Item 1.

Business

Introduction

GelTech Solutions, Inc. (“GelTech” or the “Company”) was organized on July 19, 2006 as a Florida corporation and was reincorporated on November 15, 2006 as a Delaware corporation. On July 20, 2006, GelTech issued Dyn-O-Mat, a related party affiliate, 7,250,000 shares of its common stock in exchange for all of Dyn-O-Mat’s intellectual property except the unrelated “black mat business” and selected other assets and selected liabilities. GelTech was formed to act as a holding company for the intellectual property developed by Mr. Peter Cordani, our Chief Technology Officer and a director.

Our current business model is focused on the following polymer-based products:

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FireIce® – a fire suppression product,

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RootGel ™– a line of agricultural moisture retention products,

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IceWear™ – a garment line to assist in cooling body temperature, and

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WeatherTech Innovations® – our hurricane suppression project.

FireIce®

Industry Overview

Fire suppression is approximately a $2 billion a year industry according to a 2003 National Aeronautics and Space Administration press release. According to an article published by the Building and Fire Research Laboratory of the National Institute of Standards and Technology, as early as 1994 the lack of availability of halon fire suppressants sparked worldwide efforts in developing alternative firefighting agents and delivery systems.

The business has two marketing thrusts:

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suppression of structural and other fires within cities and towns, and

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suppression of wildland fires such as forest fires managed by federal and state governments.

According to the National Fire Protection Association in 2007 there were 1,642,500 fires in the United States that caused approximately $14.6 billion in damages. In 2007 there were 28,004 structural fires in New York City alone. The New York City Fire Department or FDNY, the largest fire department in the world, had a 2007 budget of $1.4 billion. Of this amount $322.2 million, a 79% increase from 2006, is earmarked for the procurement of additional mandated front line firefighting apparatus and ambulance fleet maintenance. In 2007, federal agencies spent approximately $1.86 billion on the suppression of wildland fires. In addition, Homeland Security through their Assistance to Firefighters Grant has distributed funds to allow firefighting departments to purchase critical firefighting gear equipment and other fire suppression necessities. According to the Department of Homeland Security’s website, Homeland Security will award approximately $492.3 million under the Assistance to Firefighters Grant in Fiscal Year 2007.

The Product

FireIce® is the registered trade name of our fire suppression product. FireIce® is a dry powder that when added to water in very low concentrations (0.1 to 1.2 percent by weight), rapidly absorbs water to produce a gel whose consistency depends on the selected concentration. The dry powder is self dispersing in many applications, or can be easily mixed with water. Within seconds of being mixed with water, FireIce® is ready to use and turns into a fire preventing, heat absorbing and fire suppressing gel.

When mixed with FireIce®, water is held by a three-dimensional network of cross-linked polymers. When applied to the fire, the water evaporates and the gel collapses sapping the fire of not only heat but oxygen as well. In many applications the gel forms a cohesive layer which acts as a vapor barrier and prolongs the effectiveness of the water. Due to the gel layer created by FireIce® on burning and adjacent objects, FireIce® also has the ability to suffocate a fire.

FireIce® has the following properties. We believe it:

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is non-toxic,

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is biodegradable,

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is environmentally safe,

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is non-corrosive to metals,

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mixes easily with water,

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will not clog or stick in spraying devices,

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reduces the threat of a fire rekindling,

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extinguishes fires more rapidly than traditional methods, and

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saves customers cost on freight when compared to competitors.

Uses

There are many existing and potential uses for FireIce®. We believe it can be an extremely valuable tool for firefighters because:

When mixed with water, it can be dispersed and applied by all types of application equipment used in direct fire suppression, such as pressurized water extinguishers, pumper trucks, backpack sprayers, or even hand held spray bottles.

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Firefighters can apply FireIce® directly to buildings and other structures exposed to an advancing fire.

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FireIce® can also be rapidly sprayed on foliage to prevent the spread of fires.

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FireIce® absorbs many times its own weight in water and forms a gel producing increased droplet sizes that reduce drift and evaporation when dropped aerially.

In 2007, devastating Southern California wildfires were responsible for the deaths of 14 people, demolishing more than 2,000 homes and scorching more than 800 square miles between Los Angeles County and the Mexican border. According to a FoxNews.com article, the Florida and Georgia fires in 2007 burned hundreds of square miles of land and forced the evacuation of hundreds of homes. Additionally, the epidemic of fires recently damaged or destroyed thousands of homes in Idaho, South Dakota and Colorado. Fires are not only a major problem in the United States.  In August 2007, fires ravaged approximately one-half of Greece killing at least 63 persons according to one report. The wildfires have continued to devastate California in 2008.  Through mid-September, there have been over 67,000 wildfires burning over 4.7 million acres in California alone. FireIce® can play a major role in putting out and containing wildland fires, including forest fires, by being sprayed from airplanes directly over such fires, including in areas too dangerous for ground-based firefighters to enter. FireIce® can also be sprayed from tanker trucks on the edges of these fires.

FireIce® also has a number of potential retail and consumer uses:

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It can be pumped out of fire extinguishers.

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It can be used in a spray bottle by professionals, such as welders, who work with blowtorches.

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Though it has not yet been tested in this manner, we believe it could be sprayed from building sprinkler systems. We have companies that are interested in testing our product for this application.

Sales and Marketing

After we received independent third party laboratory certification (UL-711 2-A; UL-711 40-A, and a Custom Rubber and Tire Fire Listing), we began marketing FireIce® initially to local fire departments and local government officials.

We market and sell FireIce® through attendance at fire industry national trade shows and through our team of seven people who call on potential customers and respond to inquiries.

Because of the wildfires which threaten the West Coast of the United States each year, we are concentrating our marketing efforts there.  Beginning in the early part of 2008, our senior management and other sales personnel have regularly visited the West Coast laying the ground work and creating relationships for a distribution network. We have entered into an exclusive agreement with Pacific Fire Guard to partner and handle the sales and distribution of FireIce in California and the West Coast.   Our agreement in place gives us a California-based distributor to warehouse FireIce® and handle all logistics required to handle potential demand from West Coast firefighting organizations. We also currently have two lines of credit in place to handle both production of orders and operational expansions that may be needed.  

Although with our UL-711 certifications, we can sell directly to fire departments around the United States, sales to Wildfire and Forestry Departments require that we appear on the United States Department of Forestry (the “Department”) Qualified Products List (“QPL”) and that we obtain Department approval within U.S. Department of Agriculture Forest Service Specification 5100-306a. We have applied to the Department, but because the approval can be lengthy, we cannot be certain when FireIce® will be approved.

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We also intend to market FireIce® to the federal government.  In this capacity, we have had recent meetings with a major defense contractor who is interested in incorporating FireIce® into products they sell to the United States military.  Because of the lengthy product development and sales process, we are uncertain as to whether we will receive orders or, if we do, when we will receive them.

Raw Materials and Suppliers

The raw materials for FireIce® are in abundant supply. The polymers are manufactured for us by two third parties. However, there are also several other companies that are able to manufacture the polymer. The polymer becomes a gel when mixed in water. In addition, we expect to have exclusive agreements in place in the near future with our gel suppliers for its exclusive supply of product for fire suppressant purposes.

Competition

The fire suppression market is highly competitive. However, we believe that once we enter the market we will be able to compete effectively because:

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FireIce® should provide superior benefits over other fire suppressants.

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The price per gallon of FireIce® is significantly less than for our competitors’ products.

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Since much less FireIce® is needed per gallon of water than our competitors’ products and our product is shipped as a powder not a liquid, we anticipate the cost of shipping FireIce® to customers is also significantly lower.

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Once a fire has been extinguished, any dispensing system used to disperse FireIce® can be simply cleaned with water.

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FireIce® is different from foam. Foam consists of air bubbles in water and a small amount of surfactant. When the bubbles burst, the foam collapses. When mixed with FireIce®, water is held by a three-dimensional network of cross-linked polymers. When FireIce® is applied to the fire, the water evaporates and the liquid collapses, sapping the fire of not only heat but oxygen as well. It takes longer for water to evaporate from our polymer than for air bubbles to burst. We believe this is how FireIce® provides a more efficient protection that lasts longer than foam.

Thermo-Gel®, a product of Thermo Technologies, LLC, provides the fire fighting industry with a product that can be used for suppression, structure protection, exposure protection, defensible perimeters and wet lines. This product consists of superabsorbent polymers-polyacrylamide and sodium polyacrylate, mineral oil, and surfactants, and is supplied as a liquid concentrate which is mixed in an eductor. It does require special expensive equipment to use. Thermo-Gel® is used in fighting active fires, wildland fires, prescribed burns, urban interface fires, aviation applications, and in the protection of all types of structures from homes to commercial and industrial investments.  This product has been approved by the US Forest Service. While Thermo-Gel® has market share, FireIce® is much less expensive, easier to clean up and does not require added equipment. ICL Performance Products LP produces Phos-Chek AquaGel-K and has the largest market share on the West Coast. We believe FireIce® can compete because it is less expensive, and we believe it is more effective to use.  Ansul, Inc. produces Wildfire AFG, which is a large participant in the fire suppressant market and has access to substantial capital.  FireIce® is less expensive and easier to use and clean up.  Additionally, unlike Ansul, FireIce® does not need added equipment to use.

Barricade International, Inc. is a small, three-person company that is also marketing a liquid fire suppression gel. However, their product is an emulsion gel, which comes in a liquid form and is made from totally different materials than FireIce®. It has gained some publicity because the current owner of the company is a firefighter. We do not believe it is any real competitive threat to our FireIce® because:

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Its gel is significantly more expensive than ours.

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Even though the gel is designed to protect homes and structures, it is not designed to directly protect firefighters and other first responders as FireIce® is capable of doing.

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Unlike FireIce®, Barricade’s gel only works with the device it manufactures and that must be purchased from it.

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Barricade’s mixture has to be shaken every 30 to 60 days or it hardens and becomes unusable.

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Unlike FireIce®, its product is not allowed to be put into any type of firefighter equipment or pumper trucks. It hardens in a short time period, which is not conducive to the intricate pieces of firefighting equipment. Barricade claims that in a worst case scenario objects coated with their gel may have to be pressure cleaned.

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Barricade’s gel is an emulsion gel, which means it is already a liquid. It must be sprayed ahead of time and allowed to cure and turn into a hardened substance with a Styrofoam type of feel.

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Seasonality

There is no real seasonality to structural fires. These occur throughout the year. In wildland fires, FireIce® use will be more likely during the warmer, drier summer months when forest and other wildland fires are more prevalent.

RootGel™

Industry Overview

Irrigation in all forms costs billions of dollars a year. According to the USDA Farm and Ranch Irrigation Survey, in 2003 farmers spent $2.6 billion on farm irrigation alone. According to a 2005 article on the World Bank’s website, agricultural water management is a vital practice in ensuring food security, poverty reduction, and environmental protection. After decades of successfully expanding irrigation and improving productivity, farmers and managers face an emerging crisis in the form of poorly performing irrigation schemes, slow modernization, declining investment, constrained water availability, and environmental degradation. An article in the November 2001 edition of Golf Course News stated that the golf course irrigation industry by itself has expended millions into research and development of new products and services designed to improve efficiency, conservation and ease of operations.

Drought conditions currently exist in many parts of the United States including the West, Southwest and Southeast. These drought conditions are causing crop shortages as farmers have insufficient water for their crops which is reducing their yield. Additionally, the drought is causing an increase in forest fires in some areas.

The Product

RootGel™ is made from the family of inorganic co-polymers. Versions of this product have been used in the agricultural industry for many years. RootGel™ can absorb hundreds of times its weight in water. Water is rapidly drawn into a polymer network where it is stored. As the soil dries out, the polymer releases up to 95% of the water it has absorbed back into the soil. Therefore, the water becomes available when the plants need it most. RootGel™ is available in different particle sizes — the finer the size of the particle, the greater its absorption capacity and speed.

We are marketing two distinct versions of RootGel™, a sprayable version and a granular one. The sprayable version is a fine particle blend that is for use on existing grass and can be applied using any type of spray rig or backpack sprayer. The granular product has been formulated to be tilled into the top four to six inches of the soil to assist in replacing and replanting of grass, including sodding and seeding, and is also recommended to be used during the planting of trees, shrubs, and annuals. The granular version is appropriate for planting situations in which the grass is not already established. We are now selling both versions to our distributors which are marketing the products to the golf course maintenance industry and the sod farm market. Because of drought conditions in Florida and elsewhere in the Southeast, we have received interest in both versions of the product.

RootGel™ degrades naturally in the soil. Sunlight and salinity exposure makes it break down faster. The RootGel™ sprayable version is our flagship product and is used as a top dressing and sprayed onto already established turf and grasses. Our formulation provides a specifically formulated particle size which, with irrigation, gets down to the roots to supply turf and grasses with water and nutrients. Since the sprayable particle size is very small and not as protected from the ultraviolet light given off by the sun as the granular form, it will be broken down much more rapidly than the granular form. The granular form of RootGel™ is tilled directly into the soil and it will last for three to five years without having to be reapplied. The market for the granular product will be newly-designed golf courses as well as courses doing replanting as part of their continual golf course maintenance. Although, granular form re-orders for large scale use may be limited due to its long duration in soil, we expect it to be used in both industrial and retail markets for the planting of landscaping which always has constant turnover due to landscaping re-design, re-planting and young tree mortality rates. Additionally, we have initiated marketing both versions of RootGel™ to the agricultural market.

Uses

RootGel™ has multiple potential uses:

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RootGel™ products are specially designed for use as a soil conditioner for water and nutrient retention in golf course maintenance, landscaping, forestry, horticulture and various other types of agricultural applications. Each product’s goal is to increase the water holding capacity of soils and potting mixes, thereby reducing the frequency of irrigation, as well as the leaching of valuable nutrients.

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RootGel™ can also be beneficial for lawns and sod by improving germination and promoting regular even growth of lawns. This is especially useful for golf courses and grass in parks and gardens.

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It can be effective in agriculture, particularly in commercial farming. By storing water for later release as the soil becomes drier, RootGel™ delays wilting and makes it possible for certain plants to become better established while waiting for rain or irrigation to begin. In one test, the use of RootGel™ in rain fed sugar cane increased the yield by approximately 25%.

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By absorbing fertilizer, RootGel™ reduces the amount that runs out of the soil and makes it available to the plants for a longer period of time.

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RootGel™ can be used in the planting of trees, bushes and saplings by enhancing root development and reducing mortality rates due to transplant shock.

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RootGel™ can keep plants, trees and cut flowers hydrated and thereby facilitate their transportation over long distances.

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If RootGel™ is mixed into the soil, cuttings and transplants take root better and watering frequencies are reduced by as much as 30% to 50%.

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Another potential use of RootGel™ is for floral decoration. RootGel™ is placed in a container with colored water. RootGel™ absorbs this colored water and becomes colored. The resulting colored gel can be placed in glass containers in which cut flowers may be placed.

Sales and Marketing

Our initial marketing of RootGel™ has been aimed at the golf course market primarily in the Southeast as the recent drought created water restrictions imposed by local governments. Based upon widespread publicity, we believe that the recent drought in other parts of the United States, including the West, Southwest and Southeast, has created an opportunity to demonstrate to governments that RootGel™ can provide a solution to crop shortages. Accordingly, we have initiated marketing RootGel™ to government entities such as the V.A. Administration and ABMA (American Battle Monuments Association).  

GelTech is currently working to rollout a distribution network of over 50 distributors covering 26 states, including California, New York, Texas and Florida. The industries that have gravitated to the RootGel™ line and concept have been diverse, including sod farms, tree and crop growers, lawn and landscape professionals.

We are also engaged in discussions with a few international distributors within the irrigation industry about acting as a distributor for RootGel™ to various markets. We cannot assure you we will be successful in recruiting distributors or that they will sell substantial quantities of RootGel™ at prices that are profitable.

Raw Materials and Suppliers

Currently, our RootGel™ polymer is manufactured for us by a third party. There are several other companies that are also capable of manufacturing the polymer.

Competition

Polymers have been marketed on and off for over 20 years as additions to soil to increase water retention and reduce irrigation. Numerous companies appear to have products that are very similar to RootGel™. Some of these companies are:

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Horticultural Alliance, Inc.

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Turbo Technologies, Inc.

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American Soil Technologies, Inc. [OTCBB: SOYL]

The first two are private companies and it is unclear what financial, marketing and sales resources they have compared to us. On the other hand, American Soil Technologies, Inc. is listed on the Over-the-Counter Bulletin Board. However, from American Soil’s filings with the Securities and Exchange Commission (“SEC”), it is clear that it has experienced significant losses, has a large accumulated deficit and has a working capital deficit which may hamper its ability to compete. It supplies polymer soil additions and other related products. According to its last filing with the SEC, it is now in litigation with its former polymer supplier as the result of alleged defective supplies. American Soil has an exclusive license to two method patents with cross-linked and linear polymers as their basis. They also have a patent on a slow release liquid fertilizer. American Soil also has six patents on a machine designed to install its liquid products in mature turf as well as some standing crops.

Since we do not currently have a patent on RootGel™ itself or on any of its uses, it is possible that a competitor could reverse engineer RootGel™ and market it under its own brand name. We have filed a patent application for the sprayable version of RootGel™.

Due to the amount of polymer that we expect to use in the production of RootGel™ and our other applications such as FireIce®, we believe our pricing for RootGel™ will be superior to that of any similar products that may be offered by our competitors.

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Seasonality

We expect RootGel™ will experience seasonality in sales during the fall and winter quarters, except in the Southern part of the United States. However, we do not expect as much seasonality in more southern areas that generally experience year round growing cycles, with the sale of the agricultural products preceding the growing cycle of various crops. We also believe a higher demand for RootGel™ will exist during the drought conditions affecting the United States including the West, Southwest and Southeast.

IceWear™

Industry Overview

When the temperatures soar, the goal is to stay cool. This issue is vital to hundreds of thousands of American workers who are subject to working in high temperature conditions. A considerable amount of research has been conducted on garments for protecting individuals under hot conditions. Cooling garments were first introduced in the late 1950s to protect wearers from hostile hot environments, primarily for military and space exploration purposes. Some of the earliest work was reported in the late 1950s involving pilots who endured high temperatures due to sunlit aircraft cockpits. Further interest in cooling garments has existed because it is not always economically or practically feasible to change the surrounding environment to cause a reduction in temperature. For example, situations where cooling the environment itself is not feasible include steel mills, foundries, mines, construction jobsites and the interior of military vehicles. Cooling garments (sometimes called “microclimate air-conditioning”) permit the wearer to operate in such environments that would otherwise be debilitating. These garments operate with air, cooled water, evaporation or through a process called “phase change.” Today, cooling vests are used in a wide variety of civilian applications. Some current uses of cooling vests include the following:

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Firefighters, EMTs and first responders,

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HAZMAT and SWAT teams,

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The United States military,

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Construction workers, field workers and employees of utilities companies, and

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Motorcycle riders.

The Product

IceWear™ is designed to be used as a cooling vest under a firefighter’s outer protective clothing commonly known as “bunker gear,” a hazmat suit or any type of protective jacket. IceWear™ lowers the core body temperature by 2-3°F, thus preventing some heat strokes and heart attacks. The cooling bags do not require electricity, batteries or refrigeration and once activated the IceWear™ vest will drop in temperature to approximately 27°F, and will slowly increase to 40°F over a one-hour period. The vest is adjustable, reusable and washable and may be disposed of in a regular trash bin. Each vest weighs approximately three pounds and contains pockets for two bags. The bags themselves contain a mixture of polymer and urea. To activate the cooling bag, the user must squeeze the bag until a popping sound is heard. The bags must then be kneaded thoroughly to insure full mixture of the product and to produce maximum cooling. Each bag is then inserted into a pocket located under each arm section of the vest and the vest is ready to use. Additionally, each cooling bag can be used separately and applied to the forehead, neck or sports related injury. Like the vests, the bags can also be disposed of in the regular trash.

Uses

In 2006, we tested IceWear™ with race car drivers and television cameramen. It has also been tested by several Florida Power and Light field employees and a number of South Florida EMTs under high temperature conditions. IceWear™ has multiple potential uses including:

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fire departments to protect their firefighters,

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laborers who work in hot conditions such as pavers and roofers,

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military personnel,

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in the medical field any time it is necessary to keep a patient cool,

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athletes,

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racers, including automobile, motorcycle and motorboat, and

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anyone else who spends time in significantly elevated temperatures.

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Sales and Marketing

Currently, we are four to six months away from completing our prototype of IceWear™ for the fire and rescue industry. We have not had any sales of IceWear™, although in 2006 an early version has been shown on ESPN2 being worn by race car drivers and a television cameraman. We are currently demonstrating FireIce® to a company that sells to the United States military and are hopeful that we may retain this company to market IceWear™ to the military. A leading distributor of fire equipment has also indicated an interest in marketing IceWear™ to their accounts which include utility companies, fire departments, EMTs, and first responders. Because of our small size, we have remained focused on our two commercialized products FireIce® and RootGel™ and have not devoted any attention to IceWear™ in the last two years.

Raw Materials and Suppliers

The polymers are manufactured for us by two third parties. There are a number of other manufacturers which are available.

Currently, a third party manufactures the cooling bags for us. They have the capacity to manufacture up to 45,000 bags per day. If we lost that company as a supplier, we believe there are many other companies that could fulfill the same role.

Competition

There are four general types of cooling vests: evaporative, cold packs, phase change and active cooling.

There are numerous companies that sell the various types of cooling vests. For instance, a company called Glacier Tek, Inc. markets a type of phase change cooling vest. Similarly, a company called Arctic Heat USA also sells a phase change vest. A company called Polar Products, Inc. markets all four types of vests. Another company called Polar-Products seems to specialize in selling evaporative cooling vests. All of these companies appear to be private so it is difficult to determine what sort of financial, marketing and sales resources they have. However, it does appear that some of these companies have been in existence for a number of years and in that time have likely had greater marketing exposure than us. For instance, some of the Arctic Heat vests were used by members of the 2004 United States Olympic team. Despite this, we believe that because the IceWear™ bags do not require any prior preparation unlike the vests our competitors sell, there will be many situations in which IceWear™ will be a more attractive product.

IceWear™ is categorized as a cold pack. Even though it has similar advantages and disadvantages as other cold pack cooling products, it has a major advantage that none of the other cold packs and in fact none of the other cooling systems have -- it can be used without any prior preparation. No materials or equipment are needed to prepare or activate it. IceWear™ can be stored and used on the spot in any type of situation. IceWear™ is ideal for workers in an emergency situation where they need access to instant cooling. In addition, because the IceWear™ bags are relatively inexpensive, a supply of them could be kept on hand for prolonged use. Even though the bags are only single use, we believe the low-cost and the convenience of not having to prepare the bags by placing them in a freezer or submerging them in cold water is a distinct advantage. In many situations such preparatory steps would be very inconvenient or even totally unfeasible.

Seasonality

IceWear™ is seasonal and there will be greater potential use during the hotter times of the year and less use during times of moderate temperature.  

WeatherTech Innovations®

Industry Overview

Weather modification is not a new idea. Over the past several hundred years many attempts at weather control have been made. Native Americans had rituals which they believed could induce rain. The Finnish people were believed by others to be able to control all types of weather. In the early modern era, people observed that during battles the firing of cannons and other firearms often seemed to initiate precipitation. From 1962 to 1983, the United States government ran “Project Storm Fury,” an attempt to weaken tropical cyclones by flying aircraft into the storms and seeding the eyewalls with silver iodide. More recently in 2005, two bills, United States Senate Bill 517 and House Bill 2995, were introduced that would allow experimental weather modification by artificial methods and would implement a national weather modification policy. To date neither bill has become law.

The Project

Weather Tech Innovations, Inc. is our subsidiary that will manage our hurricane suppression project. It has undergone only very limited testing and is not ready for true live testing in hurricanes. We need to raise between $3 to $5 million for preliminary environmental impact studies and to build the appropriate computer and radar facilities for participating universities. Another $50 to $100 million will be needed to fully test the project once the preliminaries goals have been reached and verified. We are uncertain whether we can raise this sum.

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WeatherTech Innovations® uses an inorganic polymer that has physical and chemical properties that shows promise of having the ability of weakening a hurricane. GelTech’s polymer has undergone intense laboratory study and limited actual field testing. The formulated polymer looks like baby powder; however each granule has the ability to absorb hundreds of times its weight in moisture and water. The product is inert and, we believe it is non-toxic.

We believe that if a jet aircraft were to deliver our polymer into the outer bank of a hurricane and then worked its way into the eye thereby cutting a pie shaped piece out of the storm, it may cause the winds and overall strength of the storm to weaken. The product would be delivered into a storm by a third party jet aircraft with specialized disbursement systems.

In early 2001, a jet dispersed a nominal amount of the product into a building thunderstorm off the coast of South Florida. The result was that the thunderstorm was removed from Doppler radar. This was verified by the Palm Beach International Airport traffic controllers and local television stations. This test was widely publicized in the West Palm Beach area. In another crude preliminary model test by a National Oceanic and Atmospheric Administration laboratory, application of adding polymer to a hurricane was able to produce a modest reduction in wind speed under laboratory conditions.

The efficacy of our product in a cloudy, rain-filled environment requires careful further study. However, the weakening of a storm by seeding with polymer seems to be related to an increased frictional load due to larger raindrops and cloud water buildup. This takes the heat out of the atmosphere and removes water mass. This cooling is “taxing” on the storm’s energy and could dynamically weaken the storm. Determining when, where, how much a storm would be weakened and what effect this would have is the objective of the studies.

Our goal is to raise the money to conduct a thorough test of whether our hurricane suppression project can reduce the impact of a hurricane and determine what, if any, effect it has on the environment. If we are successful, we then must be able to market it to the federal government. We cannot assure you we will be successful.

We estimate that it will cost from $50,000,000 to $100,000,000 over four years to test our theory and product on incoming storms and to fully evaluate the results including environmental effects. We intend to form a scientific advisory and research board to further study the matter.

Raw Materials and Suppliers

The polymer for the project is provided to us by a third party. However, there are many other sources from which GelTech could obtain the polymer.

Competition

There really is no competition for a project such as ours, due to the fact that we have the only patent for “Method of Modifying Weather.” As described above, there have been previous attempts at weather modification, but we are not aware of any other company that is proposing a product similar to ours.

Seasonality

The project would be used during hurricane season.

Governmental Regulation

The use of the polymer for seeding purposes will be subject to governmental regulation. We are subject to the United Nations Convention on the Prohibition of Military or Any Other Hostile Use of Environmental Modification Techniques. The Convention was ratified by President Jimmy Carter on December 13, 1979. This Convention bans hostile weather modification. It is unclear whether deployment of our hurricane suppression project may be considered “hostile.” See the risk factor beginning at page 8 of this report.

On March 3, 2005 a bill was introduced by Senator Kay Bailey Hutchison to establish a “Weather Modification Operations or Research Board.” The purpose of the bill was to develop and implement a comprehensive and coordinated national weather modification policy and to establish a national cooperative federal and state program of weather modification research and development. As of the date of this filing, the bill has not been brought to a vote.

Therefore, it seems likely that that any eventual large-scale version of the project would involve some degree of government regulation and modification of the Convention referred to above.

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Intellectual Property

The patents relating to the products we currently expect to market are:

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U.S. Patent No. 6,315,213 – Method of Modifying Weather; and

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U.S. Patent U.S. Serial No. 7,182,778 – Conforming Thermal Pack for IceWear™.

The following are patents pending for products we currently expect to market:

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U.S. patent application, Serial No. 11/251,005 for IceWear™;

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U.S. patent application, Serial No. 11/680,803 and International Patent application, Serial No. PCT/US07/63075 for FireIce®; and

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U.S. patent application, Serial No. 11/775,512 for a sprayable form of RootGel™.

Trademarks

We claim trademark rights to the following marks. Federal trademark applications are on file with the United States Trademark Office:

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GelTech Solutions;

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FireIce®;

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IceWear™;

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RootGel™; and

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WeatherTech Innovations®

Employees

As of the date of this report, we have nine full-time and two part-time employees. We hire independent contractors on an “as needed” basis only. We have no collective bargaining agreements with our employees. We believe that our employee relationships are satisfactory. In addition to our Chief Executive Officer and our Chief Technology Officer, we employ two other members of the Cordani family. See the discussion in the section of this report entitled “Related Person Transactions.”

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Item 1A.

Risk Factors

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors before deciding whether to invest in the common stock Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations or our financial condition. If any of the events discussed in the risk factors below occur, our business, financial condition, results of operations or prospects could be materially and adversely affected. In such case, the value and marketability of the common stock could decline, and you might lose all or part of your investment.

Risk Factors Relating to Our Company

Our ability to continue as a going concern is in substantial doubt. To continue as a going concern, we must obtain adequate new debt or equity financing and achieve profitability.

Since our incorporation, and prior to incorporation when the business we acquired was a division of Dyn-O-Mat, we (and the Dyn-O-Mat division) incurred net losses. Because we are a development stage company and have incurred significant losses, there is substantial doubt about our ability to continue as a going concern.

We believe we have sufficient working capital for at least the next 12 months. Our continued existence is dependent upon our achieving sufficient sales levels of FireIce® and RootGel™ or obtaining adequate financing. Unless we can begin to generate material revenue, we may not be able to remain in business. We cannot assure you that we will raise enough money or generate sufficient sales to meet our future working capital needs.

If we cannot sell a sufficient volume of our products, we will not remain operational.

To date, our sales have been limited as we have focused our attention on building a sales team and distribution channels as well as obtaining the necessary certifications for FireIce®. We only commenced our sales of FireIce® in the fourth quarter of fiscal 2008 and need to be listed on the Department’s QPL in order to sell directly to governments which are responsible for combating wildfires. If we can achieve sufficient sales levels, we will not be able to remain operational.

Because our plans to commercialize FireIce® were recently launched, there can be no assurances it will be accepted by potential customers.

There are multiple factors which may prevent us from successfully commercializing FireIce®, our fire suppression gel:

·

We have demonstrated FireIce® at trade shows and have received minimal orders, but cannot assure you that we will receive repeat orders.

·

A potential long-term market for FireIce® is to combat forest fires. However, any such use would require the appropriate government approval, including the Department. We cannot assure you that we will be able to gain the necessary approvals for such a use.

·

We need to convince potential customers that FireIce® is superior to and less costly than competitive products.

We have a limited operating history on which to evaluate our potential for future success and to determine if we will be able to execute our business plan. Therefore, it is difficult to evaluate our future prospects and the risk of success or failure of our business.

We were formed on July 19, 2006 and have had very limited operations. While we have conducted development and sales and marketing activities, we have generated limited revenue to date. You must consider our business and prospects in light of the risks and difficulties we will encounter as an early-stage company. These risks include:

·

our ability to effectively and efficiently market and distribute our products,

·

our ability to obtain market acceptance of our current products and future products that may be developed by us,

·

our ability to convince potential investors that WeatherTech Innovations®, our hurricane suppression project is a viable project, and

·

our ability to sell our products at competitive prices which exceed our per unit costs.

We may not be able to address these risks and difficulties, which could materially and adversely affect our revenue, operating results and our ability to continue to operate our business.

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Because GelTech’s business plan is unproven, it may not result in the generation of material revenue or profitability.

Since our incorporation on July 19, 2006, our goal has been to generate revenue from the sale and development of the following:

·

FireIce® – a fire suppression product,

·

RootGel™ – a line of agricultural moisture retention products,

·

IceWear™  – a garment line to assist in cooling body temperature, and

·

WeatherTech Innovations® – our hurricane suppression project.

Our marketing of these products and our hurricane suppression product is subject to a number of risks, including:

·

Although we have a pending United States patent application for the sprayable form of RootGel™, we have no patent protection for the granular form and there are many products on the market which are advertised as performing similar functions to RootGel™ granular;

·

If the pending patent application is not granted for the sprayable form of RootGel™, we will face direct competition which can erode any market share we may achieve and create pricing pressure;  

·

Our IceWear™ product will take four to six months to complete developing the initial prototypes before we can market it to firefighters, hazmat units, emergency medical technicians or EMTs, first responders and the United States military; and

·

Our hurricane suppression project needs substantial funding and development before it can be commercialized, if at all, as described in Item 1.“Business.”

We cannot assure you that the implementation of the business plan will result in material sales or that if it does results in material sales, that such sales will necessarily translate into profitability.

Our growth strategy reflected in our business plan may not be achievable or may not result in profitability.

We may not be able to implement our growth strategy reflected in our business plan rapidly enough for us to achieve profitability. Our growth strategy is dependent on a number of factors, including market acceptance of our fire suppression gel and the acceptance by the public of the concept of hurricane suppression. We cannot assure you that our potential market will purchase our products or that those parties will purchase our products at the costs and on the terms assumed in our business plan.

Among other things, implementation of our growth strategy would be adversely affected if:

·

we are not able to attract sufficient customers to the products we offer in light of the price and other terms required in order for us to attain the level of profitability that will enable us to continue to pursue our growth strategy,

·

adequate penetration of new markets at reasonable cost becomes impossible limiting the future demand for our products below the level assumed by our business plan,

·

we were forced to significantly adapt our business plan to meet changes in our markets, and

·

for any reason, we are not able to attract, integrate, retain and motivate qualified personnel.

If we cannot manage our growth effectively, we may not become profitable.

Businesses which grow rapidly often have difficulty managing their growth. If we grow as rapidly as we anticipate, we will need to expand our management by recruiting and employing experienced executives and key employees capable of providing the necessary support. We cannot assure you that our management will be able to manage our growth effectively or successfully. Our failure to meet these challenges could cause us to lose money, and your investment could be lost.

Among other things, implementation of our growth strategy would be adversely affected if we were not able to attract sufficient customers to the products and services we offer or plan to offer in light of the price and other terms required in order for us to attain the necessary profitability.

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We may not be able to maintain and expand our business if we are not able to retain, hire and integrate key management and operating personnel.

Our success depends in large part on the continued services and efforts of key management personnel. Competition for such employees is intense and the process of locating key personnel with the combination of skills and attributes required to execute our business strategies may be lengthy. The loss of key personnel could have a material adverse impact on our ability to execute our business objectives. We do not have any life insurance on the lives of any of our executive officers including Mr. Peter Cordani, the inventor of our intellectual property, although we are in the process of obtaining it.

We could face potential difficulties in locating sufficient manufacturing sources if our products gain widespread commercial acceptance.

We have used third parties to manufacture our products on a limited basis. If we are unable to produce our products in sufficient quantities at an acceptable cost, we may lose customers and our business could be harmed. Our ability to expand production could also be hindered by the availability of materials used to manufacture our products or the availability of qualified personnel. These difficulties could result in reduced quality of our products or reduced sales, which could damage our industry reputation and hurt our profitability.

Because we have launched marketing of RootGel™ last year, we cannot be certain that it will be accepted by potential customers.

Because we have began marketing and selling RootGel™ as a product providing a solution to golf courses facing drought conditions in 2007, we do not know the extent of the market we will be able to penetrate. We are currently discussing distribution agreements with third parties.  Initially, we entered into an exclusive distribution agreement with a third party for the States of Florida and Arizona.  We have terminated the exclusive nature of that agreement because of limited sales and indications of interest from other potential distributors. We may not be able to sell RootGel™ in volumes and at prices which will be profitable to us.

If we are unable to expand our distribution and sales network for RootGel™, our future sales of RootGel™ will be limited.

We initially had one RootGel™ distributor for Florida and Arizona and a sales representative who sells to customers located in North Carolina, South Carolina and Virginia. As stated above, we terminated the exclusive distributorship. We have to expand our sales and distribution efforts to other states. Additionally, we must recruit distributors for agricultural usage of RootGel™. If we cannot expand our sales and distribution network, our future sales of RootGel™ will be limited since our sales efforts have been aimed primarily at golf courses.

Because we do not have a patent on RootGel™ or its uses, if our competitors are able to reverse engineer our product, our ability to compete effectively may be harmed.

Currently, there are numerous companies that advertise moisture preservation products that appear similar to RootGel™. Because we lack any patent protection on RootGel™ itself and have only a pending patent for the sprayable form, there is a substantial risk that one of these competitors could determine how to make the granular form of RootGel™ and market it under their own brand name; thereby adversely affecting our ability to compete successfully.

A change in environmental regulations may adversely affect the use of FireIce® and RootGel™ and may hinder our ability to generate revenue from this line of business.

While we believe that FireIce® and RootGel™ are environmentally friendly, we may become subject to varying environmental regulations that could adversely affect the use of it. If we do become subject to environmental regulations, the use of FireIce® and RootGel™ may be limited as compared to other technologies which may be less expensive or more efficient.

Because we have only demonstrated IceWear™ on a test basis, there can be no assurances it will be accepted by potential customers.

IceWear™ is a garment aimed at helping first responders and others who work in high temperature conditions to stay cool. However, because we expect it to take us four to six months to develop a new prototype, there is no guarantee that it will be accepted by potential customers. Even if it is accepted, we may not be able to sell it at prices which would be profitable to us.

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Because WeatherTech Innovations®, our hurricane suppression project, involves weather modification, there can be no assurances that we will ever be able to deploy it on a large scale.

The hurricane suppression project is still at an experimental stage. It is subject to a number of risk factors which may prevent us from deploying it on a large scale:

·

Though it has been tested on a thunderstorm, it has not been tested on a hurricane and we cannot assure you that the WeatherTech Innovations® will work to suppress the intensity of a hurricane. If our test results and demonstrations do not clearly convey the potential to assist in slowing the strength of a hurricane, then we may not be able to successfully commercialize all or part of the technology, which could in turn have a material adverse effect on our future prospects.

·

We estimate that it will cost $3,000,000 to $5,000,000 to start the computer storm modeling and initiate the environmental impact studies. We expect the total costs will range from $50,000,000 to $100,000,000 over four years to perform live testing on incoming storms and to fully evaluate the results including continual computer and radar modeling along with the environmental effects. While we intend to seek government grants or corporate contributions, we may be unsuccessful in raising these funds especially in light of the resistance the current administration has shown to proposed legislation supporting weather modification research. If we are unsuccessful in raising these funds in the time scale required, we will not be able to test this technology.

·

We are subject to budgetary restraints from both the federal government and large corporations and insurance companies which may impede our ability to obtain the necessary funding.

·

Even if we raise the necessary capital, we may not successfully test the hurricane suppression project.

·

In 1979, the United States became a party to an international treaty banning the use of weather modification for hostile purposes. While modification for peaceful purposes is allowed, there is some question about whether even well-intentioned programs could be considered hostile. Therefore, geopolitical considerations may make it difficult for us to deploy the hurricane suppression project on a large scale.

·

Because of the numerous attempts at weather control that have been made over the past several hundred years, we may have trouble convincing potential investors that hurricane suppression and weather modification in general is something that can credibly be achieved. If we are not able to convince potential investors of the credibility of our technology, we may be unsuccessful in proving the suppression project as viable and not receive any revenue from its sale.

·

Our product is a type of polymer that will be dispersed via aircrafts into the outer bank of a hurricane. While we believe that our polymer is inert and non-toxic, the dispersal over large areas may make us subject to environmental regulations that could hamper our ability to deploy our product. In addition if it is perceived that our granules pose a threat to the environment, we may become exposed to expensive environmental litigation. Both of these situations could hamper our ability to generate profits.

FireIce®, IceWear™ and RootGel™ face substantial competition in the fire suppression, moisture preservation and cooling garment markets, respectively, and there is no guarantee potential customers will select our products over those of our competitors.

We face multiple competitors in the fire suppression, cooling garment and moisture preservation markets. In the fire suppression field we compete against at least one well-established, publicly-traded company as well as several independently owned businesses. In the cooling garment and moisture preservation areas, we face competition from numerous independently owned businesses that have competing and in some case very similar products. In addition, companies may be developing or may, in the future, engage in the development of products and/or technologies competitive with our products. We expect that technological developments will occur and that competition is likely to intensify as new technologies are employed.

Many of our competitors are capable of developing or have developed and are capable of continuing to develop products based on similar or other technology which are or may be competitive with our products and technologies. At least one of our competitors in the fire suppression business has substantially greater financial and other resources, research and development capabilities and more experience in obtaining regulatory approvals, manufacturing and marketing than we do. Because our competitors in the cooling garment and moisture preservation markets are private companies, we are unable to determine the amount of financial and other resources they have available. However, some of these companies, particularly in the cooling garment business, appear to have had much greater marketing experience than we have. Potential customers may prefer the pricing terms or service offered by competitors. Furthermore, competitors may have an advantage as a result of having existing business relationships with potential customers.

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Because we are seeking to enter into contracts with federal and state governments, we will be subject to a number of risks which could adversely affect our business.  

We are seeking to sell our products, including FireIce®, to federal and state governments. In selling to the government, we will be subject to a number of significant risks including:

·

We may not be successful in selling our products to the government, although we will incur material costs as part of our sales efforts,

·

Government contracts often contain unfavorable termination provisions,

·

We may be subject to audit and modification of agreements by the government in its sole discretion, which subjects us to additional risks.

·

The government can unilaterally:

o

suspend or prevent us for a set period of time from receiving new contracts or extending existing contracts based on violations or suspected violations of laws or regulations,

o

terminate our existing contracts,

o

reduce the scope and value of our existing contracts,

o

audit and object to our contract-related costs and fees, and

o

change certain terms and conditions in our contracts.

Further, as part of any audit or review, the government may review the adequacy of, and our compliance with, our internal control systems and policies, including those relating to our purchasing, property, compensation and/or management information systems. In addition, if an audit or review uncovers any improper or illegal activity, we may be subject to civil and criminal penalties and administrative sanctions, including termination of our contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the government or any of its agencies. We could also suffer serious harm to our reputation if allegations of impropriety were made against us. 

Even if we are able to successfully enter into contracts to supply federal and state governments with our products, there can be no assurances these contracts will be profitable.

The process of obtaining government contracts is lengthy and uncertain, and we must compete for each contract. Similar to large corporations, government employees resist change and taking risks.  This can make it more difficult to obtain government contracts. Moreover, the award of one government contract does not necessarily secure the award of future contracts. Governments are subject to budgetary restrictions which may limit their ability to buy our products. Even if we are able to enter into a contract with a government, there is no guarantee we will be able to do so on terms which will be profitable to us.

If we are unable to protect our proprietary technology, our business could be harmed.

Our intellectual property including patents is our key asset. We currently hold two United States patents and three patents pending which we expect to commercialize. Competitors may be able to design around our patents and compete effectively with us. The cost to prosecute infringements of our intellectual property or the cost to defend our products against patent infringement or other intellectual property litigation by others could be substantial. We cannot assure you that:

·

pending and future patent applications will result in issued patents,

·

patents licensed by us will not be challenged by competitors,

·

the patents will be found to be valid or sufficiently broad to protect our technology or provide us with a competitive advantage,

·

if we are sued for patent infringement, we can raise the necessary capital to defend our patents, and

·

we will be successful in defending against future patent infringement claims asserted against our products.

If the Patent Reform Act of 2007 is enacted into law, it could make challenges to our patents easier, may increase the likelihood that we will be sued or our patents challenged at the United States Patent and Trademark Office, subject us to extraordinary legal expenses and risk a ruling that one or more of our patents are invalid.

There is currently pending in the United States Congress legislation referred to as the Patent Reform Act of 2007. While it has passed in the House of Representatives and it is now under consideration by the Senate, it is uncertain whether it will be passed into law and whether or how it will be amended. Proponents argue it will reduce the explosive litigation costs and patent infringement judgments while enhancing innovation. However, in its current version, we believe it will make it easier to challenge patents, may

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increase the likelihood our patents will be challenged in court or administratively at the United States Patent and Trademark Office, could result in extraordinary legal fees defending our patents and could result in one or more of our patents being ruled invalid. This would result in a material adverse effect upon our future operating results and financial condition, including increasing competition.

Risks Related to Our Common Stock

Because the market for our common stock is limited, persons who purchase our common stock may not be able to resell their shares at or above the purchase price paid by them.

Our common stock trades on the Over-the-Counter Bulletin Board which is not a liquid market.  There is currently only a limited public market for our common stock.  We cannot assure you that an active public market for our common stock will develop or be sustained in the future.  If an active market for our common stock does not develop or is not sustained, the price may decline.  

Because we are subject to the “penny stock” rules, brokers cannot generally solicit the purchase of our common stock which adversely affects its liquidity and market price.

The Securities and Exchange Commission or SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock on the Bulletin Board has been substantially less than $5.00 per share and therefore we are currently considered a “penny stock” according to SEC rules. This designation requires any broker-dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules limit the ability of broker-dealers to solicit purchases of our common stock and therefore reduce the liquidity of the public market for our shares.

Due to factors beyond our control, our stock price may be volatile.

Any of the following factors could affect the market price of our common stock:

·

our failure to generate revenue,

·

our failure to achieve and maintain profitability,

·

short selling activities,

·

the sale of a large amount of common stock by our shareholders including those who invested prior to commencement of trading,

·

actual or anticipated variations in our quarterly results of operations,

·

announcements by us or our competitors of significant contracts, new products, acquisitions, commercial relationships, joint ventures or capital commitments,

·

the loss of major customers or product or component suppliers,

·

the loss of significant business relationships,

·

our failure to meet financial analysts’ performance expectations,

·

changes in earnings estimates and recommendations by financial analysts, or

·

changes in market valuations of similar companies.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs and divert our management’s time and attention, which would otherwise be used to benefit our business.

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Because the majority of our outstanding shares are freely tradable, sales of these shares could cause the market price of our common stock to drop significantly, even if our business is performing well.

As of September 24, 2008, we had outstanding 13,470,950 shares of common stock, not including shares issuable upon the exercise of warrants and options. Our outstanding shares, not including the amounts issuable upon the exercise of warrants and options, may be sold publicly as follows.

(1)

Does not include 192,678 shares owned by Dyn-O-Mat, which are subject to an agreement restricting their public sale until January 1, 2009, except to the extent transferred to its shareholders as described in this report.

(2)

Includes 7,756,789 shares of common stock owned by officers, directors and a principal shareholder.  Under Rule 144, these shares are subject to limitations on sale which are described below.  

In general, Rule 144 provides that any non-affiliate of the Company, who has held restricted common stock for at least six-months, is entitled to sell their restricted stock freely, provided that the Company stays current in its SEC filings. After one year, a non-affiliate may sell without any restrictions. An affiliate of the Company may sell after six months with the following restrictions: (i) the Company is current in its filings, (ii) certain manner of sale provisions, (iii) filing of Form 144, and (iv) volume limitations limiting the sale of shares within any three-month period to a number of shares that does not exceed the greater of 1% of the total number of outstanding shares or, the average weekly trading volume during the four calendar weeks preceding the filing of a notice of sale. A person who has not been our affiliate for at least three months immediately preceding the sale and who has owned such shares of common stock for at least one year is entitled to sell the shares under Rule 144 without regard to any of the limitations described above.

An investment in GelTech may be diluted in the future as a result of the issuance of additional securities or the exercise of options or warrants.

In order to raise additional capital to fund our strategic plan, we may issue additional shares of common stock or securities convertible, exchangeable or exercisable into common stock from time to time, which could result in substantial dilution to any person who purchases our common stock. If purchasers pay more than our net tangible book value of approximately $0.08 per share at June 30, 2008, they will suffer dilution. We cannot assure you that we will be successful in raising funds from the sale of common stock or other equity securities.

In the future we may issue preferred stock without the approval of our shareholders, which could make it more difficult for a third party to acquire us and could depress our stock price.

Our board of directors may issue, without a vote of our shareholders, one or more series of preferred stock that have more than one vote per share. This could permit our board of directors to issue preferred stock to investors who support us and our management and permit our management to retain control of our business. Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and a decline in interest of our common stock.

Since we intend to retain any earnings for development of our business for the foreseeable future, you will likely not receive any dividends for the foreseeable future.

We have not and do not intend to pay any dividends in the foreseeable future, as we intend to retain any earnings for development and expansion of our business operations. As a result, you will not receive any dividends on your investment for an indefinite period of time.

Item 1B.