News Column

NOTE 2 - MANAGEMENT'S PLANS TO CONTINUE AS A GOING CONCERN

August 8, 2014

Basis of Presentation

We have prepared our financial statements on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. We have incurred losses since inception and have a deficit accumulated of $35.9 million as of June 30, 2014. We anticipate incurring additional losses for the foreseeable future until such time, if ever, that we can generate significant sales from our therapeutic product candidates currently in development or we enter into cash flow positive business development transactions. To date, we have generated no sales or revenues, have incurred significant losses and expect to incur significant additional losses as we advance G-202 through clinical studies. Consequently, our operations are subject to all the risks inherent in the establishment of a pre-revenue business enterprise as well as those risks associated with a company engaged in research and development of pharmaceutical compounds. Our cash and cash equivalents balance at June 30, 2014 was $4.8 million, representing 94% of our total assets. Based upon our current expected level of operating expenditures, we expect to be able to fund our operations for the next 12 to 18 months. We will require additional cash to fund and continue our operations beyond that point. This period could be shortened if there are any unanticipated significant increases in planned spending on development programs or other unforeseen events. We anticipate raising additional funds through collaborative arrangements, public or private sales of debt or equity securities, or some combination thereof. There is no assurance that any such collaborative arrangement will be entered into or that financing will be available when needed to allow us to continue our operations, or if available, on terms acceptable to us.

In the event financing is not obtained, we may pursue cost cutting measures as well as explore the sale of selected assets to generate additional funds. If we are required to significantly reduce operating expenses and delay, reduce the scope of, or eliminate development programs or clinical trials, these events could have a material adverse effect on: our business, results of operations, and financial condition. These factors raise significant doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue in existence. 8



NOTE 3 - SUMMARY OF CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

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. Actual results may differ from those estimates. Research and Development Research and development costs are charged to expense as incurred. Our research and development expenses consist primarily of expenditures for manufacturing, clinical trials, employee compensation and consulting costs and expenses. We incurred research and development expenses of approximately $0.9 million and $0.8 million for the three months ended June 30, 2014 and 2013, respectively. We incurred research and development expenses of approximately $2.0 million and $1.6 million for the six months ended June 30, 2014 and 2013, respectively.

Loss per Share Basic loss per share is calculated by dividing net loss and net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. Basic and diluted loss per share are the same, in that any potential common stock equivalents would have the effect of being anti-dilutive in the computation of net loss per share. The following potentially dilutive securities have been excluded from the computations of weighted average shares outstanding as of June 30, 2014 and 2013, as they would be anti-dilutive: Six months ended June 30, 2014 2013

Shares underlying options outstanding 8,462,895



5,961,641

Shares underlying warrants outstanding 20,510,987



8,089,520

Shares underlying convertible notes outstanding 265,894 257,072 29,239,776 14,308,233



Fair Value of Financial Instruments

Our short-term financial instruments, including cash, accounts payable and other liabilities, consist primarily of instruments without extended maturities. We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts. Warrant derivative liability consists of certain of our warrants with anti-dilution provisions. We use the Black-Scholes option-pricing model to value our warrant derivative liability which incorporates our stock price, volatility, U.S. risk-free interest rate, dividend rate, and estimated life. Fair Value Measurements

Valuation Hierarchy - GAAP establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:



Level 1: Quoted prices (unadjusted) in active markets for identical assets or

liabilities.



Level 2: Quoted prices for similar assets and liabilities in active markets

or inputs that are observable for the asset or liability,



either

directly or indirectly through market corroboration, for substantially the full term of the financial instrument.



Level 3: Unobservable inputs based on our own assumptions used to measure

assets and liabilities at fair value. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. We previously recorded a warrant derivative liability for warrants with non-standard anti-dilution provisions. These warrants were either exercised or expired as of June 30, 2014. 9 Stock-Based Compensation We measure the cost of employee services received in exchange for equity awards based on the grant-date fair value of the awards. All awards under our stock-based compensation programs are accounted for at fair value and that cost is recognized over the period during which an employee is required to provide service in exchange for the award (the vesting period). Compensation expense for options granted to non-employees is determined in accordance with the fair value of the consideration received or the fair value of the equity instruments issued, whichever is a more reliable measurement. Compensation expense for awards granted to non-employees is re-measured on

each accounting period.

Determining the appropriate fair value of stock-based compensation requires the input of subjective assumptions, including the expected life of the stock-based compensation and the volatility of our stock price. We use the Black-Scholes option-pricing model to value our stock option awards which incorporates our stock price, volatility, U.S. risk-free interest rate, dividend rate, and estimated life. Reclassifications



Certain prior year balances have been reclassified to conform to current year presentation.

Recent Accounting Pronouncements

In June 2014, the FASB issued ASU 2014-10 Development Stage Entities (Topic 915). ASU 2014-10 removes all incremental financial reporting requirements from U.S. GAAP for development stage entities. ASU 2014-10 should be applied retrospectively and is effective for fiscal years beginning after December 15, 2014. Early application is permitted for any annual reporting period or interim period for which the entity's financial statements have not yet been issued or made available for issuance. Accordingly, we have decided to adopt ASU 2014-10 early, accordingly all of the past disclosures and presentations for development stage accounting have been eliminated.



NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION

The following table contains additional information for the periods reported (in thousands): Six months ended June 30, 2014 2013 Non-cash financial activities: Common stock options issued as payment of accrued compensation $ 962 $ 999 Derivative liability reclassified to equity upon exercise of warrants ? 55



There was no cash paid for interest and income taxes for the three or six months ended June 30, 2014 and 2013.

NOTE 5 - ACCRUED EXPENSES



Accrued expenses consist of the following (in thousands):

June 30, December 31, 2014 2013 Accrued compensation and benefits $ 595$ 1,040 Accrued research and development 184 82 Accrued other 203 128 Total accrued expenses $ 982$ 1,250



NOTE 6 - CONVERTIBLE NOTES PAYABLE

We previously entered into convertible notes with our chief executive officer pursuant to which we borrowed an aggregate of $0.2 million, with $0.1 million principal balance outstanding at June 30, 2014. The notes, which bear interest at a rate of 4.2% per annum and matured at various dates through December 6, 2011, are now considered due on demand. As of June 30, 2014, our chief executive officer has not demanded the payment of the outstanding principal and accrued interest. Accrued interest at June 30, 2014 and December 31, 2013 was approximately $28,000 and $26,000, respectively. The notes and accrued interest are convertible, at the option of the holder, into shares of our common stock at a conversion price of $0.50 per share. 10



NOTE 7 - COMMITMENTS AND CONTINGENCIES

Legal Matters On March 12, 2012, GenSpera instituted a declaratory judgment action against Annastasiah Mhaka ("Mhaka") in the United States District Court for the District of Maryland: GenSpera, Inc. v. Mhaka, Civil Action No. MJG-12-772 (D. Md.). In that complaint, GenSpera, as the licensee of the inventions described and claimed in the U.S. Patent No. 7,468,354 ("the '354 patent") and U.S. Patent No. 7,767,648 ("the '648 patent"), sought a declaratory judgment that Mhaka (a former doctoral student at Johns Hopkins University) should not be added to either the '354 patent or the '648 patent as an inventor. On April 2, 2012, Mhaka filed and served her answer and counterclaim, in which she sought to be added as an inventor to the '354 patent and the '648 patent pursuant to 35 U.S.C. sec. 256. Between April 26, 2012 and October 1, 2012, the parties conducted fact discovery. Between October 1, 2012 and December 1, 2012, the parties conducted limited expert discovery. On November 1, 2012, Mhaka filed a separate complaint in the State Circuit Court for Baltimore County, Maryland, naming GenSpera as a defendant along with Dr. Samuel Denmeade and Dr. John Isaacs (the named inventors on the '354 patent and the '648 patent). In the complaint, Mhaka alleged that the defendants are liable under various state law tort theories for the same alleged conduct that formed the basis for her prior inventorship claim. In her prayer for relief, Mhaka sought unspecified damages from the defendants but did not seek to alter the inventorship or ownership of the '354 patent or '648 patent. On November 8, 2012, the defendants removed this second action to the United States District Court for the District of Maryland, and on November 16, 2012, the defendants moved to dismiss all claims in the complaint, asserting (among other things) that the claims were preempted by federal patent law. On January 24, 2013, the Court heard GenSpera's motion for summary judgment in the original case and the defendants' motion to dismiss in the second case. On May 1, 2013, the Court granted GenSpera's motion for summary judgment in the original case. In its order, the Court stated that it would proceed to issue a declaratory judgment establishing that Mhaka should not be added to the two patents at issue as an additional inventor pursuant to 35 U.S.C. 256. Reserving any ruling on the issue of whether Mhaka's state law tort claims are preempted by federal patent law, the Court denied defendants' motion to dismiss Mhaka's complaint and directed Mhaka to re-file her claims as counterclaims in the original action. On May 14, 2013, Mhaka filed an amended answer and counterclaims in the consolidated action, re-pleading her tort claims as counterclaims. On June 3, 2013, GenSpera (along with Drs. Denmeade and Isaacs) filed a reply to the counterclaims, denying their allegations and raising a number of affirmative defenses. Fact discovery was completed on December 13, 2013, and expert discovery was completed on March 28, 2014. On January 2, 2014, Drs. Isaacs and Denmeade moved for summary judgment on the grounds that Mhaka's claims are barred by the applicable statute of limitations, and GenSpera joined in the motion. The briefing on that motion is now complete. GenSpera filed a separate motion for summary judgment on May 6, 2014. Mhaka's opposition to that motion was filed on May 28, 2014. GenSpera's reply brief in support of the motion was filed on June 16, 2014. GenSpera's summary judgment motions are now fully briefed. Further scheduling, as appropriate, is to be set after resolution of summary judgment motions.



NOTE 8 - CAPITAL STOCK AND STOCKHOLDER'S EQUITY

Common Stock In February 2014, we entered into an agreement with H.C. Wainwright to serve as our exclusive placement agent, advisor and underwriter for a proposed offering of our securities. Pursuant to the placement agent agreement, we agreed to pay the placement agent a placement fee equal to 8% of the aggregate gross proceeds to us from the sale of our securities in an offering and to issue the placement agent warrants to purchase shares of common stock equal to 8% of the common stock sold in such offering (excluding shares of common stock issuable upon exercise of any warrants issued in this offering), provided that, with respect to sales to certain prior investors, we agreed to pay the placement agent a fee of 4% of the aggregate proceeds from such prior investors and issue the placement agent warrants equal to 4% of the common stock sold to such investors. In June 2014, we completed an offering of our securities, see Equity Financing section below for further information regarding this transaction. In February 2014, we entered into an agreement for method development by a contract manufacturer and issued an aggregate of 91,334 shares of common stock, valued at approximately $127,000, as compensation. In February 2014, we also entered into an agreement to grant an aggregate of 47,800 shares of common stock, valued at approximately $67,000, to a consultant for business advisory services to be provided to the Company. During the six months ended June 30, 2014, no warrants were exercised into common shares. During the six months ended June 30, 2013, 200,668 warrants were exercised into an equivalent number of common shares for which we received proceeds of approximately $217,000, and one million warrants were exercised on a cashless basis into 537,722 common shares. 11 Equity Financing On May 23, 2014, our registration statement on Form S-1 (File No. 333-194687) was declared effective by the Securities and Exchange Commission pursuant to which we offered and sold 4,163,961 units, each consisting of (i) one share of our common stock, (ii) one-half of one Series A common stock purchase warrant, (iii) one Series B common stock purchase warrant and (iv) one Series C common stock purchase warrant at a public offering price of $0.80 per unit. The offering commenced as of May 28, 2014 and did not terminate before all of the securities registered in the registration statement were sold. On June 3, 2014, we closed the sale of such securities, resulting in net proceeds to us of approximately $3.0 million after deducting placement agent fees and expenses of $278,000 and other offering expenses of approximately $64,000, including the reimbursement of placement agent's counsel of $50,000. The placement agent also received common stock purchase warrants to purchase such number of shares equal to 8% of the shares sold in the offering to investors, or 326,817 placement agent warrants with substantially the same terms as the Series A warrants. Each Series A warrant has an exercise price of $1.15 per share, is immediately exercisable and separately transferable from the common shares and expires on the five year anniversary of the date of issuance. Each Series B warrant has an exercise price of $0.85 per share, is immediately exercisable and separately transferable from the common shares and expires on the nine month anniversary of the date of issuance. Each Series C warrant has an exercise price of $0.85 per share, is immediately exercisable and separately transferable from the common shares and will expire on the twelve month anniversary of the date of issuance. The units are not certificated. In June 2014, we are also offered and sold 966,250 units in a private placement to certain accredited investors with whom we had a prior relationship or who were shareholders. Each unit was priced at $0.80 and consisted of one share of our common stock, and one-half of one Series D common stock purchase warrant. Each Series D warrant will have an exercise price of $1.15 per share, will be immediately exercisable and separately transferable from the shares and will expire on the five year anniversary of the date of issuance. The units are

not certificated. NOTE 9 - STOCK OPTIONS The terms of our 2009 Executive Compensation Plan ("2009 Plan") and our 2007 Equity Compensation Plan ("2007 Plan") allow for the issuance of up to 6,000,000 shares of common stock each or 12,000,000 in the aggregate. Collectively, the 2009 Plan and 2007 Plan are referred to as "the Plans." Total stock-based compensation expense recognized for stock options issued using the straight-line method in the statement of operations for the three months ended June 30, 2014 and 2013 was approximately $40,000 and $71,000, respectively. Total stock-based compensation expense recognized for the six months ended June 30, 2014 and 2013 was $1,109,000 and $1,148,000, respectively, of which $962,000 and $958,000 was accrued as of December 31, 2013 and 2012, respectively. The following table summarizes stock option activity under the Plans: Weighted- Weighted-average Aggregate average remaining intrinsic Number of exercise contractual term value (in shares price (in years) thousands) Outstanding at December 31, 2013 6,050,623 $ 1.82 Granted 2,412,272 $ 1.34 Exercised - - Forfeited - - Outstanding at June 30, 2014 8,462,895 $ 1.69 4.2 $ 147 Exercisable at June 30, 2014 8,207,750 $ 1.70 4.2 $ 142 As of June 30, 2014, there was $0.1 million of total unrecognized compensation cost related to non-vested stock options which vest over time. That cost is expected to be recognized over a weighted-average period of approximately one year. As of June 30, 2014, there was no unrecognized compensation expense related to performance-based, non-vested employee stock options. 12 During the six months ended June 30, 2014, we issued options to purchase 1,948,902 and 106,000 shares of common stock to employees and non-employee directors, respectively, under the Plans. Additionally, we issued options to purchase 357,370 shares of common stock to consultants and advisors. During the six months ended June 30, 2013, we issued options to purchase 1,221,972 and 76,000 shares of common stock to employees and non-employee directors, respectively, under the Plans. Additionally, we issued options to purchase 129,041 shares of common stock to consultants and advisors. During the six months ended June 30, 2014 and 2013, no options were exercised.



The following table summarizes weighted-average assumptions using the Black-Scholes option-pricing model used on the date of the grants issued during the six months ended June 30, 2014 and 2013:

Six months ended June 30, 2014 2013 Volatility 55.8% 58.9% Expected term (years) 3.4 3.9 Risk-free interest rate 0.5% 0.7% Dividend yield 0% 0%



NOTE 10 - WARRANTS AND DERIVATIVE WARRANT LIABILITY

We account for common stock purchase warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement. Warrants are accounted for as derivative liabilities if the warrants allow for cash settlement or provide for modification of the warrant exercise price in the event subsequent sales of common stock by the Company are at a lower price per share than the then-current warrant exercise price. We classify derivative warrant liabilities on the balance sheet at fair value, and changes in fair value during the periods presented in the statement of operations, which is revalued at each balance sheet date subsequent to the initial issuance of the warrant. At June 30, 2014, all outstanding liability-classified warrants were either exercised or had expired. Transactions involving our equity-classified warrants are summarized as follows: Weighted- Weighted-average Aggregate average remaining intrinsic Number of exercise contractual term value (in shares price (in years) thousands) Outstanding at December 31, 2013 10,216,597 $ 2.56 Granted 11,315,847 $ 0.94 Exercised - - Forfeited (1,021,457 ) $ 2.91 Outstanding at June 30, 2014 20,510,987 $ 1.65 2.2 $ 692 Exercisable at June 30, 2014 20,510,987 $ 1.65 2.2 $ 692 During the six months ended June 30, 2014, no warrants were exercised. During the six months ended June 30, 2013, 200,668 warrants were exercised into an equivalent number of common shares and 1,000,000 warrants were exercised on a cashless basis into 537,722 common shares. The following table summarizes outstanding common stock purchase warrants as of June 30, 2014: Weighted- average Number of exercise shares price Expiration Equity-classified warrants Issued to consultants 1,163,759 $ 2.38 July 2014 through February 2019

Issued pursuant to 2009 financings 495,059 $ 3.00 July 2014 through September 2014 Issued pursuant to 2010 financings 1,022,943 $ 3.38 January 2015 through May 2015 Issued pursuant to 2011 financings 1,936,785 $ 3.24 January 2016 through April 2016 Issued pursuant to 2012 financings 296,366 $ 3.00 December 2017 Issued pursuant to 2013 financings 4,376,228 $ 1.97 December 2017 through August 2023 Issued pursuant to 2014 financings 11,219,847 $ 0.93 March

2015 through June 2019 20,510,987 13 Equity-classified Warrants During the six months ended June 30, 2014, in connection with our registered offering, we issued an aggregate of 10,736,722 common stock purchase warrants, including 10,409,905 issued to investors; and 326,817 to the placement agents. The warrants were issued with an exercise prices between $0.85 and $1.15 per share. Additionally, we also issued 483,125 common stock purchase warrants to investors in our June 2014 private offering. The warrants have an exercise price of $1.15 per share.

We also issued warrants to consultants to purchase 96,000 shares of common stock at an exercise price of $3.00 per share. The per share weighted-average fair value of the warrants granted to consultants during 2014 was estimated at $0.41 per share on the date of grant. During the six months ended June 30, 2013, no warrants were issued to consultants. Total stock-based compensation expense of approximately $40,000 and $2,000 was recognized for warrants and included in the statement of operations for the six months ended June 30, 2014 and 2013, respectively. During the six months ended June 30, 2013, in connection with the offering of our securities, we issued an aggregate of 776,204 common stock purchase warrants, including: 686,420 pursuant to closings in January 2013 and March 2013; 18,410 to the placement agent; and 71,374 additional warrants issued to investors that participated in the December 2012 closing. All warrants were issued with an exercise price of $3.00 per share.



Liability-classified Warrants

We have assessed our outstanding equity-linked financial instruments and have concluded that certain of our warrants are subject to derivative accounting as a result of certain non-standard anti-dilution provisions contained in the warrants. The fair value of these warrants is classified as a liability in our financial statements with the change in fair value during the periods presented, recorded in the statement of operations. At June 30, 2014, all outstanding liability-classified warrants were either exercised or had expired. We did not record a gain or loss during the three or six months ended June 30, 2014, as the outstanding liability-classified warrants were either exercised or had expired. We recorded a gain of $0.3 million and $0.8 million during the three and six months ended June 30, 2013, respectively, related to the change in fair value of the warrant derivative liability during that period. The following table summarizes the calculated aggregate fair values for the warrant derivative liability using the Black-Scholes method based on the following assumptions: Fair value as of June 30, 2013 Calculated aggregate value (in thousands) $ 1,010 Exercise price per share of warrant $ 1.50 Closing price per share of common stock $ 2.15 Volatility 50.0 % Expected term (years) 0.3 Risk-free interest rate 0.07 % Dividend yield 0 % 14 NOTE 11 - SUBSEQUENT EVENTS In August 2014, we issued an aggregate of 25,000 units to consultants as payment for business and advisory services valued at $20,000 in total. Each unit consists of one share of our common stock, and one-half of one Series D common stock purchase warrant. The units are substantially similar to the units issued in our June 2014 private placement. Each warrant has an exercise price of $1.15 per share, is immediately exercisable and separately transferable from the common shares and expires on the five year anniversary of the date of issuance. In August 2014, we issued a total of 189,364 common shares as partial payment for investor and media relations services. We also issued 115,000 common stock purchase warrants and 54,200 common stock purchase options as compensation for business and advisory services. The common stock purchase warrants have an exercise price of $1.15 per share, are immediately exercisable and separately transferable from the common shares and expire on the five year anniversary

of the date of issuance. 15



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements regarding our business development plans, capital raising, clinical trials, regulatory reviews, timing, strategies, expectations, anticipated expense levels, business prospects and positioning with respect to the market, business outlook, technology spending and various other matters (including contingent liabilities and obligations and changes in accounting policies, standards and interpretations) and express our current intentions, beliefs, expectations, strategies or predictions. These forward-looking statements are based on a number of assumptions and currently available information and are subject to a number of risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Cautionary Note Regarding Forward-Looking Statements" and elsewhere in this Quarterly Report. The following discussion should be read in conjunction with Part I, Item 1 of this Quarterly Report as well as the financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 3, 2014.



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

Company Overview Business We are an early-stage, pre-revenue, pharmaceutical company focused on the development of prodrug cancer therapeutics for the treatment of solid tumors including liver, brain, prostate and other cancers. A prodrug is an inactive precursor of a drug that is converted into its active form only at the site of the tumor. Our technology platform combines a powerful, plant-derived cytotoxin with a prodrug delivery system that targets the release of the drug within the tumor. We believe that, if successfully developed, our cancer prodrug therapies have the potential to provide a targeted therapeutic approach to a broad range of solid tumors with fewer side effects than those related to current chemotherapy treatments. Our major focus for the next twelve to eighteen months is the ongoing Phase II clinical trial of G-202 in patients with liver cancer, the ongoing Phase II clinical trial in patients with glioblastoma, and initiating enrollment in Phase II clinical studies in patients with prostate cancer and renal cell carcinoma. As of July 23, 2014, we have treated twenty-one patients in our Phase II liver cancer trial and four patients in our Phase II glioblastoma trial. In July 2014, we presented interim results from our Phase Ib and our ongoing Phase II study in liver cancer patients, indicating that 80% of patients treated with G-202 had stable disease (no tumor growth) at two months, and 50% of patients exhibited stable disease at 4 months on study. These results support our plans to continue the development of G-202 for patients with liver cancer, as well as proceed with our clinical development strategy in other indications. We plan to develop subsequent randomized studies to further develop G-202 with a goal of seeking FDA approval for marketing. Notwithstanding that the initial and interim data from our trials appear promising, the outcome of our trials is uncertain and our current or future trials may ultimately be unsuccessful. Financial

To date, we have devoted a substantial portion of our efforts and financial resources to the development of G-202. G-202 is the only product candidate for which we have conducted clinical trials, and we have not marketed, distributed or sold any products. As a result, since our inception in 2003, we have generated no revenue from product sales and have funded our operations principally through private sales of our equity securities. We have never been profitable and, as of June 30, 2014, we had an accumulated deficit of approximately $35.9 million. We expect to continue to incur significant operating losses for the foreseeable future as we continue the development of our product candidates and advance them through clinical trials. In June 2014, we completed a registered offering of our securities in which we sold 4.2 million units, which resulted in net proceeds of approximately $3.0 million. During June 2014, we also initiated and completed a private placement of our securities to certain of our accredited prior shareholders and investors in which we sold 966,250 units resulting in approximately $0.8 million in net proceeds. Our cash and cash equivalents balance at June 30, 2014 was approximately $4.8 million, representing 94% of total assets. Based on our current expected level of operating expenditures, we expect to be able to fund our operation for the next twelve to eighteen months. This period could be shortened if there are any significant increases in spending that were not anticipated or other unforeseen events. We anticipate raising the additional cash needed to continue funding our operations through the private or public sales of equity or debt securities, collaborative arrangements, or a combination thereof. There is no assurance that any such collaborative arrangement will be entered into or that financing will be available to us, when needed, in order to allow us to continue our operations, or if available, on terms acceptable to us. If we do not raise sufficient funds in a timely manner, we may be forced to curtail operations, delay or stop our ongoing clinical trials, cease operations altogether, or file for bankruptcy. We currently do not have commitments for future funding from any source. 16 Product Development of G-202 Our ability to execute our product development plan is dependent on the amount and timing of cash, if any, that we are able to raise. Should we not raise sufficient funds to execute our product development plan, our priority is the continuation and completion of our Phase II clinical study in liver cancer. We believe we have sufficient working capital to fund the Phase II clinical trial in liver cancer to the point where we can determine if such trial will have a positive or negative outcome. Notwithstanding, depending on the rate of enrollment, and the duration of the trial, we may not have sufficient capital to fund the trial through completion.



Our current product development plan of G-202 contemplates the following major initiatives:

Conducting a Phase II clinical study in patients with liver cancer.

In the first quarter of 2014, we entered into a collaborative arrangement and

initiated our Phase II clinical trial in patients with glioblastoma (a form of

brain cancer). This trial is being conducted at the University of California

San Diego Moores Cancer Center, and is expected to enroll up to 34 patients.

Initiation of a Phase II clinical study in patients with prostate cancer via a

collaborative agreement at the University of Texas Health Science Center in

Houston.



Initiation of enrollment in a Phase II clinical study in patients with renal

cell carcinoma via a collaborative agreement at the University of Texas Health

Science Center in Houston.



Phase II Clinical Development of G-202

We are conducting a Phase II clinical trial in patients with advanced liver cancer. This trial is being conducted at multiple sites in the U.S. As of July 23, 2014, twenty-one patients were treated in the study. In July 2014, we presented interim results from our Phase Ib and our ongoing Phase II study in liver cancer patients, indicating that 80% of patients treated with G-202 had stable disease (no tumor growth) at two months, and 50% of patients exhibited stable disease at 4 months on study. Notwithstanding that the initial and interim data from our trials appear promising, the outcome of our trials is uncertain and our current or future trials may ultimately be unsuccessful. In the first quarter of 2014, we entered into a collaborative arrangement and initiated our Phase II clinical trial in patients with glioblastoma. This trial is being initially conducted at the University of California San Diego Moores Cancer Center. As of July 23, 2014, four patients have been treated in the study.



Critical Accounting Policies and Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make significant judgments and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Management bases these significant judgments and estimates on historical experience and other assumptions it believes to be reasonable based upon information presently available. Actual results could differ from those estimates under different assumptions, judgments or conditions. We adopted the provisions of ASU 2014-10 Development Stage Entities (Topic 915) in the current reporting period as discussed in Note 3 of the financial statements. There were no material changes to our critical accounting policies and use of estimates previously disclosed in our 2013 Annual Report on Form 10-K. Result of Operations



Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

Our results of operations have varied significantly from year to year and quarter to quarter and may vary significantly in the future. We did not have revenue during the three months ended June 30, 2014 and 2013. We do not anticipate generating any revenues during 2014. Net loss for the three months ending June 30, 2014 and 2013 were approximately $1.6 million and $0.9 million, respectively, resulting from the operational activities described below. Operating Expenses



Operating expense totaled approximately $1.6 million and $1.5 million during the three months ended June 30, 2014 and 2013, respectively. The increase in operating expenses is the result of the following factors.

17 Three months ended June 30, Change in 2014 versus 2013 2014 2013 $ % (amount in thousands) Operating Expenses General and administrative $ 682 $ 682 $ - - Research and development 924 792 132 17 % Total operating expenses $ 1,606$ 1,474 $ 132 9 % General and Administrative

General and administrative expenses totaled approximately $0.7 million for each of the three months ended June 30, 2014 and 2013, respectively. There was no change for the three months ended June 30, 2014 compared to the same period in 2013, primarily as a result of an increase in professional fees and consulting expenses, offset by a decrease in legal and personnel-related costs.



Our general and administrative expenses consist primarily of expenditures related to employee compensation, legal, accounting and tax, other professional services, and general operating expenses.

Research and Development Expenses

Research and development expenses totaled approximately $0.9 million and $0.8 million for the three months ended June 30, 2014 and 2013, respectively. The increase of approximately $0.1 million, or 17%, for the three months ended June 30, 2014 compared to the same period in 2013 was primarily attributable to increases related to manufacturing costs of approximately $270,000, which were partially offset by a decrease in clinical development costs. Our research and development expenses consist primarily of expenditures related to manufacturing, clinical trials, employee compensation and consulting costs, and patent related costs.



Gain (loss) on change in fair value of warrant derivative liability

There was no gain (loss) on change in fair value of warrant derivative liability during the three months ended June 30, 2014 compared to an approximately $0.5 million gain during the three months ended June 30, 2013. The change in the fair value of warrant derivative liability in the prior year resulted primarily from the reduction in the expected term and from changes in our stock price during the reported periods. Refer to our Notes to Unaudited Condensed Financial Statements for further discussion on our warrant liability.



Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

We did not have revenue during the six months ended June 30, 2014 and 2013. Net loss for the six months ending June 30, 2014 and 2013 were approximately $3.5 million and $2.2 million, respectively, resulting from the operational activities described below. Operating Expenses Operating expense totaled approximately $3.5 million and $3.0 million during the six months ended June 30, 2014 and 2013, respectively. The increase in operating expenses is the result of the following factors. Six months ended June 30,



Change in 2014 versus 2013

2014 2013 $ % (amount in thousands) Operating Expenses General and administrative $ 1,518$ 1,423 $

95 7 % Research and development 2,028 1,582 446 28 % Total operating expenses $ 3,546$ 3,005 $ 541 18 % General and Administrative General and administrative expenses totaled approximately $1.5 million and $1.4 million for the six months ended June 30, 2014 and 2013, respectively. The increase of approximately $0.1 million, or 7%, for the six months ended June 30, 2014 compared to the same period in 2013 was primarily attributable to an increase in stock-based compensation, professional fees and consulting expenses, partially offset by a decrease in personnel-related costs. 18



Our general and administrative expenses consist primarily of expenditures related to employee compensation, legal, accounting and tax, other professional services, and general operating expenses.

Research and Development Expenses

Research and development expenses totaled approximately $2.0 million and $1.6 million for the six months ended June 30, 2014 and 2013, respectively. The increase of approximately $0.4 million, or 28%, for the six months ended June 30, 2014 compared to the same period in 2013 was primarily attributable to increases related to manufacturing of approximately $470,000, as well as an increase in legal and patent costs of $130,000, which were partially offset by a decrease in clinical trial and personnel-related costs. Our research and development expenses consist primarily of expenditures related to manufacturing, clinical trials, employee compensation and consulting costs, and patent related costs.



Gain (loss) on change in fair value of warrant derivative liability

There was no gain (loss) on change in fair value of warrant derivative liability during the six months ended June 30, 2014 compared to an approximately $0.8 million gain during the six months ended June 30, 2013. The change in the fair value of warrant derivative liability in the prior year resulted primarily from the reduction in the expected term and from changes in our stock price during the reported periods. Refer to our Notes to Unaudited Condensed Financial Statements for further discussion on our warrant liability.



Liquidity and Capital Resources

We have incurred losses since our inception in 2003 as a result of significant expenditures for operations and research and development and the lack of any approved products to generate revenue. We have an accumulated deficit of approximately $35.9 million as of June 30, 2014 and anticipate that we will continue to incur additional losses for the foreseeable future. To date, we have funded our operations primarily through the sale of our equity securities and the exercise of warrants, resulting in gross proceeds of approximately $29.2 million, and net proceeds of approximately $28.1 million. Cash and cash equivalents at June 30, 2014 was approximately $4.8 million. Based on our current level of expected operating expenditures, we expect to be able to fund our operations for the next twelve to eighteen months. This assumes that we spend minimally on general operations and only continue conducting our ongoing Phase II clinical trials, and that we do not encounter any unexpected events or other circumstances that could shorten this time period. We are actively seeking sources of financing to fund our continued operations and research and development programs. To raise additional capital, we may sell equity or debt securities, or enter into collaborative, strategic and/or licensing transactions. There can be no assurance that we will be able to complete any financing transaction in a timely manner or on acceptable terms or otherwise or enter into a collaborative or strategic transaction. If we are not able to raise additional cash, we may be forced to delay, curtail, or cease development of our product candidates, or cease operations altogether. Six months ended June, Change in 2014 versus 2013 2014 2013 $ % (amount in thousands) Cash at beginning of period $ 3,587$ 2,345 $ 1,242 53 % Net cash used in operating activities (2,571 ) (2,149 ) (422 ) (20 )% Cash used in investing activities (2 ) (8 ) 6 75 % Net cash provided by financing activities 3,777 1,312 2,465 188 % Cash at end of period $ 4,791$ 1,500 $ 3,291 219 % Cash totaled approximately $4.8 million and $1.5 million as of June 30, 2014 and 2013, respectively. The increase of approximately $3.3 million at June 30, 2014 compared to the same period in 2013 was primarily attributable to approximately $1.2 million more cash at the beginning of 2014 compared to the beginning of 2013, as well as an increase cash provided by financing activities of approximately $2.5 million, partially offset by an increase in cash used in operating activities.



Net Cash Used in Operating Activities

Net cash used in operating activities was approximately $2.6 million and $2.1 million for the six months ended June 30, 2014 and 2013, respectively. The increase in cash used for operations during the six months ended June 30, 2014, compared to the same period in 2013, was primarily attributable to an increase of $1.3 million in our net loss as compared to prior year. The increase in our net loss for the six months ended June 30, 2013 was primarily a result of increases in research and development related costs, related to manufacturing, and legal and patent costs. 19



Net Cash Provided by Financing Activities

Cash provided by financing activities was approximately $3.8 million and $1.3 million for the six months ended June 30, 2014, and 2013, respectively. The increase in cash provided by financing activities for the six months ended June 30, 2014 compared to 2013 is attributable to the sale of $4.1 million of our securities in June 2014, compared to $1.4 million for the prior year from the sale of our securities and the exercise of outstanding warrants.


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Source: Edgar Glimpses


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