October 18, 2004
Mr. Jeffrey Riedler, Esq. Mail Stop 3-09
United States Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.D. 20548
Re: GeneThera, Inc.
Comment Letter
File No. 333-118937
Dear Mr. Riedler,
Thank you for the comment letter sent by your department on October 7, 2004. We
have attempted to address all the comments in a comprehensive manner. We are
sending three bound "marked" copies of the amended filing and three "clean"
copies that we hope will facilitate your review. This letter will attempt to key
our responses to your comments. We will use the term "Completed" to acknowledge
our completion of the request outlined by the comment.
Form SB-2
General
1. In your next amendment, please update the disclosure, including updated
financial information, and in your Risk Factor section, as of a recent
date practicable. Completed
2. Please provide updated interim financial information in accordance with
Item 310(g) of Regulation S-B. We have just closed our third quarter on
September 30, 2004. We will file this 10QSB prior to November 11, 2004.
Item 310 (g) speaks of a 135 day prior period, I believe our filed second
quarter ending June 30, 2004 fits this timeframe?
3. Although Form SB-2 does not contain a space to indicate that the
securities are to be offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, please revise to include this
disclosure. Completed
4. Please revise the third line where you disclose the number of shares of
common stock to say "up to 4,249,236 shares of common stock." Completed
5. Please provide the information requested by Item 501 (a)(9)(iv) of
Regulation S-B. Completed
6. Please revise the cover page to delete the last sentence of the first
paragraph and the three bullet paragraphs that follow. This information is
not required by Item 501. Consideration should be given to relocating this
information to the selling security holder section. Completed
7. Please expand the discussion to briefly identify your second subsidiary
and the nature of its business. Completed
8. Please reconcile the reference to GeneThera (Colorado) as a subsidiary
with the discussion in the last sentence on page 23 under "Certain
Relationships and Related Transactions" which suggests the acquisition has
not yet been completed. Completed
9. Please file the InvestLinc Securities and NVO Solutions agreements as
exhibits. Completed
10. We note your disclosure in the Recent Development sections that you are in
default on notes payable in the amount of $44,517, including accrued
interest. Please add a separate risk factor disclosing the risk and
consequences of such default. In your discussion, please disclose the
holders of such notes payables, and if you expect such parties to commence
legal action. In the alternative, advise us as to why you do not believe a
risk factor is necessary. Upon further review of our financial statements
with our auditors, it has been determined that the Company is not in
default on these notes. Our third quarter filing will reflect the reversal
of these transactions.
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11. Given that insiders of the Company own approximately 64% of the equity
stock of GeneThera, please add a risk factor that discusses the risk and
potential consequences to your market price of future sales of by these
individuals. In your discussion, please include the number of your
presently outstanding shares, the number that is freely tradable and the
number that is subject to Rule 144. Completed
12. Given the fluctuations in price that your shares have experienced in the
last two years, please consider adding a quantified risk factor so that
investors can appreciate the risk stemming from the volatility of your
common stock. If you decide to add a risk factor discussing the volatility
of your stock, please disclose the price range of your common stock during
the most recent two fiscal years and interim period. Note that it is not
necessary to replicate the table included on page 23 of your document
under the subheading "Market for Common Equity and Related Stockholder
Matters." Instead, you may disclose the high and low price during this
period. In addition, please explain if any one particular factor has
resulted or is anticipated in causing volatility in your stock price, if
any. Completed
13. Please include a risk factor that discusses your charter and bylaw
provisions and how such provisions would prevent a change of control in
management. In the alternative, advise us as to why you do not believe a
risk factor is necessary. Completed
14. Many of your subheadings currently either merely state a fact about your
business, such as "We do not have a sales, marketing, or distribution
capabilities and no experience in those areas," and "Many of our
competitors and potential competitors have resources superior to ours," or
describe an event that may occur in the future, such as "Our technology
may conflict with patents held by others." Succinctly state in your
subheadings the risks that result from the facts or uncertainties.
Completed
15. Please revise your heading and accompanying discussion to include
disclosure concerning the "going concern" opinion set forth in your
accountants' consent. Completed
16. Please revise the subheading to include the risk in the event additional
funding is not obtained. Completed
17. Please expand the discussion to indicate the additional funding required
and when these funds are needed. In this regard, we note the discussion
under "Liquidity and capital resources" on page 10. Completed
18. Please briefly describe whether you have any applications before the USDA
or other approvals for your key products, the stage of the approvals of
your products in process, and the amount you have spent on research and
development. You should provide more detailed disclosure in the "Business"
section of your document. Completed
19. Please consider discussing your competitive position vis-a-vis other
companies that are in your specific industry. If available, please
identify your primary competitors. Completed
20. Please identify the key personnel with whom you maintain employment
agreements. We note your description of two employment agreements in your
document. Completed
21. Please revise the subheading of this risk factor to clearly identify the
risk and potential consequences. At present, this risk factor heading does
not appear to adequately describe the risk of investors. Your reader
should be able to understand the nature of the risk to the investment by
reading the caption to your discussion. Please revise your subheading to
clearly identify a risk. Completed
22. Please disclose the dilution shareholders would experience if shares of
your common stock were sold at a price as of a recent date. Please provide
similar disclosure in the section of your document entitled "Dilution" on
page 8. The price of $1.50 is a price as of a recent date.
23. Please expand the discussion to clarify how you determined the
calculations used in the second paragraph. If the risk is to potential
purchasers of the shares that are the subject of the current registration
statement, at what price are the shares to be sold to potential
purchasers? Completed
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24. Please revise the discussion in the prospectus where appropriate to
discuss in greater detail the agreement with InvestLinc. Completed
25. Revise this risk factor to express the risk to investors, for example,
that investors will only see a return on their investment if the value of
the shares appreciates. Completed
26. Please address the topics required by Item 303 of Regulation S-B,
including expected significant infrastructure changes during this period
(e.g. increase/decrease in number of employees and plant start up) and a
discussion of off-balance sheet arrangements that are reasonably likely to
have a current or future effect on the Company's financial condition,
revenues, results of operations, liquidity, capital expenditures that is
material to investors or state that none exist. Completed
27. Please expand the discussion in the prospectus to address the specifics of
your business plan referred to on page 10. Completed
28. Please include a table of contractual obligations. Completed
29. We note your disclosure that you experienced a decline in gross profits
from the same period last year "due to the research and development state
the company is in at the present time." Please expand your description to
specifically disclose what state the company is at present. For example,
have you halted testing certain proposed products or services? How was the
state of your company different in this period as compared to the same
period last year? Completed
30. In addition, please clarify the product and/or services for which you
received revenue in the 2003 period. Completed
31. Please explain the reasons for the decrease in personnel (salaries)
expenses. Completed
32. We note you have filed several agreements related to equity line credit
agreements in your registration statement. Please describe the material
terms of such agreements in this section. This agreement was cancelled
prior to ever being finalized. Should it be removed from future filings as
an exhibit?
33. Please identify the investors to whom you issued convertible promissory
notes. Completed
34. Please disclose the expiration date for each of the notes. In addition,
indicate if you are currently in default on any of these notes. In this
regard, we note your disclosure in the Recent Development sections that
you are currently in default on notes payable. Completed
35. Please explain the discrepancies in the conversions that have occurred.
For example, the May 16, 2003 note in the principle amount of $60,000 was
convertible at a rate of $0.25 per share and was converted into 240,000
shares of common stock. However, the notes issued between May 17, 2003 and
September 19, 2003 in the principle amount of $215,000 were convertible
into common stock at a rate of $0.50 per share and the notes were
converted into 436,926 shares, a number that exceeds the conversion ratio.
Please advice or revise. The $215,000 was converted along with interest
accrued of $3,463 into shares at $0.50 shares by election of the note
holder.
36. Please expand the discussion to clarify whether the consideration received
in each note sale equaled the principal amount of the note issued. In this
regard, we note the reference to the January 12, 2003 note sale in the
principal amount of $120,000 and the fact only $36,900 was raised. In
addition, we note the conversion ratio was $0.50 per share, yet the note
was converted into 80,000 shares. Please advice or revise. Completed
37. Please explain what the "Molecular Biology Potential Agreement Structure"
is. In addition, please briefly describe what each of the stages your list
entails. Completed
38. Please provide supplemental support for the statement that your senior
scientists have more than 100 years of research and development
experience. In addition, please provide the information requested by Item
401(b) of Regulation SB. We modified the 100 years to 50 years and
attached curriculum vitae of the three scientists that make up these years
of experience.
39. Please expand the discussion to explain the absence of any revenues in
2004. If the products and services referred to in this section were
available in 2003 and revenues were derived from such products and
services, why were there no similar revenues in 2004? Completed
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40. Please expand the discussions to identify the vaccines you have developed
using the platform and the amount of time required to develop each of
these vaccines. We may have additional comment. Completed
41. Please expand the discussion to clarify whether the GEA system is intended
solely for your use or for sale to other laboratories. If the system can
be sold to other laboratories, please indicate the number of units you
have sold to date, indicating when such sales began. Completed
42. Please expand the discussion to provide a balanced presentation including,
any disadvantages to the GEA system and any advantages to other systems or
methods available to test for veterinary diseases or food contamination.
In this regard, we note your discussion concerning the methods use by
"most labs" which phrase suggests alternatives are available. Completed
43. Please expand the discussion to indicate when the GEA system was developed
and the extent of its utilization to date. Completed
44. Please expand the discussion to indicate when the system was developed,
when sales began, and the extent of sales to date. In this regard, we note
your intent to begin a marketing campaign to achieve higher volume sales.
Completed
45. Please note that Item 101 of Regulation S-B requires the description of a
small business issuer's business during the last three years. Please
revise your Business section to comply with this requirement. Completed
46. Please provide disclosure of the background of the reverse acquisition by
and between you and Hand Brand Distribution as well as the reverse
acquisition of GeneThera. For example, discuss: Completed
47. For each product/service that is still in development, please disclose the
status of any regulatory review or clinical trials; the estimated amounts
required to complete development, testing and regulatory approval process;
and when you anticipate commencement of the marketing efforts. Completed
48. Please expand the discussion to include the development of emerging
technologies or products that may compete with you and the current stage
of development of these technologies or products. Completed
49. Please discuss the status of your employee relations. Completed 50. Please
file your lease agreement as an exhibit. Completed
51. Please expand the discussion concerning each proceeding and counterclaim
to include a description of the facts underlying the proceeding. For
example, what is the specific nature of the fraud, breach of contract, and
violation of state consumer protection law alleged in the counterclaim
described in the first paragraph. The lawsuit referenced in the SB-2 has
been settled as of October 13,2004. We eliminated it from the filing.
52. Please disclose when you held your last annual meeting, and when you plan
to hold your next annual meeting. Completed
53. Please note that Item 401(a)(4) of Regulation S-B requires a brief
description of the business experience of your officers and directors
during each of the last five years. Many of your officer/director
disclosure do not include the applicable dates. Please revise the
discussion to provide the applicable dates that the officers /directors
held their various positions. Completed
54. Please also disclose the composition of your director committees.
Completed
55. Your description of the employment agreements is too limited. Please
revise your disclosure to include the following to the extent applicable:
Completed
56. Other than with respect to Dr. Milici, please indicate if any of your
directors received compensation for their services to the Company.
Completed
57. You indicate in footnote 1 that Dr. Milici was paid $42,350 in 2002 and $0
in 2003. Similarly, in footnote 2 you state that Ms. Irizarry was only
paid $19,500 for the year 2002 and $0 in 2003. The information in Summary
Compensation Table appears to be inconsistent with this disclosure. For
example, the table indicates Dr. Milici was paid $144,000 both in year
2002 and 2003. Please revise or advise us. Completed
58. Please note, the number of shares owned by each individual or entity
listed in the table should include the number of shares that the
individual has the right to acquire as specified in Rule 13d-3(d)(1).
Please revise to include these shares in the table and disclose the number
of shares they have the right to acquire upon the issuance of the options
in the footnote. Completed
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59. Please provide us with annotated third party documentation supporting your
statement that "[t]here are strong evidences that the P65 gene has
correlation to certain types of cancer." We have deleted this statement
from the filing.
60. Please disclose the value of the 56,000 shares that were issued to Mr.
Grubner, and the 1,545,000 shares issued to Dr. Milici. In addition, with
respect to the shares issued to Mr. Grubner and NVO Solutions, please
indicate when Mr. Grubner and/or his affiliate was retained to raise
capital, the nature of duties performed, and the amount of capital raised
as a result of his efforts. Completed
61. Please also indicate if the terms you received in the transactions
described in this section are on terms as favorable as could have been
obtained from unaffiliated third parties. Completed
62. To the extent you have not done so, for each selling shareholder that is
not a natural person or publicly registered company, please revise to
disclose the natural person having voting and dispositive rights.
Completed
63. If any selling shareholders are registered broker-dealers, please revise
to identify such parties as underwriters. The only exception to this
position is if the selling shareholder received the shares as underwriting
compensation. None of the selling shareholders are registered
broker-dealers. 64. If any of the selling shareholders are affiliates of
broker-dealers, please revise to state that the selling shareholder
received the shares in the ordinary course of business and has no
agreement to directly or indirectly engage in a distribution of the
shares. If a selling shareholder is not able to make such representations,
then revise to identify such selling shareholder as an underwriter. None
of the selling shareholders are affiliates of broker-dealers. 65. Please
refer to your statement that the selling shareholders and any of their
pledges, donees, assignees, and successors-in-interest may, from time to
time, sell any or all of their shares of common stock on any stock
exchange, market or trading facility on which the shares are traded or in
private transactions. Please confirm your understanding that the Company
may substitute new names for the names of selling stockholders by means of
a Rule 424(b) prospectus only if: Completed
66. Please revise this section to provide the securities you have issued or
sold in the last three years that were not registered under the Securities
Act. The information appears to be missing from this section. In addition,
please indicate the facts that entitled you to each exemption. It is not
sufficient to simply say, that the securities were issued pursuant to
Section 4(2) of the Securites Act. Further, please disclose the nature and
value of consideration as well as the aggregate offering price for each of
the offerings you intend to describe in this section. See Item 701 of
Regulation S-B. Completed
67. Please note that your CFO and a majority of your directors must sign the
registration statement. In addition, your principal financial officer and
either a controller or chief accounting officer must sign the registration
statement. Your next amendment and all subsequent amendments must contain
these signatures. If a person acts in more than one of these capacities,
the signature page must indicate all of the capacities in which they are
signing. Please revise. Completed
68. It does not appear you have provided a legal opinion and concerning the
validity of the shares you are registering. Please revise your exhibit
list to include this opinion in your next amendment.
69. In all future filings required under the Securities Exchange Act of 1934,
please comply with the comments set forth above as applicable.
Acknowledged.
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I hope our responses to your comments are as comprehensive as you might
like.
We look forward to providing any additional information you may request.
Sincerely,
Steven M. Grubner
Chief Financial Officer
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