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                                  UNITED STATES
                       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 March 31, 1997

                                       OR

             [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number 0-19635


                               GENTA INCORPORATED
   (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CERTIFICATE OF INCORPORATION)

             Delaware                                      33-0326866
(STATE OR OTHER JURISDICTION OF                          (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                          IDENTIFICATION NUMBER)


         3550 General Atomics Court
         San Diego, California                                    92121
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                        (ZIP CODE)


                                 (619) 455-2700
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


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

                    Yes  [X]                  No  [ ]


         As of April 30, 1997,  the  registrant  had 4,328,062  shares of common
stock outstanding.


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<PAGE>

                               GENTA INCORPORATED
                               INDEX TO FORM 10-Q

PART I.  FINANCIAL INFORMATION                                             Page

Item 1.  Financial Statements (Unaudited)

          Condensed Consolidated Balance Sheets at March 31, 1997
              and December 31, 1996                                           3

          Consolidated Statements of Operations for the
              Quarters Ended March 31, 1997 and 1996                          4

          Condensed Consolidated Statements of Cash Flows for the
              Quarters Ended March 31, 1997 and 1996                          5

          Notes to Consolidated Financial Statements                          6

Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                       8


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                    20

Item 4.  Submission of Matters to a Vote of Security Holders                  20

Item 6.  Exhibits and Reports on Form 8-K                                     20



SIGNATURES                                                                    22


<PAGE>

PART 1.  FINANCIAL INFORMATION
Item 1.    Financial Statements (Unaudited)

                                     Genta Incorporated
                           CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                       March 31,                December 31,
                                           ASSETS                                        1997                       1996
                                                                                         ----                       ----
                                                                                      (Unaudited)                  (Note)
Current assets:
<S>                                                                                    <C>                       <C>     
   Cash and cash equivalents ......................................                   $1,288,688                $532,013
   Trade accounts receivable ......................................                       683,070                 602,696
   Notes receivable from officers and employees ...................                        62,000                  62,000
   Inventories ....................................................                       957,552                 992,243
   Other current assets ...........................................                       709,450                 185,164
                                                                                       ----------               ---------
Total current assets ..............................................                     3,700,760               2,374,116
                                                                                       ----------               ---------
Property and equipment, net .......................................                     3,173,289               3,634,281
Intangibles, net ..................................................                     4,016,771               4,022,242
Other assets, net .................................................                     1,213,674               1,138,745
                                                                                      $12,104,494             $11,169,384
                                                                                      ===========             ===========

                            LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                                    $2,436,852              $1,481,521
   Other accrued expenses                                                               1,446,108               2,012,125
   Deferred revenue                                                                       135,684                 193,121
   Short term notes payable                                                             3,350,000                 350,000
   Current portion of notes payable and capital lease obligations                         262,400                 291,842
                                                                                        ---------               ---------
Total current liabilities                                                               7,631,044               4,328,609
                                                                                        ---------               ---------
Capital lease obligations, less current portion                                                --                  30,652
Notes payable, less current portion                                                       979,535               1,129,388
Deficit in Joint Venture                                                                1,740,542               1,606,503
Stockholders' equity:
   Preferred stock; 5,000,000 shares authorized:
      Series A convertible  preferred  stock,  $.001 par value;  528,100  shares
        issued and outstanding at March 31, 1997 and December 31, 1996,
        liquidation value is $30,446,432 at March 31, 1997.                                   528                     528
      Series C convertible preferred stock, $.001 par value; 1,424 shares
        issued and outstanding at March 31, 1997 and December 31, 1996,
        liquidation value is $1,482,870 at March 31, 1997                                       1                       1
   Common stock, $.001 par value; 70,000,000 shares authorized;
      3,999,163 shares issued and outstanding at March 31, 1997 and
      December 31, 1996*                                                                    3,999                   3,999
   Additional paid-in capital                                                         108,248,400             108,823,555
   Accumulated deficit                                                               (110,696,266)           (108,375,407)
   Accrued dividends payable                                                            4,246,687               3,671,532
   Notes receivable from stockholders                                                     (49,976)                (49,976)
                                                                                      -----------             ----------- 
Total stockholders' equity                                                              1,753,373               4,074,232
                                                                                      -----------             -----------
                                                                                      $12,104,494             $11,169,384
                                                                                      ===========             ===========
</TABLE>

Note:       The balance  sheet at December  31, 1996 has been  derived  from the
            audited  financial  statements at that date but does not include all
            of the  information  and  footnotes  required by generally  accepted
            accounting principles for complete financial statements.

* Adjusted  to reflect  the one for ten  reverse  stock  split of the  Company's
  outstanding common stock which was effected on April 4, 1997.

                            See accompanying notes.


                                       3

<PAGE>

                               Genta Incorporated
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


                                             Quarters Ended March 31,
                                             ------------------------
                                                1997            1996
                                                ----            ----
                                           
Revenues:
   Product sales .....................     $ 1,158,839      $ 1,245,559
   Collaborative research
     and development .................          50,000               --
                                                            -----------
                                             1,208,839        1,245,559
                                           -----------      -----------

Cost and expenses:
   Cost of products sold .............         712,226          555,392
   Research and development ..........       1,107,039        1,576,436
   Selling, general and administrative       1,459,458        1,109,077
                                           -----------      -----------
                                             3,278,723        3,240,905
                                           -----------      -----------
Loss from operations .................      (2,069,884)      (1,995,346)
Equity in net loss of joint venture ..        (303,129)      (1,207,847)
Other income (expense):
   Interest and other income .........         118,104           76,987
   Interest expense ..................         (65,950)         (94,723)
                                           -----------      -----------
                                                52,154          (17,736)
                                           -----------      -----------
Net loss .............................      (2,320,859)      (3,220,929)
Dividends on preferred stock .........        (575,155)        (677,500)
                                           -----------      -----------
Net loss applicable to
  common shares ......................     $(2,896,014)     $(3,898,429)
                                           ===========      ===========
  Net loss per common share* .........     $     (0.70)     $     (1.60)
                                           ===========      ===========
Shares used in computing net
  loss per common share* .............       3,999,163        2,479,663
                                           ===========      ===========


* Per share data has been  adjusted  to reflect  the one for ten  reverse  stock
  split of the Company's outstanding common stock which was effected on April 4,
  1997.

                            See accompanying notes.


                                       4

<PAGE>

                               Genta Incorporated
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                           Quarters ended March 31,
                                                           ------------------------
                                                              1997            1996
                                                              ----            ----
                                                         
Operating activities
<S>                                                      <C>              <C>         
Net loss ...........................................     $(2,320,859)     $(3,220,929)
Items reflected in net loss not requiring cash:
   Depreciation and amortization ...................         250,666          402,537
   Equity in net loss of joint venture .............         303,129        1,207,847
   Changes in operating assets and liabilities .....        (238,092)        (743,466)
                                                         -----------      -----------
Net cash used in operating activities ..............      (2,005,156)      (2,354,011)

Investing activities
Purchase of property and equipment .................          (4,449)              --
Sale of property and equipment .....................         253,337               --
Investment in and advances to joint venture ........        (169,090)        (654,007)
Deposits and other .................................        (108,020)        (101,210)
                                                         -----------      -----------
Net cash used in investing activities ..............         (28,222)        (755,217)

Financing activities
Proceeds from notes payable ........................       3,000,000          240,000
Repayments of notes payable and capital leases .....        (209,947)        (318,882)
Proceeds from issuance of preferred stock, net .....              --        8,354,458
Other ..............................................              --            7,497
                                                         -----------      -----------
Net cash provided by financing activities ..........       2,790,053        8,283,073
                                                         -----------      -----------
Increase in cash and cash equivalents ..............         756,675        5,173,845
Cash and cash equivalents at beginning of period ...         532,013          271,755
                                                         -----------      -----------
Cash and cash equivalents at end of period .........     $ 1,288,688      $ 5,445,600
                                                         ===========      ===========

Supplemental disclosures of cash flow information:
Interest paid ......................................     $    14,670      $    57,434
Supplemental schedule of noncash investing and
  financing activities:
Preferred stock dividends accrued ..................     $   575,155      $   677,500
Preferred stock issued upon conversion of short-term
   notes payable and accrued interest ..............     $        --      $ 1,044,000
</TABLE>

                            See accompanying notes.


                                       5

<PAGE>


                               GENTA INCORPORATED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1997
                                   (UNAUDITED)

(1)      BASIS OF PRESENTATION

         The unaudited  condensed  consolidated  financial  statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly,  they
do not include all of the information and footnotes required to be presented for
complete financial statements. The accompanying financial statements reflect all
adjustments  (consisting  only of normal  recurring  accruals) which are, in the
opinion of management,  necessary for a fair presentation of the results for the
interim periods  presented.  Certain balances in 1996 have been  reclassified to
conform with the presentation in 1997.

         The condensed consolidated financial statements and related disclosures
have been  prepared  with the  presumption  that users of the interim  financial
information have read or have access to the audited financial statements for the
preceding fiscal year. Accordingly, these financial statements should be read in
conjunction with the audited  consolidated  financial statements and the related
notes thereto  included in the  Registrant's  Annual Report on Form 10-K for the
year ended December 31, 1996.

         The Company  has  experienced  significant  quarterly  fluctuations  in
operating results and it expects that these  fluctuations in revenues,  expenses
and losses will continue.

(2)      INVENTORIES

         Inventories are comprised of the following:
                                                March 31,          December 31,
                                                 1997                  1996
                                            ------------           ------------
         Raw materials and supplies         $    300,765           $   342,875
         Work-in-process                         189,614               272,259
         Finished goods                          467,173               377,109
                                            ------------           -----------
                                            $    957,552           $   992,243
                                            ============           ===========


(3)      NET LOSS PER COMMON SHARE

         Net loss per common share is computed using the weighted average number
of common shares outstanding during each of the interim periods. Shares issuable
upon the  exercise  of  outstanding  stock  options  and  warrants  and upon the
conversion of convertible  preferred  stock are not reflected as their effect is
anti-dilutive.

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement  No. 128,  "Earnings  per  Share,"  which is required to be adopted on
December  31,  1997.  At that time,  the Company  will be required to change the
method  currently  used to compute net earnings  (loss) per share and to restate
all prior periods. Under the new requirements for calculating basic, or primary,
earnings per share,  the dilutive effect of stock options will be excluded.  The
impact of the new  standard  will have no effect on the  Company's  net loss per
share for the quarters ended March 31, 1997 and 1996.


                                        6


<PAGE>

(4)      STOCKHOLDERS' EQUITY

         In February  1997, the Company raised gross proceeds of $3 million in a
private  placement  to  the  Aries  Fund  and  the  Aries  Domestic  Fund,  L.P.
(collectively  the "Aries Funds"),  of Senior Secured  Convertible  Bridge Notes
(the  "Convertible  Notes") and warrants to purchase 2 million  shares of common
stock ("Bridge Warrants").  The Convertible Notes are initially convertible into
600,000 shares of Series D preferred stock, which in turn are convertible into 2
million  shares of common  stock.  Bridge  Warrants on 780,000  shares of common
stock have an exercise  price of $.01 per share.  Bridge  Warrants on  1,220,000
shares of common stock have an exercise price of $5.50 per share.  Further, upon
the  occurrence of certain events of default,  if elected by the holders,  up to
$300,000  principal  amount of the Convertible  Notes is convertible into common
stock  at a  conversion  price  of  $.01  per  share.  Each  Bridge  Warrant  is
convertible,  at the option of the  holder,  into a new Warrant  entitling  such
holder to purchase one share of common  stock at an exercise  price of $1.50 per
share or, under certain circumstances, if lower than $1.50 per share, 50% of the
market  price of the common  stock.  Pursuant to the Note and  Warrant  Purchase
Agreement  dated as of January 28, 1997  between the Company and the Aries Funds
(the "Note and Warrant Purchase  Agreement"),  the Aries Funds have the right to
appoint a majority  of the  members of the Board of  Directors  of the  Company;
provided,  however,  that in the  event  the  Company  does  not  obtain  Future
Financings (as defined in the Note and Warrant Purchase  Agreement) in excess of
$3.5  million on or before  June 30,  1977,  then the Aries Funds shall have the
contractual  right to appoint only two  directors  or observers  and, if at such
time,  more than two  directors  have been  appointed  by the Aries  Funds,  the
additional directors shall be required to resign.

         During April 1997,  280.336 shares of the Series C Preferred  Stock and
accrued  dividends  were  converted  at the option of the holders  into  175,221
shares of Genta's common stock.  The Conversion  price was based upon 75% of the
average  Nasdaq  closing  bid prices of  Genta's  common  stock for a  specified
period. Terms of the Series C Preferred Stock also provide for dividends payable
in shares of the Company's common stock.

         Also during April 1997, $250,000 of the 4% Convertible  Debentures (the
"Convertible  Debentures")  and the related accrued interest were converted into
153,368 shares of Genta's common stock.  The conversion price was based upon 75%
of the average Nasdaq closing bid prices of Genta's common stock for a specified
period. Terms of the Convertible Debentures also provide for interest payable in
shares of the Company's common stock.

         At the Company's Annual Meeting of Stockholders  held on April 4, 1997,
the stockholders  approved an amendment to the Company's Restated Certificate of
Incorporation  effecting a one for ten reverse  stock split of its common stock.
The stockholders also approved a reduction of the Company's authorized shares of
common stock from 150,000,000 to 70,000,000.  The Company commenced trading on a
post reverse split basis at the  commencement  of trading on April 7, 1997.  All
common stock and per share amounts in the  accompanying  Consolidated  Financial
Statements have been retroactively restated to reflect the reverse stock split.

         In April 1997,  the Nasdaq Listing  Qualifications  Panel (the "Panel")
reached a determination to modify the terms of the conditional  exception to the
bid price and capital and surplus  requirements  of The Nasdaq  SmallCap  Market
that was granted to the Company on February 7, 1997,  as follows  (the  "Revised
Exception").  First, on or before April 15, 1997, the Company must make a public
filing with the  Securities and Exchange  Commission  (the "SEC") and The Nasdaq
Stock  Market,  Inc.  ("Nasdaq")  evidencing  minimum  capital  and  surplus  of
$2,700,000.  The filing must contain a February 28, 1997 balance  sheet with pro
forma  adjustments for any significant  transactions  occurring on or before the
filing date.  Second,  on or before May 7, 1997, the Company must provide Nasdaq
with an April 30, 1997 balance sheet  evidencing  compliance with the $1,000,000
maintenance  requirement  for capital and surplus.  Third,  on or before June 9,
1997,  the  Company  must  provide  Nasdaq  with a May 31,  1997  balance  sheet
evidencing  compliance with the $1,000,000  maintenance  requirement for capital
and surplus.  Finally, on or before July 7, 1997, the Company must make a public
filing with the SEC and Nasdaq containing a June 30, 1997 balance sheet with pro
forma  adjustments for any significant  transactions  occurring on or before the
filing date.  The filing must  evidence a minimum of  $6,000,000  in capital and
surplus and compliance with all  requirements for continued  listing.  The Panel
has further informed the Company that in the event the Company fails to meet any


                                        7

<PAGE>

of the terms of this  Revised  Exception,  its  securities  will be  immediately
deleted from The Nasdaq  Stock  Market.  On April 15,  1997,  the Company made a
filing with the SEC and Nasdaq  evidencing  capital and surplus of $2,722,091 as
of February 28, 1997,  and on May 6, 1997, the Company  provided  Nasdaq with an
April 30, 1997 balance sheet evidencing  $1,383,984 in capital and surplus.  The
Company  believes  that  it  will be able  to  meet  the  terms  of the  Revised
Exception.  However, there can be no assurance that Nasdaq's capital and surplus
requirements  will be  satisfied  or that the Company will not fail to meet some
other listing maintenance standard during the intervening period.

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

OVERVIEW

         Since its inception in February  1988,  Genta has devoted its principal
efforts  toward  drug  discovery,  research  and  development.  Genta  has  been
unprofitable  to  date  and,  even  if it  obtains  financing  to  continue  its
operations,  expects to incur substantial  operating losses for the next several
years  due to  continued  requirements  for  ongoing  research  and  development
activities,  preclinical testing and clinical trials,  manufacturing activities,
regulatory activities, establishment of a sales and marketing organization if so
decided, and development  activities  undertaken by Genta Jago Technologies B.V.
("Genta Jago"),  the Company's  joint venture with Jagotec AG ("Jagotec").  From
the period since its  inception  to March 31,  1997,  the Company has incurred a
cumulative net loss of $110.7 million.  The Company has experienced  significant
quarterly   fluctuations  in  operating   results  and  it  expects  that  these
fluctuations in revenues, expenses and losses will continue. See "Risk Factors".

         The statements contained in this Quarterly Report on Form 10-Q that are
not historical are forward-looking  statements within the meaning of Section 27A
of the  Securities  Act of 1933, as amended,  and Section 21E of the  Securities
Exchange Act of 1934,  as amended (the  "Exchange  Act"),  including  statements
regarding the  expectations,  beliefs,  intentions  or strategies  regarding the
future.  The Company intends that all  forward-looking  statements be subject to
the safe-harbor  provisions of the Private  Securities  Litigation Reform Act of
1995.  These  forward-looking  statements  reflect the Company's views as of the
date they are made with respect to future events and financial performance,  but
are  subject  to many  risks and  uncertainties,  which  could  cause the actual
results of the Company to differ materially from any future results expressed or
implied  by  such  forward-looking  statements.   Examples  of  such  risks  and
uncertainties include, but are not limited to, obtaining sufficient financing to
maintain the Company's planned operations,  the timely  development,  receipt of
necessary  regulatory  approvals and acceptance of new products,  the successful
application of the Company's  technology to produce new products,  the obtaining
of proprietary  protection for any such  technology and products,  the impact of
competitive  products and pricing and  reimbursement  policies,  changing market
conditions  and the other  risks  detailed in the Risk  Factors  section of this
Quarterly  Report on Form 10-Q.  The Company  does not  undertake  to update any
forward-looking statements.

RESULTS OF OPERATIONS

         Operating  revenues  decreased to $1.2 million in the first  quarter of
1997  compared  to $1.3  million in the first  quarter of 1996 due to  decreased
sales of  specialty  chemical  and  pharmaceutical  intermediate  products.  The
Company has historically  experienced  significant quarterly fluctuations in its
level of product sales,  generally  reflecting the timing and degree of customer
demand for  certain  products,  and the  Company  anticipates  that these  sales
fluctuations  will  continue  in  future  periods.  Collaborative  research  and
development  revenues  recorded  during the first  quarter  of 1997  represented
revenues  earned  pursuant to the  Company's  agreement  with  Johnson & Johnson
Consumer   Products,   Inc.  which  provided  limited  funding  for  preliminary
feasibility studies using Genta's Anticode compounds.

         Costs and expenses  increased  to $3.3 million in the first  quarter of
1997  compared to $3.2 million in the first quarter of 1996.  Although  research
and  development  expenses have decreased from $1.6 million in the first quarter
of 1996 to $1.1  million in the first  quarter of 1997,  selling and general and
administrative expenses have increased from $1.1 million in the first quarter of
1996 to $1.5 million in the first quarter of 1997 and cost of


                                        8

<PAGE>

products  sold have  increased  from  $600,000 in 1996 to $700,000 in 1997.  The
decrease in research and development  expenses is primarily  attributable to the
Company's restructuring and related workforce reductions implemented in 1995 and
1996 together with the  discontinuation  or  non-initiation of several programs.
The  increase in selling and general and  administrative  expenses is  primarily
attributable to the increased expenses associated with the litigation  described
under the  heading  "Legal  Proceedings"  in Item 1 of Part II of this Report on
Form 10-Q.  The  increase in the cost of products  sold is  primarily  due to an
unfavorable product mix variance,  cost of materials  variance,  volume variance
and restructuring modifications related to manufacturing capabilities.

         The  Company's  equity  in net  loss  of  joint  venture  (Genta  Jago)
decreased  to  $300,000  in the first  quarter of 1997 from $1.2  million in the
comparable  quarter of 1996.  Such decrease is largely  attributable to the fact
that a greater  portion of development  activities were funded pursuant to Genta
Jago's collaborative  agreements with third parties and that the joint venture's
development  efforts  are now focused  exclusively  on  GEOMATRIX(R)  based drug
delivery products.

LIQUIDITY AND CAPITAL RESOURCES

         Since inception, the Company has financed its operations primarily from
private and public offerings of its equity securities.  Cash provided from these
offerings totaled  approximately $98.3 million through March 31, 1997, including
net proceeds of $2.9 million (net of expenses)  raised  during the first quarter
of 1997. At March 31, 1997, the Company had cash and cash  equivalents  totaling
$1.3 million  compared to a total of $500,000 at December 31, 1996. The increase
in cash and  cash  equivalents  during  the  first  quarter  of 1997 is  largely
attributable to proceeds from the issuance of Convertible Notes in February 1997
as described under note 4 to the Consolidated  Financial  Statements,  less cash
used in the Company's operations.

         The Company anticipates that its existing capital resources,  including
$3 million in financing  obtained from the issuance of the Convertible  Notes in
February  1997,  will  enable the  Company to  maintain  its  presently  planned
operations into June 1997.  Management  believes that a minimum of approximately
$6.4 million of additional  financing  will be required to sustain the Company's
presently-planned  operations  through  the  end  of  1997  and to  satisfy  the
Company's   obligations   under  the  Convertible   Notes  and  the  Convertible
Debentures.  The Company has been informed,  however, that its common stock will
be delisted from the Nasdaq SmallCap Market unless the Company complies with the
terms  of the  Revised  Exception  (see  note 4 to  the  Consolidated  Financial
Statements).   While  the  Company  believes  that  it  can  meet  the  Nasdaq's
requirements,  there can be no assurance that the Company will be able to do so.
Such delisting is likely to have a material  adverse effect on the Company.  The
Company is actively seeking  additional  sources of financing and is negotiating
with  biotechnology  and  pharmaceutical   companies   regarding   collaborative
agreements and other financial arrangements. There can be no assurance, however,
that any such sources of funding or  collaborative  agreements will be available
on favorable  terms,  if at all. The Company has entered into a letter of intent
with an  investment  banking  firm  pursuant  to which such firm  confirmed  its
interest in acting as placement  agent,  on a "best efforts" basis, of a private
placement of preferred stock,  convertible notes and warrants for proceeds of up
to $7.5 million (plus an over-allotment option),  subject to certain conditions.
In the letter of  intent,  this firm  agreed  that,  to the  extent  alternative
financings  were available at better timing,  pricing and terms,  the firm would
waive its right to conduct  the  offering.  If the  Company is  unsuccessful  in
raising  the  required  funds,  the  Company  may be required to license or sell
additional assets and technology, further scale back or eliminate some or all of
its development programs,  further reduce its work force and spending,  and take
other  measures in order to continue its  operations.  If such  measures are not
successfully  completed,   the  Company  may  be  required  to  discontinue  its
operations.

         As described under note 4 to the Consolidated Financial Statements, the
Aries  Funds,  who  provided $3 million in  financing to the Company in February
1997,  have the  right to  appoint a  majority  of the  members  of the Board of
Directors of the Company.  Should they  determine to do so, their  designees may
decide to alter the  business  strategy,  operations  and/or  management  of the
Company  in a manner not  contemplated  in this  Quarterly  Report on Form 10-Q.
Effective May 6, 1997,  Thomas H. Adams,  Ph.D.,  who  co-founded the Company in
1989,  resigned from the Board of Directors and as Chairman and Chief  Executive
Officer of the Company. Dr. Adams


                                        9

<PAGE>


will remain as a  consultant  and  technical  advisor to the Company as Chairman
Emeritus.  Mr. Michael S. Weiss,  Senior Managing Director of Paramount Capital,
Inc.,  was elected to the Board of  Directors  of Genta as an  appointee  of the
Aries Funds and as Interim  Chairman of the Board.  Mr. Weiss is also a director
of AVAX Technologies,  Inc., Xytronyx, Inc. and Palatin Technologies, Inc., each
a publicly traded biotechnology company. In addition, the Company announced that
Mr.  John F. Dee and Mr.  John V.  Oyler will  assist the  Company as an interim
management  team  during this  transitional  period  while the  Company  seeks a
full-time Chief Executive Officer. Both Mr. Dee and Mr. Oyler were most recently
management consultants at McKinsey & Company,  Inc., a multinational  consulting
firm and both have  consulting  and  operational  experience in  healthcare  and
biotechnology.

         In connection with the Genta Jago joint venture formed in late 1992 and
expanded in May 1995, the Company entered into a working capital  agreement with
Genta Jago that expires in October 1998. Pursuant to this agreement, the Company
is  required to make loans to Genta Jago up to a mutually  agreed  upon  maximum
commitment  amount,  which  amount is  established  by the parties on a periodic
basis.  The Company  anticipates its working capital  contribution to Genta Jago
for 1997 will be  $300,000,  as compared to $846,784 in 1996 and $7.7 million in
1995. The reduction in the Company's working capital contributions to Genta Jago
is largely a result of Genta Jago's having entered into collaborative agreements
with third  parties.  As of March 31,  1997,  the Company had  advanced  working
capital loans of  approximately  $15.8  million to Genta Jago,  net of principal
repayments. Such loans bear interest and are payable in full in October 1998, or
earlier in the event  certain  revenues  are  received  by Genta Jago from third
parties.  There can be no  assurance,  however,  that  Genta  Jago  will  obtain
sufficient  financial  resources to repay such loans to Genta. Genta Jago repaid
Genta $1 million of its working  capital loans in November 1996 from license fee
revenues.  The amount of future  loans by Genta to Genta Jago will  depend  upon
several factors  including the amount of funding  obtained by Genta Jago through
collaborative arrangements, Genta's ability to provide loans, and the timing and
cost of  Genta  Jago's  preclinical  studies,  clinical  trials  and  regulatory
activities.

         On May 7, 1997 Jago Pharma AG ("Jago")  gave Genta Jago formal  notices
of its assertion that Genta Jago is in breach of the Restated Geomatrix Services
Agreement,  the Restated  Geomatrix  Research and Development  Agreement and the
Restated  Geomatrix  License  Agreement,  stating  that should the breach not be
cured within the applicable  cure period,  Genta Jago would reserve the right to
terminate the agreements in accordance  with their terms.  Jago also gave formal
notice of default under the Restated Joint Venture and  Shareholders  Agreement,
contending that due to Genta's failure to meet its funding  obligations to Genta
Jago,  Genta Jago was  unable to fulfill  its  obligations  to Jago.  The amount
claimed  by Jago to be in  default  is  approximately  $1.2  million,  of  which
$200,000  relates  to 1997 and $1.0  million  relates to  development  costs and
license fees for 1996.  While a termination  of certain of these  agreements may
have a material adverse effect on the Company,  the Company believes there is no
basis for Jago's  assertions and intends to vigorously  oppose Jago's  position.

         Unless the Company and/or Genta Jago  successfully  secures  sufficient
levels of collaborative  revenues and other sources of financing,  it expects to
incur substantial  additional costs, including costs related to ongoing research
and   development   activities,   preclinical   testing  and  clinical   trials,
manufacturing  activities,  costs  associated  with the market  introduction  of
potential products,  expansion of its administrative activities, and development
activities   undertaken  by  Genta  Jago.  The  Company  will  need  substantial
additional  funds before it can expect to realize  significant  product revenue.
The  Company  anticipates  that  significant  additional  sources of  financing,
including  equity  financings,  will be  required  in order for the  Company  to
continue its planned  principal  operations.  The Company's  working capital and
additional  funding  requirements will depend upon numerous factors,  including:
(i) the availability of funding; (ii) the progress of the Company's research and
development  programs;  (iii) the timing and results of preclinical  testing and
clinical trials;  (iv) the timing and costs of obtaining  regulatory  approvals;
(v) the level of  resources  devoted to Genta Jago;  (vi) the level of resources
that  the  Company   devotes  to  sales  and   marketing   capabilities;   (vii)
technological  advances;  (viii) the  activities  of  competitors;  and (ix) the
ability of the Company to establish and maintain collaborative arrangements with
others to fund certain research and development,  to conduct clinical trials, to
obtain regulatory approvals and, if such approvals are obtained,  to manufacture
and market products.


                                       10


<PAGE>

RISK FACTORS

         In addition to the other information contained in this Quarterly Report
on Form 10-Q, the following factors should be considered carefully.

         Need for Additional  Funds; Risk of Insolvency.  Genta's  operations to
date have consumed substantial amounts of cash. The Company anticipates that its
existing cash funds,  including  $3,000,000 in additional  financing obtained in
February  1997,  will  enable the  Company to  maintain  its  presently  planned
operations into June 1997. The Company's  auditors included in the Annual Report
on Form  10-K an  emphasis  paragraph  in  their  opinion  with  respect  to the
Company's  ability to continue as a going  concern.  Management  believes that a
minimum of approximately $6.4 million of additional  financing will be necessary
to  sustain  operations  through  the end of 1997 and to satisfy  the  Company's
obligations  under the  Convertible  Notes and the Convertible  Debentures.  The
Convertible  Notes are due on the earlier of June 30, 1997 or five business days
following the  completion of any equity  offering or series of equity  offerings
with gross proceeds in excess of $2,500,000.  However,  the Company is currently
in discussions with the holders of the Convertible  Notes to extend the maturity
date of such Convertible  Notes. There can be no assurance that the Company will
be  successful  in  extending  the  maturity  date  of  the  Convertible  Notes.
Substantial  additional  sources of financing  will be required in order for the
Company to continue its planned operations. Furthermore, Nasdaq has informed the
Company that its common stock will be delisted from the Nasdaq  SmallCap  Market
unless the Company  provides Nasdaq with a May 31, 1997 balance sheet evidencing
compliance with the $1,000,000 capital and surplus maintenance requirement on or
before June 9, 1997 and makes a public filing with the SEC and Nasdaq by July 7,
1997 evidencing  minimum capital and surplus of at least  $6,000,000.  See "Risk
Factors -- Threat of Nasdaq  Delisting"  below.  The Company is negotiating with
biotechnology and pharmaceutical  companies regarding  collaborative  agreements
and other financing  arrangements and is actively seeking  additional  equity or
debt financing. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital  Resources."  However,  there
can be no assurance that any such  collaborative  agreements or other sources of
funding  will be available  on  favorable  terms,  if at all. If such funding is
unavailable,  the  Company  may be  required  to license or sell  certain of its
assets  and  technology,  further  scale  back or  eliminate  some or all of its
development programs, further reduce its work force and spending, and take other
measures  in  order  to  continue  its  operations.  If  such  measures  are not
successfully  completed,   the  Company  may  be  required  to  discontinue  its
operations.  The  Company  will need to raise  substantial  additional  funds to
conduct the costly and  time-consuming  research,  pre-clinical  development and
clinical  trials  necessary to bring its and Genta Jago's products to market and
to establish  production and marketing  capabilities.  The Company may also need
substantial additional funds to provide working capital loans to Genta Jago. The
Company intends to seek additional funding through public or private financings,
including equity financings,  and through collaborative  arrangements.  Adequate
funds  for  these  purposes,  whether  obtained  through  financial  markets  or
collaborative  or other  arrangements  with  corporate  partners  or from  other
sources, may not be available when needed or on terms acceptable to the Company.
Insufficient  funds may require the  Company to delay,  scale back or  eliminate
some or all of its research and product development programs or to license third
parties  to  commercialize  products  or  technologies  that the  Company  would
otherwise seek to develop itself. The Company's future cash requirements will be
affected by results of research and development,  results of preclinical studies
and   bioequivalence   and  clinical   trials,   relationships   with  corporate
collaborators,  changes in the focus and direction of the Company's research and
development programs,  competitive and technological advances, resources devoted
to Genta Jago,  the United States Food and Drug  Administration  (the "FDA") and
foreign regulatory process, potential litigation by companies seeking to prevent
or delay marketing approval of Genta Jago's products and other factors.

         Threat  of  Nasdaq  Delisting.   In  April  1997,  the  Nasdaq  Listing
Qualifications  Panel (the "Panel")  reached a determination to modify the terms
of  the  conditional  exception  to  the  bid  price  and  capital  and  surplus
requirements  of The Nasdaq  SmallCap  Market that was granted to the Company on
February 7, 1997,  as follows (the  "Revised  Exception").  First,  on or before
April 15, 1997,  the Company  must make a public  filing with the SEC and Nasdaq
evidencing minimum capital and surplus of $2,700,000.  The filing must contain a
February 28, 1997 balance sheet with pro forma  adjustments  for any significant
transactions occurring on or before the filing date. Second, on or before May 7,
1997, the Company must provide Nasdaq with an April 30, 1997 balance sheet


                                       11

<PAGE>

evidencing  compliance with the $1,000,000  maintenance  requirement for capital
and surplus.  Third,  on or before June 9, 1997, the Company must provide Nasdaq
with a May 31, 1997 balance  sheet  evidencing  compliance  with the  $1,000,000
maintenance  requirement for capital and surplus.  Finally, on or before July 7,
1997, the Company must make a public filing with the SEC and Nasdaq containing a
June 30,  1997  balance  sheet with pro forma  adjustments  for any  significant
transactions  occurring on or before the filing date. The filing must evidence a
minimum  of  $6,000,000  in  capital  and  surplus  and   compliance   with  all
requirements for continued  listing.  The Panel has further informed the Company
that in the event  the  Company  fails to meet any of the terms of this  Revised
Exception,  its  securities  will be  immediately  deleted from The Nasdaq Stock
Market.  On April 15,  1997,  the Company  made a filing with the SEC and Nasdaq
evidencing capital and surplus of $2,722,091 as of February 28, 1997, and on May
6, 1997,  the  Company  provided  Nasdaq with an April 30,  1997  balance  sheet
evidencing  $1,383,984 in capital and surplus. The Company believes that it will
be able to meet the terms of the  Revised  Exception.  However,  there can be no
assurance that Nasdaq's  capital and surplus  requirements  will be satisfied or
that the Company will not fail to meet some other listing  maintenance  standard
during the intervening  period.  A delisting of the Company's common stock could
adversely affect the ability of the Company to attract new investors.  See "Risk
Factors - Risks of Low-Priced  Stock;  Possible Effect of "Penny Stock" Rules on
Liquidity for the Company's Securities."

         Risks of Low-Priced  Stock;  Possible  Effect of "Penny Stock" Rules on
Liquidity for the Company's  Securities.  If the Company's  securities  were not
listed on a national  securities  exchange  nor listed on a qualified  automated
quotation system,  they may become subject to Rule 15g-9 under the Exchange Act,
which imposes additional sales practice requirements on broker-dealers that sell
such  securities to persons  other than  established  customers and  "accredited
investors"  (generally,  individuals with a net worth in excess of $1,000,000 or
annual incomes exceeding $200,000 or $300,000 together with their spouses).  For
transactions  covered  by  this  Rule,  a  broker-dealer  must  make  a  special
suitability  determination  for the purchaser and have received the  purchaser's
written consent to the transaction  prior to sale.  Consequently,  such Rule may
affect the ability of  broker-dealers  to sell the Company's  securities and may
affect the ability of purchasers to sell any of the securities  acquired hereby,
after subsequent registration, in the secondary market.

         The Commission has adopted  regulations  that define a "penny stock" to
be any equity security that has a market price (as therein defined) of less than
$5.00 per share or with an exercise price of less than $5.00 per share,  subject
to certain  exceptions.  For any  transaction  involving a penny  stock,  unless
exempt,  the rules require delivery,  prior to any transaction in a penny stock,
of a disclosure  schedule prepared by the Commission relating to the penny stock
market.  Disclosure is also required to be made about sales commissions  payable
to  both  the  broker-dealer  and  the  registered  representative  and  current
quotations for the securities.  Finally,  monthly  statements are required to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stock.

         The foregoing  required penny stock  restrictions will not apply to the
Company's securities if the Company meets certain minimum net tangible assets or
average  revenue  criteria.  There  can  be  no  assurance  that  the  Company's
securities will qualify for exemption from the penny stock restrictions.  In any
event, even if the Company's securities were exempt from such restrictions,  the
Company  would remain  subject to Section  15(b)(6) of the Exchange  Act,  which
gives the Commission the authority to restrict any person from  participating in
a distribution of penny stock,  if the Commission  finds that such a restriction
would be in the public interest.

         If the Company's  securities were subject to the rules on penny stocks,
the market liquidity for the Company's  securities would be materially adversely
affected.

         Risk of Appeal of the Suit. In relation to the Suit described under the
heading  "Legal  Proceedings"  in Item 1 of Part II of this Report on Form 10-Q,
the Court  issued  an  opinion  on April 25,  1997  stating  that it will  enter
judgment  in favor of Genta and its  directors  in the lawsuit  challenging  the
Aries investment. The Company believes that the lawsuit is without


                                       12

<PAGE>

merit.  However,  there can be no assurance that the Plaintiffs  will not appeal
the Court's decision, in which case the Company could incur substantial costs in
litigating  such appeal,  and, if an appeal is taken,  there can be no assurance
that the Court's decision will be upheld.

         Subordination of Common Stock to Series A and Series C Preferred Stocks
and Redemption of Series A Preferred Stock;  Risk of Dilution.  The common stock
is expressly  subordinate  to the  approximately  $30 million  preference of the
528,100  outstanding  shares of Series A Preferred  Stock and the  approximately
$1.2 million  preference of the 1,144 shares of Series C Preferred  Stock in the
event of the liquidation,  dissolution or winding up of the Company. Further, no
dividends  may be paid on the common stock unless full  cumulative  dividends on
the Series A and Series C Preferred Stocks have been paid or funds set aside for
such preferred  dividends by the Company.  In addition,  the conversion ratio of
the  Series A  Preferred  Stock and the  exercise  price of  warrants  issued in
connection  with the Series A  Preferred  Stock  (the  "Series A  Warrants")  is
subject to  adjustment,  among other  things,  upon certain  issuances of common
stock or securities  convertible  into common stock at $67.50 per share or less.
Each share of Series A preferred stock is presently convertible into 2.87 shares
of common  stock and the  exercise  price of the Series A Warrants is $21.57 per
share.


         Subordination  of Common  Stock to Senior  Secured  Convertible  Bridge
Notes  and 4%  Convertible  Debentures;  Risk of  Dilution.  In the  event  of a
liquidation,  dissolution or winding up of the Company, the common stock is also
expressly subordinate to $3 million principal amount of Convertible Notes and to
$100,000 principal amount of Convertible Debentures;  such issues are payable in
June 1997 or earlier under  certain  conditions  and August 1997,  respectively.
However,  the  Company is  currently  in  negotiations  with the  holders of the
Convertible  Notes to extend the  maturity  date  thereof.  During  April  1997,
$250,000 of the  Convertible  Debentures and the related  accrued  interest were
converted into 153,368 shares of Genta's common stock.  The conversion price was
based upon 75% of the average  Nasdaq closing bid prices of Genta's common stock
for a specified  period.  Terms of the  Convertible  Debentures also provide for
interest payable in shares of the Company's common stock.  Further, no dividends
may be paid on the common stock unless cumulative  dividends on such convertible
notes  and  debentures  have  been  paid or funds  have  been set aside for such
payment. The Convertible Notes are initially  convertible into 600,000 shares of
Series D preferred stock, which are in turn convertible into 2 million shares of
common stock, subject to antidilution adjustments.

         Early Stage of Development;  Technological Uncertainty.  Genta is at an
early stage of development.  All of the Company's potential therapeutic products
are in  research  or  development,  and no  revenues  have been  generated  from
therapeutic  product sales.  The Company is pursuing  research and  development,
through  Genta  Jago,  of a range  of oral  controlled-release  formulations  of
currently  available  pharmaceuticals.  Many  of the  products  to be  developed
through Genta Jago have not yet been  successfully  formulated  using  GEOMATRIX
technology. In addition, none of the products being developed through Genta Jago
has  had  its  manufacturing  process  successfully   scaled-up  for  commercial
production or has started pivotal  bioequivalence  trials. To date, a portion of
the Company's  resources have been dedicated to applying  molecular  biology and
medicinal chemistry to the research and development of potential  pharmaceutical
products based upon Anticode technology.  While the Company has demonstrated the
activity of Anticode  technology  in model  systems in vitro and the activity of
antisense  technology in animals and has identified a number of compounds  which
the  Company  believes  are  worthy  of  additional  testing,  only one of these
potential Anticode products has begun to be tested in humans,  with such testing
in its early  stages.  There can be no  assurance  that the  novel  approach  of
Anticode  technology  to develop  therapeutic  products  will result in products
which  receive  necessary  regulatory  approvals  or  that  will  be  successful
commercially.   Further,  results  obtained  in  preclinical  studies  or  pilot
bioequivalence  trials are not  necessarily  indicative  of results that will be
obtained  in  human   clinical   testing  or  pivotal   bioequivalence   trials,
respectively. The Company is also developing products for certain diseases where
no animal models exist.  There can be no assurance  that any of the Company's or
Genta Jago's potential products can be successfully developed.  Furthermore, the
Company's  products in research or development may prove to have undesirable and
unintended side effects or other characteristics that may prevent or limit their
commercial  use. There can be no assurance that the Company will be permitted to
undertake human


                                       13

<PAGE>

clinical  testing  of  its  potential  Anticode  products  or any  other  of the
Company's products currently in preclinical development,  or, if permitted, that
such  products will be  demonstrated  to be safe and  efficacious.  In addition,
there can be no assurance  that any of the  Company's  or Genta Jago's  products
will obtain FDA or foreign  regulatory  approval for any  indication  or that an
approved compound would be capable of being produced in commercial quantities at
reasonable costs and successfully  marketed.  Products,  if any,  resulting from
Genta's or Genta Jago's research and development programs are not expected to be
commercially available for a number of years.

         Loss  History;  Uncertainty  of  Future  Profitability.  Genta has been
unprofitable to date,  incurring  substantial  operating losses  associated with
ongoing  research and  development  activities,  preclinical  testing,  clinical
trials,  manufacturing activities and development activities undertaken by Genta
Jago.  From the period since its  inception  to March 31, 1997,  the Company has
incurred a cumulative  net loss of $110.7  million.  The  Company's  independent
auditors have included an explanatory paragraph in their report to the Company's
financial statements at December 31, 1996, which paragraph expresses substantial
doubt as to the Company's  ability to continue as a going  concern.  The Company
has experienced  significant  quarterly  fluctuations  in operating  results and
expects that these fluctuations in revenues,  expenses and losses will continue.
The Company has historically  experienced  significant quarterly fluctuations in
its level of  product  sales,  generally  reflecting  the  timing  and degree of
customer demand for various products.

         Dividends.  The  Company  has never paid cash  dividends  on its common
stock and does not  anticipate  paying  any such  dividends  in the  foreseeable
future. In addition, the Company is restricted from paying cash dividends on its
common  stock  until  such time as all  cumulative  dividends  have been paid on
outstanding shares of its Series A and Series C convertible preferred stock. The
Company  currently  intends to retain its  earnings,  if any,  after  payment of
dividends on outstanding  shares of Series A and Series C convertible  preferred
stock,  for the development of its business.  See  "Management's  Discussion and
Analysis of Financial  Condition  and Results of  Operations  --  Liquidity  and
Capital Resources."

         Operations   After   Restructuring.   As  a  result  of  the  Company's
restructuring to reduce operating expenses, the Company has focused its research
and development programs on its near-term drug delivery  (GEOMATRIX)  technology
and its Anticode cancer program.  The Company's  Anticode  programs  directed at
other areas  including BCL2 in cancer have largely been curtailed and any future
progress with these programs is dependent upon the Company  obtaining  financing
or a collaborative  partner to fund further research.  There can be no assurance
that the Company will be  successful in obtaining  additional  funding for these
programs.  The Company no longer  anticipates  devoting any of its  resources to
further development of its topical dermatology product candidates. The Company's
agreement with its collaborative partner, the Procter & Gamble Company ("Procter
& Gamble"), for its Anticode program in infectious diseases,  ended in September
1995. The Company will have to obtain additional  corporate partners in order to
continue its Anticode programs in different  molecular targets.  There can be no
assurance  that  the  Company  will  be  able to  negotiate  such  collaborative
arrangements on favorable terms, if at all.

         No Assurance of Regulatory Approval; Government Regulation. The FDA and
comparable  agencies in foreign countries impose substantial  premarket approval
requirements  upon the introduction of  pharmaceutical  products through lengthy
and detailed  preclinical and clinical  testing  procedures and other costly and
time-consuming  procedures.  Satisfaction of these requirements,  which includes
demonstrating  to the  satisfaction of the FDA and foreign  regulatory  agencies
that the product is both safe and  effective,  typically  takes several years or
more depending upon the type,  complexity and novelty of the product.  There can
be no  assurance  that  such  testing  will  show  any  product  to be  safe  or
efficacious  or,  in the  case  of  certain  of  Genta  Jago's  products,  to be
bioequivalent to a currently marketed pharmaceutical. Government regulation also
affects the manufacture and marketing of pharmaceutical  products. The effect of
government  regulation  may be to  delay  marketing  of any new  products  for a
considerable or indefinite  period of time, to impose costly procedures upon the
Company's or Genta Jago's  activities and to diminish any competitive  advantage
that the Company or Genta Jago may attain.  It may take years  before  marketing
approvals  are obtained for the Company's or Genta Jago's  products,  if at all.
There can be no assurance that FDA or other regulatory approval for any products
developed by the Company or Genta Jago will


                                       14

<PAGE>

be granted on a timely basis, if at all, or, if granted, that such approval will
cover  all the  clinical  indications  for which the  Company  or Genta  Jago is
seeking  approval or will not  sustain  significant  limitations  in the form of
warnings,  precautions or  contraindications  with respect to conditions of use.
Further,  with  respect to the  reformulated  versions  of  currently  available
pharmaceuticals  being developed through Genta Jago, there is a substantial risk
that the manufacturers or marketers of such currently available  pharmaceuticals
will seek to delay or block regulatory approval of any reformulated  versions of
such pharmaceuticals through litigation or other means. Any significant delay in
obtaining,  or failure to obtain,  such  approvals  would  materially  adversely
affect the Company and Genta Jago's  revenue.  Moreover,  additional  government
regulation from future  legislation or administrative  action may be established
which  could  prevent or delay  regulatory  approval of the  Company's  or Genta
Jago's  products or further  regulate the prices at which the Company's or Genta
Jago's proposed products may be sold.

         The  Company is also  subject to various  foreign,  federal,  state and
local  laws,   regulations  and  recommendations   (collectively   "Governmental
Regulations") relating to safe working conditions,  laboratory and manufacturing
practices,  the experimental use of animals and the use,  manufacture,  storage,
handling  and  disposal  of  hazardous  or  potentially   hazardous  substances,
including   radioactive   compounds  and  infectious  disease  agents,  used  in
connection with the Company's  research and development  work and  manufacturing
processes.  In October 1996, JBL Scientific,  Inc.  ("JBL")  retained a chemical
consulting firm to advise it with respect to environmental  compliance regarding
an incident of soil and  groundwater  contamination  (the "Spill").  The Company
believes,  based upon  information  known to date,  that the Spill is relatively
minor  and  will not have a  material  adverse  effect  on the  business  of the
Company,  although  there can be no  assurance  thereof.  Although  the  Company
believes it is in  compliance  with  Governmental  Regulations  in all  material
respects (except with respect to the Spill),  there can be no assurance that the
Company  will  not be  required  to  incur  significant  costs  to  comply  with
Governmental Regulations in the future.

         Uncertainty Regarding Patents and Proprietary Technology. The Company's
and Genta Jago's success will depend, in part, on their respective  abilities to
obtain  patents,  maintain  trade  secrets and operate  without  infringing  the
proprietary  rights of others.  No assurance can be given that patents issued to
or licensed by the Company or Genta Jago will not be challenged,  invalidated or
circumvented,  or that the rights granted  thereunder  will provide  competitive
advantages  to the Company or Genta  Jago.  There can be no  assurance  that the
Company's or Genta Jago's patent applications will be approved, that the Company
or Genta Jago will develop  additional  products that are  patentable,  that any
issued  patent  will  provide  the  Company or Genta  Jago with any  competitive
advantage or adequate protection for its inventions or will not be challenged by
others,  or that the  patents of others  will not have an adverse  effect on the
ability of the Company or Genta Jago to do business.  Competitors may have filed
applications,  may have been issued patents or may obtain additional patents and
proprietary  rights relating to products or processes  competitive with those of
the Company or Genta Jago.  Furthermore,  there can be no assurance  that others
will not independently develop similar products,  duplicate any of the Company's
or Genta Jago's products or design around any patented products developed by the
Company or Genta  Jago.  The  Company  and Genta Jago rely on secrecy to protect
technology in addition to patent protection,  especially where patent protection
is not believed to be appropriate or obtainable.  No assurance can be given that
others  will not  independently  develop  substantially  equivalent  proprietary
information  and  techniques or otherwise  gain access to the Company's or Genta
Jago's trade secrets,  or that the Company or Genta Jago can effectively protect
is rights to its unpatented trade secrets.

         Genta and Genta Jago have obtained  licenses or other rights to patents
and other  proprietary  rights of third  parties,  and may be required to obtain
licenses to additional patents or other proprietary rights of third parties.  No
assurance  can be given that any existing  licenses and other rights will remain
in effect or that any licenses  required  under any such  additional  patents or
proprietary rights would be made available on terms acceptable to the Company or
Genta Jago, if at all. If Genta's or Genta Jago's  licenses and other rights are
terminated  or if Genta or Genta Jago cannot  obtain such  additional  licenses,
Genta or Genta Jago could encounter delays in product market introductions while
it attempts to design  around such  patents or could find that the  development,
manufacture or sale of products requiring such licenses could be foreclosed.  In
addition, the Company or Genta Jago could incur


                                       15

<PAGE>

substantial  costs,  including  costs caused by delays in  obtaining  regulatory
approval  and  bringing  products to market,  in  defending  itself in any suits
brought  against the Company or Genta Jago claiming  infringement  of the patent
rights of third  parties or in asserting  the  Company's or Genta Jago's  patent
rights,  including  those granted by third  parties,  in a suit against  another
party.  The  Company  or Genta Jago may also  become  involved  in  interference
proceedings  declared by the United States Patent Office in connection  with one
or more of its patents or patent applications, which could result in substantial
cost to the Company or Genta Jago, as well as an adverse decision as to priority
of  invention  of the  patent or patent  application  involved.  There can be no
assurance that the Company or Genta Jago will have  sufficient  funds to obtain,
maintain  or enforce  patents on their  respective  products or  technology,  to
obtain  or  maintain  licenses  that may be  required  in order to  develop  and
commercialize  their respective  products,  to contest patents obtained by third
parties, or to defend against suits brought by third parties.

         Dependence  on  Others.   The  Company's  strategy  for  the  research,
development  and  commercialization  of certain of its or Genta Jago's  products
requires  negotiating,  entering into and maintaining various  arrangements with
corporate collaborators,  licensors, licensees and others, and is dependent upon
the   subsequent   success  of  these  outside   parties  in  performing   their
responsibilities. Genta Jago is seeking additional collaborative arrangements to
develop and commercialize certain of their respective products.  However,  there
can be no  assurance  that  Genta Jago will be able to  negotiate  collaborative
arrangements on acceptable terms, if at all.

         Technology  Licensed From Third  Parties.  The Company has entered into
certain  agreements  with, and licensed  certain  technology and compounds from,
third  parties.  The  Company  has relied on  scientific,  technical,  clinical,
commercial  and other data  supplied and  disclosed  by others in entering  into
these  agreements,  including the Genta Jago  agreements,  and will rely on such
data in support of development of certain products.  Although the Company has no
reason to believe  that this  information  contains  errors of omission or fact,
there can be no  assurance  that  there are no errors of  omission  or fact that
would  materially  affect the future  approvability  or commercial  viability of
these products.

         Potential Adverse Effect of Technological  Change and Competition.  The
biotechnology   industry  is  subject  to  intense  competition  and  rapid  and
significant  technological  change.  The  Company  and Genta Jago have  numerous
competitors  in the  United  States  and other  countries  for their  respective
technologies  and products  under  development,  including  among others,  major
pharmaceutical  and  chemical  companies,   specialized   biotechnology   firms,
universities and other research institutions. There can be no assurance that the
Company's or Genta Jago's competitors will not succeed in developing products or
other novel technologies that are more effective than any which have been or are
being developed by the Company or Genta Jago or which would render the Company's
or Genta Jago's technology and products  non-competitive.  Many of the Company's
and Genta Jago's  competitors have substantially  greater financial,  technical,
marketing and human resources than the Company or Genta Jago. In addition,  many
of those competitors have  significantly  greater experience than the Company or
Genta Jago in undertaking  preclinical  testing and human clinical trials of new
pharmaceutical  products and  obtaining  FDA and other  regulatory  approvals of
products  for use in  healthcare.  Accordingly,  the  Company's  or Genta Jago's
competitors  may succeed in obtaining  regulatory  approval  for  products  more
rapidly  than the  Company or Genta  Jago and such  competitors  may  succeed in
delaying or blocking  regulatory  approvals  of the  Company's  or Genta  Jago's
products.  Furthermore,  if the Company or Genta Jago is  permitted  to commence
commercial  sales  of  products,  it will  also be  competing  with  respect  to
marketing  capabilities,  an area in which it has limited or no experience,  and
manufacturing  efficiency.  There are many public and private companies that are
conducting  research  and  development  activities  based on drug  delivery  and
antisense technologies.  The Company believes that the industry-wide interest in
such  technologies  will  accelerate  and  competition  will  intensify  as  the
techniques which permit drug design and development  based on such  technologies
are more widely understood.

         Uncertainty  of Clinical  Trials and  Results.  The results of clinical
trial and preclinical  testing are subject to varying  interpretations.  Even if
the development of the Company's  products advances to the clinical stage, there
can be no assurance that they will prove to be safe and effective.  The products
that are successfully developed, if any, will be subject to requisite regulatory
approval prior to their  commercial sale, and the approval,  if obtainable,  may
take several years. Generally, only a very small percentage of the number of new
pharmaceutical products


                                       16

<PAGE>

initially  developed  is approved  for sale.  Even if products  are approved for
sale, there can be no assurance that they will be commercially  successful.  The
Company  may  encounter   unanticipated   problems   relating  to   development,
manufacturing,  distribution  and  marketing,  some of which may be  beyond  the
Company's financial and technical capacity to solve. The failure to address such
problems  adequately  could  have a  material  adverse  effect on the  Company's
business, financial condition, prospects and results of operations. No assurance
can be given that the Company will succeed in the  development  and marketing of
any new drug products, or that they will not be rendered obsolete by products of
competitors.

         Difficult  Manufacturing  Requirements.  The  manufacture  of  Anticode
oligonucleotides  is a time-consuming and complex process.  Management  believes
that  the  Company  has  the  ability  to  acquire  or  produce   quantities  of
oligonucleotides  sufficient  to support its present  needs for research and its
projected needs for its initial clinical development  programs.  However,  Genta
believes that improvements in its  manufacturing  technology will be required to
enable the Company to meet the volume and cost  requirements  needed for certain
commercial  applications  of Anticode  products.  Products  based on  chemically
modified  oligonucleotides  have never been  manufactured on a commercial scale.
The  manufacture  of all of the  Company's  and Genta  Jago's  products  will be
subject to current Good Manufacturing  Practices ("GMP") requirements prescribed
by the FDA or other standards prescribed by the appropriate regulatory agency in
the  country of use.  There can be no  assurance  that the Company or Genta Jago
will be able to manufacture products, or have products manufactured for it, in a
timely  fashion at  acceptable  quality  and  prices,  that they or third  party
manufacturers can comply with GMP or that they or third party manufacturers will
be able to manufacture an adequate supply of product.

         Limited Sales, Marketing and Distribution  Experience.  The Company and
Genta Jago have very limited experience in pharmaceutical  sales,  marketing and
distribution. In order to market and sell certain products directly, the Company
or Genta Jago would have to develop or subcontract a sales force and a marketing
group with technical expertise.  There can be no assurance that any direct sales
or marketing efforts would be successful.

         Uncertainty of Product Pricing,  Reimbursement and Related Matters. The
Company's and Genta Jago's business may be materially  adversely affected by the
continuing  efforts of governmental  and third party payers to contain or reduce
the costs of healthcare  through various means. For example,  in certain foreign
markets  the  pricing or  profitability  of  healthcare  products  is subject to
government  control.  In the United  States,  there have been,  and the  Company
expects that there will continue to be, a number of federal and state  proposals
to implement  similar  governmental  control.  While the Company  cannot predict
whether any such legislative or regulatory proposals or reforms will be adopted,
the  adoption  of any  such  proposal  or  reform  could  adversely  affect  the
commercial  viability of the Company's and Genta Jago's potential  products.  In
addition, in both the United States and elsewhere,  sales of healthcare products
are dependent in part on the  availability of reimbursement to the consumer from
third party payers,  such as government and private insurance plans. Third party
payers are increasingly  challenging the prices charged for medical products and
services and therefore,  significant  uncertainty exists as to the reimbursement
of existing and newly approved healthcare products. If the Company or Genta Jago
succeeds  in  bringing  one or more  products  to the  market,  there  can be no
assurance  that  these  products  will be  considered  cost  effective  and that
reimbursement  to the consumer  will be available or will be sufficient to allow
the Company or Genta Jago to sell its products on a competitive basis.

         Dependence  on Qualified  Personnel.  The  Company's  success is highly
dependent  on the  retention  of key  employees  and  scientific  staff  and the
recruitment of additional key personnel. As the Company has already fallen below
critical  mass,  the loss of additional  key personnel or the failure to recruit
necessary  additional  personnel does and will further impede the achievement of
development objectives.  There is intense competition for qualified personnel in
the areas of the Company's activities,  and there can be no assurance that Genta
will be able to continue to attract and retain the qualified personnel necessary
for the development of its business. The Company is actively engaged in a search
for a new Chief Executive Officer.

         Product Liability Exposure;  Limited Insurance Coverage. The Company's,
JBL's and Genta Jago's


                                       17

<PAGE>

businesses  expose them to potential  product liability risks which are inherent
in the testing, manufacturing, marketing and sale of human therapeutic products.
If  available,  product  liability  insurance  for the  pharmaceutical  industry
generally is expensive.  The Company has obtained a level of liability insurance
coverage  which it  deems  appropriate  for its  current  stage of  development.
However, there can be no assurance that the Company's present insurance coverage
is adequate.  Such existing  coverage may not be adequate as the Company further
develops  products,  and no assurance  can be given that in the future  adequate
insurance  coverage will be available in  sufficient  amounts or at a reasonable
cost, or that a product liability claim would not have a material adverse effect
on the business or financial condition of the Company.

         Hazardous Materials;  Environmental Matters. The Company's research and
development and manufacturing  processes involve the controlled storage, use and
disposal of hazardous materials,  biological hazardous materials and radioactive
compounds.  The  Company  is  subject  to  federal,  state  and  local  laws and
regulations  governing the use, manufacture,  storage,  handling and disposal of
such materials and certain waste  products.  Although the Company  believes that
its safety  procedures for handling and disposing of such materials  comply with
the standards  prescribed by such laws and  regulations,  the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an  accident,  the  Company may be held liable for any damages
that result,  and any such liability  could exceed the resources of the Company.
There  can be no  assurance  that  the  Company  will not be  required  to incur
significant  costs to comply  with  environmental  laws and  regulations  in the
future,  nor that the operations,  business or assets of the Company will not be
materially  adversely  affected  by  current  or  future  environmental  laws of
regulations. See "Risk Factors - No Assurance of Regulatory Approval; Government
Regulation" for a discussion of the Spill.

         Volatility  of Stock Price.  The market price of the  Company's  common
stock, like that of the common stock of many other biopharmaceutical  companies,
has been highly volatile. Factors such as the results of preclinical studies and
clinical trials by Genta, Genta Jago or their competitors, other evidence of the
safety or  efficacy  of  products  of Genta,  Genta  Jago or their  competitors,
announcements  of technological  innovations or new therapeutic  products by the
Company, Genta Jago or their competitors,  governmental regulation, developments
in  patent  or other  proprietary  rights  of the  Company  or its  competitors,
including  litigation,  fluctuations  in the Company's  operating  results,  and
market  conditions  for  biopharmaceutical   stocks  in  general  could  have  a
significant  impact on the future price of the common  stock.  At the  Company's
Annual Meeting of Stockholders held on April 4, 1997, the stockholders  approved
an amendment to the Company's Restated Certificate of Incorporation  effecting a
one for ten  reverse  stock split of its common  stock.  The  stockholders  also
approved a reduction  of the  Company's  authorized  shares of common stock from
150,000,000 to 70,000,000. The Company commenced trading on a post reverse split
basis at the commencement of trading on April 7, 1997. As of April 30, 1997, the
Company had 4,328,062 shares of common stock outstanding. Future sales of shares
of common stock by existing stockholders and option holders also could adversely
affect the market price of the common stock.

         Concentration   of   Ownership   and  Control;   Certain   Interlocking
Relationships.   The  Company's  directors,  executive  officers  and  principal
stockholders  and certain of their  affiliates have the ability to influence the
election of the  Company's  directors  and most other  stockholder  actions.  In
particular,  the Aries Funds may be deemed beneficially to own a majority of the
outstanding shares of the Common Stock and have the contractual right to appoint
a majority of the members of the Board of  Directors  of the Company  subject to
certain conditions, although the Aries Funds have appointed only one director to
date,  Mr.  Weiss.  See  "Management's  Discussion  and  Analysis  of  Financial
Condition  and  Results  of   Operations--Liquidity   and  Capital   Resources."
Accordingly,  the Aries  Funds have the ability to exert  significant  influence
over  the  election  of the  Company's  Board of  Directors  and  other  matters
submitted to the Company's  stockholders for approval. The Aries Funds currently
do not hold a controlling  block of voting stock,  although the Aries Funds have
the present right to convert and exercise  their  securities  into a majority of
the outstanding  common stock.  These arrangements may discourage or prevent any
proposed takeover of the Company.


                                       18

<PAGE>

         Possible  Nonpayment  of  Dividends  on Series A and Series C Preferred
Stock;  Deficiency  in Fixed  Charges and  Preferred  Stock  Dividend  Coverage.
Dividends  will be payable on the  Series A and  Series C  Preferred  Stock only
when,  as and if  declared by the  Company's  Board of  Directors,  out of funds
legally available therefor. The Company has incurred losses and, thus, has had a
deficiency  in  fixed  charges  and  preferred  stock  dividend  coverage  since
inception.  For the fiscal years ended December 31, 1991, 1992, 1993, 1994, 1995
and 1996 the coverage  deficiency  was  approximately  $9,486,000,  $16,703,000,
$16,189,000,  $25,998,000,  $27,917,000 and $13,950,000 respectively.  While the
Company  intends to pay dividends on the Series A and Series C Preferred  Stock,
it is  anticipated  that the Company will continue to incur losses and thus will
continue to have a deficiency  in fixed  charges and  preferred  stock  dividend
coverage.  Dividends  on the Series A and Series C  Preferred  Stock may be paid
only  out of  capital  surplus  (within  the  meaning  of the  Delaware  General
Corporation  Law) or net profits of the Company for the fiscal year in which the
dividend is declared and the preceding fiscal year.

         Effect of Certain  Anti-Takeover  Provisions.  The  Company's  Restated
Certificate of Incorporation and Bylaws include provisions that could discourage
potential  takeover  attempts  and  make  attempts  by  stockholders  to  change
management more difficult. The approval of 66-2/3% of the Company's voting stock
is required to approve  certain  transactions  and to take  certain  stockholder
actions,  including  the calling of a special  meeting of  stockholders  and the
amendment of any of the  anti-takeover  provisions  contained  in the  Company's
Restated Certificate of Incorporation. Additionally, the Company has contractual
obligations  to  certain of its  security  holders  which may  impair  potential
takeovers.  See  "Concentration of Ownership and Control;  Certain  Interlocking
Relationships."  Further,  pursuant to the terms of its stockholder  rights plan
adopted in December  1993,  the Company has  distributed a dividend of one right
for  each  outstanding  share  of  common  stock.  These  rights  will  cause  a
substantial  dilution to a person or group that  attempts to acquire the Company
on terms not  approved  by the  Board of  Directors  and may have the  effect of
deterring hostile takeover attempts.  The stockholder rights plan was amended to
permit the  consummation of the  transactions  with the Aries Funds described in
this Report on Form 10-Q.


                                       19

<PAGE>

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         On February 5, 1997,  Equity-Linked  Investors,  L.P. and Equity-Linked
Investors-II (collectively,  the "Plaintiffs") who, as a group, may be deemed to
beneficially own more than five percent of the outstanding  shares of the Common
Stock of the Company as Series A preferred stockholders, filed suit (the "Suit")
in the Delaware Court of Chancery (the "Court") against the Company, each of the
Company's  directors and the Aries Funds.  Through the Suit, the Plaintiffs were
seeking to enjoin the transactions contemplated by The Note and Warrant Purchase
Agreement  referred to in note 4 to the Consolidated  Financial  Statements (the
"Transactions"),  rescission of the  Transactions,  damages,  attorney fees, and
such other and further  relief as the Court may deem just and  proper.  The Suit
alleged that the Board of Directors of the Company breached  fiduciary duties by
failing to  consider  financing  alternatives  to the  Transactions  and further
alleged  that  the   Transactions   were  not  in  the  best  interests  of  the
stockholders.  Additionally,  the Suit  alleged  that the Aries  Funds aided and
abetted  such  breach of  fiduciary  duty  through  their  participation  in the
Transactions. On April 25, 1997, the Court rejected the Plaintiffs' challenge to
the  Transactions and ruled in favor of Genta,  Genta's  directors and the Aries
Funds, who were the defendants. The Court issued an opinion stating that it will
enter  judgment in favor of Genta and its  directors in the lawsuit  challenging
the Aries investment.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     (a)  The Company held its Annual Meeting of Stockholders on April 4, 1997.

     (b)  Proxies for the meeting were  solicited  pursuant to Regulation 14A of
          the Exchange  Act.  There whas no  solicitation  in  opposition to the
          Board of Directors nominee for the Class III director as listed in the
          definitive proxy statement of the Company dated as of March 14, 1997.

     (c)  Briefly  described  below  is each  matter  voted  upon at the  Annual
          Meeting of Stockholders.

          (i) Approval of the amendment to the Company's Restated Certificate of
          Incorporation  to  effectuate a one for ten reverse stock split of the
          Company's  outstanding  Common  Stock and  decrease  in the  number of
          authorized  Shares of Common  Stock from  150,000,000  to  70,000,000.
          Total Common Stock voted was 31,711,962 in favor,  1,114,225  against,
          78,900 abstained and 245,087 broker non-votes.

          (ii) Election of one Class III director.  Total Common Stock voted for
          the election of Robert E. Klem was  31,977,180  in favor and 1,172,994
          withheld.

          (iii)  Ratification  of  the  appointment  of  Ernst  &  Young  LLP as
          independent  auditors  of the  Company  for the  current  year  ending
          December 31, 1997.  Total Common Stock voted was  31,922,631 in favor,
          561,983 against and 665,560 abstained.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits.

Exhibit
Number            Description of Document
------            -----------------------

27.1(1)           Financial Data Schedule

(1)               Filed herewith.


                                       20

<PAGE>

         (b)      Reports on Form 8-K

         (i) On February 27, 1997,  the Company filed a Report on Form 8-K dated
as of January 28, 1997 reporting  under Item 5 that (A) David Hale resigned from
the Company's Board of Directors,  (B) effective February 7, 1997, the Company's
Common Stock,  formerly  listed on The Nasdaq National Market would be listed on
The Nasdaq  SmallCap  Market via an exception from the bid price and capital and
surplus  requirements of the Nasdaq SmallCap Market (the  "Exception"),  (C) the
Company raised gross proceeds of $3,000,000 in a private  placement to the Aries
Funds of Senior Secured  Convertible Bridge Notes (the  "Transaction"),  and (D)
two  stockholders  of the Company  filed suit in the Delaware  Court of Chancery
against  the  Company,  its  directors  and the Aries  Funds in  relation to the
Transaction.

         (ii) On April 15, 1997, the Company filed a Report on Form 8-K dated as
of March 19, 1997 reporting  under Item 5 that (A) The Nasdaq Hearing and Review
Committee  had called for review of The Nasdaq  Listing  Qualifications  Panel's
decision (the "Panel"),  (B) the Panel had determined to modify the terms of the
Exception,  and (C) the  Company  was  making a filing  in  accordance  with the
Revised Exception showing capital and surplus of $2,722,091.

         (iii) On April 25, 1997,  the Company  filed a Report on Form 8-K dated
as of April 25,  1997  reporting  under Item 5 that the  Company  issued a press
release entitled "Aries Investment in Genta Upheld by Delaware Court: Genta Wins
Lawsuit Brought by Certain Preferred Stockholders."

         (iv) On May 6, 1997, the Company filed a Report on Form 8-K dated as of
May 1, 1997  reporting  under  Item 5 that (A) The  Nasdaq  Hearing  and  Review
Committee has  withdrawn  its call for review of the decision of the Panel,  (B)
the Company  issued a press release  entitled  "Genta  Announces  Resignation of
Thomas H. Adams,  Ph.D., the appointment of Michael S. Weiss as Interim Chairman
and the  appointment  of a transitional  management  team" and (C) the Company's
Nasdaq symbol has changed back to GNTAC.


                                       21

<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                   GENTA INCORPORATED
                                   (Registrant)



                                   By: /s/ Michael S. Weiss
                                       --------------------
                                   Name:    Michael S. Weiss
                                   Title:   Interim Chairman of the Board




                                   By: /s/ Robert E. Klem, Ph.D.
                                       -------------------------
                                   Name:    Robert E. Klem, Ph.D.
                                   Title:   Acting Chief Financial Officer and
                                            Member of the Board of Directors

Date:    May 15, 1997


                                       22