SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2013
Commission File No. 000-27237
(Exact name of small Business Issuer as specified in its Charter)
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
7577 W. 103rd Ave. Suite 212, Westminster, CO 80021
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (303) 439-2085
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
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [x] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [ ]
Smaller reporting company [x]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes [ ] No [x]
State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 26,960,596 Shares of $.001 par value Common Stock outstanding as of March 31, 2013 and Series A 4,600 Shares, and Series B 15,410,000 shares of $.001 par value Preferred Stock outstanding as of May 20, 2013.
Consolidated Balance Sheets
March 31, 2013
December 31, 2012
Total current assets
Property and equipment
Office and laboratory equipment and leasehold improvements
Less: Accumulated depreciation
Total property and equipment, net
LIABILITIES & STOCKHOLDERS' DEFICIT
Accounts payable-related party
Convertible notes payable
Loan from shareholder
Series A preferred stock, par value $0.001 per share, 20,000,000
shares authorized, 4,600 shares shares issued and outstanding
as of March 31, 2013 and December 31, 2012, respectively
Series B preferred stock, par value $0.001 per share, 30,000,000
shares authorized, 15,410,000 shares issued and outstanding
as of March 31, 2013 and December 31, 2012, respectively
Common stock, par value $0.001 per share, 300,000,000
shares authorized, 26,960,596 and 25,960,596 shares issued and
outstanding as of March 31, 2013 and December 31, 2012, respectively
Additional paid-in capital
Deficit accumulated during the development stage
Total stockholders' deficit of Genethera, Inc.
Total stockholders’ deficit
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT
See accompanying notes to these unaudited consolidated financial statements.
Consolidated Statements of Expenses
Three Months Ended
General and administrative expenses
Total operating expenses
Loss from operations
Foreign exchange loss
Total other expense
Net loss attributable to non-controlling interest
Net loss attributable to Genethera, Inc.
Loss per common share - Basic and diluted
Weighted average common shares outstanding -
Basic and diluted
See accompanying notes to these unaudited consolidated financial statements.
Consolidated Statements of Cash Flows
Three Months Ended
Cash flows from operating activities
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Changes in operating assets and liabilities:
Accounts receivable - related parties
Accounts payable - related parties
Accounts payable and accrued expenses
Net cash used in operating activities
Cash flows from financing activities
Proceeds from issuance of stock
Proceeds from convertible notes
Net cash provided by financing activities
Net effect of exchange rates change
Net increase in cash
Cash at the beginning of the year
Cash at the end of the year
See accompanying notes to these unaudited consolidated financial statements.
Notes to Consolidated Financial Statements
NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS
The consolidated financial statements include GeneThera, Inc., its wholly owned subsidiary GeneThera, Inc. (Colorado) and its 90% owned Mexico subsidiary, Applied Genetics S.A. de C.V. (“Applied Genetics”), (collectively “GeneThera” or the “Company”). On January 3, 2012, the Company obtained, at no additional cost to the Company, 40% of the shares of Applied Genetics in addition to 50% of the shares already owned by the Company.
GeneThera is a biotechnology company that develops molecular assays for the detection of food contaminating pathogens, veterinary diseases and genetically modified organisms.
The accompanying unaudited interim consolidated financial statements of GeneThera have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year ending December 31, 2012, as reported in Form 10-K, have been omitted.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Certain amounts in prior periods have been reclassified to conform to current period presentation.
Non-controlling interests are recorded for the entities that are consolidated but are not wholly owned by the Company. Non-controlling interest recorded in these Consolidated Financial Statements is comprised of 10% of the shares of Applied Genetics, the Company's subsidiary in Mexico, of which at March 31, 2013, the Company owns 90%.
NOTE 3 – GOING CONCERN
As shown in the accompanying consolidated financial statements, GeneThera had an accumulated deficit and a working capital deficit as of March 31, 2013. These conditions raise substantial doubt as to GeneThera’s ability to continue as a going concern. Management’s plan with regard to these matters includes raising working capital and significant assets and resources to assure GeneThera’s viability, through private or public equity offerings, and/or debt financing, and/or through the acquisition of new business or private ventures. The financial statements do not include any adjustments that might be necessary if GeneThera is unable to continue as a going concern.
NOTE 4 – RELATED PARTY TRANSACTIONS
The Company has an outstanding loan payable to Antonio Milici, its President and shareholder, amounting to $645,271 as of March 31, 2013 and December 31, 2012. This outstanding loan to the Company is unsecured and non-interest bearing.
The Company owes Setna Holdings, a related party $178,461 and $173,573 as of March 31, 2013 and December 31, 2012, respectively. The total is non-interest bearing and due on demand.
NOTE 5 – SHAREHOLDER’S EQUITY
On January 17, 2012 the Company issued 1,000,000 common shares for services, valued at $100,000. $200 in cash was received from the consultant as consideration for these services.
Item 2. Management's Discussion and Analysis and Results of Operation
The following discussion and analysis should be read in conjunction with the financial statements and notes thereto that appear elsewhere herein.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
Sections of this Form 10-Q, including the Management's Discussion and Analysis or Plan of Operation, contain "forward-looking statements". These forward-looking statements are subject to risks and uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. You should not unduly rely on these statements. Forward-looking statements involve assumptions and describe our plans, strategies, and expectations. You can generally identify a forward-looking statement by words such as may, will, should, would, could, plan, goal, potential, expect, anticipate, estimate, believe, intend, project, and similar words and variations thereof. This report contains forward-looking statements that address, among other things,
* Our financing plans,
* Regulatory environments in which we operate or plan to operate, and
* Trends affecting our financial condition or results of operations, the impact of competition, the start-up of certain operations and acquisition opportunities.
Factors, risks, and uncertainties that could cause actual results to differ materially from those in the forward-looking statements ("Cautionary Statements") include, among others,
* Our ability to raise capital,
* Our ability to execute our business strategy in a very competitive environment,
* Our degree of financial leverage, risks associated with our acquiring and integrating companies into our own,
* Risks relating to rapidly developing technology, and regulatory considerations;
* Risks related to international economies,
* Risks related to market acceptance and demand for our products and services,
* The impact of competitive services and pricing, and
* Other risks referenced from time to time in our SEC filings.
All subsequent written and oral forward-looking statements attributable to us, or anyone acting on our behalf, are expressly qualified in their entirety by the cautionary statements. We do not undertake any obligations to publicly release any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect unanticipated events that may occur.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2013, COMPARED TO THE THREE MONTHS ENDED March 31, 2013
We did not generate any revenue for the three months ended March 31, 2013 and 2012.
We had total operating expenses of $278,612 for the three months ended March 31, 2013, compared to total operating expenses of $515,117 for the three months ended March 31, 2012, an decrease of $236,505 from the prior period. The decrease in expenses was largely due to an decrease in general and administrative to $160,013 for the three months ended March 31, 2013, compared to $206,820 for the three months ended March 31, 2012, a decrease of $46,807 from the prior period, and an decrease in laboratory expenses to $17,736 for the three months ended March 31, 2013, compared to $34,863 for the three months ended March 31, 2012, an decrease of $17,127 from the prior period.
We had a net loss of $286,306 for the three months ended March 31, 2013, compared to a net loss of $514,321 for the three months ended March 31, 2012, a decrease of $228,015 from the prior period.
LIQUIDITY AND CAPITAL RESOURCES
We had total assets as of March 31, 2013 of $51,223, which included cash of $1,121, accounts receivable related party of $0, net property and equipment of $43,102, and total other assets of $7,000.
We had total liabilities of $4,805,078 as of March 31, 2013, which included $1,114,258 of accounts payable, $1,973,572 of accrued expenses, $10,800 of notes payable, $882,716 of convertible notes payable, $645,471 of loan from shareholder and $178,461 to related party.
We had negative working capital of $4,803,957 and a deficit accumulated during the development stage of $22,632,724.
We had net cash used in operating activities of $1,456 for the three months ended March 31, 2013, which mainly included $289,293 of net loss largely offset by a decrease of $175,280 of accounts payable and accrued liabilities.
It is estimated that we will require outside capital for the remainder of 2013 for the commercialization of GeneThera molecular assays as well as the development of our therapeutic vaccines. The Company intends to raise these funds by means of one or more private offerings of debt or equity securities or both and also generating revenue from Mexico. Currently the Company is in discussions with one group to obtain financing through either debt and/or equity. No definitive agreements have been signed. There are no guarantees whether the Company will be able to secure such a financing, and if the financing is secured, there are no guarantees whether the Company can achieve the goals laid out in its business plan fully. We will require significant additional funding in order to achieve our business plan.
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, and 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.
In the future, we may be required to seek additional capital by selling debt or equity securities, selling assets, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then shareholders.
Applied Genetics marketing agreement with Nutrición Avanzada
On February 1, 2012, Applied Genetics, a 90% owned subsidiary of GeneThera, Inc., entered into a sales and marketing agreement with Nutrición Avanzada. According to the terms of the agreement, GeneThera, Inc., through its subsidiary Applied Genetics, granted Nutrición Avanzada the exclusive right to purchase, market, and distribute the GeneThera Field Collection System product in Mexico. Applied Genetics will pay Nutrición Avanzada a 30% commission of the total price of each product. The initial term of the agreement is for a period of one year. After a year, the agreement will not be renewed.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on our evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are not designed at a reasonable assurance level and are not effective due to limited segregation of duties to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
We regularly review our system of internal control over financial reporting to ensure we maintain an effective internal control environment. There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On June 6, 2006, the Internal Revenue Service filed a Federal Tax Lien at the Jefferson County Recorder in the State of Colorado in the amount of $29,321. The Company has not satisfied the judgment.
On June 29, 2007, the Internal Revenue Service filed a Federal Tax Lien at the Jefferson County Recorder in the State of Colorado in the amount of $1,983. The Company has not satisfied the judgment.
On June 6, 2008, Mark A. Shoemaker filed a Civil Judgment at the LA County/Recorder of Deeds Court in the State of California the amount of $37,721. The Company has not satisfied the judgment.
In June 2009, James Tufts filed a complaint at the Small Claims Court in Jefferson County, Colorado in the amount of $4,000 plus expenses from a London trip. The Company has not satisfied the judgment.
On June 26, 2009, Enterprise Leasing Company of Denver filed a Civil Judgment at the Jefferson County District Court in the State of Colorado in the amount of $78,178. The Company has not satisfied the judgment.
On August 17, 2010, Banc of America Leasing filed a Civil Judgment at the Oakland County District in Troy, Michigan in the amount of $24,002. The Company has not satisfied the judgment.
On September 23, 2010, Liberty Acquisitions filed a Civil Judgment at the Jefferson County Court in the State of Colorado in the amount of $3,300. The Company has not satisfied the judgment.
On February 10, 2009, Centennial Credit Corporation filed a Civil Judgment at the Jefferson County Court in the State of Colorado in the amount of $967. The Company has not satisfied the judgment.
On August 29, 2011, the Company had a court hearing concerning a litigation filed by The Park III related to unpaid rent according to our lease agreement. The District Court of Boulder (Colorado) entered a judgment against the Company in the amount of $77,000. The Company has not satisfied the judgment.
On January 31, 2013, the Company had a judgment by default in the amount of $19,586. Laboratory equipment was arbitrarily and improperly seized from the Company premises. These equipment were not Company’s properties since were loaned to the Company as part of an ongoing research project. The Company strongly argues that the equipment was unlawfully removed from its facilities. The Company has retained a law firm to pursue litigations against all the parties that caused to illegally and arbitrarily seize the equipment without proper procedure or cause.
Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K, filed with the Commission on April 11, 2012 and investors are encouraged to review such risk factors prior to making an investment in the Company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On January 17, 2013, the Company issued 1,000,000 shares of its common stock for cash for total proceeds of $200, a nominal fee.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances did not involve a public offering, the recipients took the securities for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
Item 3. Defaults upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
Description of Exhibit
Employment Agreement with Antonio Milici (CEO)
Employment Agreement with Tannya L. Irizarry (CFO)
Marketing and Sales Agreement with Nutrición Avanzada
Agreement with National University Autonomous of Mexico
Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certificate of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certificate of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certificate of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
XBRL Instance Document
XBRL Schema Document
XBRL Calculation Linkbase Document
XBRL Definition Linkbase Document
XBRL Label Linkbase Document
XBRL Presentation Linkbase Document
* Attached hereto.
(1) Filed as an exhibit to our Report on Form 8-K, filed with the Commission on March 5, 2012 and incorporated herein by reference.
(#) XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.
GENETHERA, INC.By: s/ Antonio Milici
Name: Antonio MiliciTitle: President and Chief Executive Officer (Principal Executive Officer)
May 20, 2013