UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[ X ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2003
Transitional Report pursuant to 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 000-27237
HAND BRAND DISTRIBUTION, INC.
(Exact name of small Business Issuer as specified in its charter)
Colorado 66-0622463
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3930 Youngfield Street, Wheat Ridge CO 80033
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 303-463-6371
Not Applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days [ X ] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: 2,988,598 Shares of $.001 par value
Common Stock outstanding as of June 30, 2003.
HAND BRAND DISTRIBUTION, INC., AND SUBSIDIARIES
FORM 10-QSB
TABLE OF CONTENTS
Page No.
Consolidated Balance Sheets 3
Consolidated Statements of Operations 5
Consolidated Statements of Changes in Stockholders'
Equity (Deficit) 6
Consolidated Statements of Cash Flows 9
Notes to Consolidated Financial Statements 11
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
FORM 10-QSB
THREE MONTHS ENDED JUNE 30, 2003
Assets $
Current assets
Cash 0
Accounts receivable, net 846
Inventory 1,075
Total current assets 1,921
Property and equipment, net 256,754
Other assets
Deposits 5,929
Goodwill and trademark, net 30,241
Deferred cost -
Other assets 31,960
68,130
$ 326,805
Liabilities sand Stockholders' (Deficit)
Current liabilities
Bank overdraft $ 10,609
Accounts payable 284,513
Accrued expenses 357,949
Deferred income 5,900
Lease payable 6,511
Loan payable 50,000
Notes payable 189,583
Convertible notes payable 177,900
Total current liabilities 1,082,965
Long term lease payable 17,223
Long term convertible notes payable 250,600
Minority interest in consolidated subsidiary 169,398
Stockholders' (deficit)
Common stock $.001 par value, authorized
3,125,000 shares; issued 1,000,000 shares;
and outstanding 2,988,598 shares 18,621
Additional paid in capital 2,433,240
Accumulated (deficit) (3,645,242)
(1,193,381)
Total Liabilities and Stockholders' (Deficit) $ 326,805
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2003 & 2002
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30,
2003 2002
Income
Sales net of returns $ 37,304 5,000
Research fees - 5,000
37,304 5,000
Cost of sales (17,791) (7,085)
Gross profit 19,513 16,138
Expenses
Salaries 44,226 94,168
Professional fees 32,276 50,000
General and administrative expenses 67,669 46,220
Lease expense 18,390 57,067
Lab expenses 287 2,814
Consulting - 20,684
Depreciation and amortization 14,445 8,186
Sales expenses 1,715 5,031
Insurance 22,303 3,032
201,002 287,302
Loss from operations (181,489) (271,164)
Other income (expenses)
Other income
Other expenses 30
Litigation expense -
Interest expense (12,007) (15,163)
Net loss from operations (193,496) (268,183)
Minority interest in loss of consolidated
subsidiary 15,520 17,840
Net loss (177,976) (268,183)
Loss per common share (0.02) (0.04)
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30,
2003 2002
Cash flows from operating activities:
Net loss $(177,976) $268,183
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 14,445 8,186
Compensation in exchange for common stock - -
Minority interest 15,520 -
Gain on transfer of asset - -
Loan fee amortization - -
(Increase) decrease in accounts receivable 4,671 (3,634)
(Increase) decrease in inventory (14,875)
(Increase) decrease in prepaid expenses - -
(Increase) decrease in other assets (257,446)
Increase (decrease) in accounts payable 391,350
and accrued liabilities 83,207 8,864
Increase (decrease) in deferred income -
Total adjustments 117,843 132,445
Net cash used in operating activities (60,133) (6,137)
Cash flows from investing activities:
Cash payments for the purchase of assets (22,185) -
Cash flows from financing activities:
Bank overdraft 10,609 2,882
Payments on lease payable (3,027) -
Principal payment on long-term debt (27,000)
Principal payment on note payable -
Proceeds form issuance of common stock 83,262
Proceeds from loans payable 77,700 70,910
Net cash provided by financing activities 58,282 5,209
Net (decrease) increase in cash and cash
equivalents (24,036) (0)
Cash and cash equivalents, beginning of
period 24,036 947
Cash and cash equivalents, end of
period $ 0 $ 18
Supplemental disclosures of cash flow information:
a) Cash paid during the period for:
Interest expense $ 12,007 $ 1,315
b) Stockholders' equity (deficit) note:
On February 25, 2002, the Company acquired GeneThera, Inc. The acquisition of
GeneThera, Inc. by the Company has been treated as an acquisition of the Company
by GeneThera, Inc., and a recapitalization of GeneThera, Inc. A total of
16,611,900 (after forward stock split) shares of common stock of the Company
equivalent to 91% of GeneThera, Inc. will be issued as a result of the
transaction. The Company expects to issue the remaining 811,200 shares of common
stock. This transaction is void per the 8-K dated March 2003.
On August 13, 2002, certain holders exercised their option to convert $10,500 in
convertible notes payable per agreement dated August 12, 2002. After a 2:1
forward stock split, 21,000 shares of common stock were issued.
In May 2002, certain holders exercised their option to convert $315,700 in
convertible notes payable into 631,400 shares (after a 2:1 forward stock split)
of common stock at $1 per share. On September 28, 2002, the Company issued
660,000 shares of common stock in connection with the conversion of a line of
credit commitment fee plus legal expenses. These shares have since been
cancelled due to non-performance.
On March 28, 2003, the Company issued 1,000,000 shares of Common Stock in
connection with acquisition of 51% of GeneThera, Inc.
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2003
NOTE 1 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Description
--------------------
Hand Brand Distribution, Inc. ("the Company") was incorporated in November 1995,
under the laws of the State of Florida. On January 23, 2002, ten shareholders of
the Company entered into a stock purchase agreement with GeneThera, Inc. to
acquire approximately 91% of its stock in a transaction accounted for as a
recapitalization of GeneThera, Inc. (See Note 13). The Company is a
biotechnology company that develops molecular assays for the detection of food
contaminating pathogens, veterinary diseases and genetically modified organisms.
GeneThera, Inc. was considered to be in the development stage for the year ended
December 31, 2001, and the accompanying comparative financial statements
represent those of a development stage company for that year. Activity during
the development stage included organization of the Company, and implementation
and revision of the business plan. The Company has also provided research
services to unrelated parties.
Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, The Family Health News, Inc. and
GeneThera, Inc. All significant inter-company balances and transactions have
been eliminated.
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 years.
Revenue Recognition
-------------------
Revenues are recognized when services are rendered.
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2003
NOTE 1 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
continued
Advertising
-----------
Advertising costs are charged to operations when incurred. There were no
advertising expenses for the three months ended June 30, 2003 and the three
months ended June 30, 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.133 as
amended by Statement No. 137 and 138, Accounting for Derivative Instruments and
Hedging Activities established accounting and reporting standards for derivative
instruments and related contracts and hedging activities. This statement is
effective for all fiscal quarters and fiscal years beginning after June 15,
2000. The adoption of this pronouncement did not have a material effect on the
Company's financial position, results of operations or liquidity. Statement No.
141, Business Combinations (SFAS 141) establishes revised standards for
accounting for business combinations. Specifically, the statement eliminates the
pooling method, provides new guidance for recognizing intangible assets arising
in a business combination, and calls for disclosure of considerably more
information about a business combination. This statement is effective for
business combinations initiated on or after July 1, 2001. The adoption of this
pronouncement on July 1, 2001 did not have a material effect on the Company's
financial position, results of operations or liquidity. Statement No. 142,
Goodwill and Other Intangible Assets (SFAS 142) provides new guidance concerning
the accounting for the acquisition of intangibles, except those acquired in a
business combination, which is subject to SFAS 141, and the manner in which
intangibles and goodwill should be accounted for subsequent to their initial
recognition. Generally, intangible assets with indefinite lives, and goodwill,
are no longer amortized; they are carried at lower of cost or market and subject
to annual impairment evaluation, or interim impairment evaluation if an interim
triggering event occurs, using a new fair market value method. Intangible assets
with finite lives are amortized over those lives, with no stipulated maximum,
and an impairment test is performed only when a triggering event occurs. This
statement is effective for all fiscal years beginning after December 15, 2001.
The Company believes that the implementation of SFAS 142 on April 1, 2002 did
not have a material effect on the Company's financial position, results of
operations, or liquidity.
Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets supercedes Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of (SFAS 121). Though it retains
the basic requirements of SFAS 121 regarding when and how to measure an
impairment loss, SFAS 144 provides additional implementation guidance. SFAS 144
excludes goodwill and intangibles not being amortized among other exclusions.
SFAS 144 also supersedes the provisions of APB 30, Reporting the Results of
Operations, pertaining to discontinued operations. Separate reporting of a
discontinued operation is still required, but SFAS 144 expands the presentation
to include a component of an entity, rather than strictly a business segment as
defined in SFAS 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS 144 also eliminates the current exemption to consolidation
when control over a subsidiary is likely to be temporary. This statement is
effective for all fiscal years beginning after December 15, 2001. The Company
believes that the implementation of SFAS 144 on April 1, 2002 did not have a
material effect on the Company's financial position, results of operations or
liquidity.
NOTE 2 BASIC EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share for each year is computed by dividing income
(loss) for the year by the weighted average number of common shares outstanding
during the year. Diluted earnings (loss) per share include the effects of common
stock equivalents to the extent they are dilutive.
Basic weighted average number of shares outstanding at June 30 is as follows:
2003 2002
---- ----
Basic weighted and dilutive average
number of shares outstanding 17,620,689 1,979,058
NOTE 3 CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to credit risk
include cash on deposit with three financial institutions amounting to $24,035
at June 30, 2003, and $24,944 at June 30, 2002. Financial institutions insure
depositors for up to $100,000 through the U.S. Federal Deposit Insurance
Corporation.
NOTE 4 PROPERTY AND EQUIPMENT
Property and equipment at June 30, 2003 and 2002 consisted of the following:
Amortization
Period
2003 2002 in Years
------------ ------------ -------------
Computer $ 21,109 $ 9,700 5
Equipment 5,414 5,414 10
Telephone system 8,519 0 5
Furniture & fixtures 81,743 57,837 7
Laboratory equipment 290,172 117,486 5
Leasehold Improvement 12,313 39
TOTAL 419,270 209,343
Less accumulated
depreciation (162,516) 106,645
------- -------
$ 256,754 $ 106,645
Depreciation expense for the three months ended June 30, 2003 was $13,556.
On February 25, 2002, through the acquisition of GeneThera, the Company acquired
computers, laboratory equipment, furniture and fixtures totaling $75,786. (See
Note 13)
During the year ended December 31, 2002, the Company entered into capital lease
agreements to acquire laboratory equipment and a computer. (See Note 5)
NOTE 5 LEASES
Capital Leases
--------------
The Company's property under capital leases is included in property and
equipment (See Note 4) and is summarized as follows:
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2003
NOTE 5 LEASES - continued
Laboratory Equipment $ 30,379
Computer 2,521
--------
32,900
Less: Accumulated depreciation (3,829)
--------
Net assets under capital leases $ 29,071
Operating Leases
----------------
The Company has a lease agreement for its Florida facility, with monthly
payments of $700 plus tax, renewable annually.
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 three months ended June 30, 2003 was $18,398.
NOTE 6 LOAN PAYABLE
The Company has an outstanding loan payable at June 30, 2003 as follows:
Loan payable with no interest,
due on demand, unsecured. $ 50,000
Less current portion (50,000)
Total long-term loan payable $ 0
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2003
NOTE 7 NOTES PAYABLE
The Company has outstanding notes payable at June 30, 2003 as follows:
Note payable with an interest rate of 7% per annum, payable in 5 payments of
$1,500 and a lump sum balance on December 1, 2001, guaranteed jointly by the
Company and its President. The note is in
default as of the date of this report. $ 23,475
Note payable with an interest rate of 14% per annum, payable principal and
interest on August 31, 2001, unsecured. The note is in
default as of the date of this report. 15,208
Note payable to stockholder with interest at 6%
due February 20, 2004; callable at the borrower's
option. 51,900
New Note - 8% - Terms Note payable to an individual with interest at 8% due in
November 2003 convertible into company common stock at $0.25/share 60,000
Note payable with no interest rate, payable $9,000 per month beginning July 2,
2002, due August 2, 2003; secured by equipment.
(See Note 4) 39,000
------------
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2003
NOTE 7 NOTES PAYABLE - CONTINUED
189,580
Less current portion: (189,580)
-----------
Total long-term note payable $ 0
Total interest expense for the three months ended June 30, 2003 was $5,012.
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2003
NOTE 8 CONVERTIBLE NOTES PAYABLE
Unrelated Parties
-----------------
On February 25, 2002, the following notes were renegotiated:
Convertible notes amounting to $84,800, with conversion rights into 1,375 shares
of common stock
Note payable in the amount of $14,605, due on demand, and
Note payable in the amount of $58,900, due on demand.
On April 22, 2002, the following notes were renegotiated:
4. Note payable in the amount of $14,000, due on demand
On May 10, 2002, the following notes were renegotiated:
5. Note payable in the amount of $200,000, due on demand
These notes, plus accrued interest totaling $18,995, were converted into a new
note payable not to exceed $500,000, with interest at 6% due January 5, 2005;
convertible into shares of common stock at a price of $1.00 per share. Upon
conversion of the note, all remaining interest shall be paid in common stock at
$1.00 per share. As of the June 30, 2003 date, the option to convert $315,700
into 315,700 shares of common stock was exercised. $ 75,600
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2003
NOTE 8 CONVERTIBLE NOTES PAYABLE - CONTINUED
Note payable to an unrelated party with interest at 6%; due January 5, 2005;
convertible into shares of common stock at a price of $1.00 per share. Upon
conversion of the note, all remaining interest shall be paid in common stock at
$1.00 per share. As of the balance sheet date, the option to convert into shares
of common stock was not exercised. 10,000
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. 150,000
Series A convertible note payable to a Shareholder, with interest at 8%; due
June 19, 2003; convertible into shares of common
stock at a price of $0.50 per share. $ 36,900
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2003
NOTE 8 CONVERTIBLE NOTES PAYABLE - CONTINUED
Series A convertible note payable to a shareholder, with interest at 8%; due May
12, 2003; convertible into shares of common stock at a price of $0.50 per share.
As of the balance sheet date, the option to convert
into shares of common stock was not exercised. $ 50,000
Series A convertible note payable to an individual, with interest at 8%; due May
24, 2003; convertible into shares of common stock at a price of $0.50 per share.
As of the balance sheet date, the option to convert
into shares of common stock was not exercised. $ 10,000
Series A convertible note payable to a shareholder, with interest at 8%; due May
27, 2003; convertible into shares of common stock at a price of $0.50 per share.
As of the balance sheet date, the option to convert into shares of common stock
was not
exercised. $ 1,000
Series A convertible note payable to an individual, with interest at 8%; due
September 16, 2003; convertible into shares of common
stock at a price of $0.50 per share. $ 60,000
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2003
NOTE 8 CONVERTIBLE NOTES PAYABLE - CONTINUED
Series A convertible note payable to an individual, with interest at 8%; due
September 16, 2003; convertible into shares of common
stock at a price of $0.50 per share. $ 35,000
----------
428,500
Less: current portion (177,900)
-----------
Total long-term convertible notes payable $ 250,600
There was no interest expense for the three months ended June 30, 2003.
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2003
NOTE 9 STOCKHOLDERS' DEFICIT
Common Stock
------------
On March 5, 1999, the Company issued 1,260,000 shares (after recapitalization -
See Note 13) of common stock valued at $36,000 according to an employment
agreement, approved by the board of directors, to a founder for services
rendered during 1999. Accordingly, consultant expense of $36,000 was charged to
operations.
On March 5, 1999, 300,000 shares (after recapitalization - See Note 13) of
common stock were issued in exchange for used equipment with a fair market value
of $34,586, supplies, and other items totaling $25,414, and $40,000 in cash to
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 180,000 shares (after recapitalization - See Note
13) of common stock valued at $60,000, in exchange for computer & consulting
services in the amount of $55,000, and $5,000 in cash. Accordingly, consultant
expense of $55,000 was charged to operations.
On April 1, 1999, 15,000 shares (after recapitalization - See Note 13) of common
stock valued at $1.00 per share were issued to an unrelated party for $500 in
cash.
On August 3, 1999, according to a contract agreement, the Company issued 211,200
shares (after recapitalization - See Note 13) of common stock valued at $70,400,
in exchange for leased equipment with an estimated fair market value of $70,400,
of which the Company will retain ownership at the end of the lease. Accordingly,
the Company recorded the equipment at $70,400.
On January 1, 2000, 75,000 shares (after recapitalization - See Note 13) of
common stock valued at $1.00 per share were issued in exchange for services
rendered. Accordingly, consultant expense of $25,000 was charged to operations.
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2003
NOTE 9 STOCKHOLDERS' DEFICIT - CONTINUED
On April 10, 2000, according to a contract agreement to provide management
services, the Company issued 600,000 shares (after recapitalization - See Note
13) of common stock valued at $200,000, in exchange for management services in
the amount of $120,000, and $80,000 in cash. Accordingly, consultant expense of
$120,000 was charged to operations.
On May 15, 2000, according to a contract agreement to provide consulting
services, the Company issued 30,000 shares (after recapitalization - See Note
13) of common stock valued at $12,000. Accordingly, consultant expense of
$12,000 was charged to operations.
On February 15, 2001, the Company issued 3,375,000 shares (after
recapitalization - See Note 13) of common stock valued at $240,000 according to
an employment agreement, approved by the board of directors, to an officer in
lieu of salary for services rendered during 2000 & 2001. Accordingly, salary
expense of $120,000 was charged to operations at December 31, 2001 and $120,000
in 2000.
On February 15, 2001, the board of directors of the Company approved the
issuance of 180,000 shares (after recapitalization - See Note 13) of common
stock valued at $60,000 to an officer in lieu of salary for services rendered.
Accordingly, salary expense of $60,000 was charged to operations.
On February 15, 2001, the board of directors of the Company approved the
issuance of 45,000 shares (after recapitalization - See Note 13) of common stock
valued at $15,000 to an officer in lieu of salary for services rendered.
Accordingly, salary expense of $15,000 was charged to operations.
On October 1, 2001, according to a contract agreement to provide management
services, the Company issued 180,000 shares of common stock valued at $60,000,
in exchange for management services in the amount of $35,000, and $25,000 in
cash. Accordingly, consultant expense of $35,000 was charged to operations.
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2003
NOTE 9 STOCKHOLDERS' DEFICIT - CONTINUED
On October 1, 2001, according to a contract agreement to provide consulting
services, the Company issued 300,000 shares (after recapitalization - See Note
13) of common stock valued at $100,000. Accordingly, consultant expense of
$100,000 was charged to operations.
On February 25, 2002, the Company acquired GeneThera, Inc. The acquisition of
GeneThera, Inc. has been treated as an acquisition of the Company by GeneThera,
Inc., and a recapitalization of GeneThera, Inc. A total of 16,611,900 shares
(after 2:1 forward stock split) of common stock of the Company equivalent to 91%
of GeneThera, Inc. were issued as a result of the transaction, subject to
stockholders' approval on or before December 31, 2002. (See Note 13) The Company
expects to acquire approximately 6% additional outstanding shares of GeneThera
common stock during the year. This transaction is void per the 8-K dated March
2003.
At the time of the closing of the acquisition of GeneThera, Inc., the Company
did not have sufficient authorized shares of common stock to issue such shares.
Consequently, under Florida law, the issuance of such shares would be void. In
May 2002, substantially all of the former stockholders of GeneThera, Inc. agreed
to accept shares of the Company's common stock immediately upon stockholders'
approval to increase the number of authorized shares of common stock. If
approval is not received by December 31, 2002, former GeneThera stockholders may
elect to forego their rights to receive shares of the Company's common stock,
and have their shares of GeneThera returned to them.
In May 2002, certain holders exercised their option to convert $315,700 in
convertible notes payable into 631,400 shares (after a 2:1 forward stock split)
of common stock at $1 per share.
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2003
NOTE 9 STOCKHOLDERS' DEFICIT - CONTINUED
On August 13, 2002, certain holders exercised their option to convert $10,500 in
convertible notes payable per agreement dated August 12, 2002. After a 2:1
forward stock split, 21,000 shares of common stock were issued.
On September 28, 2002, the Company issued 660,000 shares of common stock in
connection with the conversion of a line of credit commitment fee plus legal
expenses.
On March 28, 2003, the Company issued 1,000,000 shares of Common Stock in
connection with the acquisition of 51% of GeneThera, Inc.
NOTE 10 INCOME TAXES
At June 30, 2003, the Company had useable net operating loss carryforwards of
approximately $2,111,127 for income tax purposes, available to offset future
taxable income of the U.S. entity expiring through 2021.
The valuation allowance was $419,000 at December 31, 2002. This allowance was
reserved at December 31, 2001, as management estimates that it is more likely
than not that the deferred tax assets will not be realized due to uncertainty of
the Company's ability to generate future taxable income. The valuation allowance
was adjusted based on estimated use of net operating losses through December 31,
2002 by $160,000.
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, 2002
and 2001 of approximately $2,280,000 and $1,000,000, respectively, subject to
annual limitations prescribed by the Internal Revenue Code, which is available
to offset future taxable income through 2022. 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.
HAND BRAND DISTRIBUTION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2003
NOTE 11 COMMITMENTS
On January 14, 2002, the board of directors voted to sell the stock of The
Family Health News, Inc., subject to stockholder approval.
NOTE 12 EMPLOYMENT AGREEMENTS
On January 23, 2002, the president and CEO of GeneThera, Inc. entered into an
employment agreement with Hand Brand Distribution, Inc. and its successors for a
five-year period, to be effective February 25, 2002 and expiring January 24,
2007, payable at $12,000 per month. The compensation committee of the board of
directors will determine salary increases at the end of each year. A bonus of
$18,000 was paid upon signing of the agreement. If the Company's net income is
$2,000,000 or more, a bonus of two times the monthly salary will be paid to the
president and CEO of GeneThera. A covenant not to compete during the term of the
agreement for a period of 24 months thereafter is included.
On February 25, 2002, the Company entered into an employment agreement with its
president for one year for a total of $3,000 a month, and an additional option
to purchase 50,000 shares of the Company at an option price of $3.50 per share
with an exercise period from January 31, 2002 to February 24, 2007. The option
becomes vested on December 31, 2002 and is subject to the terms and conditions
of the Stock Incentive Plan.
NOTE 13 ACQUISITION
On January 23, 2002, the Company entered into stock purchase agreements with ten
stockholders of GeneThera, Inc. to acquire approximately 91% of its outstanding
stock in exchange for the Company's common stock. These agreements closed on
February 25, 2002. For accounting purposes, the acquisition has been treated as
a capital transaction and as a recapitalization of GeneThera, Inc. The financial
statements became those of GeneThera, Inc., with adjustments to reflect the
changes in equity structure. The operations are those of GeneThera, Inc. for all
periods presented, and those of Hand Brand Distribution, Inc. from the
recapitalization date. This transaction is void. (See 8-K March 2003)
GeneThera, Inc. is a biotechnology company that develops molecular assays for
the detection of food contaminating pathogens, veterinary diseases and
genetically modified organisms.
NOTE 14 CONTINGENCIES & LITIGATIONS
As part of an agreement dated August 3, 1999, the Company issued 70,400 shares
of common stock to an individual in exchange for leased equipment valued at
$70,400, which the Company would own at the end of the lease. The individual
ceased to pay the lease, and in an effort to retain the equipment, the Company
paid the monthly payments. Accordingly, the Company accrued a contingency of
$34,540 for future lease payments, and $61,753 as litigation expense. The
balance due for this equipment at December 1, 2002 was $16,112.
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 these and other matters is unknown at this time,
however, management has accrued an estimated liability in the amount of $48,262.
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, 2002 and 2001, the Company
showed operating losses of $1,290,589 and $453,664 respectively. The
accompanying financial statements indicate that current liabilities exceed
current assets by $761,902 and $117,566 for the years ended December 31, 2002
and 2001 respectively.
In addition, the Company is in default for payments on notes payable in the
amount of $38,683, 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.
Item 2. Management's Discussion and Analysis or Plan of Operations
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto that appear elsewhere herein.
RESULTS OF OPERATIONS
Gross profits for the three-month period ended June 30, 2003 were $13,995
compared to $23,223 for the same period last year. The decrease is attributable
to a lack of research fees at GeneThera and lower sales at FHNI. Sales for the
three month period ended June 30, 2003 were $33,659, a 60% decrease over sales
for the three month period ended June 30, 2003. The decrease was due to Hand
Brand focusing on the pre-launch development of our direct selling program at
the expense of our normal sales and marketing.
Personnel and professional expenses (consulting and professional fees and
salaries) decreased from $165,000 for the prior three month period ending June
30, 2002 to $564 for the three month period ending June 30, 2003. Comparing the
three month period ending June 30, 2002, to the three month period ending June
30, 2003, expenses decreased substantially from $165,000 to $71,029.16.
Based upon the Company's planned divestiture or closure of FHNI and the
acquisition of GeneThera, the above discussion of FHNI's operations is not
anticipated to be indicative of future operating results.
GENETHERA PLAN OF OPERATION
Background
----------
GeneThera is a development stage company (as such term is defined by the
Securities and Exchange Commission ("SEC") and Generally Accepted Accounting
Principles) and has had negligible revenues from operations in the last two
years. As a development stage company, its research and development expenditures
cannot be capitalized.
GeneThera plans to develop proprietary diagnostic assays for use in the
agricultural and veterinary markets. Specific assays for Chronic Wasting Disease
(among elk and deer), E.coli (predominantly cattle) and Johne's Disease
(predominantly cattle and bison) are in development.
Development Process
-------------------
The development process of such assays has six primary phases. These are: (i)
the identification of the disease condition targeted and the valuation of the
target market's size, penetration requirements and profit potential; (ii) the
design of the assay by defining the indicators of the presence of disease and
establishing internal controls; (iii) the establishment of baseline performance
criteria; (iv) the defining of the assay efficacy outcomes; (v) the validation
of the assay; and (vi) commercialization. Assuming that an assay is validated in
accordance with the original assay design, the entire scientific process for the
development of such an assay through to its commercial application is
approximately one year. At present, the Company is in the process of
establishing baseline performance criteria (phase 3) for the assays for Chronic
Wasting Disease and E.coli. For all other targeted diseases, the Company is
either in the market valuation stage or in the process of designing the assay.
Business Model
--------------
GeneThera's business model has four features. First, we believe that our focus,
the non-human testing market, has great profit potential without a lengthy
approval or certification processes. Over the next year, the Company intends to
introduce a number of individual assays for the detection of Chronic Wasting
Disease in live animals as well as recently harvested animals, the detection of
Johne's Disease in all ruminants, the detection of a certain type of E-coli in
beef. Second, we intend to develop a modularized approach to each assay such
that each assay will be standardized around a specific set of equipment using
consistent laboratory procedures. This will allow for placement of individual
modularized laboratories in any geographic location including existing
independent labs or on-site with the end-user. In addition to this modularized
approach to each assay, GeneThera has developed a proprietary "Field Collection
System" by which to standardize the management of blood samples to insure
maximum test performance efficacy. Additionally, this Field Collection System
serves as a primary revenue resource for the Company. Third, we believe that our
planned modularized laboratory approach will provide the high volume throughput
necessary for effective and cost-efficient commercial operations. Finally,
GeneThera's hardware and software platform will allow for the continual
collection, analysis and management of assay results over time. With the data
available from this system, animal owners, feedlot managers, food producers, and
veterinarians will have a comprehensive inventory of the animal's health.
Field Collection SystemTM (FCS)
On Sept. 23, 2002, GeneThera, Inc. announced that it is making available to
State Animal Health Agencies, a field blood collection system to test for
Chronic Wasting Disease (CWD) in both live and harvested animals. This FCS
serves to standardize the process for blood sample collection, the actual
testing for the presence of CWD to be conducted at the GeneThera labs. GeneThera
will brand the system as "Field Collection System". There are two types of FCS
available from GeneThera. One is for hunters; the second for breeders of
domesticated elk/deer. The FCS for hunters retails at $10 each; the FCS for
breeders retails at $7 each. The FCS design for CWD blood sample collection will
serve as the design for all subsequent diseases for which GeneThera will pursue
diagnostic assay testing.
Dr. Glen Zebarth, an industry expert will oversee a "Blind Study" with the State
Animal Health Agencies to ensue validation of GeneThera's CWD assay, the FCS
being an important component of securing the integrity of collected blood
samples.
GeneThera built the CWD test on its proprietary molecular diagnosis platform to
allow high sensitivity results and volume testing. To date, we have received and
tested a limited number of normal and contaminated CWD blood samples from
Colorado, Minnesota, South Dakota and Wyoming.
The "Blind Study" will begin with various State and Federal Agencies lab testing
both CWD infected and non-infected samples. The tested samples will then be
compared to the Agencies biology reports. Dr. Glen Zebarth will publish a final
report.
Fast track validation and acceptance from the State and Federal Agencies is
imperative in order for GeneThera to begin mass volume. Large scale sequencing
of the DNA field tests will allow GeneThera to study the genomic make-up of CWD
and possibly lead to a therapy or a vaccine, this being a part of GeneThera's
2004 business plan activity.
The GeneThera processing lab is highly automated using Fluorogenic Real Time PCR
(F-PCR) testing. The Company has integrated robotics and data collection and
analysis databases with the F-PCR platform. This platform combined with,
GeneThera developed proprietary diagnostic software for genetic expression
allows high through-put testing. GeneThera's processing capacity will allow for
19,200 tests per month by December 2002. Further, this capacity should increase
to 61,440 tests per month by mid-2003. Each diagnostic assay will be $10.00; the
results will be available within 24 hours.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a cash balance of $24,035 as of June 30, 2003. With the
acquisition of 51% of GeneThera, it is estimated that it will require outside
capital for the year 2003 for the commercialization of GeneThera's CWD assays.
The Company sought to address its capital needs in several ways discussed below,
including entering into a $1,000,000 Secured Convertible Line of Credit on
August 14, 2002 (as described below, the Convertible Line of Credit). Because
the conditions for use of the Convertible Line of Credit and the PELC Facility
(defined below) were never met by the respective funder as a result of the
funders' repeated defaults and because we have been unable to obtain significant
additional financing for operations, we were forced to curtail our operations.
Nevertheless, at the present time, and assuming continued forbearance by two
creditors of GeneThera on defaulted notes in the approximate amount of $35,279,
we believe we have adequate working capital through June 30, 2003. However, our
financial statements for the three months ended June 30, 2003 contain a going
concern qualification expressing doubt regarding our ability to continue
operating.
Convertible Notes
-----------------
To relieve its cash flow crisis, since January 15, 2002, the Company issued
convertible promissory notes in the aggregate principal amount of Three Hundred
Eighty Seven Thousand Six Hundred Dollars ($387,600) to a limited number of
holders. In May, 2002, Three Hundred Fifteen Thousand Seven Hundred Dollars
($315,700) of principal under the notes converted to Common Stock at the rate of
one share for each dollar of outstanding principal and accrued but unpaid
interest. The Company has subscriptions for the issuance to some of the original
holders of additional notes in the aggregate principal amount of One Hundred
Thousand Dollars ($100,000) upon the satisfaction of certain conditions. The
notes bear interest at the rate of 6% per year through the maturity date, which
is January 15, 2005. The notes automatically convert into Common Stock at any
time the price of the shares on an exchange close above Three Dollars ($3.00)
per share for twenty (20) consecutive trading days. In the absence of such
event, each holder may elect to convert all, or a portion of the principal
outstanding on his or her note. The conversion rate is one share for each dollar
of outstanding principal and accrued but unpaid interest.
On December 12, 2002, the Company issued a convertible promissory note bearing
interest at the rate of 8% per annum in the principle amount of Fifty Thousand
Dollars ($50,000) to Fidra Holdings Ltd. Under the terms of the convertible
promissory note, the holder of the note is entitled to convert all sums due
under the December12 Note for $.50 per share. As of April 14, 2002, the December
12 Note has not been converted.
On December 24, 2002, the Company issued a Convertible Promissory Note bearing
interest at the rate of 8% per annum in the principle amount of Ten Thousand
Dollars ($10,000). Under the terms of the Convertible Promissory Note, the
holder of the Note is entitled to convert all sums due under the December 24
Note for $0.50 per share. As of April 14, 2002, the December 24 Note has not
been converted.
On December 27, 2002, the Company issued a Convertible Promissory Note bearing
interest at the rate of 8% per annum in the principle amount of Ten Thousand
Dollars ($10,000). Under the terms of the Convertible Promissory Note, the
holder of the Note is entitled to convert all sums due under the December 27
Note for $0.50 per share. As of April 14, 2002, the December 27 Note has not
been converted.
Convertible Line of Credit
On August 14, 2002 the Company entered into an agreement for a $1,000,000
Convertible Line of Credit. Under the Convertible Line of Credit the Company was
to drawdown the funds in five monthly installments through November 15, 2002.
The transaction was never completed due to the funder and contracting party
defaulting in its funding obligation. The Company did not receive any proceeds
and canceled the agreement for the Convertible Line of Credit on March 28, 2003
by board action.
Private Equity Line of Credit
-----------------------------
On January 16, 2002, the Company and Prima Capital Growth Fund LLC (the
"Investor") entered into the Private Equity Line of Credit Agreement (the "PELC
Agreement"), a Registration Rights Agreement and Warrants to purchase up to
600,000 shares of the Company's Common Stock at $1.00 per share. Under the PELC
Agreement, the Company was to issue and sell, from time to time, shares of its
Common Stock for cash consideration up to an aggregate of $30 million (the "PELC
Facility"). The Company intended to use the PELC Facility to make investments in
GeneThera from time to time, consistent with approved budgets and the attainment
of planned milestones, to fund continuing operations.
Pursuant to the PELC Agreement, the Company was required to pay a commitment fee
of $300,000 and to file a Registration Statement relating to shares that may be
sold under the PELC Facility.. On March 4, 2002, the Investor agreed to amend
the PELC Agreement to permit the payment of the commitment fee upon the earlier
to occur of (i) the Company receiving $800,000 of equity financing prior to the
filing of the Registration Statement; or (ii) September 15, 2002. The amendment
also provided the Investor with the right, but not the obligation, to convert
all or any portion of the commitment fee to shares of Common Stock based upon a
value of $1.00 per share. The Company recorded the commission fee of $300,000 as
deferred cost to be amortized over a period of 36 months. On September 28, 2002,
the option to convert into shares of common stock was exercised. After a 2:1
forward stock split, 660,000 shares of common stock were issued. After the
660,000 shares of common stock were issued, the transaction was never completed
due to the funder and contracting party defaulting in its funding obligation.
The Company did not receive any proceeds and canceled the agreement for the
Private Equity Line of Credit on March 28, 2003 by board action. We fully paid
the remaining commitment fees.
FORWARD LOOKING INFORMATION
In the discussion above (and elsewhere in this report) regarding the Company's
business, any statement of its future expectations, including without
limitation, future revenues and earnings (losses), plans and objectives for
future operations, future agreements, future economic performance or expected
operational developments and all other statements regarding the future are
"forward-looking" statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as
amended, and as that term is defined in the Private Securities Litigation Reform
Act of 1995. The Company intends that the forward-looking statements be subject
to the safe harbors created thereby. These forward-looking statements are based
on the Company's strategic plans and involve risks and uncertainties that may
cause actual results to differ materially from 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," "expect," "anticipate," "estimate," "believe," "intend," or
"project". This report contains forward-looking statements that address, among
other things,
-- our financing plans,
-- regulatory environments in which we operate or plan to operate, and
-- trends affecting our financial condition or results of operations, the
impact of competition, the start-up of certain operations and acquisition
opportunities.
Factors, risks and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements herein include (the
"Cautionary Statements"), without limitation: C The Company's ability to raise
capital and to meet its obligations as they come due, C The Company's ability to
execute its business strategy in a competitive environment,
-- The Company's degree of financial leverage,
-- Risks associated with acquisitions and the integration thereof,
-- Risks associated with development stage companies,
-- Regulatory considerations,
-- The impact of competitive services and pricing,
-- The Company's ability to protect proprietary information and processes,
including without limiting the assays under development by its subsidiary,
GeneThera,
-- The Company's ability to retain key personnel, and
* Other risks referenced from time to time in the Company's filings with the
Securities and Exchange Commission. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by the Cautionary
Statements. The Company does not undertake any obligations to release
publicly any revisions to such forward-looking statements to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
ITEM 3. CONTROLS AND PROCEDURES.
As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the
"Exchange Act"), we carried out an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures within the 90 days prior
to the filing date of this report. This evaluation was carried out under the
supervision and with the participation of our Chief Executive Officer and Chief
Financial Officer. Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures
are effective in timely alerting management to material information relating to
us that is required to be included in our periodic SEC filings. There have been
no significant changes in our internal controls or in other factors that could
significantly affect internal controls subsequent to the date we carried out our
evaluation.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in our reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act is
accumulated and communicated to management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
No defaults upon senior securities.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders as of June 30,
2003. The Company did prepare during the first three months ending June
30, 2003, a Preliminary Information Statement which was submitted on
the 8th day of April, 2003. A Definitive Information Statement was
submitted and filed on the 25th day of April, 2003, and subsequently
mailed to the security holders of record.
The proposals consist of changing the Company's name from Hand Brand
Distribution, Inc., to GeneThera, Inc., to align the Company's name
with its ongoing primary business operations. The second proposal seeks
to amend the Company's authorized capital which consists of 3,125,000
shares of Common Stock having a $0.001 par value per share to
authorized capital of 100,000,000 shares of Common Stock and 10,000,000
shares of Preferred Stock, both Common and Preferred shares having a
par value of $0.001. We expect to act upon the proposed amendments with
the written consents by the end of May, 2003.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K.
(A) Financial Statements
Reference is made to the financial statements listed on the Index
to Financial Statements in this Form 10-QSB.
(B) Exhibits
99.1 Certification of the President and Chief Executive
Officer
99.2 Certification of the Chief Financial Officer
(C) Reports on Form 8-K
1. Form 8-K filed in March, 2003, canceling the original
contract to acquire GeneThera, Inc., canceling Family Health News, Inc.
sale, canceling Private Credit Line, canceling previous Schedule 14C
Submissions.
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GENETHERA, INC.
Date: August 20, 2003
By: /s/ Antonio Milici, M.D., Ph.D.
-------------------------------
Antonio Milici, M.D., Ph.D.
Chief Executive Officer
By: /s/ Tannya L. Irizarry
----------------------
Tannya L. Irizarry
Chief Financial Officer
CERTIFICATION
I, Antonio Milici, M.D., Ph.D., Chief Executive Officer of GeneThera, Inc.,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of GeneThera, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial report; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and to the audit committee of registrant's board of
directors (or persons fulfilling the equivalent function):
b) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
c) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial report.
By: /s/ Antonio Milici, M.D., Ph.D.
---------------------------------
Antonio Milici, M.D., Ph.D.
Chief Executive Officer
Dated: August 20, 2003
CERTIFICATION
I, Tannya L. Irizarry, Chief Financial Officer of GeneThera, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of GeneThera, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial report; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and to the audit committee of registrant's board of
directors (or persons fulfilling the equivalent function):
b) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
c) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial report.
By: /s/ Tannya L. Irizarry
------------------------
Tannya L. Irizarry
Chief Financial Officer
Dated: August 20, 2003