See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to the unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
Note 1 – Organization and nature of operations and summary of significant accounting policies
Organization and nature of operations
The consolidated financial statements include GeneThera, Inc. and its wholly owned subsidiary GeneThera, Inc. (Colorado) (collectively, the “Company”). The Company had a long-standing research collaboration with GTI Research.
The Company is a biotechnology company that develops molecular assays and therapeutics for the detection and treatment for COVID-19 and other zoonotic diseases.
Basis of Presentation – Unaudited Financial Information
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited condensed consolidated financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2021 and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC.
Use of estimates
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain prior period amounts in the consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation.
Principles of consolidation
The consolidated financial statements include the accounts of the Company and its subsidiary. All intercompany accounts are eliminated upon consolidation.
Cash and cash equivalents
Cash equivalents are highly liquid investments with an original maturity of three months or less.
Fair Value of Financial Instruments
For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amount of the Company’s short-term financial instruments approximates fair value due to the relatively short period to maturity for these instruments.
Property and equipment, net
Property and equipment consist primarily of office and laboratory equipment, leasehold improvements, vehicle, and is stated at cost. Depreciation is computed on a straight-line basis over the estimated useful lives ranging from five to seven years. Leasehold improvements are amortized over the shorter of their economic lives or lease terms.
Fair Value of Financial Instruments
The Company follows ASC 820-10 of the FASB Accounting Standards Codification to measure the fair value of its financial instruments and disclosures about fair value of its financial instruments. ASC 820-10 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP) and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820-10 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The three (3) levels of fair value hierarchy defined by ASC 820-10 are described below:
Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
| |
Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
| |
Level 3 | Pricing inputs that are generally unobservable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, inventory, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values because of the short maturity of these instruments.
Transactions involving related parties typically cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist.
Reclassifications
Certain prior period amounts may have been reclassified to conform to current period presentation.
Impairment of Long-Lived Assets
The Company reviews the recoverability of its long-lived assets to determine whether events or changes in circumstances occurred that indicate the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the ability to recover the carrying value of the asset from the expected future cash flows of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between the estimated fair value and carrying value. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.
Revenue recognition
There were no revenues during the six months ended June 30, 2022 and 2021, respectively.
The Company follows the FASB Accounting Standards Codification ASC 606 – Revenues from Contracts with Customers for revenue recognition. The Company considers revenue realized or realizable and earned when all the following criteria are met:
1) | Identification of the contract with a customer; |
2) | Identification of the performance obligations in the contract; |
3) | Determination of the transaction price; |
4) | Allocation of the transaction price to the performance obligations in the contract; and |
5) | Recognition of revenue when or as a performance obligation is satisfied. Revenue is recognized when each performance obligation is satisfied by the entity. An estimate of the variable consideration or performance obligations that an entity ultimately expects to be entitled to is included in the transaction price, and revenue is recognized upon satisfaction of the related performance obligation(s). An implicit or explicit significant financing component is taken into consideration. IP licenses must be analyzed. Each contract with customers is analyzed for multiple elements if any element must stand alone. |
Stock-Based Compensation
Stock-based compensation is accounted for under FASB ASC Topic No. 718 – Compensation – Stock Compensation. The guidance requires recognition in the financial statements of the cost of employee services received in exchange for an award of equity instruments over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period). The guidance also requires measurement of the cost of employee services received in exchange for an award based on the grant-date fair value of the award. The Company accounts for non-employee share-based awards in accordance with guidance related to equity instruments that are issued to other than employees for acquisition, or in conjunction with selling, goods or services.
Income taxes
Income taxes are accounted for in accordance with the provisions of FASB ASC Topic No. 740 - Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.
Basic and diluted net loss per common share
Basic and diluted net loss per share calculations are presented in accordance with FASB ASC Topic No. 260 – Earnings per Share and are calculated on the basis of the weighted average number of common shares outstanding during the period. Diluted per share calculations includes the dilutive effect of common stock equivalents in years with net income. As the Company is in a loss position, any calculation of the dilutive effects of the Company’s convertible securities would reduce the loss per share amount, and, as such, the Company will not perform the calculation.
Recently issued accounting pronouncements
Management has evaluated all recent accounting pronouncements as issued by the FASB in the form of Accounting Standards Updates (“ASU”) through the date these financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the financial statements of the Company.
Note 2- Going Concern
As reflected in the accompanying consolidated financial statements, the Company has an accumulated deficit of $32,552,129 and negative working capital of $8,418,512 as of June 30, 2022. This raises substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital and implement its business plan. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.
Presently, the Company is considering ways to apply its molecular robotic technology to address the COVID-19 pandemic. Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.
Note 3 – Property and Equipment
As of June 30, 2022, the Company had a vehicle with a net book value of $2,640.
Note 4 – Related party transactions
The Company has an outstanding loan payable and accrued interest to Antonio Milici, its CEO and stockholder amounting to $679,092 as of June 30, 2022 and December 31, 2021, respectively. This outstanding loan to the Company is unsecured and bears interest at 2.41%. The Company has an outstanding loan and accrued interest payable to Tannya Irizarry, its interim CFO interim and stockholder, amounting to $43,477 and $58,704 as of June 30, 2022 and December 31, 2021, respectively. This outstanding loan to the Company is unsecured and bears interest at 8%.
Tannya Irizarry owns 50% of GTI Corporate Transfer Agents, LLC, and the Company’s transfer agency. During the six months ended June 30, 2022 and 2021, the Company made payments to GTI Corporate Transfer Agents, LLC in the amounts of $1,700 and $80, respectively.
During the three months ended June 30, 2022, the Company:
| · | issued 816,667 shares of common stock to a director who joined the Board of Directors in the same time frame for services and recognized an expense of $24,500; |
| · | issued 433,333 shares of common stock to the same director upon conversion of his convertible notes payable of $13,000 at $0.03 per share. |
On May 9, 2021 the Company issued 3,000,000 shares of common stock to a principal of GTI Corporate Transfer Agents, LLC of which an officer of the Company owns 50%. The Company recorded an expense of $180,000 based on the closing stock quote on the date of issuance.
Note 5 – Accrued expenses
The Company’s accrued expenses consisted of the following:
| | June 30, 2022 | | | December 31, 2021 | |
Accrued officer salaries (see below) | | $ | 6,191,623 | | | $ | 5,958,623 | |
Accrued interest | | | 95,646 | | | | 94,534 | |
Other | | | 1,233,303 | | | | 1,233,494 | |
Accrued expenses | | $ | 7,520,572 | | | $ | 7,286,651 | |
Note 6 – Convertible notes payable
The Company received $13,000 in proceeds from a director of the Company in exchange for convertible notes during the six months ended June 30, 2022. The notes were converted to 433,000 shares of common stock during this same period at $0.03 per share resulting in a zero balance as of June 30, 2022.
The Company’s issued convertible notes are due on demand, bearing interest at an annual rate of 8%. The notes are convertible into shares of Company common stock at a conversion price of $0.01 to $0.05 per share. As of June 30, 2022 and December 31, 2021, the total outstanding principal and interest is $54,500.
As of June 30, 2021, an analysis of the principal amount of convertible notes payable that have elected conversion to common stock amounted to $366,000. The Company’s transfer agent has been constrained in its efforts to issue the common stock for these convertible notes due to the noncompliance of the Company’s filing requirements. The Company has ceased accruing interest on these convertible notes but continues to accrue interest on the remaining convertible notes of $54,500. The convertible notes that have elected conversion without the stock being issued have been included in ‘Accrued liabilities’ on the Balance Sheet.
Note 7 – Shareholders’ equity
Preferred Stock
The Company has authorized 20,000,000 shares of Series A Preferred Stock, $0.001 par value, and 30,000,000 shares of Series B Preferred Stock, $0.001 par value.
As of June 30, 2022 and December 31, 2021, the Company had 0 shares Series A Preferred Stock issued and outstanding respectively.
As of June 30, 2022 and December 31, 2021, the Company had 26,038,572 shares of Series B Preferred Stock issued and outstanding respectively.
Common stock
The Company has authorized 300,000,000 shares of its common stock, $0.001 par value. The Company had issued and outstanding 35,333,319 and 34,083,319 shares of common stock as of June 30, 2022 and December 31, 2021, respectively.
During the three months ended June 30, 2022, the Company issued 816,667 shares of common stock to a new director of the Company for services and recognized a stock based consulting expense of $24,500. During the same period, the Company issued 433,333 shares of common stock to this director upon conversion of his convertible notes payable of $13,000 at $0.03 per share.
On March 18, 2021, the Company issued 1,500,000 restricted common shares to Venus Capital Fund, LLC for consulting services related to security and capital raise efforts. The Company recorded a consulting expense of $55,500.
On May 9, 2021 the Company issued 3,000,000 restricted shares of common stock to a principal of GTI Corporate Transfer Agents, LLC of which an officer of the Company owns 50%. The Company recorded an expense of $180,000 based on the closing stock quote on the date of issuance.
Note 8 – Commitments
Employment Agreements
In 2022, the Company renewed the five-year employment agreements with its chief executive and scientific officer and its chief administrative and financial officer. The agreements provide for compensation of $21,500 and $17,333 per month, respectively, and expires on January 31, 2025.
Office Space Lease
The Company has a temporary office space at 3051 W 105th Ave. #350251, in Westminster, CO as of June 30, 2021. The lease term does not warrant the establishment of a right of use asset or liability. No asset or liability has been recorded on the balance sheet.
The impact of COVID-19 on the Company is unknown at this time. The financial consequences of this situation cause uncertainty as to the future and its effects on the economy and the Company.
The Russian-Ukraine conflict is a global concern. The Company does not have any direct exposure to Russia or Ukraine through its operations, employee base, investments or sanctions. We have no basis to evaluate the possible risks of this conflict.
Note 9 – Subsequent events
On July 9, 2022 the Company entered into a convertible note payable with a director of the Company for $5,000 bearing interest at 8% per annum and convertible at $0.03 per share.
