**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

**FORM 10-K**

**ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the Fiscal Year Ended December 31, 2009**

**Commission File Number:**

**000-27237**

 

**GeneThera, Inc.**

(Exact name of registrant as Specified in its Charter)

**Nevada**

**65-0622463**

(State or Other Jurisdiction of

(Internal Revenue Service

Incorporation or Organization)

Employer Identification Number)

**7577 W. 103rd Ave. Suite 212 Westminster, CO                                          80021**

(Address of Principal Executive Offices)

                       

(Zip Code)

Registrant’s telephone number, including area code:

**(303) 439-2085**

Securities registered pursuant to Section 12(b) of the Exchange Act:

**NONE**

Securities registered pursuant to Section 12(g) of the Exchange Act:

**Common Stock, $0.001 per share**

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes [  ]  No [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer [  ] Accelerated filer [  ] Non-accelerated filer [  ] Smaller reporting company [X] 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):  

Yes [  ]  No [X]

Indicate by check mark if the registrant is a well-known seasoned user, as defined in Rule 405 of the Securities Act. 

Yes [  ]  No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) if the Act. 

Yes [X] No [  ]

As of December 31, 2009, the registrant had 21,147,397 shares of its common stock ($.001 par value) outstanding.

The issuer’s revenue for its most recent fiscal year was $0.00

The aggregate market value of the issuer’s voting stock held by non-affiliates of the issuer as of December 31, 2009 was $312,550.

**PART I**

**ITEM 1**

** DESCRIPTION OF BUSINESS**

We transferred our state of incorporation from Florida to Nevada in November 2007. Our Common Stock currently trades on the Pink Sheets OTC “Over-The-Counter” under the symbol GTHR.  Our executive offices are located at 7577 W. 103rd Ave. Suite 212 in Westminster, CO 80021 and our telephone number is 303-439-2085.

For the fiscal year 2009 and as of now, the Company had one subsidiary, GeneThera, Inc., a Colorado corporation.

**BUSINESS OVERVIEW**

GeneThera, Inc., a Nevada corporation, was formerly known as Hand Brand Distribution, Inc., and was incorporated in November 1998 in Florida.  We are not currently in any regulatory or clinical trials for any of the tests we have developed to date. The molecular tests developed by GeneThera are in a validation phase. We currently have no sales, marketing or distribution capability. GeneThera has no plans, in the immediate future, to offer any veterinary services in the United States.

Our independent auditors have expressed substantial doubt about our ability to continue as a going concern in their report on our consolidated financial statements for 2009.  For 2009 and 2008, our operating losses were $1,299,647 and $1,393,023 respectively.  Our current liabilities exceeded current assets by $2,587,096 and $1,787,171 as of December 31, 2009 and 2008, respectively.

Up until 2002, GeneThera, Inc. was a privately held Colorado corporation.  The reverse acquisition with Hand Brand was completed in October 2003 with the distribution of shares to Dr. Milici for the acquisition from him of GeneThera, Inc.  A total of 9,270,000 (after 2:1) shares were issued as consideration for the sale of the private corporation.  

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We are a biotechnology company that develops molecular assays and is currently in the process of developing therapeutic vaccines for the detection and prevention of food contaminating pathogens, veterinary diseases, and diseases affecting human health.  Since June 2005, we had research contracts with Xpention Genetics, LLC for the development of a molecular test for early detection of cancer in dogs and the development of a molecular test for early detection of cancers in humans Stage 1.  GeneThera’s business is based on its Integrated Technology Platform (ITP) that combines a proprietary diagnostic solution called Gene Expression System (GES) with PURIVAXTM, a highly efficient purification technology. The first part of this platform is the ongoing development of molecular diagnostic assays solutions using Real Time Fluorogenic Polymerase Chain Reaction (F-PCR) technology to detect the presence of infectious disease from the blood of live animals.  The second part of the ITP is the development of therapeutic vaccines using RNA interference technology.  It also allows for the efficient, effectives, and continuous testing, management and treatment of animal populations.  These facts distinguish the technology from any alternative testing and management methodology available to agriculture today, all of which require the destruction of individual animals and even entire herds.  Our testing and data analysis processes also allow us not only to separate infected from clean animals, but also to gain knowledge vital to development of preventative vaccines.

To date, GeneThera has successfully developed the ability to detect Chronic Wasting Disease, a disease affecting elk and deer in North America.  GeneThera has also successfully developed an assay for the detection of Mad Cow Disease, a disease found since 2003 in the United States, but which has been in Europe for many years.  Chronic Wasting Disease and Mad Cow Disease are both in the family of diseases called Transmissible Spongiform Encephalopathy (TSE).  

**BUSINESS MODEL**

**DESCRIPTION OF TECHNOLOGIES**

Summary:  GeneThera’s animal disease assay development business is based on its Integrated Technology Platform (ITP) that combines a proprietary diagnostic solution called Gene Expression System (GES) with PURIVAXTM, a highly sophisticated purification system that removes contaminating particles from biological fluids. The first part of this platform is the ongoing development of molecular diagnostic assay solutions using real time Fluorogenic Polymerase Chain Reaction (F-PCR) technology to detect the presence of infectious disease from the blood of live animals.  The second part of the ITP is the development of therapeutic vaccines using RNA interference technology.  Interference RNA 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.  These facts distinguish the technology from any alternative testing and management methodology available to agriculture today, all of which require the destruction of individual animals and even entire herds.  Our testing and data analysis processes also allow us not only to separate infected from clean animals, but also to gain knowledge vital to development of preventative vaccines.

Each individual assay utilizes the proprietary Field Collection System (FCS) for the collection and transportation of blood samples to GeneThera’s laboratory. This system consists of two (2) tubes. A 5ml red cap tube containing 1ml anticoagulant solution and a 10ml white cap tube containing 2ml of a cell lysing and RNA extraction solution. One (1) ml of blood is collected from the animal and added to the red cap tube and then the entire content of the red cap tube is immediately transfer to the white cap tube.  The 

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FCS allows GeneThera to maintain the integrity of each sample by the addition of specific reagents to test tubes contained in the system.  GeneThera’s FCS is designed to be an easy-to-use method of gathering blood samples from harvested or domesticated animals.  It ensures consistency of samples as well as increased assurance of each sample’s integrity.

We are also continuing our research to develop vaccines for Chronic Wasting Disease and Johne’s disease.  The Company will need the approval of the 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 $5 million and may require more than one year 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.  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.

**INTEGRATED TECHNOLOGY PLATFORM (ITP)**

GeneThera’s Integrated Technology Platform (ITP) is the foundation for “fast-track” rDNA vaccine development.  At the present stage we are working on the development of a recombinant DNA vaccine for Transmissible Spongiform Encephalopathy (TSE) and Johne’s disease.  Transmissible Spongiform Encephalopathy (TSE) is a group of invariably fatal neurodegenerative diseases that include Scrapie in sheep, Bovine Spongiform Encephalopathy (BSE) in cattle, Chronic Wasting Disease (CWD) in elk and deer, and Kuru Disease and variant Creutzfeld-Jacob Disease (vGCD) in humans.  The pathological effects of the disease occur predominantly in the CNS (central nervous system) where the predominant hallmark is accumulation of an abnormally folded isoform of the prion protein (PrPsc).  Johnne’s disease is a chronic debilitating infectious disease of ruminants, characterized by weight loss and, particularly in cattle, by profuse diarrhea.  The casual agent is a bacterium, Mycobacterium avium subspecies paratuberculosis.  Infected animals may show no sign of the disease until years after the initial infection.  Johne’s is a slow, progressive disease with worldwide distribution.

Both vaccine developments are in the “in vitro” or pre-clinical stage.  We expect to initiate experimental animal studies for Johne’s disease in the next 12 months.  A longer time frame (24 months) will be needed to initiate experimental animal studies for TSE.  ITP combines the following technologies: 1) gene expression technology or GES; 2) viral DNA purification technology or PURIVAXTM technology; 3) genetically engineered Adenovirus(rAD) and recombinant Adeno Associate Virus (rAAV) systems (vectors).  This integrated technology platform yields fast-track vaccine development.  Leveraging its ITP, GeneThera believes that it can develop a prototype vaccine within four to six months versus the current standard of 18 to 24.  We estimate that the cost to bring these vaccines to market is $2-5 million.  There is no assurance that we will be able to raise the capital necessary to bring a vaccine to market and if the capital is raised, that we will be able to comply with the government regulations involved in bringing such a product to market.  The GES applied modular unit system utilizes robotics and is based on nucleic acid extraction in conjunction with F-PCR technology to develop gene expression assays.  Using GES assays, vaccine efficacy can be measured quickly because it will be unnecessary to wait for the antibody response to measure how well the vaccine is working.  F-PCR will allow effective quantification of the precise number of viral or bacterial genetic particles before, during and after vaccine injection(s).  We anticipate that the more effective the vaccine is, the stronger the decrease of the infectious disease particles will be.

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**GES SYSTEM**

GES is a proprietary assay development system.  GES was developed in 2001.  To date, the system has been used to develop our TSE molecular assay.  GES is a gene expression system to be used solely in our laboratory and will not be marketed for commercial sale.  The core of GES is Fluorogenic Polymerase Chain Reaction technology (F-PCR).  GeneThera approaches the technical problems related to the use of conventional PCR in molecular diagnostics via our modular unit concept.  Specifically, the modular unit consists of an Automated Nucleic Acid Workstation (ANAW) and a Sequence Detection System (SDS) that are integrated, allowing an operator to perform the entire procedure of DNA extraction and F-PCR analysis within a closed computerized system.  This system results in minimal intervention and non post-PCR manipulation.  GES is a molecular genetic base system that utilizes Fluorogenic Polymerase Chain Reaction (F-PCR).  Fluorogenic PCR (F-PCR) is a technology based on sequence specific hybridization between a nucleic acid target and a fluorogenic probe, a short sequence of DNA chemically treated to generate light at a specific wavelength, complementary to the target sequence.  The probe consists of an oligonucleotide, a short synthetic DNA molecule, with two fluorescent molecules (a reporter and quencher dye) attached to both ends of the oligonucleotide.  Due to the unique design of the Fluorogenic probe, the activity of the Taq Polymerase enzyme allows direct detection of PCR products by the release of the fluorogenic reporter during PCR.  The reporter and the quencher dye are linked at the end of the probe. When the probe is intact, the proximity of the reporter dye to the quencher dye results in a suppression of the reporter fluorescence.  During PCR, if the target of interest is present, the probe specifically anneals between the forward and the reverse primer site.  The nuclease activity of the Taq DNA Polymerase cleaves the probe between the reporter and the quencher only if the region binds to the target.  If the probe is not bound then no cleavage occurs. After cleavage, the shortened probe dissociates from the target and the polymerization of the DNA strand continues.  This process occurs in every cycle and does not interfere with the exponential accumulation of the product.  The cleavage of the oligonucleotide between the reporter and the quencher dye results in an increase of fluorescence of the reporter that is directly proportional to the amount of the product accumulated.  The specificity of this 5’ nuclease assay results from the requirement of sequence complementary between probe and template in order for cleavage to occur.  Thus, the fluorogenic signal is generated only if the target sequence of the probe is generated by PCR.  No signal is generated by non-specific amplification.

To perform GES, specific laboratory equipment is needed.  This involves some substantial initial costs to set up the laboratory operations.  We have performed this substantial set up and are fully operational to perform GES.  We currently have all the specific equipment necessary to further development.  However, the use of F-PCR represents a great advantage over other available systems because of its greater sensitivity, speed, and accuracy.

The Automated Nucleic Acid Workstation is a highly flexible robotic system that extracts and purifies acids from a variety of complex samples, preparing them for F-PCR analysis.  Data management system software includes a database to manage all run phases and record sample processing.

The Sequence Detection System detects the fluorescent signal generated by the cleavage of the reporter dye during each PCR cycle.  This process confers specificity without the need of post-PCR hybridization.  Most importantly, the SDS offers the advantage of monitoring real-time increases in fluorescence during PCR processing.  Specifically, monitoring real-time progress of the PCR completely changes the approach to PR-based quantitation of DNA and RNA, most particularly in improving the precision in both detection and quantitation of DNA and RNA targets.

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GeneThera currently faces limited competition in the use of F-PCR technology and the modular unit concept for commercial testing of either infectious disease in animals or food pathogen contamination.  Currently, most labs utilize conventional microbiology, immunological or conventional PCR methods for either veterinary diseases or food pathogen contamination detection.  Specific to microbiology and immunological techniques, the drawbacks of these approaches are:

1.

the antibodies-based culture media used to detect the presence of infectious diseases has a low level of sensitivity;

2.

High background due to non-specific binding of antibodies and/or culture contamination; sample preparation and storage creates artifacts; and long, cumbersome protocols necessary to perform these tests.

A major technical limitation of conventional PCR is the risk of contaminating a specimen with the products of previously amplified sequences.  Known as cross-contamination, this phenomenon represents a constant challenge to any lab using conventional PCR.  Managing these challenges is cumbersome and difficult to streamline.  Fluorogenic PCR (F-PCR) attempts to overcome these drawbacks by making it possible for PCR to efficiently test large numbers of samples even when major laboratory facilities are not readily available.  A novel methodology, F-PCR allows quantitative and qualitative detection of specific nucleic acid sequences in a sensitive, accurate, and rapid fashion.

**PURIVAXTM TECHNOLOGY**

GeneThera has developed a large-scale process for highly purified and high viral titer (viral concentration) Adenovirus and AAV genetically engineered viruses.  This technology enables GeneThera to develop Adenovirus and AAV-based recombinant DNA vaccines for veterinary diseases and food pathogens.

GeneThera’s PURIVAXTM is a purification system that dramatically improves biological purity and viral titer of recombinant Adenovirus and AAV vectors.  PURIVAXTM 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.”

Recombinant Adenovirus (rAD) and AAV (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:

1.

lack of large scale purification system; and

2.

low viral titer

Traditional technologies and first generation chromatography processes are limited both in terms of purity and yield.  And, due to the limitation of these purification technologies, adequate viral titers cannot be achieved.  We believe that the result is that there is currently no efficient system to deliver immunogenic genetic sequences into cells.

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This is the significance of GeneThera’s PURIVAXTM, 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/eulate) based on its propriety multi-resin anion exchange chromatography system.  GeneThera believes that biological contaminants such as endogenous retrovirus, bacterial, mycoplasma, non-specific nucleic acids, lipids, proteins, carbohydrates and endotoxins are eliminated during the purification process.

**DEVELOPMENTS TO DATE:**

 GeneThera is a biotechnology company that develops molecular tests and DNA vaccines for animal diseases. Listed below is a description of the different stages of development achieved for the different projects the company is currently working on.

 

**CWD/BSE TEST**

 

GeneThera has developed a molecular test for the detection of Chronic Wasting Disease (CWD). This test measures the level of RNA of a genetic marker, EDRF that is found to be at low levels in animals affected by the disease. The same marker is also found at low levels in animals infected with BSE. Chronic Wasting Disease and Mad Cow Disease are both in the family of diseases called Transmissible Spongiform Encephalopathy (TSE). We have analyzed a total of 300 samples of elk and deer blood obtained from CWD free animals, suspected CWD positive depopulated herds, and experimentally infected animals. Samples were collected using the FCS and processed according to our protocol for extraction of total RNA from blood.

Our results have shown that both the clinical stage experimentally infected sample (CWD+) and one of the samples (#54) from the suspected CWD+ herd have a dramatic reduction in the level of expression of EDRF in blood. The remaining samples obtained from the same depopulated herds’ shows a profile of the level of expression of the EDRF gene identical to our negative control (CWD-).

These results suggest 1) a correlation between the presence of clinic signs of CWD and a significant reduction of the level of expression of EDFR in blood; 2) the indication that the down regulation of EDRF in blood may represent an early sign of CWD infection at a preclinical stage.

We believe that EDRF is a very useful genetic marker to detect the presence of TSE in the blood of infected live animals. We also believe that EDRF is an ‘indicator’ of the presence of Transmissible Spongiform Encephalopathy (TSE) at an early stage of infection prior to the detection of the disease in the brain. However, additional studies are required to determine the time course correlation between the reduction in the level of expression of the EDRF gene and pre-clinical and clinical signs of TSE.

 

**JOHNE’S TEST**

GeneThera has developed a molecular test for the detection of Johne’s disease, in blood. Johne’s disease is a bacterial disease caused by Mycobacterium Paratuberculosis (MAP) in blood; which affects primarily dairy cows. Blood from uninfected cows was ‘spiked’ with different concentrations of MAP. The Bacterial DNA was isolated using standard DNA extraction procedures and analyzed using the Real Time PCR technology. Using this methodology, we can detect the presence of twenty (20) bacterial particles from 1ml of blood. We believe our test will be very useful for early diagnosis of MAP infected cows. However, we 

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have not yet tested blood from naturally infected Johne’s animals. Additional studies are therefore necessary to determine the efficacy of our test in naturally infected animals.

 

**PRODUCTS UNDER DEVELOPMENT:**

**DNA VACCINES**

We are currently developing two (2) DNA vaccines. One vaccine targets Johne’s disease; the other is related to TSE. GeneThera’s approach for developing these vaccines are based on the use of PURIVAXTM technology, genetically engineered Adenoviral and AAV, and silencing RNA technology (iRNA).  Phase 1 clinical trial has been successfully completed and is in the process of initiating Phase 2 trials.

**DISEASE DNA VACCINE**

GeneThera is developing a vaccine for Johne’s disease using Adenoviral genetically engineered virus and PURIVAXTM technology. To date, we have modified the Adenovirus by inserting a gene of the MAP bacterium responsible for triggering the infection in blood cells. Using PURIVAXTM the genetic construct has been purified and characterized.

**TSE DNA VACCINE**

The company strategy to develop a TSE vaccine is based on the use of iRNA technology. To date, we have isolated a specific sequence of the prion protein gene. Our initial experiments indicate that our system is capable of generating a reduction in the expression of the prion protein gene of about seventy percent. Our next step will be to genetically alter the Adenovirus by inserting this specific sequenced and characterize the construct using PURIVAX. TM The vaccine is still in an “in vitro” or preclinical stage.

So far, none of our molecular tests of vaccine have been validated or approved by any regulatory agency in the United States or abroad. These tests and vaccines still require extensive validation and a lengthy approval process. These procedures are extremely time consuming and expensive. There is no guarantee that any of the tests or vaccines that GeneThera is developing will be successfully validated or approved by any regulatory agency. GeneThera have limited financial resources. Therefore, the company may not be able to undertake any of the necessary steps to secure a successful validation or approval of any of the molecular tests or vaccines.

**E.COLI 0157H: 7 VACCINES**

GeneThera has obtained the right for worldwide license from the University of New Mexico to develop and commercialize a vaccine against the E.coli 0157:H7. This vaccine is based on the use of genetically modified E.coli 0157:h7 bacterial strain GeneThera E.coli vaccine is the first genetically modified vaccine. Our vaccine provides a live attenuated strain of E.coli 0157:H7, 026 or 0111 in which the shiga toxin coding sequences are deleted to abolish Shiga toxin production and one or more of the nucleotide sequences coding for the bacterial adhesion protein intimin (eae), the locus of the enterocyte effacement encoded regulator (lir) are mutated to inactivate the activity of the encoded protein(s).  This vaccine provides an effective way to inhibit carriage and shedding of enterohemorrhagic E. coli in cattle.

Phase I preclinical studies in animal models have shown that vaccinated rabbits or mice reduce shedding up to 99% with virtually no presence of shiga toxin.  These results are obtained with a single vaccine dose.

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It is the company’s plan to continue the vaccine development by initiating in the near future Phase II clinical studies which will be undertaken in cows and calves.  These animals will be treated with single or multiple injections of the mutated strain of E.coli 0157:H7. We anticipate phase II clinical trial to last 8-10 months.

In addition we have developed a highly reliable testing method based on the use of real time PCR to determine the presence of shiga toxin producing E.coli.  This method is far more sensitive and reliable than the rope test in determining the efficacy of our E.coli vaccine.

**FUTURE DEVELOPMENT PLANS**

It is GeneThera’s intention to continue with the research and development and validation of the molecular tests and DNA vaccines.  Future plans comprise of initiating validation procedures for both TSE and a Johne’s disease molecular test. These validation protocols will be performed in Mexico. At the present time, we do not plan to initiate any validation protocols in the United States.

In parallel, we will continue R&D phases for both the Johne’s disease and TSE DNA vaccine. We plan on initiating an experimental animal protocol to determine the safety of our vaccines. We estimate that the experimental animal protocol may take up to a year. We project to initiate the experimental animal studies within 12-24 months.

**MARKET STRATEGY**

GeneThera’s goal is to focus on the international market for the commercialization of its animal testing platform. We are in the process of setting up an animal testing laboratory in Monterrey, Mexico. The company has no plans, in the immediate future, to offer any veterinary services in the United States.

** **

 However, if GeneThera decides to initiate animal testing in the United States, commercialization of its diagnostic tests will not require approval process from the USDA.  All tests will be done utilizing the blood of animals that can be collected in the field using the Company’s proprietary Field Collection System (FCS).  The collected blood is then sent to GeneThera’s laboratory for testing.  Since all of the testing is done “in house,” meaning tested at laboratories operated by GeneThera and using GeneThera’s developed testing methods, the USDA deems GeneThera’s test to be under the category of veterinary services.  The regulations on veterinary services are much different than that of third party testing.  “Veterinary services” specifically mentioned by GeneThera are tests developed and performed “in house’’. The USDA through APHIS regulates veterinary biologicals (vaccines bacterins, antisera, diagnostic kits and other product of biological origin). APHIS regulates veterinary biologics available for the diagnosis, prevention and treatment of animal disease to ensure the products are pure, safe, potent and effective. GeneThera’s molecular tests are not diagnostic kits and therefore do not fall under the veterinary biologics category. 

**SALES AND MARKETING**

We currently have no sales, marketing, or distribution capabilities and we do not anticipate having the resources in the foreseeable future to allocate to the sales and marketing of any products that we may develop.  Our success will depend, in part, on our ability to either (i) enter into or maintain collaborative relationships with third parties for the marketing, sales, and distribution of products that we develop, if any, or (ii) hire and retain our own sales and marketing capabilities.  Initially, we plan to market products that 

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we develop and for which we obtain regulatory approval through marketing, licensing, distribution, or other arrangements with collaborative partners.  We believe that this approach will both increase market acceptance of any products that we develop and enable us to avoid expending significant funds to develop a sales and marketing organization.

**COMMERCIAL PRODUCTS**

**RESEARCH AND DEVELOPMENT SERVICES**

Molecular, Cellular, Viral Biology Research and Consulting Services.  We provide independent research services to scientists in academia, the pharmaceutical industry, and the biotechnology industry.  Primarily, we focus on technology relevant to animal and human immunotherapy.  Our services are supported by more than 50 years of cumulative experience in research and development for both government and industry by GeneThera’s senior scientists.  We intend to develop a commercial-scale implementation of Adenovector Purification Process to support R&D material production.  Furthermore, we intend to evaluate and test commercially available expression vectors and incorporate them into our vector repertoire.  These technologies are well established within the repertoire of GeneThera’s scientific staff.  We cannot provide any assurance, however, that we will be able to successfully offer these services or that, if offered, we can provide them profitably.

We intend to offer the following research and development services.

*Molecular Biology* services consisting of:

Synthetic eDNA Construction

Prokaryotic Expression Vector Construction & Development

E.coli Expression Strain Evaluation

Pilot Scale Fermentation

Mammalian Expression Vector Construction & Development

Baculovirus Expression

Protein Isolation

Protein Engineering: Complement Determining Region Conjugated Proteins

Monoclonal Antibody Production Chimerization & Humanization

Vector design for Prokaryotic Expression of Antibody Fragments (Fab) and Single Chain

Antibody (ScFv)

Pilot Scale-up Development

Process Purification & Characterization

Assay Development & Quality Control Pharmaceutical Dosage and Formulation

*Molecular Biology Potential Agreement Structure*, which refers to the following stages or options available to a potential customer interested in developing a gene/protein expression system for research purposes.

Stage I – cDNA Construction & Expression Vector Development Stage in which a specific gene sequence is cloned in an expression vector and screened by restriction enzyme analysis.

Stage II – The expression vector is grown into bacteria and the protein produced is purified by chromatography techniques.

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Stage III – Assay for the protein stability and activity in which protein activity is determined by testing the recombinant protein using a specific stabilizing buffer.  The recombinant protein is tested against a substrate.  The substrate is the target protein that is deactivated by the recombinant protein.

Stage IV – Quantification of protein yield per each cell line used for protein expression.  Each type of cell line responds differently to each recombinant protein.  Therefore, various cell lines that express the highest quantity of a specific recombinant protein are then used for large-scale recombinant protein production.

Stage V – This stage is an experimental animal model development for determination of proper biological active concentration and stability and determination of proper storage.  A typical animal model is a mouse model.  Mice are divided into two groups: 1) normal control and 2) mice injected with different concentrations of recombinant protein.  The biological activity is determined by immunological assays such as an ELISA test or Western blot analysis.

Gene Therapy Testing Services:  GeneThera offers GLP testing programs for somatic cell, viral and naked DNA-based gene therapies.  Our scientists have over eight years experience in providing fully integrated bio-safety testing programs for the cell and gene therapy fields and have supported a number of successful BLA and IND applications.  To date, the Company has not generated any revenues with regard to these services, and there is no assurance that we will generate any revenues from such services.

Replication-Competent Viral Vector Testing:  Sensitive in vitro cell culture assays are used to detect replication-competent retroviruses or adenoviruses.  GeneThera intends to work with clients to provide custom replication-competent virus detection assays for the particular vector construct.

Complete Somatic Cell and Viral Vector Packaging and Producer Cell Line Characterization:  GeneThera offers all of the assays mandated by regulatory authorities worldwide for the bio-safety analysis and characterization of cells and cell lines used in gene therapy products.

Vector Stock Characterization:  Custom purity and potency testing is available for gene therapy viral vector stocks.

Vector Purification Process Validation for Viral Clearance:  Most biopharmaceuticals require viral clearance studies to validate the removal of potential contaminants, such as those from bovine components or from helper viruses (adenovirus in AAV production).  GeneThera can provide custom design and performance of viral studies for various vector purification processes.

Custom Bio-safety Testing Programs for Somatic Cell, Ex Vivo Cell, and Tissue Therapies:  GeneThera can guide our clients through the unique process of designing and implementing a bio-safety testing program that meets the needs of each specific project.

To date, we have not entered into any agreement for the provision of any of the services described above with any customer.  We are currently pursuing agreements to provide some of these services to potential customers.  There is no assurance that any agreement will be entered into for the provision of the Company’s services or that the Company will generate significant revenues or profits from any such agreement.

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**INTELLECTUAL PROPERTY**

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 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 protect our interests.

**COMPETITION**

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 Prionics AG, IDEXX Laboratories, Inc., and Bio-Rad Laboratories, Inc.

Academic and government institutions are also carrying out a significant amount of research in the field of veterinary health, particularly in the fields of Chronic Wasting Disease and Mad Cow Disease.  We anticipate that these institutions will become more aggressive in pursuing patent protection and negotiating licensing arrangements to collect royalties for use of technology that they have developed and to market commercial products similar to those that we seek to develop, either on their own or in collaboration with 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 veterinary 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 F-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.

12

**MANUFACTURING**

We do not currently manufacture any products and do not have any facilities capable of manufacturing any products.  If we are successful in developing a vaccine for veterinary purposes, we intend to contract with third parties or a collaborative partner to assist with production.  We currently do not intend to establish a manufacturing facility to manufacture any products that we may develop.  In the event we decide to establish a commercial manufacturing facility, we will require substantial additional funds and will be required to hire and train significant numbers of employees and comply with the extensive federal and state regulations applicable to such a facility.  In addition, we would be required to apply for a license from the United States Department of Agriculture’s Animal and Plant Health Inspection Service to manufacture any such vaccines at such facilities.

**PRODUCT LIABILITY**

The testing, manufacturing, and marketing of the Company’s 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.

**GOVERNMENT REGULATION**

Our unique approach to the testing for various animal diseases allows us to begin commercialization of its diagnostic tests without the need for a long and enduring approval process from the USDA.  All tests are done utilizing the blood of animals that can be collected in the field using the Company’s proprietary Field Collection System (FCS).  The collected blood is then sent to our laboratory for testing.  Since all of the testing for the diseases is done “in house,” meaning tested at laboratories operated by us and using our developed testing methods, the USDA deems our test to be under the category of veterinary services.  The regulations on veterinary services are much different than that of third party testing.    The USDA through APHIS regulates veterinary biologicals (vaccines bacterins, antisera, diagnostic kits and other product of biological origin). APHIS regulates veterinary biologics available for the diagnosis prevention and treatment of animal disease to ensure the products are pure, safe, potent and effective. GeneThera’s molecular tests are not diagnostics kits and therefore do not fall under the veterinary biologics category. The USDA, to the best of our knowledge, does not regulate laboratory tests that are performed “in-house” under the category of veterinary services. 

In the event that we develop a vaccine based on our research, the vaccine product and the facility at which commercial quantities of the vaccine will be produced will be subject to comprehensive regulation by the United States Department of Agriculture’s Animal and Plant Health Inspection Service.  Before any “biological product” (which includes vaccines) can be prepared for commercial sale, APHIS must approve and license the product and the facility at which it is proposed to be manufactured.  The approval process is lengthy and expensive.  We will be required to submit an application containing, among other things, an outline of production for the proposed product, characterization data, and protocols for animal studies and trials of host animal immunogenicity, safety, efficacy, back passage, shed/spread, interference, and other 

13

studies. We do not have the capability to conduct our own studies and trials of any candidate vaccine that we may develop and will rely on collaborative partners to conduct all such studies.  Currently, we do not have any such agreements with any partner, and we cannot give any assurance that we will be able to enter into such an agreement on terms that are favorable to the Company, if at all.  If we do enter into one or more such agreements, we will not be able to control the timetable for completing such studies.  Furthermore, we cannot give any assurance that any applications that we submit for any vaccine products will be approved by APHIS.  The failure to receive such approval, or the receipt of approval following the approval of a competing product, would have an adverse material effect on the Company.

**LICENSING**

Through our third division, Licensing, we intend to manage the marketing and sale of the vaccines developed by GeneThera’s Research & Development division.  As GeneThera does 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 provide significant revenues.

**ITEM 1A**

**RISK FACTORS**

We encounter various risks related to our business and our industry.  While the Company is optimistic about its long term prospects, the following risk factors should be considered in evaluating its outlook 

**There is a substantial doubt about GeneThera ability to continue as an on-going concern.**

GeneThera has had negligible revenues since inception. Because of these circumstances, GeneThera will require additional working capital to develop business operations. There is no assurance that GeneThera will reach a level of revenues adequate to generate sufficient cash flow from operation or obtain additional financing necessary to support GeneThera’s operating expense requirements.

** A loss of key personnel could adversely affect the Company.**

The Company depends to a large part on the efforts and continued employment of Antonio Milici, M.D., Ph.D., our President, Chairman of The Board, and Chief Executive Officer.  The loss of the services of Dr. Milici could adversely affect our business.

**If the****Company fails to attract and retain additional highly skilled personnel, operations will suffer.**

Finding qualified personnel in the biotechnology industry is very challenging. Smaller biotechnology companies are always at a disadvantage because of its limited financial resources. The Company has been unable at this time to hire any additional qualified personnel. If the Company is unable to hire additional personnel this may result in a substantial delay of its R&D and commercial operations.

**If the Company fails to attract significant additional capital, the Company may be unable to continue developing its products.**

14

From the beginning of its operation, GeneThera has obtained limited funding to implement its business strategy. The Company did not have sufficient funding to meet its operating needs throughout 2008. Potential sources of additional funding could include strategic relationships, public or private sales of shares of common stocks, or other arrangements. 

**Rapid growth may place significant demands on our resources.**

We expect significant expansion of our operations.  Our anticipated future growth will place a significant demand on our managerial, operational and financial resources due to:

* The need to manage relationships with various strategic partners and other third parties

* Difficulties in hiring and retaining skilled personnel necessary to support our business

* The need to train and manage a growing employee base

* Pressures for the continued development of our financial and information management systems

If we have not made adequate allowances for the costs and risks associated with this expansion or if our systems, procedures, or controls are not adequate to support our operations, our business could be harmed.

 **The Company may not be able to comply with Government regulations.**

The Company is subject to or affected by laws and regulations that govern, for example: (i) the vaccination of animals for certain diseases.  The failure to comply with these laws and regulations, or to obtain applicable governmental approvals, could result in the imposition of penalties, cause delays in, or make impossible, the marketing of our products and services.

**The Company may be unable to compete against other more establish biotech of pharmaceutical companies.**

The Company operates in a very****competitive and difficult area. Biotechnology business is notoriously difficult and risky. The Company competes with other more established and better funded companies in the United States and overseas 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 which will make the Company’s products less valuable or unmarketable.

**The Company has no manufacturing capabilities.**

The Company does not have manufacturing capabilities for its DNA vaccine technology. The Company solely relies on other companies to manufactures vaccines that can meet Government Regulations. Manufacturing of these products are very expensive and The Company may not be able to secure the necessary funding to hire any of such companies. If the Company is unable to produce these vaccines, then the Company may never be able to initiate clinical trials. This will seriously hamper the Company’s ability to commercialize any of its DNA vaccine products.

15

**The Company has limited Government Regulatory Experience.**

The company has never successfully undertaken a clinical trial for animal DNA vaccine. Our experience in this area is limited. The Company has never obtained regulatory approvals for any of its products.

**The Company was delisted from Over the Counter Bulletin Board (OTCBB).**

Although by the time of our original Form 10-K filing, our company was participant of the exchange list of OTCBB (Over the Counter Bulletin Board), FINRA delisted our Company on June 19, 2008.  We are attempting to catch up our filings and re-apply for such active listing.

 

**ITEM 2**

** DESCRIPTION OF PROPERTY**

We lease approximately 9,600 square feet for our biotechnology laboratory located at 7577 W. 103rd Ave. in Westminster, Colorado 80021. The lease terminates January 31, 2014.  The rent is $7,000 per month for the first 14 months, $10,970 per month for months 15 through 26 and $12,584 per month for the remainder of the lease. We sub-lease 700 square feet of office space to GTI Corporate Transfer Agents, LLC, a related party, located in Suite 209.  The lease is on a three-year basis and the rent is $1,000 per month until January 31, 2014.  We do not own any real estate property.  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 GeneThera.  Currently we do not have the funds to purchase or construct any such laboratories and do not have commitment from any party to provide the funds for a laboratory.

**ITEM 3**

**LEGAL PROCEEDINGS**

On June 6, 2006, the Internal Revenue Service filed a Federal Tax Lien for $29,321. On June 29, 2007, the Internal Revenue Service filed a Federal Tax Lien for $1,983. On June 6, 2008, MAG Capital LLC, Mercator Momentum Fund III LP, Mercator Momentum Fund LP, and Monarch Pointe Fund Ltd. filed a Civil Judgment for $37,721. On June 6, 2008, Mark A. Shoemaker filed a Civil Judgment for $37,721. In June 2009, James Tufts filed a complaint at the Small Claims Court in Jefferson County CO for $4,000 plus expenses from a London trip. On June 26, 2009, Enterprise Leasing Company of Denver filed a Civil Judgment for $78,178.  On August 17, 2010, Banc of America Leasing filed a Civil Judgment for $24,002. On September 23, 2010, Liberty Acquisitions filed a Civil Judgment for $3,300. On February 10, 2009, Centennial Credit Corporation filed a Civil Judgment for $967. The Company has not satisfied any of these judgments.

**ITEM 4**

**SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

None

**PART II**

**ITEM 5**

**MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS**

Our common stock currently trades on the Over the Counter Bulletin Board under the symbol GTHR under Pink Sheets.  The following sets forth the range of high and low bid quotations for the periods indicated as reported by Yahoo Finance.  Such quotations reflect prices between dealers, without retail markup, markdown or commission, and may not represent actual transactions.

16
| **Year**

**Quarter**

**High**

**Low**

**2009**

Fourth

$

0.05

$

0.02

 

Third

0.07

0.02

 

Second

0.06

0.02

 

First

0.10

0.02

**2008**

Fourth

$

11.50

$

0.05

 

Third

18.50

11.50

 

Second

25.00

0.008

 

First

0.03

0.02

* Source Yahoo Finance

There are no restrictions on the payment of dividends. There are approximately 579 record holders of common stock as of December 31, 2009.

**DIVIDENDS**

 On May 21, 2007, the Company issued a one-time dividend payment in the amount of $.0004 per share.  

**ITEM 6**

**SELECTED FINANCIAL DATA**

The following selected financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis or Plan of Operation” and Item 8, “Financial Statements.”

**Operating Data****as of December 31,**

 

**2009 **

**2008 **

**2007 **

**2006 **

**Gross Profit**

0 

10,822 

97,900 

150,000 

**General & Administrative**

(170,849)

(377,226)

(313,381)

(739,529)

**Consulting expense**

(617,542)

(722,515)

(236,757)

(444,420)

**Payroll expense**

(239,965)

(234,000)

(235,350)

(306,890)

**Lab expense**

(2,083)

(457)

(255)

(39,592)

**Depreciation**

(184,804)

(69,647)

(72,451)

(77,014)

**Restitution expense**

(6,536)

0 

(0)

0 

**Loss on litigation**

(51,964)

0 

(0)

0 

**Fixed assets impairment**

(25,000)

0 

(0)

0 

**Dividend payment**

0 

0 

(15,980)

0 

**Settlement expense**

0 

0 

(0)

(25,132)

**Other income (expense)**

(904)

(0)

(100)

6 

 

 

 

 

 

**Net Loss**

(1,299,647)

(1,393,023)

(776,374)

(1,482,571)

 

 

 

 

 

**Loss Per Share**

-0.10 

-2.93 

-0.02 

-0.07 

17

**Balance Sheet Data**

 

**2009**

**2008**

**2007**

**2006**

**Cash and Cash Equivalents**

7 

48 

201 

234 

**Total Assets**

14,512 

221,786 

364,310 

394,607 

**Total Liabilities**

2,159,604 

1,788,040 

1,570,081 

1,418,411 

**Stockholders’ Equity (Deficit)**

(2,145,092)

(1,566,254)

(1,205,771)

(1,023,804)

** **

**ITEM 7**

**MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS**

**FORWARD-LOOKING AND CAUTIONARY STATEMENTS**

Sections of this Form 10-K, including the Management’s Discussion and Analysis or Plan of Operation, contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”), Section 21E of the Securities and Exchange Act of 1934 (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are subject to risks and uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements.  You should not unduly rely on these statements.  Forward-looking statements involve assumptions and describe our plans, strategies, and expectations.  You can generally identify a forward-looking statement by words such as “may,” “will,” “should,” “would,” “could,” “plans,” “goal,” “potential,” “expect,” “anticipate,” “estimate,” “believe,” “intent,” “project,” and similar words and variations thereof.  This report contains forward-looking statements that address, among other things:

* Our financing plans

* Regulatory environments in which we operate or plan to operate 

* Trends affecting our financial condition or results of operations, the impact of competition, the start-up of     certain operations and acquisition opportunities

Factors, risks, and uncertainties that could cause actual results to differ materially from those in the forward-looking statements (“Cautionary Statements”) include, among others:

* Our ability to raise capital

* Our ability to execute our business strategy in a very competitive environment

* Our degree of financial leverage

* Risks associated with our acquiring and integrating companies into our own

* Risks relating to rapidly developing technology

* Regulatory considerations

* Risks related to international economies

* Risks related to market acceptance and demand for our products and services

* The impact of competitive services and pricing

* Other risks referenced from time to time in our SEC filings

All subsequent written and oral forward-looking statements attributable to us, or anyone acting on our behalf, are expressly qualified in their entirety by the cautionary statements.  We do not undertake any 

18

obligations to publicly release any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect unanticipated events that may occur.

You should read the following discussion of our results and plan of operation in conjunction with the consolidated financial statements and the notes thereto appearing elsewhere in this Form 10-K.  Statements in this Management’s Discussion and Analysis or Plan of Operation that are not statements of historical or current objective fact are “forward-looking statements.”

**OVERVIEW**

We have developed proprietary diagnostic assays for use in the agricultural and veterinary markets.  Specific assays for Chronic Wasting Disease (CWD) (among elk and deer) and Mad Cow Disease (among cattle) have been developed and are available currently on a limited basis.  E. coli (predominantly cattle) and Johne’s disease (predominantly cattle and bison) diagnostics are in development.  We are also working on vaccine solutions to meet the growing demands of today’s veterinary industry and tomorrow’s agriculture and healthcare industries.  The Company is organized and operated both to continually apply its scientific research to more effective management of diseases and, in so doing, realize the commercial potential of molecular biotechnology.

We have not generated significant operating revenues and, as of December 31, 2009, we had incurred a cumulative net loss from inception of $18,970,677.  Our ability to generate substantial operating revenue will depend on our ability to develop and obtain approval for molecular assays and developing therapeutic vaccines for the detection and prevention of food contaminating pathogens, veterinary diseases, and diseases affecting human health.

Our independent auditors have expressed substantial doubt about our ability to continue as a going concern in their report on our consolidated financial statements for 2009.  For 2009 and 2008, our operating losses were $1,299,647 and $1,393,023, respectively.  Our current liabilities exceeded current assets by $2,587,096 and $1,787,171 as of December 31, 2009 and 2008, respectively.

Although we completed an equity financing with gross proceeds of approximately $1.1 million in 2005, we will require significant additional funding in order to achieve our business plan.  Over the next 12 months, in order to have the capability of achieving our business plan, we believe that we will require at least $5,000,000 in additional funding.  We will attempt to raise these funds by both means of one or more private offerings of debt or equity securities and revenues generated by our Project in Mexico.  At this time, we have commitments for additional capital funds.  This amount may exceed an additional $1,000,000 depending on cost involved in the further development and commercialization of our products.  In such event, we may need immediate additional funding.  Our capital requirements will depend on many factors including, but not limited to, the timing of further development of assays to detect the presence of infectious disease from the blood of live animals, our hiring of additional personnel, the applications for, and receipt of, regulatory approvals for any veterinary vaccines that we may develop, and other factors.  Our ability to raise capital will increase our ability to implement our business plan.

Over the next 12 months, we expect significant purchases and/or sales of plant or equipment and significant changes in the number of our employees for any off-balance sheet arrangements that will have current and future effect on our financial condition.

19

We also expect to spend a significant amount of our capital on research and development activities for commercialization relating to development and vaccine design/development.  When 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 GeneThera.  To date, we have introduced our diagnostic solution for Chronic Wasting Disease (CWD) and Mad Cow Disease on a very limited basis.  We anticipate that significant funds will be spent on research and development throughout 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 may be successful in developing or validating any new assays and, when we are successful in developing and validating any such assays, we may be able to successfully commercialize them or earn profits from sales of those assays.  Furthermore, we may be able to design, develop, or successfully commercialize vaccines as a result of our research and development efforts.

**RECENT DEVELOPMENTS**

The Company has begun to form an entity with a Mexican company to jointly own and operate a laboratory facility in Monterrey, Mexico for express purposes of testing cattle for TSE.  The entity has been legally formed. The Mexico Project continues to wait for the completion of the funding for this enterprise.

**RELATED PARTY TRANSACTIONS**

GTI Corporate Transfer Agents, LLC is the Company’s transfer agent.  Ms. Michelle Torres became the Board Member of GTI Corporate Transfer Agents, LLC with a one-third ownership and/or interest. Ms. Tannya Irizarry has a one-third ownership and/or interest; the remaining one-third ownership belongs to Ms. Krystle Rundle. 

**RESULTS OF OPERATIONS**

**Year Ended December 31, 2009 Compared to Year Ended December 31, 2008**

For 2009, the Company has a net loss of $1,299,647 or net loss per share of $0.10, and $0 of revenue as compared with a net loss of $1,393,023, or $2.93 per share, and revenue of $10,822 for 2008.

**General and Administrative Expenses:**  General and administrative expenses decreased to $170,849 for 2009 compared to $377,226 for 2008.  This decline was due to a decrease in personnel.   

**Consulting Expenses:**  Consulting expenses decreased to $617,542 for 2009 compared to $722,515 for 2008.  The difference is attributable to more marketing consultants in 2008.

**Depreciation and Amortization Expense:**  Depreciation and amortization expenses increased to $184,804 for 2009 compared to $69,647 for 2008 primarily due to changes in the estimated useful lives of certain laboratory equipment during 2009, which accelerated the depreciation of certain fixed asset items.  

**LIQUIDITY AND CAPITAL RESOURCES**

We had a cash balance of $7 as of December 31, 2009 and a cash balance of $48 as of December 31, 2008.  Our current cash balance is not sufficient to fund our business objectives and we will need significant additional capital over the next 12-18 months in order to fund our planned operations.  We may be unable to secure any additional financing on terms that are acceptable to us, if at all.

20

Since we completed the reverse merger with Hand Brand Distribution, Inc., we have financed our operations, in large part, by private placements of our common and preferred stock and promissory notes convertible into our common stock.  We have raised an aggregate of $2,613,900 through such sales, including the sale of approximately $1.1 million of our preferred stock in January 2005.

We will require significant additional funding in order to achieve our business plan.  Specifically, we intend to spend significant funds on validating and testing our products, seeking necessary regulatory approvals and focusing on international expansion.  Over the next 12 month, in order to have the capability of achieving our business plan, we believe that we will require at least $5,000,000.  We will attempt to raise these funds by means of one or more private offerings of debt or equity securities or both.  We may not be able to secure the financing that we believe is necessary to implement our strategic objectives and, even if additional financing is secured, we may not achieve our strategic objectives.  As of the date of this Report, we do not have any firm commitments from any investors for any additional funding.

Our longer-term working capital and capital requirements will depend upon numerous factors, including revenue and profit generation, pre-clinical studies and clinical trials, the timing and cost of obtaining regulatory approvals, the cost of filing, prosecuting, defending, and enforcing patent claims and other intellectual property rights, competing technological and market developments, collaborative arrangements.  Additional capital will be required in order to attain such goals.  Such additional funds may not become available on acceptable terms and we cannot give any assurance that any additional funding that we do obtain will be sufficient to meet our needs in the long term.

**CRITICAL ACCOUNTING POLICIES**

In December 2001, the SEC requested that all registrants discuss their most “critical accounting policies” in Management’s Discussion and Analysis of Financial Condition or Plan of Operation.  The SEC indicated that a “critical account policy” is one which is both important to the portrayal of the Company’s financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  Our significant accounting policies are described in Note 1 to our consolidated financial statements included in this Report.

**RECENTLY ISSUED ACCOUNTING STANDARDS**

The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant effect on its consolidated financial position or results of operations.

**EMPLOYEES**

As of December 31, 2009, we had a total of two full-time employees who devoted substantial effort on our behalf.  None of our employees are represented by a collective bargaining unit.  We entered into an employment agreement with Antonio Milici, M.D., Ph.D., to serve as our Chief Executive Officer and Chief Scientific Officer through January 7, 2012.  In consideration for his services, Dr. Milici will receive a base salary of $144,000 per annual plus bonuses as may be determined by the Board of Directors in its sole discretion.  As part of his employment agreement, Dr. Milici is subject to non-disclosure and non-competition obligations and has transferred to the Company all of his interests in any idea, concept, technique, invention or written work.  We also entered into an employment agreement with Tannya L. 

21

Irizarry to serve as our Chief Administrative Officer through January 7, 2012.  Ms. Irizarry’s base salary is $135,000 per annum.  The above salaries have been accrued to be paid in common stock shares from the Company.  There are no employee issues at this time.

**RESEARCH AND DEVELOPMENT**

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.  To date, we have introduced our diagnostic solution for Chronic Wasting Disease and Mad Cow Disease on a very limited basis.  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 you 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 you that we will be able to design, develop, or successfully commercialize any vaccines as a result of our research and development efforts.

**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 GeneThera develops), our ability to obtain the capital to build the labs, and our ability to successfully manage them from our principal office.

**PROPERTIES**

We lease approximately 9,600 square feet for our biotechnology laboratory located at 7577 W. 103rd Ave. in Westminster, Colorado 80021. The lease terminates January 31, 2014.  The rent is $7,000 per month for the first 14 months, $10,970 per month for months 15 through 26 and $12,584 per month for the remainder of the lease. We sub-lease 700 square feet of office space to GTI Corporate Transfer Agents, LLC, a related party, located in Suite 209.  The lease is $1,000 per month until January 31, 2014.  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 GeneThera.  Currently, we do not have the funds to purchase or construct any such laboratories and do not have a commitment from any party to provide the funds for a laboratory.

22

** ITEM 8**

**FINANCIAL STATEMENTS   **

**GENETHERA, INC. AND SUBSIDIARY**

**CONSOLIDATED FINANCIAL STATEMENTS**

**FOR THE YEARS ENDED**

**DECEMBER 31, 2008 AND 2009**

**INDEX TO FINANCIAL STATEMENTS**

 

 

 

Report of Independent Registered Public Accounting Firm

24

 

 

Consolidated Balance Sheets as of December 31, 2009 and 2008

26

 

 

Consolidated Statements of Operations for the years ended December 31, 2009 and 2008 

27

 

 

 

 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended Dec 31, 2009 and  2008

28

 

 

 

 Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008

30

 

 

 

Notes to Consolidated Financial Statements

32

 

23

**Report of Independent Registered Public Accounting Firm**

 

To the Board of Directors and Shareholders of

GeneThera, Inc. 

Westminster, Colorado

We have audited the accompanying consolidated balance sheet of GeneThera, Inc. and its subsidiary (collectively, the “Company”) as of December 31, 2009 and the related consolidated statements of operations, shareholders' deficit, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. 

We also have audited the adjustment described in Note 9 that was applied to restate the 2008 financial statements to correct an error.  In our opinion, such adjustment was appropriate and has been properly applied.  We were not engaged to audit, review, or apply any procedures to the 2008 financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2008 financial statements taken as a whole.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, based on our audit, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of GeneThera, Inc. and its subsidiary at December 31, 2009 and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 2 to the consolidated financial statements, the Company has no revenues, no historical profitability, and has limited available funds that raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ MaloneBailey, LLP

www.malonebailey.com

Houston, Texas

November 1, 2011

24

**Report of Independent Registered Public Accounting Firm**

Board of Directors

GeneThera, Inc.

Westminster, CO

We have audited the accompanying balance sheets of GeneThera, Inc. and subsidiary (the “Company”) as of December 31, 2008 and the related statements of operations, stockholders’ deficit, and cash flows for the year then ended (the 2008 financial statements before the effects of the adjustment discussed in Note 9 are not presented herein). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, except for the error described in Note 9, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2008 and the results of its operations and changes in stockholders’ deficit and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to audit, review, or apply any procedures to the adjustments for the correction of the error due to misrepresentations from Company’s legal counsel and described in Note 9 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by MaloneBailey, LLP.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 9 of the financial statement, the Company’s accumulated deficit from operations and its difficulties in maintaining sufficient working capital raise substantial doubt about its ability to continue as a going concern.  Management’s plans concerning these matters are also described in Note 9.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

W.T. Uniack & Co. CPA’s P.C.

Alpharetta, Georgia

June 23, 2009

25

**GENETHERA, INC.  CONSOLIDATED BALANCE SHEETS**

**                     (Restated)**

 

**December 31, 2009**

 

**December 31, 2008**

 

**ASSETS**

 

 

 

 

**Current assets**

 

 

 

 

**Cash**

$

7 

 

$

48 

 

**Accounts receivable**

- 

 

821 

 

**Prepaid expenses**

1,742 

 

- 

 

**Total current assets**

1,749 

 

869 

 

**Property and equipment**

 

 

- 

 

**Office and laboratory equipment**

729,078 

 

727,428 

 

**Less: Accumulated depreciation**

(716,315)

 

(506,511)

 

**Total property and equipment**

12,763 

 

220,917 

 

**TOTAL ASSETS**

$

14,512 

 

$

221,786 

 

 

 

 

 

 

**LIABILITIES & STOCKHOLDERS' DEFICIT**

 

 

 

 

**Current liabilities**

 

 

 

 

**Accounts payable**

$

483,707 

 

$

319,220 

 

**Accounts payable-related party**

10,570 

 

- 

 

**Accrued expenses**

1,013,348 

 

811,841 

 

**Notes payable**

4,000 

 

- 

 

**Loan from shareholder**

647,979 

 

656,979 

 

**Total liabilities**

2,159,604 

 

1,788,040 

 

 

 

 

 

 

**Stockholders' deficit:**

 

 

 

 

**Series A convertible preferred stock**

5 

[1]

5 

[2]

**Series B convertible preferred stock**

6,320 

[3]

7,320 

[4]

**Common stock**

21,148 

[5]

2,266 

[6]

**Additional paid-in capital**

16,798,112 

 

16,095,185 

 

**Accumulated deficit**

(18,970,677)

 

(17,671,030)

 

**Total stockholders' deficit**

(2,145,092)

 

(1,566,254)

 

**TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT**

$

14,512 

 

$

221,786 

 

­­­­­

 

 

 

[1] Par value $0.001 per share, 20,000,000 shares authorized, 4,600 shares issued and outstanding as of December 31, 2009, respectively.

[2] Par value $0.001 per share, 20,000,000 shares authorized, 4,600 shares issued and outstanding as of December 31, 2008, respectively.

[3] Par value $0.001 per share, 30,000,000 shares authorized, 6,320,000 shares issued and outstanding as of December 31, 2009, respectively.

[4] Par value $0.001 per share, 30,000,000 shares authorized, 7,320,000 shares issued and outstanding as of December 31, 2008, respectively.

[5] Par value $0.001 per share, 300,000,000 shares authorized, 21,147,547 shares issued and outstanding as of December 31, 2009, respectively.

[6] Par value $0.001 per share, 300,000,000 shares authorized, 2,265,816 shares issued and outstanding as of December 31, 2008, respectively.

See accompanying notes to consolidated financial statements.

­­­

26

**GENETHERA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS**

 

 

                                                       (Restated)

 

 

Year Ended Dec, 31, 2009

 

 Year Ended Dec, 31, 2008 

Revenues

 

 

 

 

  Sales

 

$

- 

 

$

10,822 

  Research fees

 

- 

 

- 

Total revenues

 

- 

 

10,822 

 

 

 

 

 

Cost of sales

 

- 

 

- 

 

 

 

 

 

Gross profit

 

- 

 

10,822 

 

 

 

 

 

Expenses

 

 

 

 

  Other compensation

 

- 

 

- 

  Consulting

 

617,542 

 

722,515 

  General and administrative expenses

 

170,849 

 

377,226 

  Payroll expenses

 

239,965 

 

234,000 

  Depreciation

 

184,804 

 

69,647 

  Settlement expense

 

- 

 

- 

  Dividend payment

 

- 

 

- 

  Laboratory expenses

 

2,083 

 

457 

  Restitution expense

 

6,536 

 

- 

  Loss on litigation

 

51,964 

 

- 

  Fixed assets impairment

 

25,000 

 

- 

Total operating expenses

 

1,298,743 

 

1,403,845 

 

 

 

 

 

Loss from operations

 

(1,298,743)

 

(1,393,023)

 

 

 

 

 

Other income (expenses)

 

 

 

 

  Beneficial conversion expense

 

- 

 

- 

  Interest expense

 

- 

 

- 

  Gain on settlements

 

- 

 

- 

  Loss on conversion of convertible notes payable

 

(904)

 

 

  Other income (expenses), net

 

- 

 

- 

Total other income

 

(904)

 

- 

 

 

 

 

 

Net loss

 

$

(1,299,647)

 

$

(1,393,023)

 

 

 

 

 

Loss per common share - Basic  and diluted

 

$

(0.10)

 

$

(2.93)

 

 

 

 

 

Weighted average common shares outstanding – Basic and diluted

 

13,238,070 

 

475,797 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

27

**GENETHERA, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICT)**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional  

 Paid-in 

 Capital

 

 

Stock 

 Subscriptions

 

 

 

 Series A Preferred Stock 

 Series B Preferred Stock 

 Common Stock 

 

Total

Stockholders

Deficit

 

 Shares 

 Amount 

 Shares 

 Amount 

 Shares 

 Amount 

Deficit 

 Accumulated   

 

 

 

 

 

 

 

 

 

 

 

**Balance at December 31, 2007**

**4,600**

**5**

**3,000,000 **

**3,000 **

**10,306**

**51,527 **

**15,017,704 **

**-**

**(16,278,007)**

**(1,205,771)**

 

 

 

 

 

 

 

 

 

 

 

Shares issued for consulting services

**-**

-

- 

- 

455,039

9,544 

812,010 

**-**

- 

821,554 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for rent

**-**

-

- 

- 

472

2,360 

30,426 

**-**

- 

32,786 

 

 

 

 

 

 

 

 

 

 

 

Additional paid-in capital - reverse split

**-**

-

- 

- 

-

(62,964)

62,964 

**-**

- 

- 

 

 

 

 

 

 

 

 

 

 

 

Shares issued to officer

**-**

-

4,500,000 

4,500 

-

- 

175,500 

**-**

- 

180,000 

 

 

 

 

 

 

 

 

 

 

 

Converted shares

**-**

-

(180,000)

(180)

1,800,000

1,799 

(3,419)

**-**

- 

(1,800)

 

 

 

 

 

 

 

 

 

 

 

Net loss

**-**

-

- 

- 

-

- 

- 

**-**

(1,393,023)

(1,393,023)

 

 

 

 

 

 

 

 

 

 

 

**Balance at December 31, 2008 (Restated)**

**4,600**

**5**

**7,320,000 **

**7,320 **

**2,265,817**

**2,266 **

**16,095,185 **

**-**

**(17,671,030)**

**(1,566,254)**

 

 

 

 

 

 

 

 

 

 

 

Shares issued for consulting services

**-**

-

- 

- 

7,756,195

7,756 

641,220 

**-**

- 

648,976 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for restitution

**-**

-

- 

- 

173,999

174 

6,362 

**-**

- 

6,536 

 

 

 

 

 

 

 

 

 

 

 

Shares issued to officers in lieu of salary

**-**

-

- 

- 

647,678

648 

63,817 

**-**

- 

64,465 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for cash

**-**

-

- 

- 

161,000

161 

671 

**-**

- 

832 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for note conversion

**-**

-

- 

- 

142,858

143 

(143)

**-**

- 

- 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series B preferred stock to common stock

**-**

-

(1,000,000)

(1,000)

10,000,000

10,000 

(9,000)

**-**

- 

- 

 

 

 

 

 

 

 

 

 

 

 

Net loss

**-**

-

- 

- 

-

- 

- 

**-**

(1,299,647)

(1,299,647)

 

 

 

 

 

 

 

 

 

 

 

**Balance at December 31, 2009**

**4,600**

**$**

**5**

**6,320,000 **

**$**

**6,320 **

**21,147,547**

**$**

**21,148 **

**$**

**16,798,112 **

**$**

**-**

**$**

**(18,970,677)**

**$**

**(2,145,092)**

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

29

**GENETHERA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS**

 

 

                                                        (Restated)

 

 

Year Ended Dec. 31, 2009

Year Ended Dec. 31, 2008

**Cash flows from operating activities**

 

 

 

 

Net loss

 

$

(1,299,647)

 

$

(1,393,023)

 

 

 

 

 

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

   Stock-based compensation 

 

719,977 

 

848,478 

   Depreciation and amortization 

 

184,804 

 

69,647 

   Impairment

 

25,000 

 

- 

   Beneficial conversion feature 

 

- 

 

- 

Changes in operating assets and liabilities:

 

 

 

 

   Accounts receivable 

 

821 

 

67,446 

   Accounts receivable - related parties 

 

- 

 

- 

   Reserve for uncollectibles 

 

- 

 

- 

   Prepaid expenses 

 

(1,742)

 

- 

   Other assets 

 

- 

 

5,278 

   Accounts payable - related parties 

 

10,570 

 

- 

   Accounts payable and accrued expenses 

 

365,994 

 

369,030 

**     Net cash provided by (used in) operating activities**

 

9,777 

 

(33,144)

**Cash flows from investing activities**

 

 

 

 

   Cash paid for purchase of property and equipment 

 

(1,650)

 

- 

**     Net cash used in investing activities**

 

(1,650)

 

- 

**Cash flows from financing activities**

 

 

 

 

   Capital contributed as equipment 

 

- 

 

- 

   Principal payments on notes and leases payable 

 

- 

 

- 

   Payment of lease payable 

 

- 

 

- 

   Payment of accrued salaries 

 

- 

 

- 

   Proceeds from issuance of stock 

 

832 

 

183,792 

   Proceeds from (payments for) loans payable 

 

4,000 

 

(150,801)

   Proceeds from subscriptions receivable 

 

- 

 

- 

   Repurchase of common stock 

 

- 

 

- 

   Receipt of additional paid-in capital 

 

- 

 

- 

   Payment of preferred dividends 

 

- 

 

- 

   Payment of loans from shareholder 

 

(9,000)

 

- 

**Net cash provided by (used in) financing activities**

 

(8,168)

 

32,991 

Net increase (decrease) in cash

 

(41)

 

(153)

Cash  at the beginning of the year

 

48 

 

201 

Cash at the end of the year

 

$

7 

 

$

48 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 Cash paid for interest

 

$

- 

 

$

- 

 Cash paid for income taxes

 

$

- 

 

$

- 

Non-cash investing  and financing transactions:

 

 

 

 

 Conversion of Series B preferred stock to common stock 

 

$

10,000 

 

$

- 

 Shares issued arising from note conversion 

 

$

143 

 

$

- 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

30

**GENETHERA, INC.**

**Notes to Consolidated Financial Statements**

**December 31, 2009**

**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 “GeneThera” or the “Company”).

GeneThera, Inc., formerly Hand Brand Distribution, Inc., was incorporated in November 1995 in Florida.  On February 25, 2002, GeneThera, Inc. acquired 100% of the outstanding shares of GeneThera, Inc. (Colorado) for 16,611,900 common shares.  For accounting purposes, the acquisition has been treated as a reverse merger and as a recapitalization of GeneThera, Inc. (Colorado).  

GeneThera is a biotechnology company that develops molecular assays for the detection of food contaminating pathogens, veterinary diseases and genetically modified organisms.

***Use of estimates***

The preparation of financial statements in accordance with 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.

***Property and equipment, net***

Property and equipment consists primarily of office and laboratory equipment and is stated at cost.  Depreciation is computed on a straight-line basis over the estimated useful lives ranging from five to seven years.  

***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.

31

***Revenue recognition***

Research and development contracts are on a pre-paid basis in order to reflect milestones during research investigation. Revenues are recognized when services are completed.  There were no revenues during the year ended December 31, 2009.

***Stock-Based Compensation***

 

Stock-based compensation is accounted for under FASB ASC Topic No. 718 – *Compensation – Stock Compensation*. The guidance requires recognition in the financial statements of the cost of employee services received in exchange for an award of equity instruments over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period). The guidance also requires measurement of the cost of employee services received in exchange for an award based on the grant-date fair value of the award. The Company accounts for non-employee share-based awards in accordance with guidance related to equity instruments that are issued to other than employees for acquisition, or in conjunction with selling, goods or services.

 

***Income taxes***

 

Income taxes are accounted for in accordance with the provisions of FASB ASC Topic No. 740 - *Income Taxes*. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.

***Basic and diluted net loss per common share***

 

Basic and diluted net loss per share calculations are presented in accordance with FASB ASC Topic No. 260 – *Earnings per Share*, and are calculated on the basis of the weighted average number of common shares outstanding during the period.  Diluted net loss-per-share calculations include the dilutive effect of common stock equivalents in years with net income.  Basic and diluted loss per share is the same due to the absence of common stock equivalents.

***Fair value of financial instruments***

 

The carrying value of cash, accounts payable and accrued expenses approximates fair value due to the short term nature of these accounts.

 

***Reclassifications***

Certain amounts in the consolidated financial statements of the prior period have been reclassified to conform to the current presentation for comparative purposes.

32

***Recently issued accounting pronouncements***

The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant effect on its consolidated financial position or results of operations.

**Note 2 – Going concern**

As reflected in the accompanying consolidated financial statements, the Company has an accumulated deficit of $18,970,677 and negative working capital of $2,157,855 as of December 31, 2009.  This raises substantial doubt about the Company’s ability to continue as a going concern.  The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital and implement its business plan.  The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern. The Company has a private investor group. The Company is currently seeking additional investors for the regional research labs in Mexico, Argentina, and Brazil.

**Note 3 – Property and equipment**

Property and equipment at December 31, 2009 and 2008 consisted of the following:

 

 

2009 

 

2008 

Office equipment

 

$

85,994 

 

$

84,344 

Laboratory equipment

 

643,084 

 

643,084 

Total

 

729,078 

 

727,428 

Less: Accumulated depreciation

 

(716,315)

 

(506,511)

 

 

 

 

 

Property and equipment, net

 

$

12,763 

 

$

220,917 

 

 

 

 

 

During 2009, the estimate of useful lives of the laboratory equipment was reduced from 7 – 10 years to 5 years.  Depreciation expense for 2009 and 2008 was $184,804 and $69,647, respectively.

**Note 4 – Accrued expenses:**

The following is the breakdown of the Company’s accrued expenses as of December 31, 2009 and 2008:

 

 

2009

 

2008

Accrued officer salaries 

 

$

998,641

 

$

811,841

Accrued interest

 

14,707

 

-

 

 

 

 

 

Total accrued expenses

 

$

1,013,348

 

$

811,841

 

 

 

 

 

33

**Note 5 – Related party transactions:**

The Company has an outstanding loan payable to Dr. Antonio Milici, its President and shareholder, amounting to $647,979 and $656,979 as of December 31, 2009 and 2008, respectively.  This outstanding loan to the Company is unsecured and non-interest bearing. The Company also has an outstanding balance due to Setna Holding, a related party, in the amount of $10,570.

**Note 6 – Shareholders’ equity:**

***Common and preferred stock***

The Company’s Articles of Incorporation, as amended on November 8, 2007, authorizes the issuance of up to 50,000 shares of common stock, par value $.0000 per share. On February 5, 2008, the Company increased its authorized share to 100,000,000 of common stock, par value $.001 per share. On August 23, 2011, the Company increased its authorized shares to 300,000,000 of common stock, par value $.001 per share. Shares issued prior to August 23, 2011 have been retroactively restated to reflect the impact of the change in par value per share.

On August 23, 2011, the Company authorized 20,000,000 Series A preferred shares and 30,000,000 Series B preferred shares.  The par value per share for all classes of preferred stock was set at $0.001 per share.   

***Convertible Preferred stock rights***

Preferred Stock (‘Series A’) shall be convertible into Common Stock any time at the holder’s sole discretion in part or in whole by dividing the Purchase Price per Share by 110% of the Market Value on the Closing Date.  ‘Market Value’ on any given date shall be defined as the average of the lowest three intra-day trading prices of the Company’s common stock during the 15 immediately preceding trading days.

Preferred Stock (“Series B”) shall be convertible into ten common shares at any time and holders are entitled to 20 common share votes per such preferred share.

***Common Stock Issuances***

For the year ended December 31, 2008

The Company issued 455,039 shares valued at $821,554 for consulting services. 

The Company issued 472 shares valued at $32,786 for payment of rent. 

For the year ended December 31, 2009

The Company issued 7,756,195 shares valued at $648,976 for consulting services. 

The Company issued 173,999 shares valued at $6,536 for restitution. 

34

The Company issued 647,678 shares valued at $64,465 to officers in lieu of salary.

The Company issued 161,000 shares for cash of $832. 

***Preferred stock issuance***

On April 30, 2008, GeneThera issued 4,500,000 Series B convertible preferred shares to its CEO as payment of $180,000 in accrued salaries.

***Stock conversions***

During 2008, the Company converted 180,000 shares of Series B preferred stock to 1,800,000 common shares.

 

During 2009, the Company issued 142,858 common shares in exchange for promissory notes from a third party.

During 2009, the Company converted 1,000,000 shares of Series B preferred stock to 10,000,000 common shares.

***2004 Equity Incentive Plan***

The Company’s 2004 Senior Executive Officer Option Plan provides for the grant of equity incentives to senior employees of the Company.  A maximum of 3,000,000 common shares are available for issuance under the 2004 Plan.

 

***Warrants***

None were issued during 2009 or 2008 and none are outstanding.

**Note 7 – Commitments and contingencies**

***Operating leases***

During 2008 and early 2009, the Company leased its office space which have initial terms on a month-to-month basis.  The Company sub-leased 700 square foot office space to GTI Corporate Transfer Agents, LLC located on the 3924 unit of this lease space reflected as 3930 Youngfield Street, Suite #2, Wheat Ridge, CO 80033.  The rent on this lease was either settled in cash or through issuance of the Company’s common stock.

Starting on March 1, 2009, the Company signed a five-year lease for office space in Colorado. The approximate square footage is 1,908. The base rent for this office space was approximately $24,000 during the first year. The lease expiration was February 28, 2014.   The Company vacated the premises in May 2010.

In May 2010, the Company entered into a five-year lease agreement commencing on April 1, 2010 covering an area of approximately 7,660 square feet intended for research and office 

35

space located at 331 South 104th Street, Louisville, Colorado. The base rent for this space was approximately $38,300 during the first year, and was set to expire on March 31, 2015.  The lease was terminated on September 6, 2010.

On November 30, 2010, the Company signed a 38-month lease agreement commencing on December 1, 2010. The office space is located in Westminster, Colorado. The space is approximately 9,681 square feet intended specifically for a biotechnology company’s use. The base rent was free during the first and second months; $7,000 per month during the next 12 months;  $10,970 during the following 12 succeeding months; and $12,584 during the last 12 months, for a total guaranteed base rent of $366,648 during the 38-month lease term.  This lease expires on January 31, 2014 and required a security deposit of $7,000.

At December 31, 2009, future minimum lease payment obligations were as follows:

Years ended December 31

 

Operating Leases

2010

 

$

39,165

2011

 

86,575

2012

 

127,670

2013

 

149,394

2014

 

12,584

Thereafter

 

-

 

 

 

Total minimum lease payments

 

$

415,388

 

 

 

Total rent expense during 2009 and 2008 was $20,800 and $53,277, respectively.

***Employment agreements***

On January 8, 2007, the Company entered into an employment agreement with its chief executive officer and scientific officer for a five year term and providing for compensation of $12,000 per month.  On the same date, the Company also entered into an employment agreement with its chief administrative and financial officer for a five year term and providing for compensation of $11,250 per month.  Both employment contracts contract expire on January 7, 2012.  

***Legal contingencies***

The Company is involved in claims arising during the ordinary course of business resulting from disputes with vendors and shareholders over various contracts and agreements.  

**Note 8 – Income taxes**

The Company has no current or deferred income tax due to its operating losses.

The Company has a federal net operating loss carry forward at December 31, 2009 and 2008 of approximately $18,970,677 and $17,671,030, respectively, subject to annual limitations prescribed by the Internal Revenue Code, that are available to offset future taxable income 

36

through 2026.  A 100% valuation allowance has been recorded to offset the net deferred taxes due to uncertainty of the Company’s ability to generate future taxable income.

**Note 9 – Restatement of Consolidated Financial Statements**

In October 2011, the Company’s management determined that the accrued expense related to an on-going legal case involving the Company was erroneously over-accrued by $601,167 as of December 31, 2008. To correct this over-accrual, the Company has restated its consolidated financial statements as of, and for the year ended December 31, 2008.  As a result of the restatement, the originally reported net loss for 2008 was decreased by $601,167 resulting in net loss, as restated, of $1,393,023. Litigation previously included in accrued expenses of $53,569 was reclassed to accounts payable.

The following tables reflect the impact of the above error on the balance sheet as of December 31, 2008 and the statement of expenses for the year ended December 31, 2008. 

 

**As of December 31, 2008**

 

**As Reported**

 

**Adjustments**

 

**Restated**

 

 

 

 

 

 

TOTAL ASSETS

$

221,786 

 

$

- 

 

$

221,786 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Accounts payable 

265,651 

 

53,569 

 

319,220 

Accrued Expenses 

$

1,466,577 

 

$

(654,736)

 

$

811,841 

Total Current Liabilities

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

2,389,207 

 

(654,736)

 

1,788,040 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

Deficit accumulated during development stage

(18,272,197)

 

601,167 

 

(17,671,030)

Total Stockholders' Deficit 

(2,167,421)

 

601,167 

 

(1,566,254)

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$

221,786 

 

$

- 

 

$

221,786 

 

 

 

 

 

 

 

**Year Ended December 31, 2008**

 

**As Reported**

 

**Adjustments**

 

**Restated**

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

General and administrative expenses 

978,393 

 

(601,167)

 

377,226 

LOSS FROM OPERATIONS

$

(1,994,190)

 

$

601,167 

 

$

(1,393,023)

 

 

 

 

 

 

NET LOSS 

$

(1,994,190)

 

$

- 

 

$

(1,393,023)

37

**Note 10 – Subsequent Events**

The Company issued 1,050,000 shares valued at $25,550 for consulting services in the year ended December 31, 2010. 

The Company issued 100,000 shares for conversion of $2,500 promissory note in the year ended December 31, 2010.

The Company received cash proceeds of $32,140 from financing activities in the year ended December 31, 2010. 

 

The Company issued 1,800,000 shares valued at $29,000 for cash during 2011.

 

The Company issued 1,580,600 shares for conversion of promissory notes totaling $10,988 during 2011.

The Company received cash proceeds of $111,591 from financing activities during 2011.

**ITEM 9**

** CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

Since March 15, 2006, our auditors were Jaspers + Hall, PC. The auditors’ PCAOB registration was revoked on October 22, 2008. Since November 9, 2008, our auditors were W.T. Uniack CPA’s & Co. Since 2009, our auditors are Malone Bailey, LP.

**ITEM 9A**

**CONTROLS AND PROCEDURES**

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (The “Exchange Act”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures within the 90 days prior to the filing date of this report.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Consulting Chief Financial Officer, and Controller. We concluded that our internal controls are ineffective. We will be working on them to improve its effectiveness.

There will be significant changes in our internal controls and in other factors that will definitely affect internal controls positively subsequent to the date we carried out our evaluation.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

38

**PART III**

**ITEM 10**

**DIRECTORS, OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT**

**DIRECTORS AND EXECUTIVE OFFICERS**

The following persons are currently serving as the Company’s executive officers and directors.

Name

Age

Positions

Dr. Tony Milici

55

Chairman of the Board, Chief Executive

Officer and Chief Scientific Officer

Tannya Irizarry

50 

Chief Financial Officer (Interim)

Shawn T. Donahue

48

Board Director

Avel Kolesnikov

22

Board Director

Dr. Antonio Milici founded GeneThera, Inc. in 1998 and has served as its Chairman and CEO since inception.  Prior to founding GeneThera, Dr. Milici served as CEO and President of Genetrans, Inc., a genetic diagnostic company from 1993 to 1998.  Dr. Milici was also an assistant professor in the department of Molecular Pathology at the University of Texas M.D. Anderson Cancer Center.

Tannya L. Irizarry has served as Chief Administrative Officer since 1999.  She is now serving as Chief Financial Officer (Interim).  Ms. Irizarry has over 20 years of experience in medical technology and biotechnology industries.  Ms. Irizarry worked at the University of Texas M.D. Anderson Cancer Center in the department of Neuro-Oncology with Dr. William S. Fields and the Office of Education with Dr. James Bowen; St. Joseph Hospital in the biotechnology division.  Ms. Irizarry was the Vice President of Genetrans, Inc. from 1994 to 1998.  Ms. Irizarry relocated to Colorado in order to manage GeneThera, Inc. at the request of Dr. Milici.

Shawn T. Donahue, age 48, has served as Board Director of the Company since October 2010. Mr. Donahue owns and operates a private environmentally friendly synthetic oil distribution company in the Northeast since 2007, in addition to being an active investor focusing on biotech and computer related companies for over 22 years. He has been in senior level technical sales, engineering purchasing, new products and manufacturing positions while at Digital Equipment Corp. for over 11 years. He studied Accounting/business at the University of Lowell and believes learning should be a life-long endeavor, hopefully rewarding to all involved! 

Avel Kolesnikov, age 22, has served as Board Director of the Company since November 2010. Mr. Kolesnikov is a gold and precious metal commodity broker. He has been involved in the jewelry business for several years both as retailer and wholesaler. Mr. Kolesnikov has worked 

39

extensively with precious stones and has improved laser techniques for stone cutting and jewelry crafting. Although new in the area of biotechnology, he has consulted for several high tech instrument companies. Mr. Kolesnikov’s experience in business development is definitely an asset to GeneThera. 

Each Director is elected at the Company’s annual meeting of shareholders and holds office until the next annual meeting of shareholders, or until the successors are elected and qualified.  At present, the Company’s bylaws provide for not less than three or more than seven Directors.  Currently, we have two Director Positions.  The bylaws permit the Board of Directors to fill any vacancy and such Director may serve until the next Annual Meeting of Shareholders or until his successor is elected and qualified.  Officers are elected by the Board of Directors and their terms of office are, except to the extent governed by employment contracts, at the discretion of the Board.  The officers of the Company devote full time to the business of the Company.

**SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE**

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our Executive Officers, Directors and 10% Shareholders to file reports regarding initial ownership and changes in ownership with the SEC.  Executive Officers, Directors, and 10% Shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.  Our information regarding compliance with Section 16(a) is based solely on a review of the copies of such reports furnished to us by our Executive Officers, Directors and 10% Shareholders.  These forms include (i) Form 3, which is the Initial Statement of Beneficial Ownership of Securities, (ii) Form 4, which is a Statement of Changes in Beneficial Ownership, and (iii) Form 5, which is an Annual Statement of Changes in Beneficial Ownership. 

The Company has recently adopted a Code of Ethics applicable to its principal executive officer, principal financial officer, and principal accounting officer.  Our Code of Ethics can be obtained by calling the Company at 303-439-2085.

**ITEM 11**

**EXECUTIVE COMPENSATION**

The following table sets forth certain summary information for the fiscal year ended December 31, 2009, concerning the compensation awarded to, earned by, or paid to those persons serving as executive officers during fiscal year 2009.

**SUMMARY COMPENSATION TABLE**

The following table sets forth certain summary information for the fiscal year ended December 31, 2009, concerning the compensation awarded to, earned by, or paid to those persons serving as executive officers during fiscal year 2009, that served as our Chief Executive Officer or earned compensation in excess of $100,000 (the “Names Executive Officers”).  No other executive officer of the Company had a total annual salary and bonus for 2009 that exceeded $100,000.  Antonio Milici, M.D., Ph.D., and Tannya L. Irizarry were the only executive officers during the fiscal year ended December 31, 2008.  The following table summarizes compensation earned in each of the last three fiscal years by the named officers.

40

The following table also summarizes the annual and long-term compensation paid to Dr. Tony Milici, our chief executive officer.  Except for Dr. Milici, no other executive officer received annual remuneration in excess of $100,000 during 2007 or 2008. This summary compensation table shows certain compensation information for services rendered in all capacities during each of the last two completed fiscal years. 

Name and Principal Position

Year

Salary

Bonus

Stock Awards

Option Awards

Non-Equity Incentive Plan Compensation

Change in Pension Value and Non-Qualified Deferred Compensation Earnings

All Other Compensation

Total

**Dr. Tony Milici**

2007

$144,000 

 

 

 

 

 

 

$144,000 

**Chief Executive Officer**

2008

$144,000 

 

 

 

 

 

 

$144,000 

** **

2009

$144,000 

 

 

 

 

 

 

$144,000 

** **

 

 

 

 

 

 

 

 

 

**Tannya Irizarry**

2007

$90,000

 

$45,000

 

 

 

 

$135,000 

**Chief Financial Officer**

2008

$90,000

 

$45,000

 

 

 

 

$135,000 

** **

2009

$90,000

 

$45,000

 

 

 

 

$135,000 

No other officer or director received in excess of $100,000 for the years ending December 31, 2009, December 31, 2008 and December 31, 2007.

 (1) and (2) Dr. Milici’s salaries for years indicated have been accrued but not paid. The Company provides Dr. Milici with a company car and reimburses him for fuel costs.

**COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS**

On January 23, 2002, the Company entered into an employment agreement with Antonio Milici, M.D., Ph.D., to serve as the Chief Executive Officer and Chief Scientific Officer of the Company through January 7, 2012. Unless either party gives notice to terminate the agreement at least thirty days prior to expiration of the agreement, the agreement will automatically be extended for an additional two year period. In consideration for his services, Dr. Milici receives a base salary of $144,000 per annum throughout the term of the agreement plus bonuses as may be determined by the Compensation Committee of the Board of Directors in its discretion or if the Company achieves net income in excess of $2,000,000 per year.  As part of his employment agreement, Dr. Milici has agreed not to compete with the Company, solicit any of its customers or solicit any of its employees for a period of two years after the term of the agreement. Dr. Milici is also subject to confidentiality obligations in favor of the Company and has agreed to transfer to the Company all of his interests in any idea, concept, technique, inventory or written work developed by him during the term of his employment agreement. The Company also provides a company vehicle and gas allowance for him and his scientific consultants.  No director received compensation for his services to the Company.

**ITEM 12**

**SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS**

41

The following table sets forth certain information concerning the beneficial ownership of our outstanding classes of stock as of December 31, 2009 by each person known by us to be (i) the beneficial owner of more than 5% of the outstanding shares of common stock, (ii) each current director and nominee, (iii) each of the executive officers who were serving as executive officers at the end of the December 31, 2009 fiscal year and (iv) all of our directors and current executive officers as a group. Unless otherwise indicated below, to our knowledge, all persons listed below have sole voting and investment power with respect to their shares of common stock except to the extent that authority is shared by spouses under applicable law.  The calculation of percentage ownership for each listed beneficial owner is based upon the number of shares of common stock issued and outstanding on December 31, 2009, plus shares of common stock subject to options, warrants and conversion rights held by such person on December 31, 2009, and exercisable or convertible within 60 days thereafter. The following table shows, as of December 31, 2009, the common stock owned beneficially by (i) each person known by us to be the beneficial owner of more than five percent of our Common Stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directors and executive officers as a group.  Unless otherwise indicated, the address of each person or entity named below is c/o GeneThera, Inc., 7577 W. 103rd Ave. Ste 212, Westminster, CO 80021.

Name of Beneficial Owner

Number of Shares Beneficially Owned (1)

Percent of Class

**Five Percent Shareholders:**

 

 

Randy Hamdan & Companies Total

5,520,051

26.1%

** **

 

 

**Directors and Executive Officers:**

 

 

** **

 

 

Dr. Antonio Milici (2)

4,820,000

22.8%

Tannya L. Irizarry

1,500,000

7.09%

** **

 

 

**All Directors and Executive Officers as a Group**

44,832,099

55.99%

(1)

This table is based upon information supplied by officers, directors and principal shareholders and Schedules 13D and 13G filed with the SEC.  Unless otherwise indicated in the footnotes to this Table and subject to community property laws where applicable, the Company believes that each of the shareholders named in this Table has sole voting and investment power with respect to the shares indicated as beneficially owned.  Applicable percentages are based on 21,147,397 shares of common stock outstanding on December 31, 2009, adjusted as required by rules promulgated by the SEC.

(2)

Includes 300,000 shares subject to operations exercisable within 60 days of December 31, 2009.          

42

**SERIES B PREFERRED STOCK**

 

 

 

 

 

 

Common Stock Beneficially Owned (2)

Voting Preferred Stock Beneficially Owned (2)

Name of Beneficial Owner (1)

Number

Percent

Number

Percent

Antonio Milici

0

6.67%

4,820,000

80%

Tannya L. Irizarry (3)

0

1.00%

1,500,000

20%

All Directors and Officers as a Group (2 persons)

5,520,051

26.10%

6,320,000

100.0%

(1)

This table is based upon information supplied by officers, directors, and principal shareholders and documents filed with the SEC.  Unless otherwise indicated and subject to community property laws, if applicable, the Company believes that each of the shareholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.

(2)

Applicable percentages are based on 21,147,547 shares of common stock outstanding and on 6,320,000 shares of Series B Preferred Stock outstanding on December 31, 2009, adjusted as required by rules promulgated by the SEC.  Although the Series A Preferred Stock is convertible into approximately 7.2 million shares of our common stock (assuming all shares were converted as of the date of this prospectus), this Table does not give effect to the Series A Preferred Stock because these shares have no voting rights and their convertibility by the holder is currently being contested by the Company.

(3)

Ms. Irizarry is married to Dr. Antonio Milici; therefore, she has a beneficial interest in his shares.

**ITEM 13**

**CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

**SERIES A PREFERRED STOCK FINANCING**

On January 18, 2005, we issued 11,000 shares of our Series A Preferred Stock to Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP, and Monarch Pointe Fund, Ltd. (the “Purchasers”), for $100 per share, or an aggregate of $1,100,000.  We also issued warrants to purchase an aggregate of 597,826 shares of common stock at an exercise price of $0.92 per share, in consideration for the aggregate proceeds of $1,100,000 to the Purchasers and Mercator Advisory Group, LLC, an affiliate of the Purchasers.  The warrants became exercisable on January 18, 2005, and are exercisable for three years from their date of issuance.  The warrants were never exercised. We paid a due diligence fee of $88,000 and legal expenses of $10,000 to Mercator Advisory Group, LLC. The Series A Preferred Stock is convertible into the Company’s common stock at an initial conversion price of $1.01, subject to adjustment.  If, at any time after March 14, 2005, the market price (i.e., the average of the lowest three intra-day trading prices of the Company’s common stock during the 15 trading days immediately preceding the conversion date) is less than $1.11, then the conversion price of the Series A Preferred Stock is 80% of the market price on the date of such conversion.  If an “Event of Default” as defined in the subscription agreement under which the Purchasers bought the Series A Preferred Stock occurs (e.g., bankruptcy, failure to timely file the registration statement, failure of such registration statement to be timely declared effective), the conversion price of the Series A Preferred Stock is reduced by 

43

10%.  The Series A Preferred Stock pays a per share monthly dividend equal to $100 multiplied by the prime rate (as reported in the Wall Street Journal) plus 2.5% to the extent that funds are lawfully available.  The Series A Preferred Stock has sole preference of priority at par in liquidation over our common stock and any subsequent series of preferred stock. In connection with the issuance of the Series A Preferred Stock and warrants, we agreed to file a registration statement with the U.S. Securities and Exchange Commission (“SEC”) registering the shares of common stock issuable upon conversion of the preferred stock and exercise of the warrants, and to use diligent efforts to have the registration statement declared effective within 120 days after the initial filing of the registration statement.  Under the terms of the agreements with the Purchasers, the ownership of our common stock by the Purchasers will not exceed 9.99% of the total outstanding shares at any one time.  In addition, the Purchasers agreed not to sell, in any trading day, shares of our common stock in excess of 20% of the total shares traded on such trading day.

**SERIES B PREFERRED STOCK FINANCING**

 

Common Stock Beneficially Owned (2)

Voting Preferred Stock Beneficially Owned (2)

Name of Beneficial Owner (1)

Number

Percent

Number

Percent

Antonio Milici (3)

151,212

6.67%

4,820,000

80.0%

Tannya L. Irizarry (4)

147

1.00%

1,500,000

20.0%

All Directors and Officers as a Group (2 persons)

151,212

8.0%

6,320,000

100.0%

(1)

This table is based upon information supplied by officers, directors, and principal shareholders and documents filed with the SEC.  Unless otherwise indicated and subject to community property laws, if applicable, the Company believes that each of the shareholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.

(2)

Applicable percentages are based on 21,147,397 shares of common stock outstanding and on 6,320,000 shares of Series B Preferred Stock outstanding on December 31, 2009, adjusted as required by rules promulgated by the SEC.  Although the Series A Preferred Stock is convertible into approximately 7.2 million shares of our common stock (assuming all shares were converted as of the date of this prospectus), this Table does not give effect to the Series A Preferred Stock because these shares have no voting rights and their convertibility by the holder is currently being contested by the Company.

(3)

On December 31, 2009, Dr. Milici owns 4,820,000 shares of our Series B Preferred Stock.  Dr. Milici is our Chief Executive Officer and Chairman of the Board.  He owns no shares of our common stock.  Pursuant to our Certificate of Designation establishing the Series B Preferred Stock, each share of our currently issued and outstanding Series B Preferred Stock may be converted into ten fully paid and non-assessable shares of our common stock.  On all matters submitted to a vote of the holders of the common stock, including, without limitation, the election of directors, a holder of shares of the Series B Preferred Stock shall be entitled to the number of votes on such matters equal to the number of shares of the Series B Preferred Stock held by such holder multiplied by twenty (20).  Therefore, Dr. Milici will have the power to vote 116,551,212 shares, effectively giving him absolute voting control of the Company.

44

(4)

Ms. Irizarry is married to Dr. Antonio Milici; therefore, she has a beneficial interest in his shares.

**MARKETING CONSULTANT**

In 2008, the Company did not sign a consulting agreement as a marketing consultant with JR Dopkin & Associates from New York, but considered his consulting services to be provided as needed. 

In 2009, the Company did not sign a consulting agreement as an Investor Relations consultant with Randy Hamdan and also with his two other consulting companies by the names of Oracle Consultants, LLC and HH Group, LLC, but considered his consulting services to be provided as needed.

**ITEM 14**

**PRINCIPAL ACCOUNTING FEES AND SERVICES**

**AUDIT FEES**

The aggregate fees billed for each of the last two fiscal years for professional services rendered by our principal accountant for the audit of the Company’s annual financial statements and review of financial statements included in the registrant’s Form 10-K was as follows:

2006

$15,000

2007

$26,500

2008

$26,000

2009

$25,000

**AUDIT-RELATED FEES**

The aggregate fees billed in each of the last two fiscal years for assurance and related services by our principal accountant that are reasonably related to the performance of the audit and not reported in Audit Fees was $-0-.

**TAX FEES**

The aggregate fees billed in each of the last two fiscal years for services rendered by our principal accountant for tax compliance, tax advice, and tax planning was $-0-.

**ALL OTHER FEES**

The aggregate fees billed in each of the last two fiscal years for products and services provided by our principal accountant other than those described above was $-0-.

The Company’s audit committee, which consists of all directors, approved the services described above.

** ITEM 15**

**EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS**

45

**EXHIBITS**

The following documents are filed herewith or have been included as exhibits to previous filings with the SEC and are incorporated herein by this reference:

**EXHIBIT**

**DESCRIPTION OF DOCUMENT**

3.1

Articles of Incorporation of GeneThera, Inc., as amended in the State of Nevada. (6) 

3.2

Bylaws, as amended. (2)

3.3

State of Incorporation in the State of Nevada

10.1

Form of Common Stock Purchase Agreement among GeneThera, Inc. and various original holders of the common stock of GeneThera, Inc. (1)

10.2

Form of Letter Agreement between GeneThera, Inc. and various original holders of the Common Stock of GeneThera, Inc. (2)

10.3

Employment Agreement dated as of January 23, 2002 between Antonio Milici, MD, Ph.D. and GeneThera, Inc. (2)

10.4

Letter of Intent dated November 6, 2003 between Oncology Sciences Corporation and GeneThera, Inc. (3)

10.5

Research Consulting Agreement between Xpention Genetics, Inc. and GeneThera, Inc.

10.6

Placement Agent Agreement dated as of May 31, 2004 between Invest Line Securities, LLC and GeneThera, Inc. (4)

10.7

Letter Agreement dated November 22, 2003 between NVO Solutions, Inc. and GeneThera, Inc. (4)

10.8

Resolution Agreement dated August 2004 by and among John Taggart, Family Health News, Inc., and GeneThera, Inc. 4)

10.9

GeneThera, Inc. 2004 Employee, Director, and Consultant Stock Option Plan (6)

10.10

GeneThera, Inc. 2004 Senior Executive Officer Option Plan. (6)

10.11

Subscription Agreement dated as of January 18, 2005 by and between GeneThera, Inc., Mercator Advisory Group, LLC, Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP, and Monarch Pointe Fund, Ltd. (5)

46

10.12

Registration Rights Agreement dated as of January 18, 2005 by and between GeneThera, Inc., Mercator Advisory Group, LLC, Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP, and Monarch Pointe Fund, Ltd. (5)

10.13

Warrant to Purchase Common Stock issued to Mercator Advisory Group, LLC. (5)

10.14

Warrant to Purchase Common Stock issued to Mercator Momentum Fund, LP. (5)

10.15

Warrant to Purchase Common Stock issued to Mercator Momentum Fund III, LP. (5)

10.16

Warrant to Purchase Common Stock issued to Monarch Pointe Fund, Ltd. (5)

10.17

Industrial Multi-Tenant Lease dated December 4, 2001 between Youngfield Plaza LLC and GeneThera, Inc. (4)

10.18

Amendment to Industrial Multi-Tenant Lease dated December 12, 2004 between Youngfield Plaza LLC and GeneThera, Inc. (6)

10.19

Strategic Alliance Agreement dated November 1, 2004 between G. Gekko Enterprises and GeneThera, Inc. (6)

10.20

Securities Purchase Agreement dated November 8, 2004 between G. Gekko Enterprises and GeneThera, Inc. (6)

10.21

Letter Agreement dated March 1, 2005 between 0711005 B.C. Ltd and GeneThera, Inc. (6)

10.22

Mutual Release and Settlement Agreement dated March 1, 2005 between J.P. Turner & Company, L.L.C. and GeneThera, Inc. (6)

21.1

List of Subsidiaries. (6)

31.1

Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act

31.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.

31.2

Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act

32.2

Certificate of Chief Financial Officer furnished pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)

47

99.1

Curriculum Vitae. (4)

(1)

Incorporated by reference to our Current Report on Form 8-K, as filed with the Commission on March 5, 2002.

(2)

Incorporated by reference to our Annual Report on Form 10-Q, as filed with the Commission on June 4, 2002.

(3)

Incorporated by reference to our Annual Report on Form 10-Q, as filed with the Commission on April 14, 2004.

(4)

Incorporated by reference to our Registration Statement on Form SB-2 (File No. 333-118937) and amendments thereto, declares effective December 1, 2004.

(5)

Incorporated by reference to our Current Report on Form 8-K, as filed with the Commission on January 19, 2005.

(6)

Incorporated by reference to our Registration Statement on Form SB-2 (File No. 333-123138) filed on March 4, 2005. 

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