NOTE 1. GENERAL
ORGANIZATION AND BUSINESS
Genesis Biopharma, Inc. (the Company
or we) was originally incorporated under the laws of the state of Nevada on September 17, 2007. The Company is considered
a development stage company, and has had no revenues from operations to date.
The Companys initial operations
included organization, capital formation, target market identification, new product development and marketing plans. The Company
has become a biopharmaceutical company engaged in the development and commercialization of drugs and other clinical solutions for
underserved diseases, including metastatic cancers and lethal infectious diseases.
On March 15, 2010, the Company (then
named Freight Management Corp.) and Genesis Biopharma, Inc., a Nevada corporation and newly formed merger subsidiary wholly owned
by the Company (Merger Sub), consummated a merger transaction (the Merger) whereby Merger Sub merged
into the Company, with the Company as the surviving corporation. The Company and Merger Sub filed the Articles of Merger
on March 15, 2010 with the Secretary of State of Nevada, along with the Agreement and Plan of Merger entered into by the two parties
effective as of March 15, 2010 (the Merger Agreement). The Merger Agreement and the Articles of Merger
provided for an amendment of the Companys Articles of Incorporation, which changed the Companys name to Genesis
Biopharma, Inc. effective as of March 15, 2010.
Basis of Presentation of Unaudited
Condensed Financial Information
The unaudited condensed financial
statements of the Company for the three and nine months ended September 30, 2012 and 2011 have been prepared in accordance with
accounting principles generally accepted in the United States of America for interim financial information and pursuant to the
requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information and
footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However,
such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management,
necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods
are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as
of December 31, 2011 was derived from the audited financial statements included in the Company's financial statements as of and
for the year ended December 31, 2011 included in the Companys Annual Report on Form 10-K filed with the Securities and Exchange
Commission (the SEC) on March 30, 2012. These financial statements should be read in conjunction with that report.
We are currently in the development
stage. As a development stage company that is currently engaged in the development of therapeutics to fight cancer,
we have not yet generated any revenues from our biopharmaceutical business. We currently do not anticipate that we will generate
any revenues during 2012 from the sale or licensing of any products. In addition, we have not generated any revenues from our prior
The accompanying condensed financial
statements have been prepared assuming that the Company will continue as a going concern. The Company has not had any
revenue and is still considered to be in the development stage. As shown in the accompanying condensed financial statements,
the Company has incurred a net loss of $6,773,860 for the nine months ended September 30, 2012 and has used $2,241,467 of cash
in its operating activities during the nine months ended September 30, 2012. As of September 30, 2012, the Company has
a stockholders deficiency of $16,581,601 and has a working capital deficiency of $8,945,365 (excluding our derivative liability). The
Company has no cash and cash equivalents on hand as of September 30, 2012. In addition, as described in Notes 3, 4 and
5, the Company is obligated to pay an aggregate of $6,481,250 in note principal pursuant to convertible notes and promissory notes
issued in during the period ended September 30, 2012 and in fiscal 2011. A total of $6,231,250 of these notes are past
due and we are currently in default and the remaining $250,000 is due on demand. Accordingly, if we do not obtain additional
funding and if these note holders demand payment we will not be able to repay these obligations which could result in the foreclosure
of all of our assets. A foreclosure would result in the loss of our assets and business and the result in a total loss
to our stockholders.
We have not identified the sources
for the additional financing that we will require, and we do not have commitments from any third parties to provide this financing. No
assurance can be given that we will have access to the capital markets in future, or that financing will be available to us on
acceptable terms to satisfy either our short-term future loan repayment obligations or our subsequent on-going cash requirements
that we need to implement our business strategies. Our inability to access the capital markets or obtain acceptable
financing could force us to terminate our business, abandon our plan to develop Contego, and cease operations.
The Companys ability to continue
as a going concern is dependent upon its ability to develop additional sources of capital and to ultimately achieve sustainable
revenues and profitable operations. As a result, the Companys independent registered public accounting firm, in its report
on the Companys December 31, 2011 financial statements, has raised substantial doubt about the Companys ability to
continue as a going concern. The Companys financial statements do not include any adjustments that might result from the
outcome of these uncertainties. At September 30, 2012, the Company has not yet commenced any revenue-generating operations and
is dependent on debt and equity funding to finance its operations.
We currently do not have sufficient
capital on hand to fund our anticipated on-going operating expenses, and we do not have any bank credit lines or other sources
of capital. Accordingly, we will have to obtain additional debt or equity funding in the near future in order to continue our operations.
We have not yet identified, and cannot be sure that we will be able to obtain any additional funding from either of these sources,
or that the terms under which we may be able to obtain such funding will be beneficial to us or our stockholders.
Because the Company is currently
engaged in research at an early stage, it will likely take a significant amount of time to develop any product or intellectual
property capable of generating revenues. As such, the Companys business is unlikely to generate any sustainable revenues
in the next several years, and may never do so. Even if the Company is able to generate revenues in the future through licensing
its technologies or through product sales, there can be no assurance that the Company will be able to generate a profit. These
factors, coupled with our inability to meet our obligations from current operations, and the need to raise additional capital to
accomplish our objectives, create a substantial doubt about our ability to continue as a going concern.