##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 0-19635
 GENTA INCORPORATED
 (Exact name of Registrant as specified in its charter)
 Delaware(State or other jurisdiction of 
incorporation or organization)
    
    33-0326866(I.R.S. Employer
Identification Number)200 Connell DriveBerkeley Heights, NJ
    
    07922(Address of principal executive offices)
    
    (Zip Code)
 (Registrants telephone number, including area code)
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer
þ
    
    Smaller reporting company
o(Do not check if a smaller reporting company)
  o þ




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##### 



Genta Incorporated
INDEX TO FORM 10-Q
 PagePART I. FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements:Consolidated Balance Sheets at June 30, 2008 (unaudited) and December 31, 2007
    
    
    3Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 2008 and 2007 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2008 and 2007 (unaudited)
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    31Item 4T. Controls and Procedures
    
    
    32PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    33Item 1A. Risk Factors
    
    
    34Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    48Item 3. Defaults Upon Senior Securities
    
    
    48Item 4. Submission of Matters to a Vote of Security Holders
    
    
    48Item 5. Other Information
    
    
    48Item 6. Exhibits
    
    
    49SIGNATURES
    
    
    50CERTIFICATIONS
    
    
    52EX-4.2: COMMON STOCK PURCHASE WARRANTEX-10.1: SUPPLY AGREEMENTEX-10.2: AMENDMENT TO THE LEASE AGREEMENTEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  2




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##### Table of Contents



GENTA INCORPORATED
 
 CONSOLIDATED BALANCE SHEETS
  June 30,2008
    
    
    December 31,(unaudited)
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    16,278
    
    
    $
    5,814Marketable securities
    
    
    
    
    
    
    1,999Accounts
receivable  net of allowances of $39 at June 30, 2008

and $38 at December 31, 2007
    
    
    55
    
    
    
    31Inventory (Note 4)
    
    
    171
    
    
    
    225Prepaid expenses and other current assets (Note 6)
    
    
    18,726
    
    
    
    19,170Total current assets
    
    
    35,230
    
    
    
    27,239Property and equipment, net
    
    
    251
    
    
    
    323Deferred financing costs on convertible note financing (Note 7)
    
    
    1,170
    
    
    
    Deferred
financing costs  warrant (Note 7)
    
    
    7,378
    
    
    
    Other assets
    
    
    
    
    
    
    1,731Total assets
    
    $
    44,029
    
    
    $
    29,293LIABILITIES AND STOCKHOLDERS (DEFICIT)/EQUITYCurrent liabilities:Accounts payable and accrued expenses (Note 6)
    
    $
    30,603
    
    
    $
    25,850Notes payable
    
    
    
    
    
    
    512Conversion feature liability (Note 7)
    
    
    740,000
    
    
    
    Warrant liability (Note 7)
    
    
    14,800
    
    
    
    Total current liabilities
    
    
    785,403
    
    
    
    26,362Long-term
liabilities:Convertible notes due June 9, 2010, issued for $20,000, 
net of
beneficial conversion feature of ($19,417) (Note 7)
    
    
    583
    
    
    
    Total long-term liabilities
    
    
    583
    
    
    
    Commitments and contingencies (Note 12)Stockholders (deficit)/equity (Note 8):Preferred stock, 5,000 shares authorized:Series A convertible preferred stock, $.001 par value; 
8 shares issued and outstanding, liquidation value of $385
at June 30, 2008 and December 31, 2007, respectively
    
    
    
    
    
    
    Series G participating cumulative preferred stock, $.001 par value; 
0 shares issued and outstanding at 
June 30, 2008
and December 31, 2007, respectively
    
    
    
    
    
    
    Common stock, $.001 par value; 250,000 shares authorized, 
36,741 and 30,621 shares issued and outstanding at June 30, 2008
and December 31, 2007, respectively
    
    
    37
    
    
    
    31Additional paid-in capital
    
    
    444,315
    
    
    
    441,159Accumulated deficit
    
    
    (1,186,309
    )
    
    
    (438,288
    )Accumulated other comprehensive income
    
    
    
    
    
    
    29Total stockholders (deficit)/equity
    
    
    (741,957
    )
    
    
    2,931Total liabilities and stockholders (deficit)/equity
    
    $
    44,029
    
    
    $
    29,293
  3




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GENTA INCORPORATED
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,(In thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Product
sales  net
    
    $
    131
    
    
    $
    105
    
    
    $
    248
    
    
    $
    199Cost of goods sold
    
    
    29
    
    
    
    26
    
    
    
    54
    
    
    
    48Gross margin
    
    
    102
    
    
    
    79
    
    
    
    194
    
    
    
    151Operating expenses:Research and development
    
    
    4,454
    
    
    
    4,099
    
    
    
    10,891
    
    
    
    7,481Selling, general and administrative
    
    
    2,587
    
    
    
    4,735
    
    
    
    6,225
    
    
    
    8,787Settlement of office lease obligation (Note 5)
    
    
    3,307
    
    
    
    
    
    
    
    3,307
    
    
    
    Reduction in liability for settlement of litigation, net (Note 6)
    
    
    (80
    )
    
    
    (240
    )
    
    
    (340
    )
    
    
    (1,800
    )Total operating expenses
    
    
    10,268
    
    
    
    8,594
    
    
    
    20,083
    
    
    
    14,468Other income/(expense):Gain on maturity of marketable securities
    
    
    
    
    
    
    36
    
    
    
    31
    
    
    
    44Interest income and other income, net
    
    
    40
    
    
    
    269
    
    
    
    100
    
    
    
    543Interest expense
    
    
    (198
    )
    
    
    (25
    )
    
    
    (223
    )
    
    
    (109
    )Amortization of deferred financing costs (Note 7)
    
    
    (840
    )
    
    
    
    
    
    
    (840
    )
    
    
    Fair value
 conversion feature liability (Note 7)
    
    
    (720,000
    )
    
    
    
    
    
    
    (720,000
    )
    
    
    Fair value
 warrant liability (Note 7)
    
    
    (7,200
    )
    
    
    
    
    
    
    (7,200
    )
    
    
    Total other income/(expense)
    
    
    (728,198
    )
    
    
    280
    
    
    
    (728,132
    )
    
    
    478Net loss
    
    $
    (738,364
    )
    
    $
    (8,235
    )
    
    $
    (748,021
    )
    
    $
    (13,839
    )Net loss per basic and diluted share
    
    $
    (20.10
    )
    
    $
    (0.27
    )
    
    $
    (21.21
    )
    
    $
    (0.48
    )Shares used in computing net loss per
basic and diluted share
    
    
    36,741
    
    
    
    30,621
    
    
    
    35,261
    
    
    
    28,604
  4




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GENTA INCORPORATED
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Six Months Ended June 30,(In thousands)
    
    2008
    
    
    2007Operating activities:Net loss
    
    $
    (748,021
    )
    
    $
    (13,839
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    83
    
    
    
    93Amortization of deferred financing costs
    
    
    840Share-based compensation (Note 9)
    
    
    305
    
    
    
    928Gain on maturity of marketable securities
    
    
    (31
    )
    
    
    (44
    )Reduction in liability for settlement of litigation, net (Note 6)
    
    
    (340
    )
    
    
    (1,800
    )Change in
fair value  conversion feature liability (Note 7)
    
    
    720,000
    
    
    
    Change in
fair value  warrant liability (Note 7)
    
    
    7,200
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (24
    )
    
    
    12Inventory
    
    
    54
    
    
    
    49Prepaid expenses and other current assets
    
    
    444
    
    
    
    558Accounts payable and accrued expenses
    
    
    5,094
    
    
    
    (2,740
    )Other assets
    
    
    
    
    
    
    (21
    )Net cash used in operating activities
    
    
    (14,396
    )
    
    
    (16,804
    )Investing activities:Purchase of marketable securities
    
    
    
    
    
    
    (13,900
    )Maturities of marketable securities
    
    
    2,000
    
    
    
    16,000Elimination of restricted cash deposits (Note 5)
    
    
    1,731
    
    
    
    Purchase of property and equipment
    
    
    (11
    )
    
    
    (10
    )Net cash provided by investing activities
    
    
    3,720
    
    
    
    2,090Financing activities:Repayments of note payable
    
    
    (512
    )
    
    
    (642
    )Issuance of note payable
    
    
    
    
    
    
    236Issuance of convertible notes net of financing cost of $1,205 (Note 7)
    
    
    18,795
    
    
    
    Issuance of common stock, net (Note 8)
    
    
    2,857
    
    
    
    10,090Net cash provided by financing activities
    
    
    21,140
    
    
    
    9,684Increase/(decrease) in cash and cash equivalents
    
    
    10,464
    
    
    
    (5,030
    )Cash and cash equivalents at beginning of period
    
    
    5,814
    
    
    
    9,554Cash and cash equivalents at end of period
    
    $
    16,278
    
    
    $
    4,524
  5




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GENTA INCORPORATED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 June 30, 2008
(Unaudited)
 1. Reverse Stock Split
  2. Organization and Business
  ® ®
     6




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®
   
    
    delay, scale back or eliminate some or all of the Companys research and product
development programs and sales and marketing activity;
    
    license third parties to develop and commercialize products or technologies that the
Company would otherwise seek to develop and commercialize themselves;
    
    attempt to sell the Company;
    
    cease operations; or
    
    declare bankruptcy.
 3. Summary of Significant Accounting Policies
 Basis of Presentation
  7




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Revenue Recognition
  Research and Development
  Cash, Cash Equivalents and Marketable Securities
  Income Taxes
    8




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##### Table of Contents



Stock Options
 Share-Based Payment
 Deferred Financing Costs
  Net Loss Per Common Share
  Recent Accounting Pronouncements
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
 9




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Accounting for Collaborative
Arrangements
 Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and Development Activities
 The Fair Value Option for Financial Assets and
Financial Liabilities Fair Value Measurements
 Fair Value Measurements
 4. Inventory
  June 30,
    
    
    December 31,2008
    
    
    2007Raw materials
    
    $
    24
    
    
    $
    24Finished goods
    
    
    147
    
    
    
    201$
    171
    
    
    $
    225
 ® ®
 10




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5. Settlement of Office Lease Obligation
  6. Reduction in Liability for Legal Settlement
 Accounting for Contingencies Reasonable
Estimation of the Amount of a Loss, an interpretation of FASB Statement No. 5,
 7. Convertible Notes and Warrant
   11




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June 30, 2008
    
    June 9, 2008Volatility
    
    
    127.7
    %
    
    
    125.6
    %Risk-free interest rate
    
    
    2.63
    %
    
    
    2.73
    %Remaining contractual lives
    
    
    1.94
    
    
    
    2.00
   12




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June 30, 2008
    
    June 9, 2008Volatility
    
    
    115.5
    %
    
    
    115.0
    %Risk-free interest rate
    
    
    3.34
    %
    
    
    3.41
    %Remaining contractual lives
    
    
    4.94
    
    
    
    5.00
  8. Stockholders Equity
 Common Stock
  Series A Preferred Stock
  Warrant
  9. Share-Based Compensation
  13




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Six Months EndedJune 30, 2007Expected volatility
    
    
    102
    %Expected dividends
    
    
    Expected term (in years)
    
    
    6.25Risk-free rate
    
    
    4.6
    %
  Three months ended
    
    
    Six months endedJune 30
    
    
    June 30($ thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Research and development expenses
    
    $
    52
    
    
    $
    144
    
    
    $
    96
    
    
    $
    351Selling, general and administrative
    
    
    108
    
    
    
    214
    
    
    
    209
    
    
    
    577Total share-based compensation expense
    
    $
    160
    
    
    $
    358
    
    
    $
    305
    
    
    $
    928Share-based compensation expense, per
basic and diluted common share
    
    $
    0.00
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.03
 10. Stock Option Plans
  2007 Stock Incentive Plan
   Acquisition Bonus Program
  14




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1998 Stock Incentive Plan
   WeightedAverage
    
    AggregateWeighted
    
    Remaining
    
    IntrinsicNumber of
    
    Average
    
    Contractual
    
    ValueShares
    
    Exercise
    
    Term
    
    (in(in thousands)
    
    Price
    
    (in years)
    
    thousands)Stock OptionsOutstanding at January 1, 2008
    
    
    2,155
    
    
    $
    23.05Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (137
    )
    
    
    6.02Outstanding at June 30, 2008
    
    
    2,018
    
    
    $
    24.21
    
    
    
    4.4
    
    
    $
    Vested and exercisable at June 30, 2008
    
    
    1,371
    
    
    $
    23.79
    
    
    
    2.1
    
    
    $
    
   15




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##### Table of Contents



Weighted AverageNumber of Shares
    
    Grant Date Fair(in thousands)
    
    Value per ShareRestricted Stock UnitsOutstanding nonvested RSUs at January 1, 2008
    
    
    20
    
    
    $
    1.42Granted
    
    
    488
    
    
    $
    0.41Forfeited or expired
    
    
    (195
    )
    
    $
    0.41Outstanding nonvested RSUs at June 30, 2008
    
    
    313
    
    
    $
    0.47
  1998 Non-Employee Directors Plan
    WeightedAverage
    
    AggregateNumber of
    
    Weighted
    
    Remaining
    
    IntrinsicShares
    
    Average
    
    Contractual
    
    Value(in
    
    Exercise
    
    Term
    
    (inthousands)
    
    Price
    
    (in years)
    
    thousands)Stock OptionsOutstanding at January 1, 2008
    
    
    113
    
    
    $
    30.61Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (1
    )
    
    
    39.00Outstanding at June, 2008
    
    
    112
    
    
    $
    30.49
    
    
    
    5.9
    
    
    $
    Vested and exercisable at June 30, 2008
    
    
    111
    
    
    $
    31.06
    
    
    
    5.9
    
    
    $
    
  16




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##### Table of Contents



11.
    
    Comprehensive Loss
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,($ in thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (738,364
    )
    
    $
    (8,235
    )
    
    $
    (748,021
    )
    
    $
    (13,839
    )Change in market value
of available-for-sale
marketable securities
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    (36
    )Total comprehensive loss
    
    $
    (738,364
    )
    
    $
    (8,225
    )
    
    $
    (748,021
    )
    
    $
    (13,803
    )
 12. Commitments and Contingencies
 Litigation and Potential Claims
 ®
   17




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13. Supplemental Disclosure of Cash Flows Information and Non-cash Investing and Financing
Activities
  14. Listing of Common Stock of Genta Incorporated
  18




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Certain Factors Affecting Forward-Looking Statements  Safe Harbor Statement
  
    
    the Companys financial projections;
    
    the Companys projected cash flow requirements and estimated timing of sufficient cash
flow;
    
    the Companys current and future license agreements, collaboration agreements, and
other strategic alliances;
    
    the Companys ability to obtain necessary regulatory approval for Genasense®(oblimersen sodium) Injection from the U.S. Food and Drug Administration (FDA) or
European Medicines Agency (EMEA);
    
    the safety and efficacy of the Companys products;
    
    the commencement and completion of clinical trials;
    
    the Companys ability to develop, manufacture, license and sell its products or product
candidates;
    
    the Companys ability to enter into and successfully execute license and collaborative
agreements, if any;
    
    the adequacy of the Companys capital resources and cash flow projections, and the
Companys ability to obtain sufficient financing to maintain the Companys planned
operations; or the Companys risk of bankruptcy if it is unsuccessful in obtaining such
financing or in securing stockholder approval to increase the number of shares authorized
for issuance under the Companys certificate of incorporation, as required by the
transactional documents in our recent financing;
    
    the adequacy of the Companys patents and proprietary rights;
    
    the impact of litigation that has been brought against the Company and its officers and
directors and any proposed settlement of such litigation; and
    
    the other risks described under Risk Factors in the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2007 and in this Form 10-Q.
  http://www.genta.com
 19




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Overview
 ® ® ® ®
  ®
  ®
 ® ® ®
 20




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##### Table of Contents



® ® ®
 ® ® ®
 ® ® ®
 ® ® ® ®
 ® ® ® ® ®
 21




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##### Table of Contents



® ®  ® ®
 ® ® ®
 ® ®
  ®
 ® ® ®  ®
 22




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##### Table of Contents



®
  ® ® ®
   ®
 23




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##### Table of Contents



® Pseudomonas aeruginosa
 ® ®
 Results of Operations for the Three Months Ended June 30, 2008 and June 30, 2007
 ($ thousands)
    
    2008
    
    
    2007Product
sales  net
    
    $
    131
    
    
    $
    105Cost of goods sold
    
    
    29
    
    
    
    26Gross margin
    
    
    102
    
    
    
    79Operating expenses:Research and development
    
    
    4,454
    
    
    
    4,099Selling, general and administrative
    
    
    2,587
    
    
    
    4,735Settlement of office lease obligation
    
    
    3,307
    
    
    
    Reduction in liability for settlement of litigation, net
    
    
    (80
    )
    
    
    (240
    )Total operating expenses
    
    
    10,268
    
    
    
    8,594Other (expense)/income:Amortization of deferred financing costs
    
    
    (840
    )
    
    
    0Fair market
value  conversion feature liability
    
    
    (720,000
    )
    
    
    0Fair market
value  warrant liability
    
    
    (7,200
    )
    
    
    0All other (expense)/ income, net
    
    
    (158
    )
    
    
    280Total other (expense)/income, net
    
    
    (728,198
    )
    
    
    280Net loss
    
    $
    (738,364
    )
    
    $
    (8,235
    )
 Product sales-net
 ® ® ®
 24




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##### Table of Contents



Cost of goods sold
  Research and development expenses
  ®
  Selling, general and administrative expenses
  Settlement of office lease obligation
  Provision for settlement of litigation, net
  25




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Amortization of deferred financing costs
  Fair value  conversion feature liability
   Fair value  warrant liability
   All other (expense)/ income, net
  Net loss
   26




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Results of Operations for the Six Months Ended June 30, 2008 and June 30, 2007
 ($ thousands)
    
    2008
    
    
    2007Product sales  net
    
    $
    248
    
    
    $
    199Cost of goods sold
    
    
    54
    
    
    
    48Gross margin
    
    
    194
    
    
    
    151Operating expenses:Research and development
    
    
    10,891
    
    
    
    7,481Selling, general and administrative
    
    
    6,225
    
    
    
    8,787Settlement of office lease obligation
    
    
    3,307
    
    
    
    Reduction in liability for settlement of litigation, net
    
    
    (340
    )
    
    
    (1,800
    )Total operating expenses
    
    
    20,083
    
    
    
    14,468Other (expense)/income:Amortization of deferred financing costs
    
    
    (840
    )
    
    
    0Fair market value  conversion feature liability
    
    
    (720,000
    )
    
    
    0Fair market value  warrant liability
    
    
    (7,200
    )
    
    
    0All other (expense)/ income, net
    
    
    (92
    )
    
    
    478Total other (expense)/income, net
    
    
    (728,132
    )
    
    
    478Net loss
    
    $
    (748,021
    )
    
    $
    (13,839
    )
 Product sales-net
 ®
 Cost of goods sold
  Research and development expenses
  ® ®
 Selling, general and administrative expenses
  27




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Provision for settlement of litigation, net
  All other (expense)/ income, net
  Net loss
   Liquidity and Capital Resources
      28




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##### Table of Contents



® ®
   Recent Accounting Pronouncements
 Business Combinations
 29




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Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
  Accounting for Collaborative
Arrangements
 Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and Development Activities
 The Fair Value Option for Financial Assets and
Financial Liabilities Fair Value Measurements
 Fair Value Measurements
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Critical Accounting Policies and Estimates
  
    
    Going concern.Our recurring losses from operations and negative cash flows from
operations raise substantial doubt about our ability to continue as a going concern and as
a result, our independent registered public accounting firm included an explanatory
paragraph in its report on our consolidated financial statement for the year ended
December 31, 2007 with respect to this uncertainty. We have prepared our financial
statements on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of business. The
financial statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or amounts of liabilities that might be necessary
should we be unable to continue in existence.
    
    Revenue recognition. We recognize revenue from product sales when title to product and
associated risk of loss has passed to the customer and we are reasonably assured of
collecting payment for the sale. All revenue from product sales are recorded net of
applicable allowances for returns, rebates and other applicable discounts and allowances.
We allow return of our product for up to twelve months after product expiration.
    
    Research and development costs. All such costs are expensed as incurred, including raw
material costs required to manufacture drugs for clinical trials.
    
    Estimate of fair value of convertible notes and warrant.We use a Black-Scholes model
to estimate the fair value of our convertible notes and warrant.
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
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Item 4T. Controls and Procedures
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
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PART II
 
 Item 1. Legal Proceedings
 ®
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Item 1A. Risk Factors
 You should carefully consider the following risks and all of the other information set forth
in this Form 10-Q and the Form 10-K for the year ended December 31, 2007 before deciding to invest
in shares of our common stock. The risks described below are not the only ones facing our Company.
Additional risks not presently known to us or that we currently deem immaterial may also impair our
business operations.
 If any of the following risks actually occurs, our business, financial condition or results of
operations would likely suffer. In such case, the market price of our common stock would likely
decline due to the occurrence of any of these risks, and you may lose all or part of your
investment.
 Risks Related to Our Business
 If our stockholders do not approve our amended certificate of incorporation, we will be in a
default under the terms of the June 2008 convertible note financing.
   We may be unsuccessful in our efforts to obtain approval from the FDA or EMEA and commercialize
Genasense ® or our other pharmaceutical products.
 ® ®
 
    
    our ability to demonstrate clinically that our products are useful and safe in
particular indications;
    
    delays or refusals by regulatory authorities in granting marketing approvals;
    
    our limited financial resources and sales and marketing experience relative to our
competitors;
    
    actual and perceived differences between our products and those of our competitors;
    
    the availability and level of reimbursement for our products by third-party payors;
    
    incidents of adverse reactions to our products;
    
    side effects or misuse of our products and the unfavorable publicity that could result;
and
    
    the occurrence of manufacturing, supply or distribution disruptions.
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® ®
 ® ®
 ® ®
 ®
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Recurring losses and negative cash flows from operations raise substantial doubt about our
ability to continue as a going concern and we may not be able to continue as a going concern.
   Our business will suffer if we fail to obtain additional funding.
     
    
    delay, scale back or eliminate some or all of our research and product development
programs;
    
    license third parties to develop and commercialize products or technologies that we
would otherwise seek to develop and commercialize ourselves;
    
    attempt to sell our company;
    
    cease operations; or
    
    declare bankruptcy.
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We have relied on and continue to rely on our contractual collaborative arrangements with
research institutions and corporate partners for development and commercialization of our
products. Our business could suffer if we are not able to enter into suitable arrangements,
maintain existing relationships, or if our collaborative arrangements are not successful in
developing and commercializing products.
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We anticipate that we will incur additional losses and we may never be profitable.
 ®
 Our business depends heavily on a small number of products.
 ® ®
  We may be unable to obtain or enforce patents, other proprietary rights and licenses to protect
our business; we could become involved in litigation relating to our patents or licenses that
could cause us to incur additional costs and delay or prevent our introduction of new drugs to
market.
  
    
    obtain U.S. and foreign patent or other proprietary protection for our technologies,
products and processes;
    
    preserve trade secrets; and
    
    operate without infringing the patent and other proprietary rights of third parties.
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®
  ® ®
 Most of our products are in an early stage of development, and we may never receive regulatory
approval for these products.
 ® ®
 We will not be able to commercialize our product candidates if our preclinical studies do not
produce successful results or if our clinical trials do not demonstrate safety and efficacy in
humans.
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
    
    we may discover that a product candidate does not exhibit the expected therapeutic results
in humans, may cause harmful side effects or have other unexpected characteristics that may
delay or preclude regulatory approval or limit commercial use if approved;
 
    
    the results from early clinical trials may not be statistically significant or predictive
of results that will be obtained from expanded, advanced clinical trials;
 
    
    institutional review boards or regulators, including the FDA, may hold, suspend or
terminate our clinical research or the clinical trials of our product candidates for various
reasons, including noncompliance with regulatory requirements or if, in their opinion, the
participating subjects are being exposed to unacceptable health risks;
 
    
    subjects may drop out of our clinical trials;
 
    
    our preclinical studies or clinical trials may produce negative, inconsistent or
inconclusive results, and we may decide, or regulators may require us, to conduct additional
preclinical studies or clinical trials; and
 
    
    the cost of our clinical trials may be greater than we currently anticipate.
 ®
 ® ®
 Clinical trials are costly and time consuming and are subject to delays; our business would
suffer if the development process relating to our products were subject to meaningful delays.
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
    
    inability to obtain sufficient quantities of materials for use in clinical trials;
    
    inability to adequately monitor patient progress after treatment;
    
    unforeseen safety issues;
    
    the failure of the products to perform well during clinical trials; and
    
    government or regulatory delays.
 If we fail to obtain the necessary regulatory approvals, we cannot market and sell our products
in the United States.
   If the third party manufacturers upon which we rely fail to produce our products in the volumes
that we require on a timely basis, or to comply with stringent regulations applicable to
pharmaceutical drug manufacturers, we may face delays in the commercialization of, or be unable
to meet demand for, our products and may lose potential revenues.
 ® ®
 ® ® ®
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Even if we obtain regulatory approval, we will be subject to ongoing regulation, and any failure
by us or our manufacturers to comply with such regulation could suspend or eliminate our ability
to sell our products.
 ® ®
 The raw materials for our products are produced by a limited number of suppliers, and our
business could suffer if we cannot obtain needed quantities at acceptable prices and qualities.
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If third-party payors do not provide coverage and reimbursement for use of our products, we may
not be able to successfully commercialize our products.
  Our business exposes us to potential product liability that may have a negative effect on our
financial performance and our business generally.
  We may incura variety of costs to engage in future acquisitions of companies, products or
technologies, and the anticipated benefits of those acquisitions may never be realized.
  
    
    difficulties in assimilating the operations and personnel of acquired companies;
    
    diversion of our managements attention from ongoing business concerns;
    
    our potential inability to maximize our financial and strategic position through the
successful incorporation of acquired technology and rights into our products and services;
    
    additional expense associated with amortization of acquired assets;
    
    maintenance of uniform standards, controls, procedures and policies; and
    
    impairment of existing relationships with employees, suppliers and customers as a
result of the integration of new management personnel.
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We face substantial competition from other companies and research institutions that are
developing similar products, and we may not be able to compete successfully.
    We are dependent on our key executives and scientists, and the loss of key personnel or the
failure to attract additional qualified personnel could harm our business.
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Risks Related to Outstanding Litigation
 The outcome of and costs relating to the pending stockholder class action and stockholder
derivative actions are uncertain.
 ®
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Risks Related to Our Common Stock
 Provisions in our restated certificate of incorporation and bylaws and Delaware law may
discourage a takeover and prevent our stockholders from receiving a premium for their shares.
    We have not paid, and do not expect to pay in the future, cash dividends on our common stock.
  Our stock price is volatile.
  
    
    the results of preclinical studies and clinical trials by us or our competitors;
    
    announcements of technological innovations or new therapeutic products by us or our
competitors;
    
    government regulation;
    
    developments in patent or other proprietary rights by us or our respective competitors,
including litigation;
    
    fluctuations in our operating results; and
    
    market conditions for biopharmaceutical stocks in general.
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If our convertible noteholders convert their notes into shares of our common stock, our
stockholders may be diluted.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
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Item 6. Exhibits.
  ExhibitNumber
    
    Description of Document4.1
    
    Form of Senior Secured Convertible Promissory Note
(Incorporated by reference to Exhibit 4.1 of the Companys
Current Report on Form 8-K, as filed with the SEC on June
10, 2008).4.2
    
    Common Stock Purchase Warrant, dated June 9, 2008 (filed herewith).10.1
    
    Supply Agreement, dated May 1, 2008, between the Company
and Avecia Biotechnology (filed herewith).*10.2
    
    Amendment to the Lease Agreement, dated May 27, 2008,
between the Company and The Connell Company (filed
herewith).10.3
    
    Securities Purchase Agreement, dated June 5, 2008, by and
among the Company and certain accredited investors set
forth therein (Incorporated by reference to Exhibit 10.1 of
the Companys Current Report on Form 8-K, as filed with the
SEC on June 10, 2008).10.4
    
    General Security Agreement, dated June 9, 2008, by and
among the Company, certain additional grantors as set forth
therein and Tang Capital Partners, L.P. as agent
(Incorporated by reference to Exhibit 10.2 of the Companys
Current Report on Form 8-K, as filed with the SEC on June
10, 2008).31.1
    
    Certification by Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).31.2
    
    Certification by Vice President, Finance pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).32.1
    
    Certification by Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (furnished herewith).32.2
    
    Certification by Vice President, Finance pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (furnished herewith).
 
 *
    
    Portions of this exhibit have been omitted under a request for confidential treatment and filed
separately with the Securities and Exchange Commission. 49




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SIGNATURES
  Genta IncorporatedDate: August 7, 2008/s/ RAYMOND P. WARRELL, JR., M.D.Raymond P. Warrell, Jr., M.D.Chairman and Chief Executive Officer(principal executive officer)Date: August 7, 2008/s/ GARY SIEGELGary SiegelVice President, Finance(principal financial and accounting officer)
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Exhibit Index
 ExhibitNumber
    
    Description of Document4.1
    
    Form of Senior Secured Convertible Promissory Note
(Incorporated by reference to Exhibit 4.1 of the Companys
Current Report on Form 8-K, as filed with the SEC on June
10, 2008).4.2
    
    Common Stock Purchase Warrant, dated June 9, 2008 (filed herewith).10.1
    
    Supply Agreement, dated May 1, 2008, between the Company
and Avecia Biotechnology (filed herewith) (filed
herewith).*10.2
    
    Amendment to the Lease Agreement, dated May 27, 2008,
between the Company and The Connell Company (filed
herewith).10.3
    
    Securities Purchase Agreement, dated June 5, 2008, by and
among the Company and certain accredited investors set
forth therein (Incorporated by reference to Exhibit 10.1 of
the Companys Current Report on Form 8-K, as filed with the
SEC on June 10, 2008).10.4
    
    General Security Agreement, dated June 9, 2008, by and
among the Company, certain additional grantors as set forth
therein and Tang Capital Partners, L.P. as agent
(Incorporated by reference to Exhibit 10.2 of the Companys
Current Report on Form 8-K, as filed with the SEC on June
10, 2008).31.1
    
    Certification by Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).31.2
    
    Certification by Vice President, Finance pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).32.1
    
    Certification by Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (furnished herewith).32.2
    
    Certification by Vice President, Finance pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (furnished herewith).
 
 *
    
    Portions of this exhibit have been omitted under a request for confidential treatment and filed
separately with the Securities and Exchange Commission. 51