOTES PAYABLE
2003 2002
------------- ------------
(As Restated) (As Restated)
Various convertible notes payable, with interest at 6%; due January 5, 2005;
convertible into shares of common stock at $1.00 per share. $ 0 $ 85,600
Note payable - line of credit loan not to exceed one million dollars. For each
draw, the borrower will issue a convertible promissory note bearing a 6%
interest rate per year through January 14, 2004, and 12% interest rate from
January 15, 2004; convertible into shares of common stock at $1.40 per share,
subject to adjustment. 0 150,000
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. 223,124 61,000
F-16
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM
OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
NOTE 7 CONVERTIBLE NOTES PAYABLE - continued
2003 2002
---------- -----------
(As Restated) (As Restated)
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
---------- -----------
286,874 296,600
Less: current portion (286,874) (61,000)
---------- -----------
Total long-term convertible notes payable $ 0 $ 235,600
========== ===========
Interest expense for the years ended December 31, 2003 and 2002 was $15,677 and
$10,215, 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.
NOTE 9 STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock On March 5, 1999, the Company issued 420,000 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.
F-17
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM
OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
NOTE 9 STOCKHOLDERS' DEFICIT - continued
Common Stock
On March 5, 1999, 100,000 shares 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 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 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 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 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 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 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 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-18
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM
OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
NOTE 9 STOCKHOLDERS' DEFICIT - continued
Common Stock
On February 15, 2001, the board of directors of the Company approved the
issuance of 15,000 shares 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 of common stock valued at $100,000.
Accordingly, consultant expense of $100,000 was charged to operations.
As a result of the recapitalization on February 25, 2002, the Company is deemed
to have issued 697,176 common shares to the stockholders of GeneThera, Inc.
(f/k/a Hand Brand Distribution, Inc.).
During November 2002, certain holders exercised their option to convert $40,500
in convertible notes payable per various agreements dated in 2002. As a result,
81,000 shares of common stock were issued.
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 $331,652 in
convertible notes payable per various agreements dated in 2002 and 2003. As a
result, 663,302 shares of common stock were issued.
On October 1, 2004, the Company issued 80,000 shares of common stock to the
President of FHNI to satisfy all outstanding convertible notes and accrued
interest for funds loaned to the Company. Additionally, the Company released and
conveyed all interest in the FHNI to its president. Although signed on August 1,
2004, the agreement was effective nunc pro tunc ("now for then") to October 1,
2003.
F-19
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM
OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
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 $4,930,000 and $2,600,000, 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
----------- -----------
(As Restated) (As Restated)
Current taxes $ 0 $ 0
Deferred tax benefit:
Net operating loss carryforward 972,000 267,000
Accrued wages 76,000 72,000
Change in valuation allowance (1,048,000) (339,000)
----------- -----------
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
----------- -----------
(As Restated) (As Restated)
Deferred tax assets
Loss carryforward, including recapitalization $ 1,858,000 $ 884,000
Accrued wages 148,000 74,000
----------- -----------
Total deferred tax assets 2,006,000 958,000
Valuation allowance (2,006,000) (958,000)
----------- -----------
Net deferred tax assets $ 0 $ 0
=========== ===========
F-20
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM
OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
NOTE 11 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 12 RESTATEMENT
On February 25, 2002, GeneThera, Inc., f/k/a Hand Brand Distribution, Inc., (the
Company), entered into an agreement to acquire GeneThera, Inc. (Colorado). The
Company was to issue 6 shares of common stock (after a 2:1 forward stock split)
for each share of GeneThera, Inc. (Colorado). At the end of the transaction the
Company would have issued a total of 16,611,900 shares of common stock and own
approximately 91% of GeneThera, Inc. (Colorado). At the time the agreement was
signed, the Company did not have sufficient authorized shares of common stock to
complete the transaction. The stockholders of GeneThera, Inc. (Colorado) decided
to proceed with the acquisition and agreed to delay receipt of the shares until
the Company increased the number of authorized shares. This did not occur until
late in 2003. In the 10-K filed for the year ended December 31, 2002, the
Company reported a total of 18,621,476 shares issued, but only 2,009,576
outstanding. The 16,611,900 shares of common stock related to the acquisition
were never issued due to the insufficient number of authorized shares of common
stock of the Company.
The assets of GeneThera, Inc. (f/k/a Hand Brand Distribution, Inc.) and
GeneThera, Inc. (Colorado) are at historical cost as of December 31, 2001. The
value of the net assets of GeneThera, Inc. at the time of the acquisition is the
same as the historical negative book value of ($114,654). 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) from inception, October 5, 1998 to December 31,
2003, and those of GeneThera, Inc. (f/k/a Hand Brand Distribution, Inc.) from
February 25, 2002, the recapitalization date.
During the first quarter of 2003, the agreement of February 25, 2002 was
rescinded and a new acquisition agreement was signed. At this time, the board of
directors of the Colorado corporation resolved to restructure the equity of the
Colorado corporation, whereby of the 3,039,050 shares of common stock issued and
outstanding (including the minority interest) at the time of the first
agreement, only 1,960,000 shares of common stock remained at March 23, 2003.
F-21
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM
OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
NOTE 12 RESTATEMENT - continued
The canceled shares had the following effect on the Colorado corporation:
Shares of Additional Accumulated
Common Stock Paid in Capital Deficit
----------- ----------- -----------
As reported February 25, 2002 - before
acquisition 18,234,300 $ 1,048,428 $ (995,073)
Adjustments
Reversal 3:1 (2:1 fwd stock split) (15,195,250) 10,463 0
Cancelled shares (290,400) (290,109) 290,400
Cancelled shares (788,650) 5,520 0
----------- ----------- -----------
Total adjustments (16,274,300) (274,126) 290,400
----------- ----------- -----------
As restated - retroactive to
February 25, 2002 acquisition 1,960,000 $ 774,302 $ (704,673)
=========== =========== ===========
During 2002, the Company issued a total of 1,312,400 shares--652,400 related to
convertible notes, and the remaining 660,000 shares associated with a credit
line commitment fee having an option to convert. By resolution of the Board of
Directors a total of 1,231,400 shares were canceled.
Following is the aggregate effect on the consolidated financial statements of
the Company at December 31, 2002, reflecting the cancellation of shares by both
the Colorado corporation and the Company, as well as the retroactive effect of
the initial acquisition as per the terms of the new agreement dated March 23,
2003.
Shares of Additional Accumulated
Common Stock Paid in Capital Deficit
------------ ------------ ------------
As reported December 31, 2002 18,621,476 $ 2,433,240 $ (3,401,716)
Adjustments
Rescission/Acquisition (16,274,300) (274,126) 290,400
Reversal minority interest 1,622,400 270,778 (62,998)
Cancelled shares (660,000) (329,340) 330,000
Cancelled shares (571,400) 571 0
FHNI adjustment COGS 0 0 23,924
------------ ------------ ------------
As restated retroactive December 31, 2002 $ 2,738,176 $ 2,101,123 $ (2,820,390)
============ ============ ============
F-22
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM
OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
NOTE 12 RESTATEMENT - continued
The consolidated financial statements of the Company included in the 10-KSB for
December 31, 2003 depicted the new acquisition as of March 23, 2003, and
considered the 2002 reverse acquisition null and void. The historical
information was that of the Colorado corporation. After reviewing FAS 141,
Business Combination and all facts surrounding the original acquisition, the
rescission and consequent re-acquisition, the Company determined that even
though the January 2002 acquisition agreement was rescinded, control of the
Company remained continuously with the Colorado corporation through its major
shareholders. Consequently, the consolidated financial statements for December
31, 2003 are restated as follows:
Shares of Additional Accumulated
Common Stock Paid in Capital Deficit
----------- ----------- -----------
As reported December 31, 2003 4,749,976 $ 4,300,500 $(4,798,772)
Adjustments
Additional liabilities 0 0 (26,989)
Reclassification of supplies 0 0 (33,314)
Revaluation of fixed assets 0 (248,024) 11,649
Related party debt 0 568,962 (518,962)
Beneficial conversion features 0 319,221 (319,221)
Correction of shares converted (33,498) (16,915) 0
Consolidation of FHNI 0 0 (93,457)
Disposal of subsidiary 80,000 191,120 (122,064)
----------- ----------- -----------
As restated December 31, 2003 4,796,478 $ 5,114,864 $(5,901,130)
=========== =========== ===========
NOTE 13 CONSOLIDATION AND DIVESTITURE OF SUBSIDIARY
The consolidated financial statements of the Company included in the 10-KSB
filed for December 31, 2003 did not include the financial statements of its
wholly own subsidiary Family Health News, Inc. (FHNI). Further evaluation of the
applicable standards revealed that FAS 144 amended ARB 51, and eliminated the
exemption to consolidation for a subsidiary for which control is likely to be
temporary. In reevaluating the accounting treatment, the Company restated the
consolidated financial statements for the year ended December 31, 2003 to
include FHNI and the results of its operations through September 30, 2003, and
the effect of its disposal on October 1, 2003. On August 1, 2004 the Company
signed a resolution agreement with the President of FHNI. As stated in the
agreement, the Company issued 80,000 shares of common stock to the President of
FHNI to satisfy all outstanding convertible notes and accrued interest for funds
loaned to the Company. Additionally, the Company released and conveyed all
interest in the FHNI to its president. Although signed on August 1, 2004, the
agreement was effective nunc pro tunc ("now for then") to October 1, 2003.
F-23
GENETHERA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM
OCTOBER 5, 1998 (INCEPTION) TO DECEMBER 31, 2003
NOTE 13 CONSOLIDATION AND DIVESTITURE OF SUBSIDIARY - continued
As a result of the disposition the Company recorded a loss of $113,026. FHNI had
net sales of $119,445 and a net loss of $9,039 through September 31, 2003, which
is included as loss from operations on the consolidated financial statements.
At December 31, 2003, there were no assets related to discontinued operations on
the consolidated balance sheet.
NOTE 14 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.
The ultimate outcome of this matter is unknown at this time. In the opinion of
management, the outcome will have no adverse effect on the financial statements.
NOTE 15 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 restated operating losses of $2,967,714 and $999,663, respectively. The
accompanying financial statements indicate that current liabilities exceed
current assets by $1,268,620 and $737,978 for the restated years ended December
31, 2003 and 2002, respectively.
In addition, the Company is in default for payments on notes payable in the
amount of $116,405 including accrued interest. These factors raise substantial
doubt about its ability to continue as a going concern. Management's plan with
regard to these matters includes raising working capital to assure the Company's
viability, through private or public equity offering, and/or debt financing,
and/or through the acquisition of new business or private ventures.
F-24
4,249,236 Shares
COMMON STOCK
GENETHERA, INC.
-----------------------
PROSPECTUS
-----------------------
September 10 , 2004
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Neither our Articles of Incorporation nor our Bylaws contain provisions
that obligate us to indemnify our officers, directors, employees, agents, or
others if they are involved in certain legal proceedings related to their
services to us or permitting our Board of Directors to authorize such
indemnification. Nonetheless, Section 607.0850, Florida Statutes requires
corporations to pay legal expenses for employees who successfully defend
themselves against criminal charges or lawsuits related to their jobs.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth estimated expenses expected to be
incurred in connection with the issuance and distribution of the securities
being registered. The Company will pay all expenses in connection with this
offering..
Securities and Exchange Commission Registration Fee .............$ 449.55
Printing and Engraving Expenses .........................................
Accounting Fees and Expenses ....................................$1200.00
Legal Fees and Expenses ........................................ $2500.00
Miscellaneous ...................................................$ 800.00
------------------------------------------------------------
Total ..........................................................$4,949.55
RECENT SALES OF UNREGISTERED SECURITIES
There have been no recent sales of unregistered securities within the past three
year
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)
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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)
5.1 Letter opinion of Counsel
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., Ph.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 (7)
10.7 Employment Agreement between Antonio Milici, M.D., Ph.D. and
the Company
10.8 Employment Agreement between Tannya Irizarry and the Company
10.9 Placement Agreement
10.10 NVO Solutions Agreement
21 List of Subsidiaries (6)
23.1 Consent of Kantor, Sewell & Oppenheimer.
31.1 Certification of the President and Chief Executive Officer
pursuant to Rule 13a-14
31.2 Certification of the 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 Chief Financial Officer pursuant to
Section 1350
99.1 Resolution Agreement
99.2 Curriculum Vitae
99.3 Lease Agreement
(1) Incorporated by reference from an Exhibit to the Current Report on
Form 8-K, as filed on January 17, 2002.
(2) Incorporated by reference from an Exhibit to the Company's Current
Report on Form 8-K, as filed on March 4, 2002.
(3) Incorporated by reference from an Exhibit to the Company's Schedule
14C Preliminary Information Statement, as filed on May 23, 2002.
(4) Incorporated by reference from an Exhibit to the Company's Current
Report on Form 10KSB, as filed on June 4, 2002.
(5) Incorporated by reference from an Exhibit to the Company's Report
on Form 10QSB as filed on June 14, 2002.
(6) Incorporated by reference to Exhibit 21 filed with the Company's
Annual Report on Form 10-KSB filed on May 19, 2003.
(7) Incorporated by reference to Exhibit 10.6 to the Company's Annual
Report on Form 10-K, as filed on April 14, 2004.
UNDERTAKINGS
A. Registrant hereby undertakes:
a. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(2) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(3) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
b. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
c. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
B. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise, the
small business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Wheat Ridge, Colorado on this 10th
day of September, 2004.
GENETHERA, INC.
By: /s/ Antonio Milici
---------------------------------------------
Name: Antonio Milici
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933 this Registration
Statement has been signed by the following persons in the capacities indicated
on September 10, 2004:
Signature Title(s)
/s/ Antonio Milici President, Chief Executive Officer and Director
--------------------------- (principal executive officer)
Antonio Milici
/s/ Steven M. Grubner Chief Financial Officer and Director
---------------------------- (principal financial and accounting officer)
Steven M. Grubner
* Director
----------------------------
Thomas Slaga
* Director
-----------------------------
Richard Bryans
* By: /s/ Steven M. Grubner
--------------------------
Steven M. Grubner
Attorney-in-Fact
II-3