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This Annual Report on Form 10-K/A contains 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 the Private Securities Litigation Reform Act of 1995, which are subject to the “safe harbor” created by those sections / acts. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts are “forward-looking statements” for purposes of these provisions. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions intended to identify forward-looking statements.
We are a biotechnology company dedicated to eradicating zoonotic diseases such as COVID-19 (Novel Coronavirus), Paratuberculosis (Johne’s disease), Mad Cow Disease, Chronic Wasting Disease, and E.coli and Salmonella infections, by applying our advanced proprietary molecular sciences and technologies. Diseases of terrestrial, avian and aquatic life animals influence a number of economic and global security issues, including food for an increasing world population, access to international trade, species conservation and protection of those endangered, and economic growth in developing and re-organizing nations. Because more than 80% of animal bacteria and viruses are zoonotic (i.e. transmissible between humans and animals, causing infection in both species), their management and prevention are crucial to improving public health on a global scale. Zoonotic diseases are the major cause of global pandemics throughout human history. These diseases are capable of altering human history by causing significant loss of life, and major economic and social upheaval. We focus on developing novel molecular diagnostic tests, therapeutics, and vaccines through our proprietary robotic technologies with the belief that improved technologies and methodologies must be developed and implemented in order to aid mankind’s control of emerging diseases in animals and in humans. We believe that, if not properly addressed, diseases in animals will continue to cause serious and growing global problems with respect to economics, human health and biodiversity.
We previously developed proprietary diagnostic assays for use in the agricultural and veterinary markets, and we intent to develop proprietary, genetics-based diagnostic assays and vaccine solutions through our robotic technologies with the goal of controlling the spread of zoonotic infection in the human population. Our mission is to continually apply our scientific research to the more effective management of zoonotic diseases and, in so doing, realize the commercial potential of our molecular biotechnologies.
We will require significant additional funding in order to implement our business plan. There is no guarantee that we will be successful in securing the required financing, and if such financing is secured, there is no guarantee that we will fully achieve our business goals.
COVID-19 is an infectious disease caused by SARS- CoV-2. Common symptoms include fever, cough and shortness of breath. Other symptoms may include muscle pain, diarrhea, sore throat, and loss of smell. The majority of cases result in mild symptoms. However, some cases progress to viral pneumonia and multi-organ failure. SARS-Cov-2 coronavirus is the latest example of a long list of viruses and bacteria that can cause widespread global infection in humans. As of early June 2020, the number of infectious cases worldwide were close to seven and a half million with more than 415,000 deaths. In December 2019, SARS- Cov-2 was first discovered in the city of Wuhan, China. In February 2020, the World Health Organization (WHO) declared COVID-19 a global pandemic. The SARS-Cov-2 is a genetically mutated strain of the SARS-Cov-1 virus that caused SARS in 2003-2004 epidemic. Coronaviruses are opportunistic viruses that are harbor in the Asian bat population. Pangolins, nocturnal mammals, native to Asia and Africa especially tropical forests, are the most likely intermediate carriers of the SARS-Cov-2 between bats and humans. In 2002–03, Civet cats, nocturnal mammals found in Asia and Africa sold for meat in local markets of China’s Yunnan province carried the SARS virus from bats to humans.
SARS-CoV-1 and 2’s abilities to genetically mutate through passages into humans is one of the reasons of their enhanced virulence. Coronaviruses are easily transmitted by human-to-human close contact primarily through saliva droplets. Coronaviruses are “positive single stranded (ss) RNA virus. These types of viruses can replicate into human cells without using the host DNA as a template. Positive single stranded RNA viruses have genetic material that can function both as genome and messenger RNA. This feature allows the Coronaviruses to work more efficiently once it infects its target. SARS-Cov-2 is the etiological cause of COVID-19, a highly infectious respiratory disease causing an atypical pneumonia.
The mechanism of infections to humans is through saliva droplets caused by persistent cough and sneezing. Indirect contact with contaminated surfaces is another way of infection although it is not a very efficient way of transmission. Viral RNA is also being found in the stools of infected patients. SARS-Cov-2 is able to enter human cells by binding to the ACE2 cell receptor. Once inside the cells, the virus starts the process of replication by using its own RNA polymerase enzyme. The incubation time COVID-19 varies between 2-14 days. It is not clear if during the incubation period, the virus is able to infect humans.
Major clinical symptoms and epidemiological risk factors related to COVID-19:
| | Organ failure (terminal cases) |
| | Higher mortality rate compared to influenza (>0.1-1%) |
| | Pre-existing medical conditions (cancer, cardiovascular diseases, diabetes, immunodeficiency diseases) |
| | Mortality Age factor (individuals >65yrs old) |
| | Saliva droplets transmission |
| | Virus can survive in the air up to 3 hours and on surfaces up to 72 hours |
| | Unknown asymptomatic transmission |
Epidemiological evidences support the hypothesis that SARS-CoV-2 neuronal cells in the medulla oblongata region of the brain could become infected with the virus. Anosmia (loss of smell) and ageusia (loss of taste) are reported to be early signs of COVID-19. In some cases the neuronal infection of the medulla oblongata can contribute to a patient’s breathing problems and respiratory failure within five days from the infection. SARS-CoV-2 enters human cell by binding the ACE2 receptor. The ACE2 protein regulates cardiovascular function and is express in many human cells including lung, heart, kidney, intestine, and brain tissue. There are multiple ways the virus could invade the central nervous system. A possible mechanism of action is that the SARS-CoV-2 is in the blood of infected patients and through this infectious route binds to ACE2 receptors in the endothelial cells of the blood capillaries in the brain, breaching the blood-brain barrier and invading neurons through that route. A breached blood-brain barrier could also cause brain swelling, compressing the brain stem and affecting respiration. The cells innervating the lungs could also become infected, making involuntary respiration more difficult.
Evidence from experiments in mice also suggest that the virus might target the nervous system through the olfactory bulb. A study published in 2008 (Netland et al. J Virology 2008 Aug (15): 7264-7275) showed that SARS-CoV-1 — the virus that caused the SARS outbreak in 2003 — entered the brains of transgenic mice expressing human ACE2 through neurons in the nose. The virus then rapidly spread to connecting nerve cells. The extensive nerve damage was the major cause of death, even though, low levels of the virus were detected in the animals’ lungs. It is therefore possible that the respiratory failure in patients with COVID-19 could be caused from the extensive neuronal damages in the cardiorespiratory area of the medulla oblongata.
Diagnostics assays and Treatment of COVID -19
Nasopharyngeal, oropharyngeal swabs and saliva specimen are collected from patients to detect the SARS-Cov-2 viral infection. Viral RNA is extracted from the swab and amplified using the Real Time Polymerase Chain reaction (RT-PCR) technology. The COVID-19 detection molecular assay is a multi-step procedure that requires up to 72 hours to obtain a result. Because of the complexity of the assay, a limited number of samples can be manually processed daily. Limitations in the number of samples to be process is the main reason of the spreading of the COVID-19. Automated systems such as the Roche COBA 8800 are capable of processing up to 4,000 samples/daily. However, due to the sheer number of potentially infected people globally, this system could not fully meet assay demand.
Currently, no treatment is available to treat COVID-19. Influenza vaccines are not effective to stop the spread of COVID-19 infection. Several COVID-19 vaccines are currently in Phase I clinical trials. Estimated development time is between 15-18 months. Alternatively, “off label” drug combination protocols have been used, with various degree of success, to treat COVID-19 patients.
Paratuberculosis, also known as Johne’s disease in Stage III clinical phase, is a worldwide problem in domestic livestock animals including dairy cattle, sheep and goats. A significant public health concern is associated with Paratuberculosis, which results from an infection with the Mycobacterium Avium Sub Paratuberculosis (MAP) bacteria. This bacterial organism grows very slowly, causes a gradually worsening disease condition, and is highly resistant to the infected animal’s immune defenses. Therefore, infected animals harbor the organism for years before they test positive or develop disease signs.
Major factors related to a MAP infection include:
| | Global widespread infection |
| | Reduction in milk production to 25%+ |
| | High culling rate which increases costs |
| | Link between MAP infection and Immunodeficiency Diseases |
| | Highest at-risk animals are young calves or pre-born |
| | Bacterium can survive pasteurization process |
| | MAP present in infant formula products |
| | MAP present in contaminated soil, water, dairy products |
| | Spread in herds can occur by fecal contamination, colostrum, milk, and trans placental |
| | For every “clinical stage” animal in a herd, there are 15-20 silently infected plus an additional 6-8 carriers |
Seventy to ninety percent of the herds worldwide are infected with MAP. Most of the infected animals do not show any clinical signs of the disease. The majority of infected animals are capable of shedding billions of bacteria mostly in the soil and milk without ever developing clinical signs of paratuberculosis and are responsible for the spreading of the disease to other animals and for the transmission of MAP to humans, mostly through milk. Lack of routine testing has resulted in the inability of managing MAP infection worldwide. MAP is resistant to conventional pasteurization protocols. Therefore, many of the dairy products, infant formula, and milk sold in stores are contaminated with the bacterium.
: Silent, subclinical, non-detectable infection. Typically, this stage occurs in all calves, heifers, and young stock less than two years of age and many adult animals exposed to small doses of disease-causing organisms. Infected animals at this early stage are rarely detected with currently available diagnostic tests, including fecal culture or serologic tests (ELISA). This stage progresses slowly over many months or years to stage II.
: Subclinical infection. Typically, this stage occurs in older heifers or adults. Animals at this stage appear healthy but are shedding adequate numbers of Mycobacterium Avian Para tuberculosis organisms in their manure to be detected on fecal culture. Blood tests will detect some, but not all animals at this stage. Blood test (ELISA) positive animals should be confirmed positive by fecal culture.
: Clinical Johne’s disease. It is categorized as any animal with advanced infection, the onset of which is often associated with a period of stress such as recent calving. Cattle at this stage have intermittent, watery pea-soup manure. Animals lose weight and gradually drop in milk production but continue to maintain a healthy appetite. Some animals appear to recover but often relapse in the next stress period. Most of these animals are shedding billions of organisms and are positive on culture. Most are positive on serologic tests (ELISA). Clinical signs often last several weeks to months before the animals are sent to slaughter in a thin, emaciated condition. In the final and terminal aspects of stage III of the fatal disease, animals become emaciated with fluid diarrhea and develop “bottle jaw.” The carcass may not pass meat inspection for human consumption in the later phases of stage III.
MAP and Immunodeficiency Diseases
A large number of studies show that several immunodeficiency diseases including, Crohn’s Disease (CD) a chronic inflammatory disease of the intestine and colon, Type 1 Diabetes and Multiple Sclerosis can be triggered by MAP. The bacterium is therefore a zoonotic infectious organism which can be transmitted through contaminate milk, infant formula and water.
MAP Related Immunodeficiency Diseases
| | Systemic Lupus Erythematosus |
Crohn’s disease is an inflammatory disease of the intestines that may affect any part of the gastrointestinal tract from anus to mouth, causing a wide variety of symptoms. It primarily causes abdominal pain, diarrhea (which may be bloody), vomiting, or weight loss, but may also cause complications outside of the gastrointestinal tract such as skin rashes, arthritis, and inflammation of the eye.
Crohn’s disease is an immunodeficiency disease, in which the body’s immune system attacks the gastrointestinal tract, causing inflammation. It is classified as a type of inflammatory bowel disease. There has been evidence of a genetic link to Crohn’s disease, putting individuals with siblings afflicted with the disease at higher risk. It is understood to have a large environmental component as evidenced by the higher number of cases in western industrialized nations. Males and females are equally affected. Smokers are three times more likely to develop Crohn’s disease than non-smokers. Crohn’s disease affects between 400,000 and 600,000 people in North America. Prevalence estimates for Northern Europe have ranged from 27–48 per 100,000. Crohn’s disease tends to present initially in the teens and twenties, with another peak incidence in the fifties to seventies; although, the disease can occur at any age.
Histological alterations found in Crohn’s patients’ intestinal tract, closely resembles similar tissue changes observed in the intestine of Johne’s disease cattle.
Similar to Paratuberculosis in cattle, no known pharmaceutical or surgical cure for Crohn’s disease currently exists for humans. Furthermore, Mycobacterium Avian Paratuberculosis have been found in human patients and we believe that individuals that are genetically predisposed could be contracting the disease through digestion of MAP - infected dairy products.
Molecular Robotic Artificial Intelligence (AI) Integrated Platform (MORAP)
It has become evident from the COVID-19 global pandemic that current systems and related technologies are not capable of preventing or successfully controlling the spreads of zoonotic infectious agents. One of the features of these infectious organisms is their ability to infect both people and animals while some carriers remain asymptomatic for a period of time or for the entire duration of the infection. We believe it is imperative that during pandemic outbreaks the entire population must be tested for the presence of infection agents. In addition, we believe that AI models should be developed to analyze data and forecast zoonotic diseases outbreak and ultimately prevent epidemics and pandemics from occurring in the future. GeneThera’s goal is to develop the infrastructure of a nationwide zoonotic infectious agents “alert shield” which would operate to predict, detect and manage the spread of pandemics and ultimately prevent pandemics from developing, similar to a “nuclear shield,” which is designed to detect incoming nuclear warheads and destroy them before they can be deployed. We believe that a nationwide network of AI controlled laboratory robotic systems may be able to perform such a task.
Our business model is based on an Ultra High Throughput Molecular Robotic/AI Platform (MORAP) which combines the use of advance robotic integrated systems with AI and Machine Learning (ML) software systems. Upon development, MORAP would encompass a nationwide network of interactive molecular laboratories operated using advanced integrated robotic and machine learning cloud-based software systems, which would be able to share data and interact with each other. We believe the MORAP would be capable of processing millions of samples and collecting, storing and analyzing data. We believe that the MORAP nationwide communications network could be accomplished through advanced cloud-based software systems, machine learning and Internet-of-Things (IoT) networks. MORAP could be readily replicated and scaled utilizing identical instrumentation and software.
We have designed the MORAP’s second generation molecular robotic/AI laboratory system prototype. Upon development subject to securing the requisite funding, each individual MORAP system would be capable, in a full-scale commercial platform, to perform over 100,000 samples/daily with minimal human intervention.
We envision the MORAP’s cloud-based AI-integrated software system with a dual purpose: 1) data obtained from each individual robotic laboratory system would be sent to the cloud to be stored where data could be analyzed and risk factors could be evaluated; and 2) each individual robotic laboratory system as part of the MORAP network could be configured in the cloud. The individual robotic laboratory systems, identical in each location, would be controlled and operated through MORAP’s cloud-based software.
The MORAP’s cloud software architecture would:
| | Collect and analyze data from each run performed by each robotic clone; |
| | Compare data between runs from individual robotic clones and determined risk factors; |
| | Send commands to operate each robotic clone; and |
| | Run diagnostics for each clone and alert and possibly fix any software or hardware problem the system may experience. |
Each individual robotic unit is composed of different equipment controlled by the integrated software. The MORAP cloud-base system would be function as the ‘brain’ of the entire network.
Our MORAP system is designed to targeted zoonotic diseases in general; however, we intend to focus our robotic/AI and therapeutic vaccine technologies on SARS-Cov-2 and MAP related diseases.
Zoonotic Diseases Vaccine Development
Our therapeutic vaccine technology is based on the use of CRISPR gene editing technology. CRISPR technology is a new technique that is based on the use of short RNA sequences complementary to a specific target gene. Once the RNA sequence binds to the gene, the gene is deactivated or “silenced” and no longer able to produce the specific protein. It also allows for the efficient, effective, and continuous testing, management and treatment of animal populations. We plan to deliver CRISPR modified RNA sequences motif using our proprietary PURIVAX technology. Our focus will be to develop CRISPR based vaccines for SARS-COV-2 and MAP. Our strategy is to silence the expression of gene pathways, which are activated by the infectious agents to gain entry into the host cells.
We have developed a large-scale process for highly purified and high viral titer (viral concentration) Adenovirus and AAV genetically engineered viruses. This technology enables us to develop Adenovirus and AAV-based recombinant DNA vaccines for zoonotic pathogens. Our PURIVAX is a purification system that dramatically improves biological purity and viral titer of recombinant Adenovirus and AAV vectors. PURIVAX is intended to completely eliminate toxic side effects associated with Adenoviruses and AAV vectors, thereby making it possible to develop highly immunogenic and safe recombinant DNA vaccines. Importantly, recombinant DNA (rDNA) vaccine technology represents a powerful tool for an innovative vaccine design process known as “genetic immunization.”
rAD and rAAV vectors are the ideal candidates for a gene delivery system. These viruses can efficiently deliver genetic material to both dividing and non-dividing cells, thereby overcoming some of the obstacles encountered with first generation retroviral vectors.
Equally important, rAD and rAAV are engineered virus genomes that contain no viral gene. One of the key features for rAD and rAAV is their ability to infect a large variety of cells. However, two technical challenges had to be overcome to fully utilize rAD and rAAV in the development of rDNA vaccines:
| | Lack of large-scale purification system; and |
Traditional technologies and first-generation chromatography processes are limited both in terms of purity and yield. Due to the limitation of these purification technologies, adequate viral titers may not be achieved. We believe the result is that there is currently no efficient system to deliver immunogenic genetic sequences into cells.
This is the significance of our PURIVAX, rAD and rAAV system for rDNA vaccine development. Succinctly stated, it is designed to be able to achieve both high purity and high viral titer (up to 10e16 viral particles/eluate) based on its propriety multi-resin anion exchange chromatography system. We believe that biological contaminants such as endogenous retrovirus, bacterial, mycoplasma, non-specific nucleic acids, lipids, proteins, carbohydrates and endotoxins are eliminated during the purification process.
We provide a comprehensive solution that allows diagnosing, treating and managing zoonotic diseases in animals and humans. Our proprietary Molecular Robotic/AI Platform and Therapeutic strategy (MORAPAT) is design to prevent the spread of disease from animals and at the same time, allow to better control of zoonotic infectious agents. More importantly, we believe that our platform could prevent the spread of viruses and bacteria into the food chain and subsequent infection of human population. An important part of this strategy is our ability to detect the presence of a low number of infected particles in different specimen tested for the presence of zoonotic virus and bacteria such as SARS- CoV-2 and MAP. Consequentially, our platform is not only able to detect infected animals, but can also prevent human infections.
We have developed a molecular system for the detection of Mycobacterium Avian Paratuberculosis in the milk of infected dairy cows. Samples from milk obtained from supermarket shelves were either ’spiked’ with different concentrations of Mycobacterium Avian Para tuberculosis or ‘naturally processed.’ The bacterial DNA was isolated using both, manual and robotic-based DNA extraction procedures and analyzed using the real time PCR technology. Using this methodology, we can detect between two (2) and twenty (20) bacterial particles from 10 ml of milk. We believe that our test will be very useful for early detection of Mycobacterium Avian Para tuberculosis, both in milk samples and in infected cows.
We are currently evaluating several robotic systems for nucleic acid extraction. We believe that we can further increase the sensitivity of the molecular assay by using robotic driven DNA and RNA extraction methods.
We are currently developing a vaccine for MAP infection. Our approach for developing this vaccine is based on the use our Molecular Robotic/AI Platform and Therapeutic (MORAPAT) technology which also includes our PURIVAX technology, genetically engineered Adenoviral and AVV, and CRISPR technology.
At the present time, we do not have sufficient financial resources to implement further development work; therefore, we will need to secure substantial funding to continue the development of the MAP vaccine.
To date, we have developed a prototype computer program to track samples that will be received and processed in our planned commercial laboratory. This program will initially be used to track samples that will be sent out and received by our laboratory. Upon raising the additional requisite funding, of which there is no guarantee, we will then work on improving the system in order to track samples during the different phases of DNA and RNA extraction procedures. In addition, we will continue to develop a database system to store and analyze data collected during sample analysis.
We anticipate that research and development, or R&D, will be the source for both assay development and vaccine design/development. If we are successful in developing assays for different diseases, we intend to formalize the procedure into a commercial application through a series of laboratories to be owned and operated by us. We anticipate that R&D will be ongoing during the life of the Company, as this is the source for new products to be introduced to the market. Our plan is to seek new innovations in the biotechnology field. We cannot assure that we will be successful in developing or validating any new assays or, if we are successful in developing and validating any such assays, that we can successfully commercialize them or earn profits from sales of those assays. Furthermore, we cannot assure that we will be able to design, develop, or successfully commercialize any vaccines as a result of our research and development efforts.
It is our intention to continue with the research and development and validation of the molecular tests and DNA vaccines. Future plans of the Company include initiating validation procedures for MAP and SARS-CoV-2 molecular tests.
In parallel, we will continue R&D phases for the MAP vaccine. We intend to initiate development of a SARS-CoV-2 vaccine. We plan on initiating an experimental animal protocol to determine the safety of our vaccines. Moreover, upon raising the necessary capital, we plan to initiate the experimental animal studies within 12-18 months.
We anticipate that R&D will be the source for both assay development and vaccine design/development. If we are able to develop assays for different diseases, we intend to formalize the procedure into a commercial application through a series of laboratories to be owned and operated by us. We anticipate that R&D will be ongoing during the life of the Company, as this is the source for new products to be introduced to the market. Our plan is to seek new innovations in the biotechnology field. We cannot assure that we will be successful in developing or validating any new assays or, if we are successful in developing and validating any such assays, that we can successfully commercialize them or earn profits from sales of those assays. Furthermore, we cannot assure that we will be able to design, develop, or successfully commercialize any vaccines as a result of our research and development efforts.
Our goal is to focus on both the domestic and international markets for the commercialization of our MORAP and MORAPAT systems.
Our marketing approach is to align ourselves with both the private sector and government agencies.
Commercial Diagnostic Testing
In the event that we are able to develop assays for the detection of diseases in animals, we intend to establish a series of diagnostic testing laboratories geographically proximate to the primary sources of individual diseases and/or according to specific available operating efficiencies. The specific number of labs to be built and operated will be based on assay demand (demand facilitated by the number of specific disease assays we develop), our ability to obtain the capital to build the labs, and our ability to successfully manage them from our principal offices.
We intend to manage the marketing and sales of our vaccines developed as through our R&D. As we do not intend to be a vaccine manufacturer, we plan to use our licensing division to license the technology related to any vaccines that may be developed and to manage the revenue potential available from the successful development and validation of specific vaccines. We cannot provide any assurance that we will develop any vaccines or that, if they are developed, we will be able to license them successfully or that any such license will produce significant revenues.
We do not own any patents on any of our technology and have not filed any applications for patents in any country. We cannot give any assurance that we will be able to file any patent applications or that, if we file one or more applications for patents, any patents will issue or that, if issued, the claims granted in any such patents will afford us adequate protection against competitors with similar technology.
We believe that we own common law proprietary rights with respect to our technologies and we intend to use our best efforts to protect such rights through maintaining trade secret protections and entering into confidentiality agreements.
We also depend upon the skills, knowledge, and experience of our scientific and technical personnel, none of which is patentable. To help protect our proprietary know-how, which is not patentable, and for inventions for which patents may be difficult to endorse, we rely on trade secret protection to shield our interests.
We face competition from many companies, universities, and research institutions in the United States and abroad. Virtually all of our competitors have substantially greater resources, experience in product commercialization, and obtaining regulatory approvals for their products, operating experience, research and development, marketing capabilities, and manufacturing capabilities that we do. We will face competition from companies marketing existing products or developing new products for diseases targeted by our technologies. The development of new products for those diseases for which we are attempting to develop products could render our product candidates noncompetitive and obsolete.
Our current competitors include primarily, Roche Diagnostics, Abbott Laboratories, IDEXX Laboratories, Inc., and academic and government institutions are also carrying out a significant amount of research in the field of health, particularly in the field zoonotic diseases. We anticipate that these institutions will become more aggressive in pursuing patent protection and negotiating licensing arrangements to collect royalties for the use of technologies they have developed and to market commercial products similar to those that we seek to develop, either on their own or in collaboration with our competitors. Any resulting increase in the cost or decrease in the availability of technology or product candidates from these institutions may affect our business.
Competition with respect to our robotic technologies and potential products is and will be based, among other things, on effectiveness, safety, reliability, availability, price, and patent protection. Another important factor will be the timing of market introduction of products that we may develop and for which we may receive regulatory approval. Accordingly, the speed with which we can develop products, complete the required animal studies or trials and approval processes and ultimately supply commercial quantities of the products to the market is expected to be an important competitive factor. Our competitive position will also depend upon our ability to attract and retain qualified personnel, to obtain patent protection or otherwise develop propriety products or processes, and to secure sufficient capital resources for the often-substantial period between technological conception and commercial sales.
Several attempts have been made to develop technologies that compete with Real-time-PCR (RT-PCR). To our knowledge none of these technologies have resulted to date in any product available on the market. The field of biotechnology is very dynamic. The possibility that more advanced technologies could be developed into products that may compete with ours is very strong. However, it is very difficult to predict the length of time necessary for this scenario to take place.
We do not manufacture any products. We do not intend to establish a manufacturing facility to manufacture any products that we may develop anywhere in the world.
The testing, manufacturing, and marketing of our proposed products involves an inherent risk of product liability attributable to unwanted and potentially serious health effects in animals that may receive any vaccines that we may develop and market. To the extent we elect to test, manufacture, or market veterinary vaccines and other products, we will bear the risk of product liability directly. We do not currently have product liability insurance. There is no guarantee that we can obtain product liability insurance at a reasonable cost, or at all, or that the amount of such insurance will be adequate to cover any liability that we may be exposed to. In the absence of such insurance, one or more product liability lawsuits against us can be expected to have a material adverse effect on our business and could result in our ceasing operations.
Our unique approach to the testing for zoonotic diseases allows us to begin commercialization of our diagnostic tests without the need for a long and enduring approval process from the USDA. USDA approval will be required for commercialization of animal vaccines. However, it is our intention not to seek, in the foreseeable future, any approval either from the USDA or the U.S. Food & Drug Administration for any of the products we develop both, diagnostic and therapeutic. It is our intention to perform any validation or clinical trials of our product both domestically and abroad. Our commercial laboratories will require a validation study to be performed to demonstrate the effectiveness of the system. Validation studies will be performed according to each country’s guidelines. It is expected that validation studies will be conducted in collaboration with each country’s government guidelines over the next 18 to 36 month period. We will need the approval of the U.S. Department of Agriculture, or USDA, before the vaccines can be manufactured or sold. The approval process for animal vaccines is time-consuming and expensive. We anticipate that such approval, if it is obtained, may require more than $75 million and may require more than two years for each vaccine for which approval is sought. Currently, we do not have the capital necessary to seek approval of any of our candidate vaccines, and we cannot provide any assurance that we will be able to raise the capital necessary for such approval on terms that are acceptable to us, if at all. Failure to raise the necessary capital will likely cause us to curtail or cease operations. In addition, even if we are successful in raising the capital necessary to seek approval of any vaccine, there are no assurances that such an approval will be granted, or if granted, whether we will be able to produce and sell such vaccines following such an approval in commercial quantities or to make a profit from such production and sales.
We had a total of two full-time employees as of December 31, 2021. No changes in full-time employees have occurred subsequently. None of our employees is represented by a collective bargaining unit.
Investment in our common stock involves a high degree of risk. You should carefully consider each of the following risks, together with all other information set forth in this report, including the financial statements and the related notes, before making a decision to buy our common stock. If any of the following risks actually occurs, our business could be harmed. In that case, the trading price of our common stock could decline, and you may lose part or all of your investment.
Risks Related to Our Business
Our success depends on our ability to resume development of our MORAP technology.
We focused on the development of MORAP technology for zoonotic disease diagnostic detection and vaccine development. As a result, our success depends entirely on our ability to finalize the development and commercialize the of molecular robotic/AI laboratory platform. If we are unable to achieve this goal, we may not be able to earn sufficient revenue to continue our business.
Business interruptions, including any interruptions resulting from COVID-19, could significantly disrupt our operations and could have a material adverse impact on the Company if the situation continues. Under Colorado Updated Public Health Order 20-24 Implementing Stay At Home Requirements (the “Order”), GeneThera falls under the definition of a “Critical Business”, as, pursuant to the Order “Critical Business” means (1) research and laboratory services, and (2) pharmaceutical and biotechnology companies.
Further, all employees, including our specialized scientific and technical staff, are working from home or in a virtual environment. The Company always maintains the ability for team members to work virtual and we will continue to stay virtual, until the State and or the Federal government indicate the environment is safe to return to work.
The ongoing coronavirus outbreak which began in China at the beginning of 2020 has impacted various businesses throughout the world, including travel restrictions and the extended shutdown of certain businesses in impacted geographic regions. If the coronavirus outbreak situation should worsen, we may experience disruptions to our business including, but not limited to equipment, to our workforce, or to our business relationships with other third parties.
The extent to which the coronavirus impacts our operations or those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. Any such disruptions or losses we incur could have a material adverse effect on our financial results and our ability to conduct business as expected.
Our recurring operating losses have raised substantial doubt regarding our ability to continue as a going concern, and our auditors issued a “going concern” audit opinion in their report on our financial statements.
Our independent auditors have indicated in their report on our audited consolidated financial statements as of December 31, 2021, which are included in this report, that there is substantial doubt about our ability to continue as a going concern. A “going concern” opinion indicates that the financial statements have been prepared assuming we will continue as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result if we do not continue as a going concern. As of this Annual Report on Form 10-K/A, the circumstances have not been changed, and therefore, the aforementioned going concern situation remains current. Therefore, you should not rely on our consolidated balance sheet as an indication of the amount of proceeds that would be available to satisfy claims of creditors and potentially be available for distribution to shareholders in the event of liquidation.
We need to raise additional capital in 2022 to continue operations. If we fail to obtain additional financing, we would be forced to delay the development of our MORAP or liquidate the Company.
We are a development stage company with limited operating history. We will need significant, additional capital to continue development of the molecular robotic/AI laboratory platform and to develop diagnostic assays and vaccine product candidates. As of December 31, 2021, we had cash and cash equivalents (excluding restricted cash) of $0 and negative working capital of $8,058,772.
Based on our current operating plan, we don’t expect that our existing cash and cash equivalents as of December 31, 2021, will enable us to maintain our operating expenses in 2022. We will need to raise additional capital in 2022 to execute our current operating plan. Securing additional financing may divert our management from our day-to-day activities, which may adversely affect our ability to operate our business, including our ability to develop and commercialize our product candidates.
We cannot guarantee that additional capital will be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to raise additional capital, when required in 2022 or thereafter in the future, or on acceptable terms, we may be required to:
| | Significantly delay, scale back or discontinue the development of the MORAP; |
| | Seek corporate partners for the development of our diagnostic assays and vaccine product candidates than other wise desirable or on terms that are less favorable than might otherwise be available; or |
| | Significantly curtail or cease operations. |
If we are unable to raise additional capital in sufficient amounts or on terms acceptable to use, we will be prevented from pursuing development and commercialization efforts, which will have a material adverse impact on our business operating results and prospects, including possible liquidation of the company.
In addition, we may secure additional capital using credit facilities and other debt and may substantially increase our reliance on such debt in the future. Such debt may be secured by a portion or substantially all of our assets. If we do not repay such indebtedness in a timely fashion, secured lenders could declare a default and foreclose upon our assets, which would result in harmful disruption to our business, the sale of assets for less than their fully realizable value, and possible bankruptcy. Such credit facilities also typically include several operational and financial covenants. If we fail to comply with the covenants and our other obligations under any credit facility, the secured lenders would be able to accelerate the required repayment of amounts due and, if they are not repaid, could foreclose upon our assets, which would result in harmful disruption to our business, the sale of assets for less than their fully realizable value, and possible bankruptcy. In addition, future credit facilities may limit our ability to incur incremental debt without our lenders’ permission.
Future sales and issuances of our common stock or rights to purchase common stock by us will result in additional dilution of the percentage ownership of our shareholders and may cause our share price to decline.
Until such time, if ever, as we can generate substantial product revenues, we expect that significant additional capital will be needed to continue our planned operations, including securing regulatory approvals, commercialization efforts, expanding research and development activities and costs associated with operating as a public company. We may sell shares of our common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner that we determine from time to time. If we sell shares of our common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing shareholders and new investors. In addition, new shareholders could gain rights superior to our existing shareholders.
We have identified material weaknesses in our internal control over financial reporting. If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results and prevent fraud. As a result, current and potential shareholders could lose confidence in our financial statements, which would harm the trading price of our common shares.
We are subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404. SOX 404 requires management to establish and maintain a system of internal control over financial reporting and annual reports on Form 10-K/A filed under the Securities Exchange Act of 1934, as amended, or the Exchange Act, to contain a report from management assessing the effectiveness of a company’s internal control over financial reporting. During its evaluation of the effectiveness of internal control over financial reporting, the Company’s management identified material weaknesses. These material weaknesses were associated with our lack of sufficient accounting resources and internal personnel with GAAP knowledge. We are undertaking remedial measures, which measures will take time to implement and test, to address these material weaknesses. We cannot assure you that such measures will be sufficient to remedy the material weaknesses identified or that additional material weaknesses or other control or significant deficiencies will not be identified in the future. If we continue to experience material weaknesses in our internal controls or fail to maintain or implement required new or improved controls, such circumstances could cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements, or adversely affect the results of periodic management evaluations and, if required, annual auditor attestation reports. Each of the foregoing results could cause investors to lose confidence in our reported financial information and lead to a decline in our stock price.
Our technology is not protected by patents.
Our technology and know-how are not patented. We rely on trade secret protections and confidentiality agreements to protect our intellectual property. We cannot assure you that these trade secrets and confidentiality agreements will provide meaningful protection for our intellectual property. Furthermore, in absence of patent protection, competitors who independently develop substantially equivalent technology may harm our business.
Loss of key personnel has temporarily and adversely affected the Company.
We depended in large part on the efforts and continued employment of Dr. Antonio Milici, M.D., Ph.D., our President, Chairman and Chief Executive Officer. It is with a heavy heart and immense sadness to announce that on December 12, 2022, we lost Dr. Milici from Stage 4 Prostate Cancer metastasized to his bones and liver. The loss of Dr. Milici has had a material adverse effect on our business, results of operations and financial condition. In addition, the loss of Dr. Milici will force us to seek a replacement, who may have less experience, fewer contacts, or less understanding of the business. Further, we may be unable to find a suitable replacement for Dr. Milici. However, his scientific nephew, Dr. Stefano Milici, is eager to continue Dr. Milici’s research and development project to commercialization. We will find additional scientists to assist Dr. Stefano Milici with Tony’s work. Finding qualified personnel in the biotechnology industry is very challenging, but feasible. Smaller biotechnology companies are potentially at a disadvantage in the employment marketplaces due to their limited financial resources; something like reliable funding can resolve with ease. The late Dr. Milici’s previous interviews with highly experienced scientists in molecular biology and robotic engineers like Dr. Stefano Milici, has been possible to expanding our current projects globally. May he Rest in Peace. Until we meet again. “
Che tu possa finalmente riposare in pace; ti ameró per sempre
.”
We may be unable to compete against other more establish biotechnology companies.
We operate in a very competitive and difficult area. Biotechnology business is notoriously challenging and risky. We compete with more established and better funded companies that are involved in the development of similar products. Several of these companies have significantly greater financial resources as well as greater production and marketing capabilities. The field of biotechnology requires extensive research and development. Better funded competitors may be able to develop and market superior or less expensive products that will make our products less valuable or unmarketable unless we acquire reliable funding from trustworthy investors in order to have an excellent advantage to succeed with our competitors.
If we fail to anticipate or respond adequately to technological developments, our ability to operate could suffer. We cannot assure that research and discoveries by other biotechnology, agriculture, pharmaceutical or other companies will not render our technologies or products uneconomical or result in products superior to those we develop, depend on new and evolving technologies. If our technologies do not produce satisfactory results, our business may be harmed.
Increased competition from and technological advances by our competitors could negatively affect our operating results.
We face intense competition, and we expect that future competition may become even more intense as new products, services and technologies become available and other new competitors enter the market. Competition could negatively affect our sales and profitability in a number of ways. Other new competitors may enter our markets through the development of innovative new technology, the acquisition of rights to use existing technologies or the use of existing technologies when patents protecting such existing technologies expire. New or existing competitors may introduce new, innovative, and competitive products and services, which could be superior or perceived by our customers to be superior to our products and services or lead to the obsolescence of one or more of our products or services. Some of our competitors and potential competitors may choose to differentiate themselves by offering products and services perceived in the eyes of customers as similar, at substantially lower sales prices, which could have an adverse effect on our results of operations through loss of market share or a decision to lower our own sales prices to remain competitive. In addition, our ability to attract and retain customers depends on the effectiveness of our customer marketing and incentive programs and multiple competitors could bundle product and service offerings through co-marketing or other arrangements, which could enhance their ability to compete with our broad product and service offering. Certain of our competitors and potential competitors, have substantially greater financial and managerial resources than us, as well as greater experience in manufacturing, marketing, research and development, and obtaining regulatory approvals than we do. Once we secure reliable funding, we can increase our success astronomically.
Changes in testing patterns could negatively affect our operating results.
The market for our products could be negatively impacted by a number of factors impacting diagnostic assaying practices. Market acceptance of vaccines or preventatives for the diseases and conditions for which we sell diagnostic assays and services could result in a decline in testing. Changes in accepted medical protocols regarding the diagnosis of certain diseases and conditions could have a similar effect. Eradication or substantial declines in the prevalence of certain diseases also could lead to a decline in diagnostic assaying for such diseases. Changes in government regulations or in the availability of government funds available for monitoring programs could negatively affect sales of our products. In addition, changes and trends in local food markets around the world could negatively affect the related production markets resulting in a decline in demand for our diagnostic assaying products. Declines in testing for any reason could have an adverse effect on our results of operations. As we can attest, the market for our products is in high demand and we are eager to improve the healthcare of both humans and animals.
Various U.S. and foreign government regulations could limit or delay our ability to market and sell our products or otherwise negatively impact our business.
Our business is subject to numerous states, federal and international rules and regulations. Several of these regulations may require that we obtain approval from the related governmental agency prior to the marking or sale of our products. Delays in obtaining regulatory approvals for new products or product upgrades could have a negative impact on our growth and profitability.
We have never successfully undertaken a clinical trial for animal testing. Our experience in this area is limited. We have never obtained regulatory approvals for any of our products. As such, we may be unable to ever successfully undertake a clinical trial of our products and may be forced to curtail or modify our current business plan.
In addition, the manufacture, import, and sale of our products, as well as our research and development processes, may be subject to similar or more stringent laws in other countries. Compliance with these regulations may require the expenditure of significant time and resources by the Company, and could require the registration, redesign or reformulation of our products in order to conform. Any redesign or reformulation or restricted supply of parts and components may negatively affect the availability or performance of our products and services, add assaying lead-times for products and reformulated products, reduce our margins, result in additional costs, or have other similar effects. Any of these could adversely affect our business, financial condition, or results of operations. These legal and regulatory requirements are complex and subject to change, and we continue to evaluate their impact. Additionally, foreign governments may require us to register our products, and these product registration requirements, which vary among the applicable jurisdictions and change from time to time, are often complex and require us to engage in lengthy and costly processes. We cannot assure you that we will be able to obtain or maintain any product registration required by one or more foreign governments. Any inability to obtain or maintain a required product registration in a jurisdiction could adversely affect our ability to market and sell the applicable product in that jurisdiction, which could have a negative effect on our business, financial condition and results of operations.
We are also subject to a variety of federal, state, local, and international laws and regulations, as well as the associated legal and political environments, concerning, among other things, the importation and exportation of products; our business practices in the U.S. and abroad, such as anti-corruption, anti-money laundering, and anti-competition laws; and immigration and travel restrictions. These legal, regulatory, and political requirements and environments differ among jurisdictions around the world and are rapidly changing and increasingly complex. The costs associated with compliance with these legal and regulatory requirements and adjusting to changing legal and political environments are significant and likely to increase in the future.
Any failure by us to comply with applicable legal and regulatory requirements, or to adjust to changing legal and political environments, could result in fines, penalties, and sanctions; product recalls; suspensions or discontinuations of, or limitations or restrictions on, our ability to design, manufacture, market, import, export or sell our products; and damage to our reputation. Any of these could negatively impact our business.
Future operating results could be negatively affected by changes in tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities.
We are subject to local, state, regional and federal tax laws in jurisdictions around the world. Our future tax expense could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities or changes in tax laws or their interpretation. Additionally, tax rules governing cross-border activities are continually subject to modification as a result of both coordinated actions by governments and unilateral measures designed by individual countries, both intended to tackle concerns over base erosion and profit shifting and perceived international tax avoidance techniques.
Our income tax filings may become subject to an audit by various tax authorities, and the final determination of tax audits could be materially different than that which is reflected in historical income tax provisions and accruals. Significant judgment is required in determining our provision for income taxes. We assess our exposures related to our provision for income taxes to determine the adequacy of our provision for taxes. Any reduction in these contingent liabilities or additional assessments would increase or decrease income, respectively, in the period such determination is made.
Natural and other disasters, information technology system failures and network disruptions and cybersecurity breaches and attacks could adversely affect our business.
Our business and results of operations could be negatively affected by certain factors beyond our control, such as natural disasters and/or climate change-related events (such as hurricanes, earthquakes, fires, and floods); civil unrest; negative geopolitical conditions and developments; war, terrorism, or other man-made disasters; and information technology system failures, network disruptions and cybersecurity breaches and attacks. Any of these events could result in, among other things, damage to or the temporary closure of our facilities; a temporary lack of an adequate work force in one or more markets; an interruption in power supply; a temporary or long-term disruption in our supply chain (including a disruption to our ability to obtain critical components for the development of our product candidates); and short- or long-term damage to our prospective customers’ businesses (which would adversely impact demand for our products and services).
We rely on our own information systems, as well as those of our third-party business partners and suppliers. Despite the introduction of system backup measures and engage in information system redundancy planning and processes, such measures, planning and processes may be ineffective or inadequate to address all eventualities. Further, our information systems and our business partners’ and suppliers’ information systems may be vulnerable to attacks by hackers and other security breaches, including computer viruses and malware, through the internet (including via devices and applications connected to the internet), email attachments and persons with access to these information systems, such as our employees or third parties with whom we do business. As information systems and the use of software and related applications by us, our business partners, suppliers, and customers become more cloud-based and connected to the internet, there has been an increase in global cybersecurity vulnerabilities and threats, including more sophisticated and targeted cyber-related attacks that pose a risk to the security of our information systems and networks and the confidentiality, availability and integrity of data and information. Any such attack or breach could compromise our networks and the information stored thereon could be accessed, publicly disclosed, lost, or stolen.
If we or our business partners or suppliers were to experience a system disruption, attack or security breach that impacts any of our critical functions, or our customers were to experience a system disruption, attack or security breach via any of our connected products and services, it could result in a period of shutdown of information systems during which we may not be able to operate, the loss of sales and customers, financial misstatement, potential liability for damages to our customers, reputational damage and significant incremental costs, which could adversely affect our business, results of operations and profitability. Furthermore, any access to, public disclosure of, or other loss of data or information (including any of our confidential or proprietary information or personal data or information) as a result of an attack or security breach could result in governmental actions or private claims or proceedings, which could damage our reputation, cause a loss of confidence in our products and services, damage our ability to develop (and protect our rights to) our proprietary technologies and adversely affect our business.
Risks Related to Ownership of our Common Stock
Our common stock is quoted on the OTC Markets, which may have an unfavorable impact on our stock price and liquidity.
Our common stock is quoted on the OTC Markets under the symbol “GTHR.” The OTC Markets is a significantly more limited market than the New York Stock Exchange or the NASDAQ stock market. The quotation of our shares on the OTC Markets may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.
We cannot predict the extent to which an active public trading market for our common stock will develop or be sustained. If an active public trading market does not develop or cannot be sustained, you may be unable to liquidate your investment in our common stock.
Currently there is minimal public trading in our common stock. We cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares of common stock until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot assure you that an active public trading market for our common stock will develop or be sustained. If such a market cannot be sustained, you may be unable to liquidate your investment in our common stock.
Our common stock may be subject to significant price volatility, which may have an adverse effect on your ability to liquidate your investment in our common stock.
The market for our common stock may be characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will be more volatile than a seasoned issuer for the indefinite future. The potential volatility in our share price is attributable to a number of factors. First, our shares of common stock may be sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our shares of common stock are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price. Secondly, an investment in us may be considered a speculative investment due to our lack of profits to date and uncertainty of future profits. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.
We are subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.
The United States Securities and Exchange Commission, or SEC, has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. Our common stock is a “penny stock” and is subject to Rule 15g-9, or the Penny Stock Rule, under the Securities Exchange Act of 1934, as amended, or the Exchange Act. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by the Penny Stock Rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market, thus possibly making it more difficult for us to raise additional capital.
For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.
We cannot assure you that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.
We have never paid cash dividends on our stock and do not intend to pay dividends for the foreseeable future.
We have paid no cash dividends on any class of our stock to date, and we do not anticipate paying cash dividends in the near term. For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board deems relevant.
Fluctuations in our quarterly or annual results may cause our stock price to decline.
Our operating results could fluctuate due to a number of factors, including changes in our accounting estimates; litigation and claim-related expenditures; increase in the number and type of competitors; changes in competitors’ product offerings; and other matters. Similarly, our future operating results may vary significantly from quarter to quarter or year to year due to these and other factors, many of which are beyond our control. If our operating results or projections of future operating results do not meet the expectations of securities analysts or investors in future periods, our stock price may fall.
UNRESOLVED STAFF COMMENTS
We do not own any properties. We have a temporary lease for office space.
From time to time, we may be involved in litigation relating to claims arising out of our operations. We are not currently a party to, and our property is not subject to, any material legal proceedings.
R
EPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of GeneThera Inc.:
Opinion on the Financial Statements
We have audited the accompanying balance sheets of GeneThera Inc. (the “Company”) as of December 31, 2021 and 2020, the related statements of operations, changes in stockholders’ equity, and cash flows for each of the years then ended. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the two-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
The accompanying financials have been prepared assuming the Company will continue as a going concern. As of December 31, 2021, the Company had an accumulated deficit of approximately $31,999,000 and may experience losses in the near term. These factors and the need for additional financing in order for the Company to meet its business plan, raise substantial doubt about its ability to continue as a going concern. Management’s plan to continue as a going concern is also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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otes to Consolidated Financial Statements
Note 1 – Organization, 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. GTI Research was assisting the Company in managing the robotic technology project. The Company’s CEO is collaborating with this project with another group in order for the Company’s research and development to finally become commercial in order to generate revenues.
The Company is a biotechnology company that develops molecular assays and therapeutics for the detection and treatment of zoonotic diseases.
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, it is a controlled subsidiary. 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 of a vehicle and is stated at cost. Depreciation is computed on a straight-line basis over the estimated useful life of five years. Leasehold improvements are amortized over the shorter of their economic lives or lease terms.
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:
| Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
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| 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. |
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| 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.
Certain prior period amounts 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.
There were no revenues during the years ended December 31, 2021 and 2020.
The Company’s policy is to record revenues in accordance with 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:
| | Identification of the contract with a customer; |
| | Identification of the performance obligations in the contract; |
| | Determination of the transaction price; |
| | Allocation of the transaction price to the performance obligations in the contract; and |
| | 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. |
The Company accounts for leases in accordance with ASC 842 – Leases. Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date for leases exceeding 12 months. Minimum lease payments include only the fixed lease component of the agreement, as well as any variable rate payments that depend on an index, initially measured using the index at the lease commencement date. Non-lease components are accounted for separately from the fixed lease component for all leases. Most of the Company’s leases do not provide an implicit rate that can readily be determined. Therefore, the applied discount rate is based on the Company’s incremental borrowing rate, which is determined using its credit rating and other information available as of the commencement date and is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. Lease terms may include options to renew, which the Company factors into the determination of the lease term when it is reasonably certain that the Company will exercise that option. The ROU asset is measured at the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received.
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.
Research and development costs
R&D cost are currently expensed as incurred and primarily include cost associated with R&D arrangements with external parties in connection with the Company’s robotic technology project.
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.
Shipping and Handling Costs
The Company accounts for shipping and handling fees in accordance with paragraph 605-45-45-19 of the FASB Accounting Standards Codification. While amounts charged to customers for shipping products are included in revenues, the related costs are classified in cost of revenue as incurred.
Shipping and handling costs were $0 and $0 for the years ended December 31, 2021 and 2020, respectively.
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.
As reflected in the accompanying consolidated financial statements, the Company has an accumulated deficit of $32,271,446 and negative working capital of $8,177,968 as of December 31, 2021. 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.
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 – Accrued Expenses
The following is the breakdown of the Company’s accrued expenses as of December 31, 2021 and 2020:
Note 4 – Related Party Transactions
The Company has an outstanding loan payable and accrued interest to Antonio Milici, its CEO and stockholder amounting to $673,092 as of December 31, 2021 and 2020, 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 $47,877 and $58,704 as December 31, 2021 and 2020, respectively. This outstanding loan to the Company is unsecured and bears interest at 8%.
Tannya Irizarry owns 50% of GTI Corporate Transfer Agents, LLC, (“GTICTA”) the Company’s transfer agent. During the years ended December 31, 2021 and 2020, the Company made payments to GTICTA in the amounts of $80 and $29,723, respectively. In 2021 the Company issued 5,000,000 shares of its common stock to GTICTA and recorded an expense of $291,000.
F-12
On December 11, 2021 the Company entered into a convertible loan agreement with a director and received $6,500 bearing interest at 8% and is due in six months. The note holder may convert the note into restricted shares of common stock at a conversion price of $0.03 per share.
The Company utilizes Elia Holdings, LLC for construction and other maintenance services to maintain the Company’s office and lab space. Elia Holdings, LLC is controlled by Ms. Irizarry’s relative. Costs incurred related to such services were $0 and $11,749 during the years December 31, 2021 and 2020, respectively.
Note 5 – Convertible Notes Payable
On August 2, 2021 a convertible note was issued in the amount of $3,500. The convertible note bears interest at 8% as is due six months from the issue date.
On September 13, 2021 the Company issued 200,000 shares of common stock upon conversion of two convertible notes for $3,000 each with an interest rate of 3% and due within one year.
On November 6, 2021 the Company issued 112,064 shares of common stock upon conversion of a convertible note of $3,400.
In previous years the Company borrowed additional money from investors and issued convertible notes, 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 December 31, 2021 and 2020, the outstanding principal and interest on these notes was $54,500, respectively.
As of December 31, 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 6- Stockholders’ Equity
The Company has authorized 20,000,000 shares of Series A Preferred Stock, $.001 par value, and 30,000,000 shares of Series B Preferred Stock, $.001 par value.
As of December 31, 2021 and 2020, the Company had 0 shares Series A Preferred Stock issued and outstanding respectively.
As of December 31, 2021 and 2020, the Company had 26,038,572 shares of Series B Preferred Stock issued and outstanding respectively of the total authorized shares of 30,000,000.
The Company has authorized 300,000,000 shares of common stock, $.001 par value. As of December 31, 2021 and 2020, there were 30,971,255 and 24,071,255 shares of common stock issued and outstanding, respectively.
During the year ended December 31, 2021, the Company issued 10,012,064 shares of common stock valued at $509,900 and charged to stock based compensation included in general and administrative expenses.
| | | Issued 1,500,000 restricted shares of common stock to a consultant engaged to assist in raising capital. The Company recorded consulting fee expense of $55,500; |
| | | Issued 5,000,000 shares of common stock to a principal of GTI Corporate Transfer Agents, LLC, the Company’s stock transfer agent, and recorded an expense of $291,000. Ms. Irizarry, an officer, owns 50% interest in GTI Corporate Transfer Agents, LLC; |
| | | Issued 200,000 shares of common stock to a director for consulting valued at $13,400; |
| | | Issued 112,064 shares of common stock for conversion of a convertible note of $3,400; |
| | | Issued 200,000 shares of common stock for conversion of notes payable of $6,000; |
| | | Issued 1,000,000 restricted shares of common stock to a consultant engaged to assist in raising capital. The Company recorded consulting fee expense of $50,000; |
| | | Issued 1,000,000 restricted shares of common stock to a board member and recorded a consulting fee expense of $50,000; |
| | | Issued 1,000,000 restricted shares of common stock to a new board member and recorded a consulting fee expense of $50,000. |
| | | year ended December 31, 2021, the Company issued 1,000,000 issued restricted shares of common stock for raising capital consulting service. |
| | | Issued 1,000,000 restricted shares of common stock in exchange for raising capital consulting services; the Company recognized an expense of $50,000. |
During the year ended December 31, 2020, the Company canceled 13,426,728 common shares in an effort to update its stock ledger. The cancelled shares consisted of shares issued to consultants for failure to perform the duties of their contracts, the lack of compliance on the part of some entities that did not renewal its charter, dissolution of other corporate entities, the deletion of stock held in escrow and treasury by the Company and other true-up efforts.
F-13
During the year ended December 31, 2020, the Company issued 1,591,381 shares of common stock in exchange for services and property:
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100,000 shares to a director on the board for services rendered. The Company recognized an expense of $5,000. |
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995,381 shares to a consultant for services. The Company recognized an expense of $9,954. |
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500,000 shares representing a reissuance of a certificate to a shareholder. |
Designation of Series A Convertible Preferred Stock
On August 29, 2018, the Company filed a certificate of designation (the “Series A Certificate of Designation”) with the Nevada Secretary of State to set forth the terms of the Series A Convertible Preferred Stock. Pursuant to the Series A Certificate of Designation, the Company designated 20,000,000 shares of its preferred stock as Series A Convertible Preferred Stock. Following is a summary of the material terms of the Series A Convertible Preferred Stock:
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Dividends . Holders of shares of Series A Convertible Preferred Stock are not entitled to dividends. |
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Liquidation . Upon any dissolution or winding up of the Company, whether voluntary or involuntary (a “Liquidation”), holders of Series A Convertible Preferred Stock shall be entitled to receive out of the assets of the Company, before any distribution of assets is made to holders of any other class of capital stock of the Company, an amount equal to $100 per share (the “Series A Liquidation Preference”). If upon any Liquidation the amounts payable with respect to the Series A Convertible Preferred Stock and any other shares of stock of the Company ranking as to any such distribution on parity with the Series A Convertible Preferred Stock are not paid in full, the holders of Series A Convertible Preferred Stock and of such other shares shall share ratably in any such distribution in proportion to the full respective preferential amounts to which they are entitled. After the payment of the Series A Liquidation Preference shall have been made in full to the holders of the Series A Convertible Preferred Stock, the remaining assets of the Company legally available for distribution to its stockholders shall be distributed among the holders of any junior capital stock that has a liquidation preference senior to holders of common stock, and after such holders have received in full their liquidation preference, the remaining amounts shall be distributed among the holders of the Series A Convertible Preferred Stock and the common stock, collectively, as one class. |
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Voting . On any matter presented to stockholders for their action or consideration, each holder of Series A Convertible Preferred Stock shall be entitled to cast the number of votes equal to the number of shares of common stock into which the shares of Series A Convertible Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of the Series A Certificate of Designation, the holders shall vote together with the holders of shares of common stock as a single class. However, so long as at least 50% of the shares of Series A Convertible Preferred Stock originally issued remains outstanding, the Company may not, without the affirmative vote or the written consent of the holders of at least 51% of the then outstanding shares of Series A Convertible Preferred Stock, voting separately as a class, (i) create, authorize or issue any equity security, or any security convertible into or exercisable for any equity security, unless such security is junior to the Series A Convertible Preferred Stock, in terms of dividend and liquidation preference; or (ii) increase the total number of authorized shares of Series A Convertible Preferred Stock. |
F-14
| ● | Conversion . Each holder of shares of Series A Convertible Preferred Stock may, at holder’s option and at any time, convert any or all such shares into shares of common stock. The number of shares of common stock into which each share of Series A Convertible Preferred Stock may be converted (the “Conversion Rate”) shall be determined according to the terms of a stock purchase agreement between the Company and the holder. In addition, each share of Series A Convertible Preferred Stock shall automatically convert into shares of common stock, at the then applicable Conversion Rate, upon the earlier of (i) the closing of a public offering of equity or equity equivalent securities resulting in minimum gross proceeds to the Company of $20 million and (ii) upon the Company’s common stock trading at or above $6.00 per share for 20 out of 30 consecutive trading days; provided that prior to the event specified by (ii) above, the Company shall have (y) an effective registration statement on file with the SEC registering the resale of the common stock issuable upon conversion of the Series A Convertible Preferred Stock and (ii) obtained the approval for listing the common stock on any national securities exchange. The Conversion Rate is subject to customary adjustments as described in the Series A Certificate of Designation. |
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| | Redemption . The Series A Convertible Preferred Stock is not redeemable. |
Designation of Series B Convertible Preferred Stock
On August 29, 2018, the Company filed a certificate of designation (the “Series B Certificate of Designation”) with the Nevada Secretary of State to set forth the terms of the Series B Convertible Preferred Stock. Pursuant to the Series B Certificate of Designation, the Company designated 30,000,000 shares of its preferred stock as Series B Convertible Preferred Stock. Following is a summary of the material terms of the Series B Convertible Preferred Stock:
| | Dividends . Holders of shares of Series B Convertible Preferred Stock are not entitled to dividends. |
| | Liquidation . Upon any Liquidation, holders of Series B Convertible Preferred Stock shall be entitled to receive out of the assets of the Company, before any distribution of assets is made to holders of any other class of capital stock of the Company, an amount equal to $100 per share (the “Series B Liquidation Preference”). If upon any Liquidation the amounts payable with respect to the Series B Convertible Preferred Stock and any other shares of stock of the Company ranking as to any such distribution on parity with the Series B Convertible Preferred Stock are not paid in full, the holders of Series B Convertible Preferred Stock and of such other shares shall share ratably in any such distribution in proportion to the full respective preferential amounts to which they are entitled. After the payment of the Series B Liquidation Preference shall have been made in full to the holders of the Series B Convertible Preferred Stock, the remaining assets of the Company legally available for distribution to its stockholders shall be distributed among the holders of any junior capital stock that has a liquidation preference senior to holders of common stock, and after such holders have received in full their liquidation preference, the remaining amounts shall be distributed among the holders of the Series B Convertible Preferred Stock and the common stock, collectively, as one class. |
| | Voting . On any matter presented to stockholders for their action or consideration, each holder of Series A Convertible Preferred Stock shall be entitled to cast 20 votes per share. Except as provided by law or by the other provisions of the Series B Certificate of Designation, the holders shall vote together with the holders of shares of common stock as a single class. However, so long as at least 50% of the shares of Series B Convertible Preferred Stock originally issued remains outstanding, the Company may not, without the affirmative vote or the written consent of the holders of at least 51% of the then outstanding shares of Series B Convertible Preferred Stock, voting separately as a class, (i) create, authorize or issue any equity security, or any security convertible into or exercisable for any equity security, unless such security is junior to the Series B Convertible Preferred Stock, in terms of dividend and liquidation preference; or (ii) increase the total number of authorized shares of Series B Convertible Preferred Stock. |
| | Conversion . Each holder of shares of Series B Convertible Preferred Stock may, at holder’s option and at any time, convert any or all such shares into shares of common stock. The number of shares of common stock into which each share of Series B Convertible Preferred Stock may be converted is ten shares of common stock for each share of Series B Convertible Preferred Stock. |
| | Redemption . The Series B Convertible Preferred Stock is not redeemable. |
As of December 31, 2021, the Company had issued to Dr. Milici, CEO and Tannya Irizarry, CAO, CFO a total of 26,038,572 shares of Series B Preferred Stock pursuant to the terms of their employee agreements.
Note 7 – Commitments and Contingencies
On January 8, 2017, the Company entered into an employment agreement with Antonio Milici, its chief executive officer and chief scientific officer, for a five-year term. On the same date, the Company also entered into an employment agreement with Tannya L. Irizarry, its chief administrative officer and interim chief financial officer, for a five-year term. Both agreements were renewed in January 2022 with essentially the same terms.
The Company agreed to pay Dr. Milici a base salary of $258,000 per annum, plus $90,000 worth of Series B Convertible Preferred Stock in March of each year. The Company also agreed to pay Dr. Milici bonus compensation or a lump sum equal to two (2) times the salary at the time the Company has net income of at least two million ($2,000,000) dollars each year based on performance. In addition, the Company agreed to pay a onetime payment of $26,900 at the renewal of the employment agreement. The Company is also required to pay all living expenses to Dr. Milici during the time his deferred salary is not entirely released during the term of his employment agreement. Once deferred salary is entirely released to Dr. Milici, he is responsible for his taxes. Dr. Milici is also entitled to a leased Company vehicle of his selection. At the end of aforementioned lease, Dr. Milici is authorized to either purchase the vehicle and/or exchange leased vehicle for another vehicle. The Company did not issue $90,000 worth of Series B Preferred Stock in 2019 as the Company did not have enough authorized shares of Series B Preferred stock. For the fiscal years 2021 and 2020, all salary was deferred.
The Company agreed to pay Ms. Irizarry a base salary of $208,000 per annum, plus $45,000 worth of Series B Convertible Preferred Stock in March of each year. The Company also agreed to pay Ms. Irizarry bonus compensation or a lump sum equal to two (2) times the salary at the time the Company has net income of at least two million ($2,000,000) dollars each year based on performance. In addition, the Company agreed to pay a onetime payment of $18,000 at the renewal of the employment agreement. The Company is also required to pay all living expenses to Ms. Irizarry during the time her deferred salary is not entirely released during the term of her employment agreement. Once deferred salary is entirely released to Ms. Irizarry, she is responsible for her taxes. Ms. Irizarry is also entitled to a leased Company vehicle of her selection. At the end of aforementioned Lease, Ms. Irizarry is authorized to either purchase the vehicle and/or exchange leased vehicle for another vehicle. The Company did not issue $45,000 worth of Series B Preferred Stock in 2019 as the Company did not have enough authorized shares of Series B Preferred stock. For the fiscal years 2021 and 2020, all salary was deferred.
As of December 31, 2021, the Company had issued to Dr. Milici, CEO and Tannya Irizarry, CAO, CFO a total of 26,038,572 shares of Series B Preferred Stock pursuant to the terms of their employee agreements.
The Company has been involved in claims arising during the ordinary course of business resulting from disputes with vendors and stockholders over various contracts and agreements. The Company has outstanding judgments that are deemed to be lapsed and passed Colorado’s statute of limitations. No other legal claims have been made or are known at this time.
F-16
At December 31, 2021, the Company has available for U.S. federal income tax purposes a net operating loss (“NOL”) carry-forwards of approximately $21 million that may be used to offset future taxable income through the fiscal year ending December 31, 2036. If not used, these NOLs may be subject to limitation under Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under the regulations. The Company plans on undertaking a detailed analysis of any historical and/or current Section 382 ownership changes that may limit the utilization of the net operating loss carryovers. No tax benefit has been reported with respect to these net operating loss carry forwards in the accompanying consolidated financial statements since the Company believes that the realization of its net deferred tax asset of approximately $3.0 million was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by a valuation allowance of $3.0 million.
Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its reliability. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon future generation for taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all the information available, Management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. The valuation allowance increased by approximately $155,000 and $156,000 for the years ended December 31, 2021 and 2020, respectively.
The Company evaluated the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain positions that the Company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability is recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740.
If applicable, interest costs related to the unrecognized tax benefits are required to be calculated and would be classified as “Other expenses – Interest expense” in the statement of operations. Penalties would be recognized as a component of “General and administrative.”
No material interest or penalties on unpaid tax were recorded during the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, no liability for unrecognized tax benefits was required to be reported. The Company does not expect any significant changes in its unrecognized tax benefits in the next year.
F-17
Net deferred tax assets consist of the following components as of December 31:
Income Tax Provision in the Consolidated Statement of Operations
A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows for the years ended December 31,
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F-18
Note 9 – Subsequent Events
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. Presently, the Company continuous to considering ways to apply its molecular robotic technology to address the COVID-19 pandemic.
As of March 31, 2022, no additional conversions have occurred, and no new convertible notes have been issued.
