Rebus Holdings, Inc. - Quarter Report: 2011 September (Form 10-Q)

Unassociated Document

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

FORM 10-Q

(Mark one)

x	Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2011

¨	Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 333-153829

GENSPERA, INC.

(Exact name of registrant as specified in its charter)

Delaware		20-0438951
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)

2511 N Loop 1604 W, Suite 204 San Antonio, TX		78258
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (210) 479-8112

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. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

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

Large accelerated filer ¨	Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a small reporting company)	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 x No

As of November 1, 2011, Registrant had 21,457,419 common shares, $0.0001 par value, issued and outstanding.

Table of Contents

		Page
PART I -	FINANCIAL INFORMATION

Item 1.	Financial Statements	4

	Balance Sheets as of September 30, 2011 (Unaudited) and December 31, 2010

	Statements of Operations (Unaudited)
	Three and nine months ended September 30, 2011 and 2010 and for the period from November 21, 2003 (inception) to September 30, 2011

	Statement of Changes in Stockholders' Equity (Unaudited)
	For the period from November 21, 2003 (inception) to September 30, 2011

	Statements of Cash Flows (Unaudited)
	Nine months ended September 30, 2011 and 2010 and for the period from November 21, 2003 (inception) to September 30, 2011

	Notes to Financial Statements (Unaudited)

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21

Item 4.	Controls and Procedures	21

PART II -	OTHER INFORMATION	22

Item 1.	Legal Proceedings	22

Item 1A.	Risk Factors	22

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 3.	Defaults Upon Senior Securities	32

Item 4.	(Removed and Reserved)	32

Item 5.	Other Information	32

Item 6.	Exhibits	32

ADVISEMENT

We urge you to read this entire Quarterly Report, including the “Risk Factors” section, the financial statements, and related notes included herein. As used in this Quarterly Report, unless the context otherwise requires, the words “we,” “us,” “our,” “the Company,” “GenSpera” and “Registrant” refer to GenSpera, Inc. Also, any reference to “common shares,” or “common stock,” refers to our $.0001 par value common stock. The information contained herein is current as of the date of this Quarterly Report (September 30, 2011), unless another date is specified.

We prepare our interim financial statements in accordance with United States generally accepted accounting principles. Our financials and results of operation for the three and nine month periods ended September 30, 2011 are not necessarily indicative of our prospective financial condition and results of operations for the pending full fiscal year ending December 31, 2011. The interim financial statements presented in this Quarterly Report as well as other information relating to our company contained in this Quarterly Report should be read in conjunction and together with the reports, statements and information filed by us with the United States Securities and Exchange Commission (“SEC”).

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These forward-looking statements include, but are not limited to, statements about:

the development of our drug candidates, including when we expect to undertake, initiate and complete the clinical trials of our drug candidates;

the regulatory approval of our drug candidates;

our use of clinical research centers and other contractors;

our ability to sell, license or market any of our products if developed;

our ability to compete against other companies;

our ability to secure adequate protection for our intellectual property;

our ability to attract and retain key personnel; and

our ability to obtain adequate financing.

These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend” and similar words or phrases. Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Discussions containing these forward-looking statements may be found throughout this Form 10-Q, including Part I, the section entitled “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These forward-looking statements involve risks and uncertainties, including the risks discussed in Part II, Item 1A of this Report, under the caption “Risk Factors” that could cause our actual results to differ materially from those in the forward-looking statements. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document. The risks discussed in this report should be considered in evaluating our business and future financial performance.

PART I

FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

GENSPERA INC.

(A Development Stage Company)

CONDENSED BALANCE SHEETS

	September 30,			December 31,
	2011			2010
Assets	(Unaudited)

Current assets:
Cash	$	6,654,026		$	3,671,151

Total current assets		6,654,026			3,671,151

Fixed assets, net of accumulated depreciation of $6,250 and $3,874		9,584			11,959

Prepaid fees		-			3,500
Intangible assets, net of accumulated amortization of $55,775 and $43,029		156,393			169,139

Total assets	$	6,820,003		$	3,855,749

Liabilities and stockholders' equity

Current liabilities:

Accounts payable and accrued expenses	$	489,633		$	139,169
Accrued interest - stockholder		15,816			12,517
Convertible note payable - stockholder, current portion		105,000			105,000

Total current liabilities		610,449			256,686

Warrant derivative liabilities		1,757,685			2,314,033

Total liabilities		2,368,134			2,570,719

Commitments and contingencies

Stockholders' equity:

Preferred stock, par value $.0001 per share; 10,000,000 shares authorized, none issued and outstanding		-			-
Common stock, par value $.0001 per share; 80,000,000 shares authorized, 21,457,419 and 17,604,465 shares issued and outstanding, respectively		2,146			1,760
Common stock subscribed		-			611,846
Additional paid-in capital		22,683,294			15,120,792
Deficit accumulated during the development stage		(18,233,571	)		(14,449,368	)

Total stockholders' equity		4,451,869			1,285,030

Total liabilities and stockholders' equity	$	6,820,003		$	3,855,749

See accompanying notes to unaudited condensed financial statements.

GENSPERA, INC.

(A Development Stage Company)

CONDENSED STATEMENTS OF LOSSES

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

AND FOR THE PERIOD FROM INCEPTION (NOVEMBER 21, 2003) TO SEPTEMBER 30, 2011

(Unaudited)

													Cumulative Period
													from November 21, 2003
													(date of inception) to
	Three Months ended September 30,						Nine Months ended September 30,						September 30,
	2011			2010			2011			2010			2011

Operating expenses:
General and administrative expenses	$	800,708		$	340,979		$	2,326,647		$	1,514,603		$	7,214,283
Research and development		1,057,725			238,225			2,280,078			1,329,396			10,035,485
Research and development grant received		-			-			(244,479	)		-			(488,958	)

Total operating expenses		1,858,433			579,204			4,362,246			2,843,999			16,760,810

Loss from operations		(1,858,433	)		(579,204	)		(4,362,246	)		(2,843,999	)		(16,760,810	)

Finance cost		-			-			-			-			(518,675	)
Change in fair value of derivative liability		112,389			862,395			556,348			248,783			(983,856	)
Interest income, net		6,805			7,758			21,695			20,017			29,770

Income (loss) before provision for income taxes		(1,739,239	)		290,949			(3,784,203	)		(2,575,199	)		(18,233,571	)

Provision for income taxes		-			-			-			-			-

Net income (loss)	$	(1,739,239	)	$	290,949		$	(3,784,203	)	$	(2,575,199	)	$	(18,233,571	)


Net income (loss) per common share, basic	$	(0.08	)	$	0.02		$	(0.18	)	$	(0.15	)

Net loss per common share, diluted - see
Note 1	$	(0.08	)	$	(0.03	)	$	(0.18	)	$	(0.15	)

Weighted average shares outstanding, basic and diluted		21,448,048			17,602,726			20,607,271			16,675,447

See accompanying notes to unaudited condensed financial statements.

GENSPERA, INC.

(A Development Stage Company)

CONDENSED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY

FROM DATE OF INCEPTION (NOVEMBER 21, 2003) TO SEPTEMBER 30, 2011

(Unaudited)

										Deficit
										Accumulated
					Additional			Common		During the			Stockholders'
	Common Stock				Paid-in			Stock		Development			Equity
	Shares		Amount		Capital			Subscribed		Stage			(Deficit)

Balance, November 21, 2003		-	$	-	$	-		$	-	$	-		$	-

Sale of common stock to founders at $0.0001
per share in November, 2003		6,100,000		610		(510	)		-		-			100

Contributed services		-		-		120,000			-		-			120,000

Net loss		-		-		-			-		(125,127	)		(125,127	)

Balance, December 31, 2003		6,100,000		610		119,490			-		(125,127	)		(5,027	)

Contributed services		-		-		192,000			-		-			192,000

Stock based compensation		-		-		24,102			-		-			24,102

Net loss		-		-		-			-		(253,621	)		(253,621	)

Balance, December 31, 2004		6,100,000		610		335,592			-		(378,748	)		(42,546	)

Contributed services		-		-		48,000			-		-			48,000

Stock based compensation		-		-		24,100			-		-			24,100

Net loss		-		-		-			-		(126,968	)		(126,968	)

Balance, December 31, 2005		6,100,000		610		407,692			-		(505,716	)		(97,414	)

Contributed services		-		-		144,000			-		-			144,000

Stock based compensation		-		-		42,162			-		-			42,162

Net loss		-		-		-			-		(245,070	)		(245,070	)

Balance, December 31, 2006		6,100,000		610		593,854			-		(750,786	)		(156,322	)

Shares sold for cash at $0.50 per share
in November, 2007		1,300,000		130		649,870			-		-			650,000

Shares issued for services		735,000		74		367,426			-		-			367,500

Contributed services		-		-		220,000			-		-			220,000

Stock based compensation		-		-		24,082			-		-			24,082

Exercise of options for cash at $0.003 per share
in March and June, 2007		900,000		90		2,610			-		-			2,700

Net loss		-		-		-			-		(691,199	)		(691,199	)

Balance, December 31, 2007		9,035,000		904		1,857,842			-		(1,441,985	)		416,761

Exercise of options for cash at $0.50 per share
on March 7,2008		1,000,000		100		499,900			-		-			500,000

Sale of common stock and warrants at $1.00 per
share - July and August 2008		2,320,000		232		2,319,768			-		-			2,320,000

Cost of sale of common stock and warrants		-		-		(205,600	)		-		-			(205,600	)

Shares issued for accrued interest		31,718		3		15,856			-		-			15,859

Shares issued for services		100,000		10		49,990			-		-			50,000

Stock based compensation		-		-		313,743			-		-			313,743

Contributed services		-		-		50,000			-		-			50,000

Beneficial conversion feature of convertible debt		-		-		20,675			-		-			20,675

Net loss		-		-		-			-		(3,326,261	)		(3,326,261	)

Balance, December 31, 2008		12,486,718		1,249		4,922,174			-		(4,768,246	)		155,177

See accompanying notes to unaudited condensed financial statements.

GENSPERA, INC.

(A Development Stage Company)

CONDENSED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY

FROM DATE OF INCEPTION (NOVEMBER 21, 2003) TO SEPTEMBER 30, 2011

(Unaudited)

Cumulative effect of change in accounting principle	-		-		(444,161	)		-			(290,456	)		(734,617	)

Warrants issued for extension of debt maturities	-		-		51,865			-			-			51,865

Stock based compensation	-		-		1,530,536			-			-			1,530,536

Common stock issued for services	86,875		10		104,109			-			-			104,119

Sale of common stock and warrants at $1.50 per
share - February 2009	466,674		46		667,439			-			-			667,485

Sale of common stock and warrants at $1.50 per
share - April 2009	33,334		3		49,997			-			-			50,000

Sale of common stock and warrants at $1.50 per
share - June 2009	1,420,895		142		2,038,726			-			-			2,038,868

Sale of common stock and warrants at $1.50 per
share - July 2009	604,449		60		838,024			-			-			838,084

Sale of common stock and warrants at $1.50 per
share - September 2009	140,002		14		202,886			-			-			202,900

Common stock and warrants issued as payment
of placement fees	53,334		5		(5	)		-			-			-

Common stock and warrants issued upon conversion of note and accrued interest	174,165		18		174,147			-			-			174,165

Net loss	-		-		-			-			(5,132,827	)		(5,132,827	)

Balance, December 31, 2009	15,466,446		1,547		10,135,737			-			(10,191,529	)		(54,245	)

Stock based compensation	-		-		1,165,450			-			-			1,165,450

Sale of common stock and warrants at $1.65 per
share - February and March 2010	533,407		53		806,157			-			-			806,210

Sale of common stock and warrants at $2.00 per
share - May 2010	1,347,500		135		2,655,365			-			-			2,655,500

Common stock and warrants issued as payment
of placement fees	43,632		4		(4	)		-			-			-

Common stock issued as payment for patents
and license	20,000		2		46,798			-			-			46,800

Common stock and warrants subscribed	-		-		-			611,846			-			611,846

Salaries paid with common stock	43,479		4		99,996			-			-			100,000

Exercise of options and warrants	150,001		15		124,986			-			-			125,001

Reclassification of derivative liability upon exercise of warrants	-		-		86,307			-			-			86,307

Net loss	-		-		-			-			(4,257,839	)		(4,257,839	)

Balance, December 31, 2010	17,604,465		1,760		15,120,792			611,846			(14,449,368	)		1,285,030

Stock based compensation	-		-		758,831			-			-			758,831

Sale of common stock and warrants at $1.80 per
share - January and February 2011	2,241,605		224		4,034,659			(611,846	)		-			3,423,037

Sale of common stock and warrants at $1.65 per
share - April 2011	1,363,622		136		2,249,839			-			-			2,249,975

Common stock and warrants issued as payment
of placement fees	61,498		6		(6	)		-			-			-

Common stock and warrants issued as payment
of accrued consulting fees	33,334		3		59,997			-			-			60,000

Common stock and warrants issued as payment
of consulting fees	152,895		17		532,685			-			-			532,702

Cost of sales of common stock and warrants	-		-		(73,503	)		-			-			(73,503	)

Net loss	-		-		-			-			(3,784,203	)		(3,784,203	)

Balance, September 30, 2011	21,457,419	$	2,146	$	22,683,294		$	-		$	(18,233,571	)	$	4,451,869

See accompanying notes to unaudited condensed financial statements.

GENSPERA, INC.

(A Development Stage Company)

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

AND FOR THE PERIOD FROM INCEPTION (NOVEMBER 21, 2003) TO SEPTEMBER 30, 2011

(Unaudited)

							Cumulative Period
							from November 21, 2003
							(date of inception) to
	Nine months ended September 30,						September 30,
	2011			2010			2011

Cash flows from operating activities:
Net loss	$	(3,784,203	)	$	(2,575,199	)	$	(18,233,571	)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization		15,121			13,886			62,024
Stock based compensation		1,291,533			878,836			5,037,327
Common stock issued for acquisition of license		-			28,800			28,800
Warrants issued for financing costs		-			-			467,840
Change in fair value of derivative liability		(556,348	)		(248,783	)		983,856
Contributed services		-			-			774,000
Amortization of debt discount		-			-			20,675
Changes in assets and liabilities:
Increase (decrease) in accounts payable and accrued expenses		413,763			(28,613	)		591,873

Cash used in operating activities		(2,620,134	)		(1,931,073	)		(10,267,176	)

Cash flows from investing activities:
Acquisition of property and equipment		-			-			(15,833	)
Acquisition of intangibles		-			(10,000	)		(194,168	)

Cash used in investing activities		-			(10,000	)		(210,001	)

Cash flows from financing activities:
Proceeds from sale of common stock and warrants		5,673,012			3,461,710			16,974,705
Proceeds from exercise of warrants		-			125,001			125,001
Cost of common stock and warrants sold		(70,003	)					(73,503	)
Proceeds from convertible notes - stockholder		-			-			155,000
Repayments of convertible notes - stockholder		-			-			(50,000	)

Cash provided by financing activities		5,603,009			3,586,711			17,131,203

Net increase in cash		2,982,875			1,645,638			6,654,026
Cash, beginning of period		3,671,151			2,255,311			-
Cash, end of period	$	6,654,026		$	3,900,949		$	6,654,026

Supplemental cash flow information:
Cash paid for interest	$	-		$	-
Cash paid for income taxes	$	-		$	-

Non-cash investing and financing activities:

Common stock units issued as payment of placement fees	$	110,695		$	-
Common stock issued for acquistion of patent		-			18,000
Derivative liability reclassified to equity upon exercise of warrants		-			86,307

See accompanying notes to unaudited condensed financial statements.

GENSPERA, INC.

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

AND FOR THE PERIOD FROM NOVEMBER 21, 2003

(INCEPTION) TO SEPTEMBER 30, 2011

(Unaudited)

NOTE 1 - SUMMARY OF ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.

Business and Basis of Presentation

GenSpera Inc. (“we”, “us”, “our company”, “our”, “GenSpera” or the “Company”) was formed under the laws of the State of Delaware in 2003. We are a development stage entity, as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915. GenSpera, Inc. is a pharmaceutical company focused on the development of targeted cancer therapeutics for the treatment of cancerous tumors, including breast, prostate, bladder and kidney cancer. Our operations are based in San Antonio, Texas.

To date, we have generated no sales revenues, have incurred significant expenses and have sustained losses. Consequently, our operations are subject to all the risks inherent in the establishment of a new business enterprise. For the period from inception on November 21, 2003 through September 30, 2011, we have accumulated losses of $18,233,571.

Liquidity

As of September 30, 2011, we had working capital (current assets in excess of current liabilities) of $6,043,577. Our cash flow used in operations was $2,620,134 and $1,931,073 for the nine months ended September 30, 2011 and 2010, respectively. At September 30, 2011, we had cash on hand of approximately $6,654,000 and raised approximately $5,673,000 in the first nine months of 2011. Based upon current cash flow projections, management believes the Company will have sufficient capital resources to meet projected cash flow requirements until August 2012.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Although these estimates are based on management's best knowledge of current events and actions the Company may undertake in the future, actual results may differ from those estimates.

Research and Development

Research and development costs include expenses incurred by the Company for research and development of therapeutic agents for the treatment of cancer and are charged to operations as incurred. Our research and development expenses consist primarily of expenditures for toxicology and other studies, manufacturing, clinical trials and compensation and consulting costs.

GenSpera incurred net research and development expenses of $1,057,725 and $238,225 for the three months ended September 30, 2011 and 2010, respectively, and $2,035,599 and $1,329,396 for the nine months ended September 30, 2011 and 2010, respectively, and $9,546,527 from November 21, 2003 (inception) through September 30, 2011.

Loss Per Share

We use ASC 260, “Earnings Per Share” for calculating the basic and diluted income (loss) per share. We compute basic income (loss) per share by dividing net income (loss) and net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding.

Dilutive common stock equivalents consist of shares issuable upon conversion of debt and the exercise of our stock options and warrants. In accordance with ASC 260-45-20, common stock equivalents derived from shares issuable through the exercise of our warrants subject to derivative accounting are not considered in the calculation of the weighted average number of common shares outstanding because the adjustments in computing income available to common stockholders would result in a loss. Accordingly, the diluted EPS would be computed in the same manner as basic earnings per share.

The following is a reconciliation of net income and share amounts used in the computation of loss per share for the three months ended September 30, 2010:

	Three Months
	Ended
	September 30, 2010
Net income used in computing basic net income per share	$	290,949
Impact of assumed assumptions:
Gain on warrant liability marked to fair value		862,395
Net loss used in computing diluted net loss per share	$	(571,446	)

There were 12,113,791 common share equivalents at September 30, 2011 and 8,959,649 at September 30, 2010. For the three and nine months ended September 30, 2011 and 2010, these potential shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would reduce net loss per share.

Fair value of financial instruments

Our short-term financial instruments, including cash, accounts payable and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of long term convertible notes is based on management estimates and reasonably approximates their book value after comparison to obligations with similar interest rates and maturities. The fair value of the Company’s derivative instruments is determined using option pricing models.

Fair value measurements

We follow the guidance established pursuant to ASC 820 which established a framework for measuring fair value and expands disclosure about fair value measurements. ASC 820 defines fair value as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes the following three levels of inputs that may be used:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

Level 3: Unobservable inputs when there is little or no market data available, thereby requiring an entity to develop its own assumptions. The fair value hierarchy gives the lowest priority to Level 3 inputs.

The table below summarizes the fair values of our financial liabilities as of September 30, 2011:

	Fair Value at		Fair Value Measurement Using
	September 30, 2011		Level 1		Level 2		Level 3
Warrant derivative liability	$	1,757,685	$	—	$	—	$	1,757,685

	$	1,757,685	$	—	$	—	$	1,757,685

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities (warrant derivative liability) for the nine months ended September 30, 2011.

	2011
Balance at beginning of year	$	2,314,033
Change in fair value of warrant liability		(556,348	)
Balance at end of period	$	1,757,685

The following is a description of the valuation methodologies used for these items:

Warrant derivative liability — these instruments consist of certain of our warrants with anti-dilution provisions. These instruments were valued using pricing models which incorporate the Company’s stock price, volatility, U.S. risk free rate, dividend rate and estimated life.

Income Taxes

We utilize ASC 740 “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.

Stock-Based Compensation

We account for our stock based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

We use the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

Recent Accounting Pronouncements

Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial statements.

NOTE 2 - CAPITAL STOCK AND STOCKHOLDER’S EQUITY

We are authorized to issue 80,000,000 shares of common stock with a par value of $.0001 per share and 10,000,000 shares of preferred stock with a par value of $.0001 per share.

On January 21, 2011, pursuant to a securities purchase agreement (the “Securities Purchase Agreement”), we sold 2,074,914 units resulting in gross proceeds to the Company of $3,734,840 (“Offering”). The price per unit was $1.80. Each unit consists of: (i) one (1) share of the Company’s common stock, par value $.0001 (“Shares”), and (ii) one half (1/2) Common Stock Purchase Warrant (“Warrant(s)”). Of these units, 339,915 were subscribed at December 31, 2010 with gross proceeds to the Company of $611,847 recorded in the December 31, 2010 financial statements as Common Stock Subscribed.

The Warrants have a term of five years and entitle the holders to purchase the Company’s common shares at a price per share of $3.30. In the event the shares underlying the Warrants are not subject to a registration statement, the warrants may be exercised on a cashless basis after 12 months from the issuance date. The Warrants also contain provisions providing for an adjustment in the underlying number of shares and exercise price in the event of stock splits or dividends and fundamental transactions. The Warrants do not contain any price protection provisions. The Warrants are callable by the Company assuming the following: (i) the Common Stock trades above $5.50 for ten (10) consecutive days; (ii) the daily average minimum volume over such ten (10) days is 15,000 or greater; and (iii) there is an effective registration statement covering the underlying shares. The Securities Purchase Agreement also grants the investors certain piggy-back registration rights.

In connection with the Offering, we incurred placement agent and finder’s fees in the amount of $114,295 in cash and issued warrants to purchase a total of 63,498 shares at an average exercise price per share of $3.26. Of the fees incurred, $110,695 was reinvested in the Offering on the same terms and conditions as the investors, resulting in the issuance of 61,498 units.

On February 16, 2011, pursuant to a securities purchase agreement, we sold an additional 166,691 units resulting in gross proceeds to the Company of $300,044. The units contain the same terms as the January 21, 2011 units described above. In connection with the offering, we incurred placement agent and finder’s fees in the amount of $6,403 in cash and issued warrants to purchase a total of 3,558 shares at an exercise price per share of $2.16.

On April 29, 2011, pursuant to a securities purchase agreement, we sold an additional 1,363,622 units resulting in gross proceeds of $2,249,750. The price per unit was $1.65. Each unit consists of: (i) one (1) share of the common stock, par value $.0001, and (ii) one half (1/2) common stock purchase warrant. The warrants have a term of five years and entitle the holders to purchase the common shares at a price per share of $3.15. In the event the shares underlying the warrants are not subject to a registration statement, the warrants may be exercised on a cashless basis after 12 months from the issuance date. The warrants also contain provisions providing for an adjustment in the underlying number of shares and exercise price in the event of stock splits or dividends and fundamental transactions. The warrants do not contain any price protection provisions. The warrants are callable assuming the following: (i) our common stock trades above $6.50 for ten (10) consecutive days; (ii) the daily average minimum volume over such ten (10) days is 15,000 or greater; and (iii) there is an effective registration statement covering the underlying shares. We also granted the investors certain piggy-back registration rights. In connection with the offering, we incurred finder’s fees in the amount of $60,000 in cash and issued warrants to purchase a total of 36,364 shares at an exercise price per share of $3.15. The warrants have the same terms and conditions as the investor warrants.

As a result of the offerings, the reinvestment of fees, and the issuance of placement agent and finder’s warrants, we issued a total of 3,666,725 shares and 1,936,785 common stock purchase warrants.

During March, 2011, we issued 33,334 units as payment of accrued consulting fees in the amount of $60,000. These fees had been accrued at December 31, 2010.

During March, 2011, we issued 82,500 shares of common stock and 144,000 warrants as payment of consulting fees. The warrants have an exercise price of $3.30 per share and have the same terms as the warrants issued with the offerings described above. The common shares have been valued at $144,375 based on the market price of our common stock. The warrants have been valued at $149,249, determined using the Black-Scholes method based on the following weighted average assumptions: (1) risk free interest rate of 2.25%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 89%; and (4) an expected life of the warrants of 5 years.

On March 1, 2011, we granted 39,000 common stock options to a director. The options have an exercise price of $1.90 per share. The options will vest quarterly over one year. The options lapse if unexercised after five years. The options have a grant date fair value of $20,416, determined using the Black-Scholes method based on the following weighted average assumptions: (1) risk free interest rate of 0.225%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 89%; and (4) an expected life of the options of 0.625 years. During the three and nine months ended September 30, 2011 we have recorded an expense of $5,104 and $11,909 related to the fair value of the options that vested or are expected to vest.

During May 2011, we issued 52,500 shares of common stock and 91,000 warrants as payment of consulting fees. The warrants have an exercise price of $3.15 per share and have the same terms as the warrants issued with the offerings described above. The common shares have been valued at $100,800 based on the market price of our common stock. The warrants have been valued at $104,277, determined using the Black-Scholes method based on the following weighted average assumptions: (1) risk free interest rate of 1.50%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 87%; and (4) an expected life of the warrants of 5 years.

During May 2011 we issued 4,211 shares of common stock, valued at $8,000, as payment for services.

On May 18, 2011, we granted a total of 80,000 common stock options to the four members of our Advisory Board. The options have an exercise price of $1.85 per share. The options will vest 20,000 upon grant and the balance quarterly over the remainder of 2011. The options lapse if unexercised after five years. During the three and nine months ended September 30, 2011 we have recorded an expense of $22,567 and $73,533, respectively, related to the fair value of the options that vested, determined using the Black-Scholes method based on the following weighted average assumptions: (1) risk free interest rate of 1.3%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 84%; and (4) an expected life of the options of 4.86 years.

During January 2011, we granted a total of 25,000 common stock options for legal and consulting services. The options have an exercise price of $1.90 per share. Of these options, 5,000 vested upon grant and 20,000 vests quarterly during 2011. The options and warrants lapse if unexercised after five years. We have recorded an expense of $5,424 and $24,352 during the three and nine months ended September 30, 2011, respectively, related to the fair value of the options and warrants that vested or are expected to vest, determined using the Black-Scholes method based on the following weighted average assumptions: (1) risk free interest rate of 1.75%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 87%; and (4) an expected life of the warrants of 4.7 years.

On July 1, 2011, our compensation committee approved the 2010 Long Term Incentive Grants for our chief executive officer and chief operating officer. The 2010 Long Term Incentive Grants aggregate $510,000 and were paid via the issuance of common stock options in lieu of cash. For purposes of calculating the number of options to be issued as payment of the discretionary bonuses, determined using the Black-Scholes method based on the following weighted average assumptions: (1) risk free interest rate of 0.375%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 87%; and (4) an expected life of the options of 2.5 years, the grant date is July 1, 2011. The aggregate number of options granted is 559,370, with a weighted average exercise price of $1.93.

During August 2011, we granted 10,000 common stock options for consulting services. The options have an exercise price of $1.82 per share. The options vested upon grant. The options lapse if unexercised after five years. We have recorded an expense of $11,485 during the three months ended September 30, 2011 related to the fair value of the options, determined using the Black-Scholes method based on the following assumptions: (1) risk free interest rate of 1.5%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 78%; and (4) an expected life of the warrants of 5 years.

During August 2011, we granted 8,000 common stock options for consulting services. The options have an exercise price of $1.65 per share. The options vested upon grant. The options lapse if unexercised after five years. We have recorded an expense of $8,268 during the three months ended September 30, 2011 related to the fair value of the options, determined using the Black-Scholes method based on the following assumptions: (1) risk free interest rate of 1%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 78%; and (4) an expected life of the warrants of 5 years.

On August 13, 2011, we granted 38,000 common stock options to a director. The options have an exercise price of $1.86 per share. The options will vest quarterly over one year. The options lapse if unexercised after five years. The options have a grant date fair value of $17,133, determined using the Black-Scholes method based on the following assumptions: (1) risk free interest rate of 0.1%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 78%; and (4) an expected life of the options of 0.625 years. During the three months ended September 30, 2011 we have recorded an expense of $2,142 related to the fair value of the options that vested or are expected to vest.

During September 2011 we issued 13,684 shares of common stock, valued at $26,000, as payment for services.

During the three and nine months ended September 30, 2011 we have recorded an expense of $58,072 and $93,841, respectively, related to the fair value of the options granted to our chief executive officer and chief operating officer in prior years that vested or are expected to vest.

During the three and nine months ended September 30, 2011 we have recorded an expense of $4,675 and $23,301 related to the fair value of the options granted to directors and consultants in prior years that vested or are expected to vest.

NOTE 3 – DERIVATIVE LIABILITY

At September 30, 2011, we recalculated the fair value of our warrants subject to derivative accounting and have determined that their fair value at September 30, 2011 is $1,757,685. The value of the warrants was determined using the Black-Scholes method based on the following assumptions: (1) risk free interest rate of 0.125%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 78%; and (4) an expected life of the warrants of 2 years. We have recorded income of $112,389 and $556,348 during the three and nine months ended September 30, 2011, respectively, related to the change in fair value during those periods.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:

Overview — Discussion of our business and plan of operations, overall analysis of financial and other highlights affecting the company in order to provide context for the remainder of MD&A.

Significant Accounting Policies — Accounting policies that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.

Results of Operations — Analysis of our financial results comparing the three and nine month periods ended September 30, 2011 to the comparable periods of 2010.

Liquidity and Capital Resources — An analysis of changes in our balance sheets and cash flows, and discussion of our financial condition and potential sources of liquidity.

The various sections of this MD&A contain a number of forward-looking statements. Words such as “expects,” “goals,” “plans,” “believes,” “continues,” “may,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated operational results and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this filing and particularly in the “Overview” section (see also “Risk Factors” in Part II, Item 1A of this Form 10-Q). Our actual results may differ materially.

Management's Plan of Operation

We are pursuing a business plan related to the development of targeted cancer therapeutics for the treatment of cancerous tumors, including breast, prostate, bladder, and kidney cancer. We are considered to be in the development stage as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915 “Development Stage Entities”.

Business Strategy

Our business strategy is to develop a series of therapeutics based on our target-activated pro-drug technology platform and bring them through Phase I/II clinical trials. At that point, we plan to license the rights to further development of the drug candidates to major pharmaceutical companies. We believe that major pharmaceutical companies see significant value in drug candidates that have passed one or more phases of clinical trials, and these organizations have the resources and expertise to finalize drug development and market the drugs.

Plan of Operation

We have identified 4 prodrug candidates: G-202, G-114, G-115 and G-301 (formerly designated as Ac-GKAFRR-L12ADT). With regard to our technology, our prodrug is an inactive form of a tumor-killing agent that is converted into an active form only within the tumor, thus minimizing side effects and maximizing anti-tumor efficacy. All of our drugs are based upon a unique cytotoxin called thapsigargin, which is isolated from Thapsia garganica, a plant primarily found in the Mediterranean Region.

Management believes that the best way to increase shareholder value is to remain focused on the efficient clinical development of G-202, already in Phase I clinical trials, as our highest priority. In addition to the development of G-202, we are also engaged in the preclinical development of G-115. It is anticipated that the development of the remaining candidates will not commence until we have sufficient resources to devote to their development.

Clinical Development of G-202

On June 23, 2009, we submitted our first Investigational New Drug application (“IND”) for G-202 to the United States Food and Drug Administration (“FDA”). On September 4, 2009, we received approval from the FDA for our IND in order to commence clinical trials. Over the next twelve months we plan to focus on clinical trials of G-202 in cancer patients.

As of September 30, 2011, twenty-two patients have been treated with G-202 in the ongoing Phase I clinical trial. We anticipate that the Phase I clinical trial of G-202 will continue through the first quarter of 2012. The purpose of the Phase I study of G-202 is to evaluate safety, understand the pharmacokinetics (the process by which a compound is absorbed, distributed, metabolized, and eliminated by the body) of the drug candidate in humans, and to determine an appropriate dosing regimen for the subsequent clinical studies. This is accomplished by exposing successive cohorts of three patients to escalating doses of the drug until a Maximally Tolerated Dose (“MTD”) is identified. We are currently conducting the Phase I study in refractory cancer patients (those who have relapsed after former treatments) with any type of solid tumors. This strategy is intended to facilitate enrollment and perhaps give us a glimpse of safety across a wider variety of patients. We expect to enroll up to 30 patients in this Phase I study being conducted at: (i) Sidney Kimmel Comprehensive Cancer Center at Johns Hopkins (Michael Carducci, MD as Principal Investigator); (ii) University of Wisconsin Carbone Cancer Center (George Wilding, MD as Principal Investigator); and (iii) Cancer Therapy and Research Center at the University of Texas Health Science Center in San Antonio (Devalingam Mahalingam, MD as Principal Investigator). The Phase I clinical protocol has been modified to accommodate enrollment of up to 18 additional patients at the Maximum Tolerated Dose in a Phase IB component of the study to evaluate the drug’s safety and tolerability and possible efficacy in a broader patient population consisting primarily of prostate cancer patients who have previously failed treatment with chemotherapeutic agents. It is expected that the Phase IB component of the study may give us an earlier glimpse of true anti-tumor activity as well as provide information on how to best design the subsequent Phase II study in the later stage prostate cancer patient population. It is anticipated that the ongoing Phase I clinical trial will be completed in the first quarter of 2012 whereas the Phase IB component of the trial will continue through the fourth quarter of 2012. Although initial data from our Phase I clinical trial of G-202 appears promising, the outcome of the trial is uncertain and the trials may ultimately be unsuccessful.

Upon completion of the dose escalation component of the Phase I clinical trial, we expect to conduct several Phase II clinical trials to determine the therapeutic efficacy of G-202 in cancer patients. The Phase II studies can be started while the Phase IB trial in late stage post-chemotherapy prostate cancer patients is ongoing. Although we believe that G-202 will be useful across a wide variety of cancer types, it is usually most efficient and medically prudent to evaluate a drug candidate in separate Phase II studies, each enrolling patients with a specific tumor type per individual study. We are developing a Phase II clinical protocol for the treatment of castrate-resistant chemotherapy-naive prostate cancer patients to be conducted in the US with additional sites in the UK. This trial will have an advantage of demonstrating approval by European regulatory agencies for testing of G-202 in patients and is expected to launch in Q2 2012. We are also evaluating Phase II trial designs in other tumor types and expect to conduct up to four separate concurrent Phase II studies in different tumor types.

For the manufacture of G-202, we have secured a stable supply of source material (Thapsia garganica seeds) from which thapsigargin is isolated, have a sole source agreement with a European supplier, Thapsibiza, SL, and have obtained the proper import permits from the United States Department of Agriculture for these materials. We have also identified a clinically and commercially viable formulation for G-202 and have manufactured sufficient G-202 to supply our Phase I and Phase II clinical needs.

Development of G-115

We began development of G-115 in the fourth quarter of 2010 with an anticipated filing of an IND in the third quarter of 2011. We recently deferred full development of G-115 to allow us to invest more aggressively in multiple G-202 Phase II clinical trials. We are however continuing limited preclinical development of G-115.

Anticipated Expenditures

We have budgeted $7,670,000 in cash expenditures for the twelve month period following September 30, 2011, including (1) $1,330,000 to cover our projected general and administrative expense during this period; and (2) $6,340,000 for research and development activities. Based on our cash at September 30, 2011 we believe we have sufficient cash on hand to fund our operations until August 2012, after which time we will need to undertake additional financings. These assumptions are based upon operations focused on completion of the G-202 Phase I clinical program, the initiation of several G-202 Phase II clinical trials and limited pre-clinical development of G-115.

We anticipate that we will license G-202 to a third party during or after Phase II clinical studies. In the event we are not able or decide not to license G-202, we will proceed with Phase III clinical trials. We estimate that Phase III clinical trials will cost approximately $25 million and will be completed in the first half of 2015. If all goes as planned, we would expect marketing approval in the second half of 2016 with an additional $3 million spent to get the New Drug Application (“NDA”) approved. We do not expect material net cash inflows from our own marketing efforts before the first half of 2017. The Phase III estimated costs are subject to major revision because we have not yet obtained any efficacy data for our drug in patients and therefore cannot accurately predict what may be the optimal Phase III patient population. The estimates will become more refined as we obtain more clinical data.

The amounts and timing of our actual expenditures and possible financings may vary significantly from our expectations depending upon numerous factors, including our results of operations and clinical trials, financial condition and capital requirements. Accordingly, we will retain the discretion to allocate the available funds among the identified uses described above, and we reserve the right to change the allocation of available funds among the uses described above.

Significant Accounting Policies

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Note 1 of the Notes to Financial Statements describes significant accounting policies used in the preparation of the financial statements. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below. We do not believe that there have been significant changes to our accounting policies during the three and nine months ended September 30, 2011, as compared to those policies disclosed in the comparable period of 2010 and December 31, 2010 financial statements, except as disclosed in the notes to those financial statements.

A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: 1) we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and 2) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with accounting principles generally accepted in the United States, and present a meaningful presentation of our financial condition and results of operations. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our financial statements:

Use of Estimates— These financial statements have been prepared in accordance with accounting principles generally accepted in the United States and, accordingly, require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Specifically, our management has estimated the expected economic life and value of our licensed technology, our net operating loss for tax purposes and our stock, option and warrant expenses related to compensation to employees and directors and consultants. Actual results could differ from those estimates.

Cash and Equivalents — Cash equivalents are comprised of certain highly liquid investments with maturity of three months or less when purchased. We maintain our cash in bank deposit accounts, which at times, may exceed federally insured limits. We have not experienced any losses in such accounts.

Intangible and Long-Lived Assets — We follow Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360, "Property, Plant and Equipment," which established a "primary asset" approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. We have not recognized any impairment losses.

Research and Development Costs — Research and development costs include expenses incurred by the Company for research and development of therapeutic agents for the treatment of cancer and are charged to operations as incurred.

Stock Based Compensation — We account for our share-based compensation under the provisions of ASC Topic 718 “Compensation – Stock Compensation.”

Fair Value of Financial Instruments — Our short-term financial instruments, including cash, accounts payable and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of long term convertible notes is based on management estimates and reasonably approximates their book value after comparison to obligations with similar interest rates and maturities. The fair value of the Company’s derivative instruments is determined using option pricing models.

Recent Accounting Pronouncements

For a discussion of new accounting pronouncements affecting the Company, refer to Note 1 of Notes to Financial Statements.

Result of Operations

Our results of operations have varied significantly from year to year and quarter to quarter and may vary significantly in the future.

Revenue

We did not have revenues for the three or nine months ended September 30, 2011 and 2010. We do not anticipate any revenues during 2011.

Operating Expenses

Operating expense totaled $1,858,433 and $579,204 for the three months ended September 30, 2011 and 2010, respectively. The increase in operating expenses results from increases in both research and development and general and administrative expenses.

Operating expense totaled $4,362,246 and $2,843,999 for the nine months ended September 30, 2011 and 2010, respectively. The increase in operating expenses increases in both research and development and general and administrative expenses.

	Three Months				Nine Months
	Ended September 30				Ended September 30
	2011		2010		2011			2010
Operating expenses:
General and administrative expenses	$	800,708	$	340,979	$	2,326,647		$	1,514,603
Research and development		1,057,725		238,225		2,280,078			1,329,396
Research and development grant received		-		-		(244,479	)		-
Total operating expenses	$	1,858,433	$	579,204	$	4,362,246		$	2,843,999

General and Administrative Expenses

General and Administrative Expenses (“G&A”) expenses totaled $800,708 and $340,979 for the three months ended September 30, 2011 and 2010, respectively. The increase of $459,729 or 135% for the three months ended September 30, 2011 compared to the same period in 2010 was primarily attributable to a number of factors, including increases in compensation of approximately $263,000 (resulting mainly from an increase in the current period bonus compensation compared to 2010) and consulting and other fees of approximately $216,000.

G&A expenses totaled $2,326,647 and $1,514,603 for the nine months ended September 30, 2011 and 2010, respectively. The increase of $812,044 or 54% for the nine months ended September 30, 2011 compared to the same period in 2010 was primarily attributable to a number of factors, including increases in compensation expense of approximately $414,000 (resulting mainly from an increase in the current period bonus compensation compared to 2010) and consulting and other fees of approximately $298,000.

Research and Development Expenses

Research and development expenses totaled $1,057,725 and $238,225 for the three months ended September 30, 2011 and 2010, respectively. The increase of $819,500 or 344% for the three months ended September 30, 2011 compared to the same period in 2010 was attributable to an increase in compensation expense of approximately $241,000 (resulting mainly from an increase in the current period bonus compensation compared to 2010) and an increase in development expense of approximately $579,000.

Research and development expenses totaled $2,280,078 and 1,329,396 for the nine months ended September 30, 2011 and 2010, respectively. The increase of $950,682 or 72% for the nine months ended September 30, 2011 compared to the same period in 2010 was attributable to an increase in compensation expense of approximately $347,000 (resulting mainly from an increase in the current period bonus compensation compared to 2010) and an increase in development expense of approximately $604,000.

Our research and development expenses consist primarily of expenditures for toxicology and other studies, manufacturing, clinical trials and compensation and consulting costs. Under the planning and direction of key personnel, we expect to outsource all of our Good Laboratory Practices (“GLP”) preclinical development activities (e.g., toxicology) and Good Manufacturing Practices (“GMP”) manufacturing and clinical development activities to contract research organizations (“CROs”) and contract manufacturing organizations (“CMOs”). Manufacturing will be outsourced to organizations with approved facilities and manufacturing practices.

Research and Development Grant

During 2010 we were awarded two Federal grants, totaling approximately $489,000, through the Patient Protection and Affordable Care Act, which supports investments in qualifying therapeutic discovery projects. Of this amount, we received $244,479 during the fourth quarter of 2010 and the balance of $244,479 during the first quarter of 2011. We will not receive any additional funding under these grants.

Other Income (Expenses)

Other income (expenses) totaled $119,194 and $870,153 of income for the three months ended September 30, 2011 and 2010, respectively.

Other income (expenses) totaled $578,043 and $268,800 of income for the nine months ended September 30, 2011 and 2010, respectively.

	Three Months				Nine Months
	Ended September 30				Ended September 30
	2011		2010		2011		2010
Other expenses:
Change in fair value of derivative liability	$	112,389	$	862,395	$	556,348	$	248,783
Interest income, net		6,805		7,758		21,695		20,017
Total other income (expenses)	$	119,194	$	870,153	$	578,043	$	268,800

Change in fair value of derivative liability

Change in fair value of derivative liability totaled $112,389 and $862,395 of income during the three months ended September 30, 2011 and 2010 respectively.

Change in fair value of derivative liability totaled $556,348 and $248,783 of income during the nine months ended September 30, 2011 and 2010 respectively.

The change in the fair value of our warrant derivative liability resulted primarily from the changes in our stock price and the volatility of our common stock during the reported periods. Refer to Note 3 to the financial statements for further discussion on our warrant liabilities.

At September 30, 2011, we recalculated the fair value of our warrants subject to derivative accounting and have determined that their fair value at September 30, 2011 is $1,757,685. The value of the warrants was determined using the Black-Scholes method based on the following assumptions: (1) risk free interest rate of 0.125%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 78%; and (4) an expected life of the warrants of 2 years. We have recorded income of $112,389 and 556,348 during the three and nine months ended September 30, 2011, respectively, related to the change in fair value during those periods.

At September 30, 2010, we recalculated the fair value of our remaining warrants subject to derivative accounting and have determined that their fair value at September 30, 2010 is $1,955,596. The value of the warrants was determined using the Black-Scholes method based on the following assumptions: (1) risk free interest rate of 0.375%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 96%; and (4) an expected life of the warrants of 2 years. We have recorded income of $862,395 and $248,783 during the three and nine months ended September 30, 2010, respectively, related to the change in fair value during that period.

During the nine months ended September 30, 2010 50,001 of our warrants subject to derivative accounting were exercised into common stock. As a result of the exercise of the warrants, we have reclassified a total of $86,307 of our warrant derivative liability to paid in capital.

Interest income

We had net interest income of $6,805 and $7,758 for the three months ended September 30, 2011 and 2010, respectively. We had net interest income of $21,695 and $20,017 for the nine months ended September 30, 2011 and 2010, respectively. Net interest income is attributable to interest earned on deposits.

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through the private placement of our securities. Our current monthly cash burn rate is approximately $400,000. This will increase to $650,000 per month in the 2nd quarter 2012 primarily due to initiation of Phase II clinical trials with G-202. We anticipate that our available cash and expected income will be sufficient to finance most of our current activities for at least the next 11 months from September 30, 2011.

	Nine Months
	Ended September 30
	2011		2010
Cash & Cash Equivalents	$	6,654,026	$	3,900,949
Net cash used in operating activities	$	2,620,134	$	1,931,073
Net cash provided by financing activities	$	5,603,009	$	3,586,711

Cash and cash equivalents totaled $6,654,026 and $3,900,949 as of September 30, 2011 and 2010, respectively. The increase of $2,753,077 at September 30, 2011 compared to the same period in 2010 was attributable to capital raised through equity sales during 2011.

Net Cash Used in Operating Activities

In our operating activities we used cash of $2,620,134 and $1,931,073 for the nine months ended September 30, 2011 and 2010, respectively. The increase of $689,061 in cash used for operations during the nine months ended September 30, 2011, compared to the same period in 2010, was attributable to an increase in loss of $1,131,437 (after adjusting for non-cash items), partially offset by an increase in accounts payable of $442,376.

Net Cash Provided by Financing Activities

Cash provided by financing activities was $5,603,009 and $3,586,711 for the nine months ended September 30, 2011 and 2010, respectively.

Listed below are key financing transactions we entered into during 2010 and year to date through September 30, 2011.

In January and March of 2010, we sold 553,407 units resulting in gross proceeds of approximately $880,000.

In May of 2010, we sold 1,347,500 units resulting in gross proceeds of approximately $2,695,000.

In January and February of 2011, we sold 2,303,100 units resulting in gross proceeds of $4,146,000 (of which approximately $612,000 had been received as of December 31, 2010).

In April of 2011, we sold 1,363,622 units resulting in gross proceeds of $2,249,750.

We have incurred significant operating losses and negative cash flows since inception. We have not achieved profitability and may not be able to realize sufficient revenue to achieve or sustain profitability in the future. We do not expect to be profitable in the next several years, but rather expect to incur additional operating losses. We have limited liquidity and capital resources and must obtain significant additional capital resources in order to sustain our product development efforts, for acquisition of technologies and intellectual property rights, for preclinical and clinical testing of our anticipated products, pursuit of regulatory approvals, acquisition of capital equipment, laboratory and office facilities, establishment of production capabilities, for general and administrative expenses and other working capital requirements. We rely on cash balances and the proceeds from the offering of our securities, the exercise of outstanding warrants and grants to fund our operations.

The source, timing and availability of any future financing will depend principally upon market conditions, interest rates and, more specifically, on our progress in our exploratory, preclinical and future clinical development programs. Funding may not be available when needed — at all, or on terms acceptable to us. Lack of necessary funds may require us, among other things, to delay, scale back or eliminate some or all of our research and product development programs, planned clinical trials, and/or our capital expenditures or to license our potential products or technologies to third parties.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are not required to provide the information required by this item as we are considered a smaller reporting company, as defined by Rule 229.10(f)(1).

ITEM 4.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

The Company’s management, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial (and principal accounting) Officer, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of September 30, 2011. Based upon that evaluation and the identification of the material weakness in the Company’s internal control over financial reporting as described below, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were ineffective as of the end of the period covered by this report.

The Company has limited resources and a limited number of employees. As a result, management concluded that our internal control over financial reporting is not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. To mitigate the current limited resources and limited number of employees, we rely heavily on direct management oversight of transactions, along with the use of legal and accounting professionals. As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

As of the date of this Quarterly Report, there are no material pending legal or governmental proceedings relating to our company or properties to which we are a party, and to our knowledge there are no material proceedings to which any of our directors, executive officers or affiliates are a party adverse to us or which have a material interest adverse to us.

ITEM 1A.

RISK FACTORS

We have described below a number of uncertainties and risks which, in addition to uncertainties and risks presented elsewhere in this Report, may adversely affect our business, operating results and financial condition. The uncertainties and risks enumerated below as well as those presented elsewhere in this Report should be considered carefully in evaluating us and our business and the value of our securities. The following important factors, among others, could cause our actual business, financial condition and future results to differ materially from those contained in forward-looking statements made in this Report or presented elsewhere by management from time to time.

General risks relating to our business and business model.

We are not profitable and may never be profitable.

Our net loss for the nine months ended September 30, 2011 is $3,784,203. Our net losses for the two most recent fiscal years ended December 31, 2010 and 2009 have been $4,257,839 and $5,132,827, respectively. Since inception, we have generated no revenue. We intend to develop our drug compounds through Phase I/II clinical trials, and then license our drug compounds to third parties after Phase I/II clinical trials. It is expected that such third parties would then continue to develop, market, sell, and distribute the resulting products. Even if we succeed in developing one or more product candidates, we expect to incur substantial losses for the foreseeable future and may never become profitable.

As a result of our limited operating history, you cannot rely upon our historical performance to make an investment decision.

Our limited operating history means that there is a high degree of uncertainty in our ability to: (i) develop and commercialize our technologies and proposed products; (ii) obtain regulatory approval to commence marketing our products; (iii) achieve market acceptance of our proposed product, if developed; (iv) respond to competition; or (v) operate the business, as management has not previously undertaken such actions as a company. No assurances can be given as to exactly when, if at all, we will be able to fully develop, license, commercialize, market, sell and derive any revenues from our proposed products in development.

We currently have no product revenues and will need to raise additional capital to operate our business.

Since inception in 2003 and through September 30, 2011, we have raised approximately $17,026,000 in capital. During this same period, we have recorded accumulated losses totaling $18,233,571. As of September 30, 2011 and December 31, 2010, we had working capital of $6,043,577 and $3,414,465, respectively, and stockholders’ equity of $4,451,869 and $1,285,030 respectively. To date, we have generated no product revenues. Until, and unless, we receive approval from the FDA and other regulatory authorities for our product candidates, we cannot sell our drugs and will not generate any revenues from the sale of our products. Currently, our only product candidates are G-202 and G-115 Neither of these products is approved for sale by the FDA. Therefore, for the foreseeable future, we will have to fund all of our operations and capital expenditures from cash on hand and potential future offerings of our securities. As of September 30, 2011, we had cash of approximately $6,654,000. Our current monthly cash burn rate is approximately $400,000. This will increase to $650,000 per month in the 2nd quarter 2012 primarily due to initiation of Phase II clinical trials with G-202. Accordingly, based on our cash at September 30, 2011, we believe that we have sufficient cash on hand to fund our operations until August, 2012. However, changes may occur that would consume our available capital before that time, including changes in and progress of our development activities, acquisitions of additional product candidates and changes in regulation. Accordingly, we will need additional capital to fund our continuing operations. Since we do not generate any revenue, the most likely sources of such additional capital include the sale of our securities or funds from a potential strategic licensing or collaboration transaction involving the rights to one or more of our product candidates or from grants. To the extent that we raise additional capital by issuing equity securities, our stockholders will likely experience dilution, which may be significant. If we raise additional funds through collaborations and licensing arrangements, it may be necessary to relinquish some rights to our technologies, product candidates or products, or grant licenses on terms that are not favorable to us. If we raise additional funds by incurring debt, we could incur significant interest expense and become subject to covenants in the related transaction documentation that could affect the manner in which we conduct our business.

We have no committed sources of additional capital and our access to capital funding is always uncertain. Accordingly, despite our ability to secure adequate capital in the past, there is no assurance that additional equity or debt financing will be available to us when needed, on acceptable terms or even at all. In the event that we are not able to secure financing, we may have to delay, reduce the scope of, or eliminate one or more of our research, development or commercialization programs, product launches, or marketing efforts. Any such change may materially harm our business, financial condition, and operations.

Raising needed capital may be difficult as a result of our limited operating history.

When making investment decisions, investors typically look at a company’s historical performance in evaluating the risks and operations of the business and the business’s future prospects. Our limited operating history makes such evaluation and an estimation of our future performance substantially more difficult. As a result, investors may be unwilling to invest in us or such investment may be on terms or conditions which are not acceptable. If we are unable to secure such additional finance, we may need to cease operations or materially scale back our business plan and/or operations.

We may not be able to commercially develop our technologies.

We have concentrated our research and development on our pro-drug technologies. Our ability to generate revenue and operate profitably will depend on us being able to develop these technologies for human applications. Our technologies are primarily directed toward the development of cancer therapeutic agents. We cannot guarantee that the results obtained in the pre-clinical and clinical evaluation of our therapeutic agents will be sufficient to warrant approval by the FDA. Even if our therapeutic agents are approved for use by the FDA, there is no guarantee that they will exhibit an enhanced efficacy relative to competing therapeutic modalities such that they will be adopted by the medical community. Without significant adoption by the medical community, our agents will have limited commercial potential which could harm our ability to generate revenues, operate profitably or remain a viable business.

Inability to complete pre-clinical and clinical testing and trials will impair our viability.

During the first quarter of 2010, we commenced our first clinical trials of G-202 at the University of Wisconsin Carbone Cancer Center in Madison Wisconsin and at the Sydney Kimmel Comprehensive Cancer Center at Johns Hopkins University. During the first quarter of 2011, we expanded the study by opening a third Phase I clinical trial site at the Cancer Therapy and Research Center at the University of Texas Health Science Center at San Antonio. Although our clinical trials are underway, the outcome of the trials is uncertain and, if we are unable to satisfactorily complete such trials, or if such trials yield unsatisfactory results, we will be unable to commercialize our proposed products. No assurances can be given that our clinical trials will be successful. The failure of such trials could delay or prevent regulatory approval and could harm our ability to generate revenues, operate profitably or remain a viable business.

Future financing will result in dilution to existing stockholders.

We will require additional financing in the future. We are authorized to issue 80 million shares of common stock and 10 million shares of preferred stock. Such securities may be issued without the approval or consent of our stockholders. The issuance of our equity securities in connection with a future financing will result in a decrease of our current stockholders’ percentage ownership.

We depend on Craig A. Dionne, PhD, our Chief Executive Officer, and Russell Richerson, PhD, our Chief Operating Officer, for our continued operations.

We only have 2 full time employees. The loss of Craig A. Dionne, PhD, our Chief Executive Officer, or Russell Richerson, PhD, our Chief Operating Officer, would be detrimental to us. Although we have entered into employment agreements with Messrs. Dionne and Richerson, there can be no assurance that these individuals will continue to provide services to us. A voluntary or involuntary termination of employment by Messrs. Dionne or Richerson could have a materially adverse effect on our business.

We may be required to make significant payments to members of our management in the event their employment with us is terminated or if we experience a change of control.

We are a party to employment agreements with each of Craig Dionne, our Chief Executive Officer, and Russell Richerson, our Chief Operating Officer. In the event we terminate the employment of either of these executives, we experience a change in control, or in certain cases, if such executive terminates his employment with us, such executive will be entitled to receive certain severance and related payments. Additionally, in such instance, certain securities held by Messrs. Dionne and Richerson will become immediately vested and exercisable. Upon the occurrence of any such event, our obligation to make such payments could significantly impact our working capital and accordingly, our ability to execute our business plan which could have a materially adverse effect to our business. Also, these provisions may discourage potential takeover attempts.

We will require additional personnel to execute our business plan.

Our anticipated growth and expansion into areas and activities requiring additional expertise, such as clinical testing, regulatory compliance, manufacturing and marketing, may require the addition of new personnel and the development of additional expertise by existing management. There is intense competition for qualified personnel in such areas. There can be no assurances that we will be able to continue to attract and retain the qualified personnel necessary for the development of our business.

Our competitors have significantly greater experience and financial resources.

We compete against numerous companies, many of which have substantially greater financial and other resources than us. Several such competitors have research programs and/or efforts to treat the same diseases we target. Companies such as Merck, Ipsen, Johnson and Johnson, and Sanofi-Aventis, as well as others, have substantially greater resources and experience than we do and are situated to compete with us effectively. As a result, our competitors may bring competing products to market that would result in a decrease in demand for our product, if developed, which could have a materially adverse effect on the viability of the company.

We are dependent upon third-parties to develop our product candidates, and such parties are, to some extent, outside of our control.

We depend upon independent investigators and collaborators, such as universities and medical institutions, to conduct our pre-clinical and clinical trials under agreements with us. These individuals and/or entities are not our employees and we cannot control the amount or timing of resources that they devote to our programs. These investigators may not assign as great a priority to our programs or pursue them as diligently as we would if we were undertaking such programs ourselves. If outside collaborators fail to devote sufficient time and resources to our drug-development programs, or if their performance is substandard, the approval of our FDA applications, if any, and our introduction of new drugs, if any, will be delayed. These collaborators may also have relationships with other commercial entities, some of whom may compete with us.

We intend to rely exclusively upon third-party FDA-approved manufacturers and suppliers for our products.

We currently have no internal manufacturing capability, and will rely exclusively on FDA-approved licensees, strategic partners or third party contract manufacturers or suppliers. Should we be forced to manufacture our products, we cannot give you any assurance that we will be able to develop internal manufacturing capabilities or procure third party suppliers. In the event we seek third party suppliers, they may require us to purchase a minimum amount of materials or could require other unfavorable terms. Any such event would materially impact our prospects and could delay the development of our products. Moreover, we cannot give you any assurance that any contract manufacturers or suppliers that we select will be able to supply our products in a timely or cost effective manner or in accordance with applicable regulatory requirements or our specifications.

Our business is dependent upon securing sufficient quantities of a natural product that currently grows in very specific locations outside of the United States.

The therapeutic component of our products, including our lead compound G-202, is referred to as 12ADT. 12ADT functions by dramatically raising the levels of calcium inside cells, which leads to cell death. 12ADT is derived from a material called thapsigargin. Thapsigargin is derived from the seeds of a plant referred to as Thapsia garganica which grows along the coastal regions of the Mediterranean Sea. We currently secure the seeds from Thapsibiza, SL, a third-party supplier. There can be no assurances that the countries from which we can secure Thapsia garganica will continue to allow Thapsibiza, SL to collect such seeds and/or export the seeds derived from Thapsia garganica to the United States. In the event we are no longer able to import these seeds, we will not be able to produce our proposed drug and our business will be adversely affected.

We may be required to secure land for cultivation and harvesting of Thapsia garganica.

We believe that we can satisfy our needs for clinical development of G-202, through completion of Phase III clinical studies, from Thapsia garganica that grows naturally in the wild. In the event G-202 is approved for commercial marketing, our current supply of Thapsia garganica may not be sufficient for the anticipated demand. We estimate that in order to secure sufficient quantities of Thapsia garganica for the commercialization of a product comprising G-202, we will need to secure approximately 1000 acres of land to cultivate and grow Thapsia garganica. We anticipate the cost to lease such land would be $400,000 per year but have not yet fully assessed what other costs would be associated with a full-scale farming operation. There can be no assurances that we can secure such acreage, or that even if we are able to do so, that we could adequately grow sufficient quantities of Thapsia garganica to satisfy any commercial objectives that involve G-202. Our inability to secure adequate seeds will result in us not being able to develop and manufacture our proposed drug and will adversely impact our business.

Thapsia garganica and Thapsigargin can cause severe skin irritation and is highly toxic.

The plant Thapsia garganica can cause severe skin irritation when contact is made between the plant and the skin. In 1978, thapsigargin was determined to be the skin-irritating component of the plant Thapsia garganica. The therapeutic component of our products, including our lead product G-202, is derived from thapsigargin. We obtain thapsigargin from the above-ground seeds of Thapsia garganica. These seeds are harvested by hand and those conducting the harvesting must wear protective clothing and gloves to avoid skin contact. Although we obtain the seeds from a third-party contractor located in Spain, and although the contractor has contractually waived any and all liability associated with collecting the seeds, it is possible that the contractor or those employed by the contractor may suffer medical issues related to the harvesting and subsequently seek compensation from us via, for example, litigation. No assurances can be given, despite our contractual relationship with the third-party contractor, that we will not be the subject of litigation related to the harvesting of Thapsia garganica.

The synthesis of 12ADT must be conducted in special facilities.

There are a limited number of manufacturing facilities qualified to handle and manufacture therapeutic toxic agents and compounds. This limits the potential number of possible manufacturing sites for our therapeutic compounds derived from Thapsia garganica. No assurances can be provided that these facilities will be available for the manufacture of our therapeutic compounds under our time schedules or within the parameters of our manufacturing budget. In the event facilities are not available for manufacturing our therapeutic compounds, our business and future prospects will be adversely affected.

Our current manufacturing process requires acetonitrile.

The current manufacturing process for our compounds requires the common solvent acetonitrile. From late 2008 through 2009 there was a worldwide shortage of acetonitrile for a variety of reasons. We observed during that time that the available supply of acetonitrile was of variable quality, some of which is not suitable for our purposes. If we are unable to successfully change our manufacturing methods to avoid the reliance upon acetonitrile, we may incur prolonged production timelines and increased production costs in the future if such shortage reoccurs. In an extreme case this situation could adversely affect our ability to manufacture our compounds altogether, thus significantly impacting our future operations.

Our proposed products may not be accepted by the health care community.

Our proposed products, if approved for marketing, may not achieve market acceptance since hospitals, physicians, patients or the medical community in general may decide not to accept and utilize them. We are attempting to develop products that will likely be first approved for marketing in late stage cancer where there is no truly effective standard of care. If approved for use in late stage cancer, the drugs will then be evaluated in earlier stage where they would represent substantial departures from established treatment methods and will compete with a number of more conventional drugs and therapies manufactured and marketed by major pharmaceutical companies. It is too early in the development cycle of the drugs for us to accurately predict our major competitors. The degree of market acceptance of any of our developed products will depend on a number of factors, including but not limited to:

our demonstration to the medical community of the clinical efficacy and safety of our proposed products;

our ability to create products that are superior to alternatives currently on the market;

our ability to establish in the medical community the potential advantage of our treatments over alternative treatment methods; and

the reimbursement policies of government and third-party payors.

If the health care community does not accept our products, our business will be materially harmed.

Our therapeutic compounds have not been subjected to large scale manufacturing procedures.

To date, G-202 and G-115 have only been manufactured at a scale which is adequate to supply early stage clinical trials. There can be no assurances that the current procedures for manufacturing G-202 or G-115 will work at a scale which is adequate for commercial needs. In the event our therapeutic compounds cannot be manufactured in sufficient commercial quantities, our future prospects could be significantly impacted.

We face product liability risks for which we may not be able to obtain adequate insurance to protect us against losses.

We currently have no products approved for commercial sale. However, the current and future use of our product candidates by us in clinical trials, and the sale of any approved products in the future, may expose us to liability claims. These claims might be made directly by consumers or healthcare providers or indirectly by pharmaceutical companies, or others selling such products. We may experience financial losses in the future due to product liability claims. We have obtained limited general commercial liability insurance coverage for our clinical trials. However, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against all losses. If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.

Risks Relating to Intellectual Property and Government Regulation

We may not be able to withstand challenges to our intellectual property rights.

We rely on our intellectual property, including our issued and applied for patents and our licenses, as the foundation of our business. Our intellectual property rights may come under challenge. No assurances can be given that our patents or licenses will survive claims alleging invalidity or infringement on other patents and/or licenses. The viability of our business will suffer if our intellectual property protection becomes limited or is eliminated.

We may not be able to adequately protect our intellectual property.

Considerable research with regard to our technologies has been performed in countries outside of the United States. The laws protecting intellectual property in some of those countries may not provide protection for our trade secrets and intellectual property. If our trade secrets or intellectual property are misappropriated in those countries, we may be without adequate remedies to address the issue. In addition to our patents, we rely on confidentiality and assignment of invention agreements to protect our intellectual property. These agreements provide for contractual remedies in the event of misappropriation. We do not know to what extent, if any, these agreements and any remedies for their breach will be enforced by a foreign or domestic court. In the event our intellectual property is misappropriated or infringed upon and an adequate remedy is not available, our future prospects will greatly diminish.

Our proposed products may not receive FDA approval.

The FDA and comparable government agencies in foreign countries impose substantial regulations on the manufacture and marketing of pharmaceutical products through lengthy and detailed laboratory, pre-clinical and clinical testing procedures, sampling activities and other costly and time-consuming procedures. Satisfaction of these regulations typically takes several years or more and varies substantially based upon the type, complexity and novelty of the proposed product. Although our G-202 Phase I clinical trials are underway, we cannot assure you that we will successfully complete the trial. As of September 30, 2011, we had treated twenty-two patients. It is still too early to predict when we might first submit any product license application for FDA approval or whether any such product license application would be granted on a timely basis, if at all. Any delay in obtaining, or failure to obtain, such approvals could have a materially adverse effect on the commercialization of our products and the viability of the company.

Risks Relating To Our Common Stock

Our limited market is relatively illiquid.

Commencing in the first quarter of 2010, our common shares began trading regularly but with limited volume on the Over-the-Counter Bulletin Board (“OTCBB”) and Pinksheets. Accordingly, although a limited public market for our securities now exists, it is still relatively illiquid. Any prospective investor in our common stock should consider the limited market when making an investment decision. No assurances can be given that the trading volume of our common shares will increase or that a liquid public market will ever materialize. Additionally, due to the limited trading volume, it may be difficult for an investor to sell his or her shares.

Our stock price may be particularly volatile because we are a drug development company.

The market prices for securities of biotechnology companies in general, and early-stage drug development companies in particular, have been highly volatile and may continue to be highly volatile in the future. The following factors, in addition to other risk factors described in this section, may have a significant impact on the market price of our common stock:

the development status of our drug candidates, particularly the results of our clinical trials of G-202;

market conditions or trends related to the biotechnology and pharmaceutical industries, or the market in general;

announcements of technological innovations, new commercial products, or other material events by our competitors or us;

disputes or other developments concerning our proprietary rights;

changes in, or failure to meet, securities analysts’ or investors’ expectations of our financial and developmental performance;

additions or departures of key personnel;

discussions of our business, products, financial performance, prospects, or stock price by the financial and scientific press and online investor communities such as chat rooms;

public concern as to, and legislative action with respect to, testing or other research areas of biopharmaceutical companies, the pricing and availability of prescription drugs, or the safety of drugs;

regulatory developments in the United States or foreign countries; and

economic and political factors.

In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. We may become subject to this type of litigation, which is often extremely expensive and diverts management’s attention.

We face risks related to compliance with corporate governance laws and financial reporting standards.

The Sarbanes-Oxley Act of 2002, as well as related new rules and regulations implemented by the United States Securities and Exchange Commission (“SEC”) and the Public Company Accounting Oversight Board, require changes in the corporate governance practices and financial reporting standards for public companies. These new laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002 relating to internal control over financial reporting (“Section 404”), will materially increase the Company's legal and financial compliance costs and make some activities more time-consuming and more burdensome. Presently we qualify as a non-accelerated filer and, accordingly, are exempt from the requirements of 404b and our independent registered public accounting firm is not required to audit the design and operating effectiveness of our internal controls and management's assessment of the design and the operating effectiveness of such internal controls. In the event we become an accelerated filer, we will be required to expend substantial capital in connection with compliance.

Because of our limited resources, management has concluded that our internal control over financial reporting may not be effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. To mitigate the current limited resources and limited number of employees, we rely heavily on direct management oversight of transactions, along with the use of legal and accounting professionals. As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the Committee of Sponsoring Organizations of the Treadway Commission internal control framework.

Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses and will divert time and attention away from revenue generating activities.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting. For example, on January 30th, 2009, the SEC adopted rules requiring companies to provide their financial statements in interactive data format using the eXtensible Business Reporting Language, or XBRL. Our management team will need to invest significant management time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from developing our business to compliance activities which could have an adverse effect on our business.

Our common stock is considered a “penny stock,” and is subject to additional sale and trading regulations that may make it more difficult to sell.

Our common stock, which currently trades on the Over-the-Counter Bulletin Board and Pinksheets, is considered to be a “penny stock” if it does not qualify for one of the exemptions from the definition of “penny stock” under Section 3a51-1 of the Securities Exchange Act for 1934, as amended (the “Exchange Act”). Our common stock may be a “penny stock” if it meets one or more of the following conditions (i) the stock trades at a price less than $5.00 per share; (ii) it is NOT traded on a “recognized” national exchange; (iii) it is NOT quoted on the Nasdaq Capital Market, or even if so, has a price less than $5.00 per share; or (iv) is issued by a company that has been in business less than three years with net tangible assets less than $5 million.

The principal result or effect of being designated a “penny stock” is that securities broker-dealers participating in sales of our common stock will be subject to the “penny stock” regulations set forth in Rules 15g-2 through 15g-9 promulgated under the Exchange Act. For example, Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two business days before effecting any transaction in a penny stock for the investor’s account. Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.

As an issuer of “penny stock” the protection provided by the federal securities laws relating to forward-looking statements does not apply to us.

Although the federal securities law provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, if we are a penny stock issuer, we will not have the benefit of this safe harbor protection in the event of any claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading.

If securities or industry analysts do not publish research or reports or publish unfavorable research about our business, the price and trading volume of our common stock could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage, the trading price for our common stock will be negatively affected. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who covers us downgrades our securities, the price of our securities would likely decline. If one or more of these analysts ceases to cover us or fails to publish regular reports on us, interest in the purchase of our securities could decrease, which could cause the price of our common stock and other securities and their trading volume to decline.

We do not intend to pay cash dividends.

We do not pay, and do not anticipate paying, cash dividends in the foreseeable future. Accordingly, any gains on your investment will need to come through an increase in the price of our common stock. The lack of a liquid market for our common stock makes such gains highly unlikely.

Our board of directors has broad discretion to issue additional securities.

We are entitled under our certificate of incorporation to issue up to 80,000,000 common and 10,000,000 “blank check” preferred shares. Blank check preferred shares provide the board of directors broad authority to determine voting, dividend, conversion, and other rights. As of September 30, 2011, we have issued and outstanding 21,457,419 common shares and we have 16,359,758 common shares reserved for future grants under our equity compensation plans and issuances upon the exercise of current outstanding options, warrants and convertible securities. Accordingly, we are entitled to issue up to 42,182,823 additional common shares and 10,000,000 additional preferred shares. Our board may generally issue those common and preferred shares, or convertible securities to purchase those shares, without further approval by our shareholders. Any preferred shares we may issue will have such rights, preferences, privileges and restrictions as may be designated from time-to-time by our board, including preferential dividend rights, voting rights, conversion rights, redemption rights and liquidation provisions. It is likely that we will be required to issue a large amount of additional securities to raise capital in order to further our development and marketing plans. It is also likely that we will be required to issue a large amount of additional securities to directors, officers, employees and consultants as compensatory grants in connection with their services, both in the form of stand-alone grants or under our various stock plans. The issuance of additional securities may cause substantial dilution to our shareholders.

Our Officers and Scientific Advisors beneficially own approximately 31% of our outstanding common shares.

Our Officers and Scientific Advisors own approximately 31% of our issued and outstanding common shares. As a consequence of their level of stock ownership, the group retains substantial ability to influence the elect or remove members of our board of directors, and thereby control our management. This group of shareholders has the ability to significantly control the outcome of corporate actions requiring shareholder approval, including mergers and other changes of corporate control, going private transactions, and other extraordinary transactions any of which may be in opposition to the best interest of the other shareholders and may negatively impact the value of your investment.

Provisions in Delaware law and executive employment agreements may prevent or delay a change of control.

We are subject to the Delaware anti-takeover laws regulating corporate takeovers. These anti-takeover laws prevent Delaware corporations from engaging in a merger or sale of more than 10% of its assets with any stockholder, including all affiliates and associates of the stockholder, who owns 15% or more of the corporation’s outstanding voting stock, for three years following the date that the stockholder acquired 15% or more of the corporation’s assets unless:

the Board of Directors approved the transaction in which the stockholder acquired 15% or more of the corporation’s assets;

after the transaction in which the stockholder acquired 15% or more of the corporation’s assets, the stockholder owned at least 85% of the corporation’s outstanding voting stock, excluding shares owned by directors, officers and employee stock plans in which employee participants do not have the right to determine confidentially whether shares held under the plan will be tendered in a tender or exchange offer; or

on or after this date, the merger or sale is approved by the Board of Directors and the holders of at least two-thirds of the outstanding voting stock that is not owned by the stockholder.

A Delaware corporation may opt out of the Delaware anti-takeover laws if its certificate of incorporation or bylaws so provide. We have not opted out of the provisions of the anti-takeover laws. As such, these laws could prohibit or delay mergers or other takeover or change of control of GenSpera and may discourage attempts by other companies to acquire us.

In addition, employment agreements with certain executive officers provide for the payment of severance and acceleration of the vesting of options and restricted stock in the event of termination of the executive officer following a change of control of GenSpera. These provisions could have the effect of discouraging potential takeover attempts.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following information is given with regard to unregistered securities sold since January 1, 2011. The following securities were issued in private offerings pursuant to the exemption from registration contained in the Securities Act and the rules promulgated thereunder in reliance on Section 4(2) thereof, relating to offers of securities by an issuer not involving any public offering.

On January 27, 2011, we issued options to purchase 25,000 common shares. The options were issued as partial compensation for legal services related to our intellectual property and for market research with regard to our proposed products. The options have an exercise price of $1.90 and a term of 5 years. Of the options granted, 20,000 vest quarterly over 2011 with the first vesting date being March 31, 2011 and 5,000 are fully vested as of the grant date. The grants were made from our 2007 Stock Plan.

On January 21, 2011, we sold 2,074,914 units resulting in gross proceeds of $3,734,840. The price per unit was $1.80. Each unit consists of: (i) one (1) share of the common stock, par value $.0001, and (ii) one half (1/2) common stock purchase warrant. Of these units, 339,915 were subscribed at December 31, 2010 with gross proceeds to the Company of $611,847 recorded in the December 31, 2010 financial statements. The warrants have a term of five years and entitle the holders to purchase the common shares at a price per share of $3.30. In the event the shares underlying the warrants are not subject to a registration statement, the warrants may be exercised on a cashless basis after 12 months from the issuance date. The warrants also contain provisions providing for an adjustment in the underlying number of shares and exercise price in the event of stock splits or dividends and fundamental transactions. The warrants do not contain any price protection provisions. The warrants are callable assuming the following: (i) our common stock trades above $5.50 for ten (10) consecutive days; (ii) the daily average minimum volume over such ten (10) days is 15,000 or greater; and (iii) there is an effective registration statement covering the underlying shares. We also granted the investors certain piggy-back registration rights.

In connection with the offering, we incurred placement agent and finder’s fees in the amount of $114,295 in cash and issued warrants to purchase a total of 63,498 shares at an average exercise price per share of $3.26. Of the fees incurred, $110,695 was reinvested in the Offering on the same terms and conditions as the investors, resulting in the issuance of 61,498 units.

On February 16, 2011, we sold an additional 166,691 units resulting in gross proceeds of $300,044. The units contain the same terms as the January 21, 2011 units described above. In connection with the offering, we incurred placement agent and finder’s fees in the amount of $6,403 in cash and issued warrants to purchase a total of 3,558 shares at an exercise price per share of $2.16.

As a result of the offerings, the reinvestment of fees, and the issuance of placement agent and finder’s warrants, we issued a total of 2,303,103 shares and 1,218,610 common stock purchase warrants.

In March of 2011 we entered into a consulting agreement. Pursuant to the terms of the agreement, the consultant agreed to convert $60,000 of previously earned fees (consulting fees for October, November and December of 2010) into the Company’s securities on the same terms and conditions as the January 2011 offering. Accordingly, we issued 33,334 units consisting of 33,334 common shares and warrants to purchase an addition 16,667 common shares. The price per unit was $1.80 and the warrants have the same terms and conditions as the units issued during our January 2011 offering. The agreement also provides for a retainer of 32,500 common shares and a warrant to purchase 44,000 common shares. Consulting fees for the months of January, February, March, April, and May of 2011 have also been paid through the issuance of the Company’s securities at a rate of: (i) 10,000 common shares per month, and (ii) 20,000 common stock purchase warrants per month. The warrants have substantially the same terms and conditions as the warrants issued during the Company’s January 2011 offering. As a result of agreement and the payment of prior consulting fees, we issued an aggregate of: (x) 115,834 common shares, and (y) warrants to purchase 160,667 common shares.

On April 29, 2011, we sold 1,363,622 units resulting in gross proceeds of $2,249,750. The price per unit was $1.65. Each unit consists of: (i) one (1) share of the common stock, par value $.0001, and (ii) one half (1/2) common stock purchase warrant. The warrants have a term of five years and entitle the holders to purchase the common shares at a price per share of $3.15. In the event the shares underlying the warrants are not subject to a registration statement, the warrants may be exercised on a cashless basis after 12 months from the issuance date. The warrants also contain provisions providing for an adjustment in the underlying number of shares and exercise price in the event of stock splits or dividends and fundamental transactions. The warrants do not contain any price protection provisions. The warrants are callable assuming the following: (i) our common stock trades above $6.50 for ten (10) consecutive days; (ii) the daily average minimum volume over such ten (10) days is 15,000 or greater; and (iii) there is an effective registration statement covering the underlying shares. We also granted the investors certain piggy-back registration rights.

In connection with the offering, we incurred finder’s fees in the amount of $60,000 in cash and issued warrants to purchase a total of 36,364 shares at an exercise price per share of $3.15. The warrants have the same terms and conditions as the investor warrants.

As a result of the offering and the finder’s warrants, we issued a total of 1,363,622 shares and 718,175 common stock purchase warrants.

On May 23, 2011 we entered into a consulting agreement. The agreement provides for a retainer of 12,500 common shares and a warrant to purchase 11,000 common shares as well as a $20,000 expense advance. Consulting fees for the months of June, July, August and September have been paid through the issuance of the Company’s securities at a rate of: (i) 10,000 common shares per month, and (ii) 20,000 common stock purchase warrants per month. The warrants have substantially the same terms and conditions as the warrants issued during the Company’s April 2011 offering. As a result of the agreement we issued an aggregate of: (x) 52,500 common shares, and (y) warrants to purchase 91,000 common shares.

On May 26, 2011, we issued 4,211 common shares to Prism Production Services, Inc. as payment for services valued at $8,000. The services were provided in connection with the creation of a corporate informational video. The shares were valued at $1.90 per share.

ITEM 3.

DEFAULT UPON SENIOR SECURITIES

None

ITEM 4.

(REMOVED AND RESERVED)

None

ITEM 5.

OTHER INFORMATION

None

ITEM 6.

EXHIBITS

The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Form 10-Q.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed by the undersigned hereunto duly authorized.

	GENSPERA, INC.

Date: November 14, 2011		/s/ Craig Dionne
		Chief Executive Officer
		/s/ Craig Dionne
		Chief Financial Officer (Principal Accounting Officer)

INDEX TO EXHIBITS

			Incorporated by Reference
Exhibit No.	Description	Filed Herewith	Form	Exhibit No.	File No.	Filing Date
3.01	Amended and Restated Certificate of Incorporation		S-1	3.01	333-153829	10/03/08

3.02	Amended and Restated Bylaws		8-K	3.02	333-153829	1/11/10

4.01	Specimen of Common Stock certificate		S-1	4.01	333-153829	10/03/08

4.02**	Amended and Restated GenSpera 2007 Equity Compensation Plan adopted on January , 2010		8-K	4.01	333-153829	1/11/10

4.03**	GenSpera Form of 2007 Equity Compensation Plan Grant and 2009 Executive Compensation Plan Grant		8-K	4.02	333-153829	9/09/09

4.04	Form of 4.0% convertible note issued to shareholder		S-1	4.05	333-153829	10/03/08

4.05	Form of Warrant dated March 6, 2008 issued to consultant for financial consulting services.		S-1	4.07	333-153829	10/03/08

4.06	Form of Warrant – July and August 2008 private placement		S-1	4.10	333-153829	10/03/08

4.07	Form of 4.0% convertible debenture modification between GenSpera, Inc. and shareholder		8-K	10.02	333-153829	2/20/09

4.08	Form of Common Stock Purchase Warrant issued on 2/17/09 to TR Winston & Company, LLC		8-K	10.05	333-153829	2/20/09

4.09	Form of Common Stock Purchase Warrant issued on 2/17/09 to Craig Dionne		8-K	10.06	333-153829	2/20/09

4.10	Form of Common Stock Purchase Warrant dated 2/19/09		8-K	10.02	333-153829	2/20/09

4.11	Form of Common Stock Purchase Warrant dated June of 2009		8-K	10.03	333-153829	7/06/09

4.12**	2009 Executive Compensation Plan		8-K	4.01	333-153829	9/09/09


4.13	Form of Common Stock Purchase Warrant – 9/2/09	8-K	10.02	333-153829	9/09/09

4.14	Form of Securities Purchase Agreement – Jan – Mar 2010	10-K	4.27	333-153829	3/31/10

4.15	Form of Common Stock Purchase Warrant Jan – Mar 2010	10-K	4.28	333-153829	3/31/10

4.16	Form of Consultant Warrants Issued in May of 2010	10-Q	4.18	333-153829	5/14/10

4.17	Form of Securities Purchase Agreement – May 18, 2010	8-K	10.01	333-153829	5/25/10

4.18	Form of: (i) Common Stock Purchase Warrant – May 18, 2010 offering, and (ii) June Consultant Warrants	8-K	10.02	333-153829	5/25/10

4.19**	Form of 2007 Equity Compensation Plan Restricted Stock Grant and 2009 Executive Compensation Plan Restricted Stock Grant	S-8	4.03	333-171783	1/20/11

4.20	Form of Securities Purchase Agreement dated January and February of 2011	8-K	10.01	333-153829	1/27/11

4.21	Form of Common Stock Purchase Warrant dated January and February of 2011	8-K	10.021	333-153829	1/27/11

4.22	Form of 2007 Equity Compensation Plan Restricted Stock Unit Agreement and 2009 Executive Compensation Plan Restricted Stock Unit Agreement	10-K	4.22	333-153829	3/30/11

4.23	Form of Securities Purchase Agreement dated April 29, 2011	8-K	10.01	333-153829	5/03/11

4.24	Form of Common Stock Purchase Warrant dated April 29, 2011	8-K	10.02	333-153829	5/03/11

4.25	Form of Executive Deferred Compensation Plan	8-K	99.01	333-153829	7/08/11

10.01	Exclusive Supply Agreement between GenSpera and Thapsibiza dated January 22, 2008	S-1	10.02	333-153829	10/03/08

10.02**	Craig Dionne Employment Agreement	8-K	10.04	333-153829	9/09/09

10.03**	Craig Dionne Severance Agreement	8-K	10.05	333-153829	9/09/09

10.04**	Craig Dionne Proprietary Information, Inventions And Competition Agreement	8-K	10.06	333-153829	9/09/09

10.05**

Form of Indemnification Agreement

8-K

10.07

333-153829

9/09/09

10.06**

Russell Richerson Employment Agreement

8-K

10.08

333-153829

9/09/09

10.07**

Russell Richerson Proprietary Information, Inventions And Competition Agreement

8-K

10.09

333-153829

9/09/09

31.1

Certification of the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C § 1350.

32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C § 1350.

**Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.