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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 June 30, 1998

                                       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 August 6, 1998,  the  registrant  had 6,516,089  shares of common
stock outstanding.


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<PAGE>

                               Genta Incorporated
                                INDEX TO FORM 10



PART I.  FINANCIAL INFORMATION                                              Page

Item 1.       Financial Statements (Unaudited)

              Condensed Consolidated Balance Sheets at June 30, 1998          3
                  and December 31, 1997                                       

              Condensed Consolidated Statements of Operations for the         4
                  Three and Six months Ended June 30, 1998 and 1997

              Condensed Consolidated Statements of Cash Flows for the         5
                  Six months Ended June 30, 1998 and 1997                     

              Notes to Condensed Consolidated Financial Statements            6

Item 2.       Management's Discussion and Analysis of Financial Condition     7
              and Results of Operations                                       


PART II.  OTHER INFORMATION

Item 1.       Legal Proceedings                                              24

Item 4.       Submission of Matters to a Vote of Security Holders            24

Item 6.       Exhibits and Reports on Form 8-K                               25



SIGNATURES

<PAGE>

<TABLE>
<CAPTION>

                               Genta Incorporated
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
                                                                                   JUNE 30                DECEMBER 31
                                                                         --------------------------------------------------
                                 ASSETS                                            1998                     1997
                                                                         --------------------------------------------------
<S>                                                                                        <C>                     <C>
Current assets:
   Cash and cash equivalents.............................................$                417,966     $           1,202,668
   Short term investments................................................               4,773,378                 7,253,756
   Trade accounts receivable.............................................                 645,664                   431,046
   Inventories...........................................................                 786,184                   826,008
   Other current assets..................................................                 276,717                   218,513
                                                                         --------------------------------------------------
Total current assets.....................................................               6,899,909                 9,931,991
                                                                         --------------------------------------------------
Property and equipment, net..............................................               1,559,923                 1,718,150
Intangibles, net ........................................................               3,142,145                 3,390,032
Deposits and other assets................................................                 708,580                   713,730
                                                                         --------------------------------------------------
Total Assets                                                             $             12,310,557     $          15,753,903
                                                                         ==================================================

                  LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable .....................................................$                573,751     $             849,108
   Payable to Research Institutions......................................                 635,661                   635,661
   Accrued payroll payable...............................................                 123,745                   548,295
   Other accrued expenses................................................               1,030,933                   992,660
   Deferred revenue......................................................                 232,730                   198,570
   Current portion of notes payable and
      capital lease obligations..........................................               1,067,374                   900,558
                                                                         --------------------------------------------------
Total current liabilities................................................$              3,664,194     $           4,124,852
                                                                         --------------------------------------------------
Notes payable, less current portion......................................                       -                         -
Deficit in joint venture.................................................               2,777,633                 2,204,053
Stockholders' equity:
   Preferred stock; 5,000,000 shares authorized:
      Series A convertible preferred stock, $.001 par value;
        451,100  and 456,600  shares  issued and  outstanding  at 
        June 30, 1998 and December 31, 1997, respectively, liquidation
        value is $27,066,000 at June 30, 1998                                                 451                       457
      Series D convertible preferred stock, $.001 par value; 226,995
        shares issued and outstanding at June 30, 1998 and December 31, 1997
        liquidation value is $31,779,300 at June 30, 1998.                                    227                       227
   Common stock, $.001 par value; 70,000,000 shares authorized;
      5,752,116 and 5,712,364 shares issued and outstanding at
      June 30, 1998 and December 31, 1997, respectively..................                   5,752                     5,712
   Additional paid-in capital............................................             129,375,459               129,320,493
   Accumulated deficit...................................................            (128,024,159)             (124,467,891)
   Accrued dividends payable.............................................               4,511,000                 4,566,000
   Notes receivable from stockholders....................................                       -                         -
                                                                         --------------------------------------------------
Total stockholders' equity...............................................               5,868,730                 9,424,998
                                                                         --------------------------------------------------
Total Liabilities and Stockholders' Equity                               $             12,310,557     $          15,753,903
                                                                         ==================================================


</TABLE>


                                       3


<PAGE>


                               GENTA INCORPORATED
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                    QUARTERS ENDED JUNE 30,                  SIX MONTHS ENDED JUNE 30,
                                              -------------------------------------      ----------------------------------
                                                     1998               1997                  1998              1997
                                              -------------------  ----------------      ---------------  -----------------
<S>                                                   <C>              <C>                     <C>                 <C>
Revenues:
   Product sales..............................$         1,032,367  $      1,093,214      $     2,634,546  $       2,252,053
   Contract Revenue for Genta Jago............             17,396            87,524               34,792            175,049
   Collaborative research
     and development..........................              7,036                 -               24,432             50,000
                                              -------------------  ----------------      ---------------  -----------------
                                              $         1,056,799  $      1,180,738      $     2,693,770  $       2,477,102
                                              -------------------  ----------------      ---------------  -----------------

Cost and expenses:
   Cost of products sold......................$           738,033  $        792,860      $     1,608,914  $       1,505,086
   Research and development...................            484,151         1,229,108            1,433,734          2,423,672
   Selling, general and
      administrative..........................          1,303,992         2,115,131            2,810,207          3,574,589
                                              -------------------  ----------------      ---------------  -----------------
                                              $         2,526,176  $      4,137,099      $     5,852,855  $       7,503,347
                                              -------------------  ----------------      ---------------  -----------------
Loss from operations..........................$        (1,469,377) $     (2,956,361)     $    (3,159,085) $      (5,026,246)
Equity in net loss of
  joint venture...............................           (286,790)         (477,393)            (573,580)          (780,522)
Other income (expense):
   Interest and other income..................             97,149            85,740              183,666            203,844
   Interest expense...........................             (3,839)         (930,299)              (7,269)        (1,541,249)
     
                                              -------------------  ----------------      ---------------  -----------------
Sub Total Other Income (Expense)                           93,310          (844,559)             176,397         (1,337,405)
                                              -------------------  ----------------      ---------------  -----------------
Net loss......................................$        (1,662,857) $     (4,278,313)     $    (3,556,268) $      (7,144,173)
Dividends Accrued on Preferred Stock..........                  -          (573,163)                   -         (1,148,318)
Dividends Imputed on Preferred Stock........                    -       (16,158,000)                   -        (16,158,000)
                                              -------------------  ----------------      ---------------  -----------------
Net loss applicable to
  common shares...............................$        (1,662,857) $    (21,009,476)     $    (3,556,268) $     (24,450,491)
                                              ===================  ================      ===============  =================
Net loss per common share.....................$              (.29) $          (4.89)     $          (.62) $           (5.90)
                                              ===================  ================      ===============  =================
Shares used in computing net
  loss per common share.......................          5,745,333         4,293,722            5,745,250          4,147,358
                                              ===================  ================      ===============  =================
</TABLE>

See accompanying notes.

                                       4


<PAGE>

                               Genta Incorporated
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                        SIX MONTHS ENDED JUNE 30,
                                                                       -----------------------------
                                                                            1998           1997
                                                                            ----           ----
<S>                                                                         <C>            <C>
OPERATING ACTIVITIES
Net loss...............................................................$  (3,556,268)  $  (7,144,172)
Items reflected in net loss not requiring cash:
   Depreciation and amortization.......................................      406,114         466,889
   Equity in net loss of joint venture.................................      573,580         780,522
   Interest Imputed on Convertible Debentures..........................            -       1,363,333
   Changes in operating assets and liabilities.........................     (860,472)      1,474,580
                                                                       --------------  -------------
Net cash used in operating activities..................................   (3,437,046)     (3,058,848)

INVESTING ACTIVITIES
Maturities of Short Term Investments...................................    2,480,378         (11,556)
Purchase of property and equipment.....................................            -         338,161
Loans Receivable from joint venture....................................            -        (384,012)
Deposits and other.....................................................        5,150         (77,950)
                                                                       --------------  --------------
Net cash provided by investing activities..............................    2,485,528        (135,357)

FINANCING ACTIVITIES
Proceeds from notes payable............................................            -       3,000,000
Repayments of notes payable and capital leases.........................            -        (312,849)
Proceeds from issuance of preferred stock, net.........................            -       9,882,765
Proceeds from Notes Receivable.........................................            -          62,000
Increase in Current Portion Capital Leases/Notes Payable...............      166,816               -
                                                                      --------------   -------------
Net cash provided by financing activities..............................      166,816      12,631,916
                                                                       -------------- --------------
Increase (decrease) in cash and cash equivalents.......................     (784,702)      9,437,711
Cash and cash equivalents at beginning of period.......................    1,202,668         532,013
                                                                       -------------- --------------
Cash and cash equivalents at end of period.............................$     417,966  $    9,969,724
                                                                       ============== ==============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid..........................................................$       7,269  $       26,584
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
  FINANCING ACTIVITIES:
Preferred stock dividends accrued......................................            -       1,148,318
Common stock issued in payment of dividends on preferred stock.........       55,000          12,074
Common stock issued upon conversion of convertible debentures
   and accrued interest................................................            -         358,559
Preferred stock issued upon conversion of short term notes payable.....            -         650,000
Preferred stock issued for receivable..................................            -       4,154,007

</TABLE>

See accompanying notes.
                                       5


<PAGE>

                               Genta Incorporated
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 1998
                                   (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 1997 have been  reclassified to
conform with the presentation in 1998.

        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, 1997, as amended.

        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:
                                              June 30,      December 31,
                                              1998            1997
                                              -------       ------------


        Raw materials and supplies        $    309,962       $   329,681
        Work-in-process                        178,840           141,120
        Finished goods                         297,382           355,197
                                           -----------       -----------
                                          $    786,184       $   826,008
                                          ============       ===========


(3)     Net Loss Per Common Share

        As required, the Company adopted SFAS No. 128, "Earnings Per Share", for
the year ended  December  31,  1997.  SFAS No. 128  changes  the method  used to
calculate  earnings per share and requires the restatement of all prior periods.
Under SFAS No.  128,  the  Company is  required  to  present  basic and  diluted
earnings  per  share if  applicable.  Basic  earnings  per share is based on the
weighted  average  number of  shares  outstanding  during  the  period.  Diluted
earnings per share includes the weighted  average  number of shares  outstanding
and gives effect to potentially dilutive common shares such as options, warrants
and convertible debt and preferred stock outstanding.

        Net loss per common share for six months ended June 30, 1998 and 1997 is
based on the  weighted  average  number of shares  of common  stock  outstanding
during the periods.  Potentially  dilutive securities include options,  warrants
and convertible preferred stock; however, such securities have not been included
in the  calculation  of the net  loss  per  common  share  as  their  effect  is
antidilutive where, as here, there is loss rather than earnings.


                                       6

<PAGE>

Therefore,  there is no  difference  between  the basic and diluted net loss per
common share for any of the periods presented.

(4)     Stockholders' Equity

        During May 1998,  an  aggregate  of 2,000  shares of Series A  Preferred
Stock and  accrued  dividends  were  converted  at the option of the  respective
holders  thereof into an aggregate of 14,510 shares of Genta's common stock at a
conversion price of $8.27 per share.

(5)     Legal Proceedings

        LBC Capital Resources, Inc. ("LBC"), a Philadelphia-based broker/dealer,
has asserted claims against the Company and others,  including Paramount Capital
Inc., of which Dr.  Rosenwald is the sole  stockholder and Mr. Weiss is a Senior
Managing Director, and various related entities and persons. LBC's claims relate
to the alleged  breach by the  Company of certain  letter  agreements  (the "LBC
Agreements"),  allegedly  entered  into by LBC and the  Company in 1995 and 1996
with respect to brokerage and/or investment  banking  services,  particularly in
connection with a $3 million investment for which LBC is seeking a fee. In April
1998 a Complaint was filed in the United States  District Court for the Southern
District  of New York (98 Civ.  2491) by LBC  against  the  Company and the same
other parties. The Company is engaged in settlement discussions with LBC.

        On June 4,  1998,  the  Company's  statutory  process  agent  received a
Summons and Complaint in a lawsuit  brought by Johns Hopkins against the Company
in Maryland Circuit Court for Baltimore City (Case No. 98120110).  Johns Hopkins
alleges  in the  Complaint  that the  Company  has  breached  the Johns  Hopkins
Agreement and owes it licensing  royalty fees and related expenses in the amount
of  $308,832.24.  Johns Hopkins also alleges the  existence of a separate  March
1993 letter agreement wherein the Company agreed to support a fellowship program
at the Johns  Hopkins  School of  Hygiene  and Public  Health and the  Company's
breach thereof,  with damages of $326,829.00.  On August 10, 1998, the Company's
statutory  process agent  received a Summons and Complaint in a related  lawsuit
brought by the  Ts'o/Miller  Partnership  and others  against the Company in the
same court (Case No. 98182113).  The Ts'o/Miller  Partnership  claims that it is
owed licensing royalty fees in the amount of $287,671.23.  The Company currently
intends  to retain  Maryland  counsel  so that it can  properly  evaluate  these
lawsuits and respond.

        On June 30, 1998,  the  Director  General of the  Company's  subsidiary,
Genta Pharmaceuticals  Europe, SA, ("Genta Europe"), was served notice of a suit
in  Marseille,  France by Marseille  Amenagement,  the manager of the  Company's
facilities in Marseille.  On July 30, 1998,  the Company's  office in San Diego,
California  was also served with Notice of the suit.  The suit seeks the payment
of unpaid  past rents in the  amount of  473,464.50  FF (as of August 11,  1998,
approximately  $79,000),  the removal of the Company  from the  facility  and an
indemnity  payment  of  1,852,429  FF  (as of  August  11,  1998,  approximately
$310,000),  which is  allegedly  equal to the  balance of the first nine  years'
rent.  On July 1, 1998,  the ANVAR  notified  Genta Europe of its claim that the
Company  remains  liable for 4,187,423 FF (as of August 11, 1998,  approximately
$701,000)  and is  required  to pay this  amount  immediately.  In view of these
events,  the Board of Directors of Genta Europe directed the Director General to
declare  "Cessation  of  Payment"  in the  commercial  court  in  France,  which
declaration was made in July 1998.

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

--------



                                       7

<PAGE>

operations,  expects to incur substantial  operating losses for the next several
years  due to  continued  requirements  for  ongoing  research  and  development
activities,   preclinical  and  clinical  testing,   manufacturing   activities,
regulatory activities,  establishment of a sales and marketing organization, and
development  activities  undertaken by Genta Jago,  the Company's  joint venture
with Jagotec.  From the period since its inception to June 30, 1998, the Company
has  incurred  a  cumulative  net  loss  of  $128.0  million.  The  Company  has
experienced  significant  quarterly  fluctuations  in  operating  results and it
expects that these fluctuations in revenues, expenses and losses will continue.

        The  Company's   independent   auditors  have  included  an  explanatory
statement in their report to the Company's financial  statements at December 31,
1997, that expresses  substantial  doubt as to the Company's ability to continue
as a going concern.  There are several factors that must be considered  risks in
that  regard  and those that are known to  management  are  discussed  under the
caption "Certain Trends and Uncertainties," in this Management's  Discussion and
Analysis of Financial Condition and Results of Operations ("MD&A").

        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,   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 Certain Trends and  Uncertainties
section of this MD&A  and elsewhere in this  Quarterly  Report on Form 10-Q. The
Company does not undertake to update any forward-looking statements.

Results of Operations

        Operating  revenues  totaled $1.06 million in the second quarter of 1998
compared to $1.18  million in the second  quarter of 1997,  and $2.7 million for
the six months ended June 30, 1998  compared to $2.5  million in the  comparable
period of 1997. This revenue is the result of sales by the Company's subsidiary,
JBL Scientific, Inc. All of the Company's product sales are attributable to JBL.
Sales of specialty chemical and pharmaceutical intermediate products used in the
clinical diagnostics, pharmaceutical research and development and pharmaceutical
manufacturing were $1.03 million in the second quarter of 1998 compared to $1.09
million in the same period in 1997,  and $2.6  million for the six months  ended
June 30, 1998 compared to $2.3 million in the comparable  period of 1997.  While
the annual  demand for many of JBL's  products is relatively  stable,  there are
significant  quarter  to  quarter  variations  in  sales  due to the  timing  of
customers' production schedules and demands.  Overall,  demand for the Company's
products has been increasing,  while  competition has caused prices to decrease.
Sales  of  products  used in  pharmaceutical  manufacturing  and  pharmaceutical
research and development  increased due to increased  market  penetration  while
sales of products used in clinical diagnostics trended slightly downward.

        Europa Bioproducts ("Europa"), JBL's European distributor, accounted for
approximately  16.5%, of product sales in the second quarter,  compared to 14.5%
in the comparable  period in 1997.  Two other  customers each accounted for more
than 10% of product sales in the second quarter of 1998,  representing 21.7% and
15.3%.  Individual customers' demands for JBL products generally fluctuates with
the outcomes of clinical trials or the


                                       8

<PAGE>

availability  of funding.  The Company  believes  that the loss of any  material
customer, if not replaced, could have an adverse effect on the Company.

        Costs and expenses were $2.5 million in the second quarter of 1998, down
from $4.1  million for the same  quarter in 1997,  and $5.9  million for the six
months ended June 30, 1998 compared to $7.5 million in the comparable  period in
1997.  The costs of products  sold by JBL  decreased  from $0.79  million in the
second  quarter of 1997 to $0.74 million in the second quarter of 1998, and were
$1.6 million for the six months ended June 30, 1998 compared to $1.5 million for
the six months  ended June 30, 1997.  Gross  margins for JBL in the quarter were
$0.29 million  compared to $0.30 million in the second quarter of 1997, and $1.0
million for the six months ended June 30, 1998  compared to $0.74 million in the
comparable  period of 1997. The stability in gross margins largely  reflects the
level sales with relatively stable fixed overhead costs.

        Research and Development  expenses  decreased in the second quarter from
$1.23 million in 1997 to $0.47 million in 1998, and in the six months ended June
30 from $2.4 million in 1997 to $1.4 million in 1998. Included in these expenses
is $0.26  million in the second  quarter of 1998 and $0.71  million in the first
half of 1998 for the  purchase of bulk G3139 to support the  Company's  expanded
clinical  research  program.  The  remaining  decrease in on-going  research and
development  expenses is primarily  attributable  to the Company's  research and
development   workforce  reductions   implemented  in  1997  together  with  the
discontinuation of several programs.

        Selling,  General &  Administrative  Expenses  were $1.3  million in the
second quarter of 1998,  compared to $2.1 million in the second quarter of 1997,
and $2.8 million for the six months ended June 30, 1998 compared to $3.6 million
in the comparable  period of 1997. The reduction is attributable to the expenses
of $868,000 of accrued severance costs recorded in the second quarter of 1997.

        The Company's net loss totaled $1.7 million,  or $0.29 per common share,
for the second quarter of 1998 compared to a net loss of $21.0 million, or $4.89
per common share,  for the second  quarter of 1997.  For the first six months of
1998, the Company's net loss was $3.6 million, or $0.62 per share, compared to a
net loss of $24.5  million for the first six months of 1997, or $5.90 per share.
The  Company's  net losses for the  second  quarter  and first half of 1998 were
lower than those  reported  for the  comparable  periods of 1997  primarily as a
result of the  following  which  occurred  in 1997:  a one time  charge of $16.1
million of imputed  dividends due to the value  associated  with the  discounted
conversion  terms and  liquidation  preference of the Series D Preferred  Stock;
$0.57  million  in accrued  dividends  on the Series A  Preferred  Stock;  $0.87
million of accrued severance costs, which were partially offset by $0.75 million
Research  and  Development   cost-savings   related  to  workforce  and  program
reductions  implemented  in 1995  through  1997;  and $0.82  million in interest
expense from the  amortization  of debt issuance costs of Bridge Warrants issued
in the first quarter of 1997.

        The Company's equity in net loss of joint venture (Genta Jago) decreased
to $0.29  million  in the  second  quarter  of 1998 from  $0.48  million  in the
comparable  period of 1997,  and $0.57 million for the six months ended June 30,
1998 compared to $0.78 million in the comparable period of 1997. The decrease in
the Company's equity in net loss of joint venture 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. The equity in net loss
of joint venture is determined by reducing the loss per Genta Jago's  financials
by Genta's  20% markup on internal  costs for which the joint  venture is billed
plus the  interest  accrued on the  working  capital  loans.  For more  detailed
interim  financial  information  regarding Genta Jago, see Exhibit 99.1,  "Genta
Jago  Technologies  B.V. (a development  stage company)  Statement of Operations
(unaudited)" filed herewith.

        Since the formation of Genta Jago,  no products  have been  successfully
developed and marketed. Since the initial plans called for earlier introductions
and since there have been significant  changes in the market  environment  since
the Company entered into the joint venture,  there is reason to believe that any
products that may be marketed in the future could represent significantly poorer
financial  opportunities  than those that were anticipated in the earlier plans.
This  reduction  in  opportunity  derives  from  factors such as the presence of
direct  competitors  to Genta Jago's  products being in the  marketplace  before
Genta Jago, and increasing  pricing pressures on  pharmaceuticals,  particularly
multisource or generic  products from payors such as reimbursers  and government
buyers.  On May 20, 1998,  Genta Jago received  notice from  Apothecon that they
have  terminated  the agreement for the  development  of  ketoprofen.  Apothecon
stated that their  decision to terminate was based on the facts that a competing
generic is already being successfully  marketed,  other competitors already have
ANDAs pending for their own generic  formulations of such drug and they consider
the Geomatrix capsule size  competitively  disadvantageous.  See  "MD&A--Certain
Trends and  Uncertainties--Uncertainty  of Technological Change and Competition"
and  "MD&A--Certain  Trends and  Uncertainties--Uncertainty  of Product Pricing,
Reimbursement  and Related  Matters." Both of these factors may adversely affect
Genta Jago even if it is successful in developing  products to obtain regulatory
approval.  As a result  and in  consideration  of the  Company's  need to reduce
expenses and focus its efforts,  the Company is seeking to direct its  resources
away from the joint venture to its Anticode(TM) drug  development,  specifically
G3139, for the immediate future.

        Interest   income  has  fluctuated   significantly   each  year  and  is
anticipated  to continue to fluctuate  primarily due to changes in the levels of
cash, investments and interest rates each period.


                                       9

<PAGE>

        In  consideration  of EITF  D-60,  which was  issued by the SEC in March
1997, the Company  recorded debt issuance costs totaling $3.0 million related to
value  associated  with 6.4 million Bridge  Warrants issued in connection with a
$3.0 million  debt issue in February  1997 that  matured in December  1997.  The
Company has amortized such costs to interest  expense over the life of the debt.
In the three  months  ended  June 30,  1997,  the  Company  recorded a charge to
interest expense  totaling  $818,333 ($.14 per share) related to amortization of
such debt issuance costs.

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  $124.5 million through June 30, 1998. At June
30, 1998, the Company had cash,  cash  equivalents  and  short-term  investments
totaling $5.2 million compared to $8.5 million at December 31, 1997.

        The Company will need substantial additional funds. The Company projects
that,  at its current  rate of  spending  and for its  current  activities,  its
existing  cash funds will enable the Company to maintain its present  operations
into the first  quarter of 1999. To the extent that the Company is successful in
accelerating its development of G3139 or in expanding its development  portfolio
or acquiring or adding new  development  candidates,  the current cash resources
would be consumed at a greater rate. Similarly,  the Company has been seeking to
identify  and hire  additional  senior  managers  to direct the  business of the
Company.  To the extent it is  successful in these  endeavors,  the rate of cash
utilization  would also  increase.  Certain  parties  with whom the  Company has
agreements  have claimed  default and some have  instituted  legal  proceedings.
Should the  Company be  obligated  to pay these  claims or should the Company be
obliged to incur  significant legal fees to defend or negotiate its positions or
both,  its  ability to continue  operations  could be  significantly  reduced or
shortened.  See  "MD&A--Certain  Trends  and  Uncertainties--Claims  of  Genta's
Default Under Various  Agreements."  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 also anticipates  seeking additional product  development  opportunities
from external  sources.  Such  acquisitions may consume cash reserves or require
additional cash or equity.  The Company's working capital and additional funding
requirements will depend upon numerous factors,  including:  (i) the progress of
the Company's research and development programs;  (ii) the timing and results of
preclinical testing and clinical trials; (iii) the level of resources devoted to
Genta Jago;  (iv) the level of resources  that the Company  devotes to sales and
marketing  capabilities;  (v)  technological  advances;  (vi) the  activities of
competitors;  and (vii) the ability of the  Company to  establish  and  maintain
collaborative  arrangements with others to fund certain research and development
efforts, to conduct clinical trials, to obtain regulatory approvals and, if such
approvals are obtained,  to manufacture and market products.  See "MD&A--Certain
Trends and Uncertainties--Need for Additional Funds; Risk of Insolvency."

        If the Company  successfully  secures sufficient levels of collaborative
revenues and other  sources of  financing,  it expects to use such  financing to
continue and expand its 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.

        In the second  quarter of 1998,  the  holders of an  aggregate  of 2,000
shares of Series A Preferred  Stock converted those shares into 14,510 shares of
Common  Stock.  After the close of the second  quarter of 1998,  an aggregate of
7,210  shares of Series D Preferred  Stock were  converted  by their  respective
holders into an aggregate of 763,971 shares of Common Stock (approximately 11.7%
of the outstanding Common Stock).

Impact of Year 2000

        Some older  computer  programs were written using two digits rather than
four to define the applicable  year. As a result,  those computer  programs have
sensitive  software that recognizes a date using 00 as the year 1900 rather than
the year 2000 (the "Year 2000  Issue").  This  could  cause a system  failure or
miscalculations   causing  disruption  of  operations,   including  a  temporary
inability to process transactions or engage in similar normal business


                                       10

<PAGE>

activities.

        The  Company has  completed  its  assessment  of whether it will have to
modify or replace  portions of its  software so that its  computer  systems will
function  properly  with respect to dates in the year 2000 and  thereafter.  The
Company is  currently  implementing  a plan to acquire and install new  computer
hardware and upgraded  software in its facilities that will  accommodate  dating
beyond 1999. The total year 2000 project cost is not expected to be material and
is expected to be completed not later than December 31, 1998,  which is prior to
any anticipated impact on its operating systems.  The Company believes that with
the modifications to existing software and conversions to new software, the Year
2000 Issue  will not pose  significant  operational  problems  for its  computer
systems. However, if such modifications and conversions are not made, or are not
completed  timely,  the Year 2000 Issue could have a material  adverse effect on
the operations of the Company.

        The  Company  has  initiated  formal  communications  with  all  of  its
significant  suppliers to determine the extent to which the Company's  interface
systems are  vulnerable to those third parties'  failure to remediate  their own
Year 2000 Issues.  There is no assurance that the systems of other  companies on
which the  Company's  systems rely will be timely  converted and will not have a
material adverse effect on the Company's  systems.  The costs of the project and
the  date  on  which  the  Company  believes  it will  complete  the  Year  2000
modifications are based on management's best estimates, which were derived using
numerous assumptions of future events,  including the continued  availability of
certain  resources and factors.  However,  there can be no assurance  that these
estimates will be achieved and actual results could differ materially from those
anticipated.  Specific  factors  that  might  cause  such  material  differences
include,  but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer codes, and
similar uncertainties.

Certain Trends and Uncertainties

        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  will need to raise  substantial  additional  funds to continue  its
operations and to conduct the costly and time-consuming  research,  pre-clinical
development and clinical trials necessary to bring its products to market and to
establish  production and marketing  capabilities.  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;  to  license  third  parties  to
commercialize  products or technologies that the Company would otherwise seek to
develop  itself;  to sell itself to a third party;  to cease  operations;  or to
declare  bankruptcy.  The Company's future cash requirements will be affected by
results of  research  and  development,  results  of  pre-clinical  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  FDA  and  foreign  regulatory  processes,  potential  litigation  by
companies  seeking  to  prevent  or delay  marketing  approval  of Genta  Jago's
products and other factors.

Loss History; Uncertainty of Future Profitability.

        Genta has been  unprofitable to date,  incurring  substantial  operating
losses associated with ongoing research and development activities, pre-clinical
testing, clinical trials, manufacturing activities and development activities


                                       11

<PAGE>

undertaken by Genta Jago.  From the period since its inception to June 30, 1998,
the Company has incurred a cumulative  net loss of $128.0  million.  The Company
has experienced  significant  quarterly  fluctuations  in operating  results and
expects that these fluctuations in revenues,  expenses and losses will continue.
The Company's  independent  auditors have included an  explanatory  paragraph in
their report to the Company's  financial  statements at December 31, 1997, which
paragraph expresses substantial doubt as to the Company's ability to continue as
a going concern. See "Report of Ernst & Young LLP, Independent  Auditors" in the
1997 Annual  Report and "MD&A -- Certain  Trends and  Uncertainties  -- Need for
Additional Funds; Risk of Insolvency."

Subordination of Common Stock to Series A and Series D Preferred Stock;  Risk of
Dilution; Anti-Dilution Adjustments.

        In the  event  of the  liquidation,  dissolution  or  winding  up of the
Company,  the Common Stock is expressly  subordinate to the approximately  $27.1
million preference of the 451,100 outstanding shares of Series A Preferred Stock
and the  approximately  $37.4 million  preference of 267,390  shares of Series D
Preferred  Stock  (including  40,395 shares of Series D Preferred Stock issuable
upon  exercise  of certain  warrants).  Dividends  may not be paid on the Common
Stock  unless full  cumulative  dividends on the Series A and Series D Preferred
Stocks have been paid or funds have been set aside for such preferred  dividends
by the Company.

        The  conversion  rate 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") are 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. As of June 30, 1998,  each share of Series A Preferred  Stock
is convertible into  approximately  7.255 shares of Common Stock at a conversion
price of $8.27 per share and the  exercise  price of the  Series A  Warrants  is
presently $9.32 per share.  There are outstanding  Series A Warrants to purchase
an aggregate of 675,966  shares of Common  Stock,  which expire on September 24,
1998.  The  conversion  rate of the Series D  Preferred  Stock and the  exercise
prices of the Class D Warrants are subject to  adjustment,  among other  things,
upon certain  issuances of Common Stock or  securities  convertible  into Common
Stock at prices per share below  certain  levels.  In addition,  the  Conversion
Price of the Series D Preferred  Stock in effect on January 29, 1999 (the "Reset
Date") will be adjusted and reset  effective as of the Reset Date if the average
closing  bid price of the  Common  Stock  for the 20  consecutive  trading  days
immediately preceding the Reset Date (the "19 Month Trading Price") is less than
140% of the  then  applicable  Conversion  Price  (a  "Reset  Event").  Upon the
occurrence  of a Reset  Event,  the then  applicable  Conversion  Price  will be
reduced to be equal to the greater of (i) the 19 Month  Trading Price divided by
1.40 and (ii) 25% of the then applicable  Conversion Price. Each share of Series
D Preferred  Stock is presently  convertible  into  approximately  106 shares of
Common Stock, at a conversion  price of $0.94375 per share of Common Stock,  and
the  exercise  price of the Class D Warrants is  presently  $0.94375  per share.
There are  807,900  Class D Warrants  outstanding  and another  201,975  Class D
Warrants  issuable upon the exercise of certain warrants.  Finally,  the Company
has outstanding  Bridge Warrants to purchase an aggregate of 6,357,616 shares of
Common  Stock at an  exercise  price of  $0.471875  per  share,  Line of  Credit
Warrants  to  purchase  an  aggregate  of 50,000  shares  of Common  Stock at an
exercise  price of $2.50 per share,  warrants to purchase an aggregate of 95,768
shares of Common Stock at various exercise prices between  approximately $13 and
$21 per share and  outstanding  employee  stock  options.  The Note and  Warrant
Purchase  Agreement  provides  that  a  number  of  additional  Bridge  Warrants
("Penalty Warrants") equal to 1.5% of the number of Bridge Warrants then held by
the Aries  Funds  shall be issued to the Aries Funds for each day beyond 30 days
after the final closing of the Private Placement (as defined below) that a shelf
registration  statement  covering the Common  Stock  underlying  the  securities
purchased  pursuant to the Note and Warrant Purchase Agreement is not filed with
the  SEC and for  each  day  beyond  210  days  after  the  closing  date of the
investment  contemplated  by the Note and Warrant  Purchase  Agreement that such
shelf  registration  statement is not declared effective by the SEC. The Company
filed such  shelf  registration  statement  with the SEC on  September  9, 1997,
however,  the Company  has to date been  unable to have such shelf  registration
statement  declared  effective  by the SEC. As a result,  the  Company  could be
obligated to issue  Penalty  Warrants to the Aries  Funds.  The Aries Funds have
not,  to date,  requested  that the Company  issue such  Penalty  Warrants.  The
Company


                                       12

<PAGE>

and the Aries Funds are currently conducting  negotiations to determine whether,
and  to  what  extent,   Penalty  Warrants  will  be  issued.  See  "Market  for
Registrant's  Common Equity and Related  Stockholder  Matters -- Recent Sales of
Unregistered Securities" in the 1997 Annual Report.

Claims of Genta's Default Under Various Agreements.

        On May 7, 1997 Jago and Jagotec  gave Genta Jago  formal  notices of its
assertion  that Genta Jago is in breach of the  Restated  GEOMATRIX(R)  Services
Agreement,  the Restated GEOMATRIX(R) Research and Development Agreement and the
Restated  GEOMATRIX(R) 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.  Each  of  these
Agreements  provides for a cure period of 30 days, except that if the default is
not  capable of being  cured  within  this  period and the  defaulting  party is
diligently  undertaking  to cure such default as soon as  commercially  feasible
thereafter under the circumstances,  then the non-breaching  party shall have no
right to terminate the agreement.  In addition each of these agreements contains
a  provision  providing  for the final  resolution  of any  disputes,  claims or
controversies,  whether  before  or  after  termination  of  the  agreement,  by
arbitration in Paris, France. After the 30-day cure period expired, Jago did not
take action  purporting to terminate  these  agreements  but did not rescind the
notices of default. Jago, Jagotec and Jago Holding AG 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.
There is no specific  cure period  contained in the Restated  Joint  Venture and
Shareholders  Agreement  but rather a  provision  providing  for  resolution  of
disputes,  claims or controversies by arbitration in Paris,  France. The Company
met with Jago and is  attempting  to resolve  the  situation  without  resort to
arbitration. While a termination of these agreements may have a material adverse
effect on the Company, the Company intends to oppose vigorously Jago's position.
Stating  that it was  without  prejudice  to Genta's  position,  Genta  provided
approximately  $129,000  to Genta  Jago  for the  payment  by Genta  Jago of all
amounts claimed by Jago under the Restated  GEOMATRIX(R)  License  Agreement and
certain  other  amounts owed by Genta Jago to third  parties  (both  included in
Jago's notice of default).  On May 15, 1997,  Johns Hopkins  University  ("Johns
Hopkins")  sent Genta a letter stating that the license  agreement  entered into
between  the  Company  and  Johns  Hopkins  in  May  1990  (the  "Johns  Hopkins
Agreement")  was  terminated.  On November 26, 1997 Drs. Paul O.P. Ts'o and Paul
Miller (the "Ts'o/Miller  Partnership")  sent Genta a letter claiming that Genta
was in  material  breach of the  February  1989  license  agreement  between the
Company  and the  Ts'o/Miller  Partnership  (the  "Ts'o/Miller  Agreement")  for
failing to pay royalties  from 1995 through 1997.  This notice  further  advised
that if the  alleged  breach  were not cured  within 90 days of the  notice  the
license would be  terminated.  By letter dated April 28, 1998,  the  Ts'o/Miller
Partnership  advised the Company  that it was  terminating  the license  granted
pursuant to the Ts'o/Miller Agreement.  On June 4, 1998, the Company's statutory
process  agent  received a Summons and  Complaint in a lawsuit  brought by Johns
Hopkins  against the Company in Maryland  Circuit Court for Baltimore City (Case
No.  98120110).  Johns  Hopkins  alleges in the  Complaint  that the Company has
breached the Johns  Hopkins  Agreement  and owes it  licensing  royalty fees and
related  expenses in the amount of  $308,832.24.  Johns Hopkins also alleges the
existence of a separate March 1993 letter  agreement  wherein the Company agreed
to support a  fellowship  program  at the Johns  Hopkins  School of Hygiene  and
Public Health and the Company's breach thereof, with damages of $326,829.00.  On
August 10, 1998,  the Company's  statutory  process agent received a Summons and
Complaint in a related lawsuit brought by the Ts'o/Miller Partnership and others
against  the  Company in the same court  (Case No.  98182113).  The  Ts'o/Miller
Partnership  claims  that it is owed  licensing  royalty  fees in the  amount of
$287,671.23. The Company currently intends to retain Maryland counsel so that it
can properly evaluate these lawsuits and respond.  See "Business -- Anticode(TM)
Brand of Antisense Oligonucleotide Programs -- Oligonucleotide Collaborative and
Licensing  Agreements  --  Ts'o/Miller/Hopkins"  in the 1997  Annual  Report and
"Legal Proceedings." The Company is currently engaged in settlement  discussions
with Johns Hopkins and the Ts'o/Miller Partnership. The French government agency
L'Agence  Nationale de Valorisation  de la Recherche  ("ANVAR")  asserted,  in a
letter dated February 13, 1998, that


                                       13


<PAGE>

Genta Europe was not in compliance with the ANVAR Agreement and that ANVAR might
request  the  immediate  repayment  of such  loan.  On July 1,  1998,  the ANVAR
notified Genta Europe of its claim that the Company remains liable for 4,187,423
FF (as of August 11, 1998,  approximately  $701,000) and is required to pay this
amount  immediately.  In July 1998, Genta Europe declared "Cessation of Payment"
in the commercial court in France. See "Legal  Proceedings" and see "Business --
Genta Europe" in the 1997 Annual Report. LBC Capital Resources,  Inc. ("LBC"), a
Philadelphia-based  broker/dealer,  has asserted  claims against the Company and
others. See "Legal Proceedings." There can be no assurance that the Company will
not incur material costs in relation to these terminations  and/or assertions of
default or liability. See "MD&A -- Liquidity and Capital Resources."

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.  To date,  most of the
Company's  resources  have been  dedicated  to  applying  molecular  biology and
medicinal  chemistry to the research and  development of potential  Anticode(TM)
pharmaceutical products based upon oligonucleotide technology. While the Company
has  demonstrated  the activity of  Anticode(TM)  oligonucleotide  technology in
model  systems in vitro and the activity of antisense  technology in animals and
has  identified  compounds  that the Company  believes are worthy of  additional
testing, only one of these potential Anticode(TM)  oligonucleotide  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  oligonucleotide  technology  will
result in products that will receive necessary regulatory approvals or that will
be successful commercially. Further, results obtained in pre-clinical studies or
early clinical investigations or pilot bioequivalence trials are not necessarily
indicative  of results  that will be  obtained  in  pivotal  human  clinical  or
bioequivalence  trials.  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  clinical  testing  of  the  Company's  products  currently  in
pre-clinical  development,   or,  if  permitted,  that  such  products  will  be
demonstrated to be safe and  efficacious.  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  formulated  using  GEOMATRIX
technology.  On July 27,  1998,  SkyePharma  PLC,  the  parent  company to Jago,
announced that an ANDA for naproxen sodium filed by Brightstone Pharma, its U.S.
sales  and  marketing  subsidiary,  had been  accepted  for  filing  by the FDA.
Brightstone  has a license from Genta Jago to market this product.  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.  Certain competitive products have already been
filed  with  and/or  approved  by the FDA.  See  "MD&A  --  Certain  Trends  and
Uncertainties  --  Potential   Adverse  Effect  of   Technological   Change  and
Competition."

Limited Availability of Net Operating Loss Carry Forwards.

        At December  31,  1997,  the Company  has  federal  and  California  net
operating  loss  carryforwards  of  approximately  $71,697,000  and  $15,236,000
respectively.  The  difference  between  the  federal  and  California  tax loss
carryforwards is primarily  attributable to the  capitalization  of research and
development   expenses  for  California  tax  purposes  and  the  fifty  percent
limitation on California loss carryforwards  prior to 1997. The federal tax loss
carryforwards   will  begin  expiring  in  2003,  unless  previously   utilized.
Approximately  $2,767,000 of the California tax loss carryforward expired during
1997 and the related deferred tax asset and tax loss carryforward amounts have


                                       14


<PAGE>

been reduced  accordingly.  The remaining  California  tax loss will continue to
expire in 1998,  unless  utilized.  The Company also has federal and  California
research and development tax credit  carryforwards of $2,921,000 and $1,203,000,
respectively, which will begin expiring in 2003 unless previously utilized.

        Federal and California tax laws limit the  utilization of income tax net
operating loss and credit  carryforwards  that arise prior to certain cumulative
changes  in a  corporation's  ownership  resulting  in change of  control of the
Company.  The future annual use of net operating loss carryforwards and research
and  development  tax credits will be limited due to the ownership  changes that
occurred  during 1990,  1991,  1993,  1996 and 1997.  Because of the decrease in
value of the Company's stock,  the ownership  changes which occurred in 1996 and
1997 will have a material  limitation on the Company's  ability to utilize these
carryforwards.

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 D Preferred  Stocks.  The Company  currently  intends to
retain its earnings, if any, after payment of dividends on outstanding shares of
Series A and Series D Preferred Stocks, for the development of its business.

No Assurance of Regulatory Approval; Government Regulation.

        The FDA and comparable  agencies in foreign countries impose substantial
premarket approval  requirements on the introduction of pharmaceutical  products
through lengthy and detailed  pre-clinical 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 have  attained.  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 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  could  materially  adversely  affect  the
Company's or 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


                                       15

<PAGE>

1996,  JBL retained a chemical  consulting  firm to advise it with respect to an
incident of soil and groundwater contamination (the "Spill"). Sampling conducted
at the JBL facility  revealed the presence of chloroform and  perchloroethylenes
("PCEs") in the soil and groundwater at this site. Six soil borings were drilled
and  groundwater  wells were  installed  at several  locations  around the site.
Chloroform was detected at levels of up to 190 ug/liter  on-site,  exceeding the
California Drinking Water Maximum Contamination Level for trihalomethanes of 100
ug/liter.  PCEs were also  detected  at  levels  of up to 22  ug/liter  on-site,
exceeding  the  California  Drinking  Water  Maximum  Contamination  Level  of 5
ug/liter.  In  addition,  toluene was  detected at levels of up to 2 ug/liter at
several points on-site,  which is  significantly  below the California  Toxicity
Action Level of 100  ug/liter.  These  toxicity  levels are not binding,  as the
final  regulatory  maximum  levels may be higher or lower.  JBL has notified the
appropriate  regulatory  agency,  the California  Regional Water Quality Control
Board,  of  conditions  at the  site,  and with the  agency's  approval,  JBL is
monitoring  groundwater  conditions  at the site on a  quarterly  basis.  JBL is
currently in the  pre-regulatory  action stage with ongoing site  monitoring and
site   assessment.   In  addition,   current   sampling  results  indicate  that
contaminants may be migrating off-site. An off-site well, used as a domestic and
irrigation  water source,  has shown evidence of being impacted by chloroform at
1.0  ug/liter,   significantly  below  the  California  Drinking  Water  Maximum
Contamination  Level for  trihalomethanes  of 100  ug/liter,  and toluene at 0.9
ug/liter,  also  significantly  below (less than one percent of) the  California
Toxicity  Action Level of 100  ug/liter.  While  another  off-site well has been
found to contain  chloroform,  the  engineering  consultant  concluded  that the
contaminants  do not appear to relate to impact  from the JBL site.  The Company
believes that any costs  associated  with further  investigating  or remediating
this  contamination  will not have a material  adverse effect on the business of
the Company,  although there can be no assurance  thereof.  The Company believes
that it is in material compliance with Governmental Regulations,  however, 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 its 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


                                       16

<PAGE>


of products  requiring  such  licenses  could be  foreclosed.  In addition,  the
Company or Genta Jago could incur 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 and Trademark
Office  (or any  foreign  counterpart)  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 and Genta Jago's  strategy for the research,  development
and commercialization of their 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.  No assurance can be given
that they will obtain such collaborative arrangements on acceptable terms, if at
all, nor can any assurance be given that any current collaborative  arrangements
will be maintained.

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  pre-clinical 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.  As  competitors  of the Company or of Genta Jago receive  approval to
products that share the same  potential  market as the Company's or Genta Jago's
potential products, the market share available to the Company or Genta Jago will
likely  be  reduced,  thereby  reducing  the  potential  revenues  and  earnings
available  to  the  Company  or  Genta  Jago.  In  addition,  increased  pricing
competition would also likely result, further reducing the earnings potential of
the Company's or Genta Jago's products. The Company is aware


                                       17

<PAGE>


that certain  competitors  of Genta Jago have filed,  and received  approval of,
ANDAs for  generic  formulations  of drugs of which  Genta  Jago was  working to
develop  generic  formulations.  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 or 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 trials and  pre-clinical  testing are subject to
varying  interpretations.  Even if the  development  of the  Company's  or Genta
Jago's  respective  products  advances to the  clinical  stage,  there can be no
assurance that such products 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  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 or Genta Jago may encounter unanticipated
problems  relating to development,  manufacturing,  distribution  and marketing,
some of which may be beyond the Company's or Genta Jago's  respective  financial
and technical capacity to solve. The failure to address such problems adequately
could have a material adverse effect on the Company's or Genta Jago's respective
businesses,  financial  conditions,  prospects  and  results of  operations.  No
assurance  can be given  that the  Company  or Genta  Jago will  succeed  in the
development  and  marketing of any new drug  products,  or that they will not be
rendered  obsolete by products of competitors.  "See "MD&A -- Certain Trends and
Uncertainties  --  Potential   Adverse  Effect  of   Technological   Change  and
Competition."

Difficult Manufacturing Process; Access to Certain Raw Materials.

        The manufacture of Anticode(TM) 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, in order to obtain  oligonucleotides  sufficient to meet the
volume and cost  requirements  needed for  certain  commercial  applications  of
Anticode(TM)  oligonucleotide  products,  Genta requires raw materials currently
provided by a single supplier which is itself a development stage  biotechnology
company  (and a  competitor  of the  Company)  and is subject  to  uncertainties
including  the  potential  for  a  decision  by  such  supplier  to  discontinue
production  of such raw  materials,  the  insolvency  of such  supplier,  or the
failure of such supplier to follow applicable  regulatory  guidelines.  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 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.  Failure to establish compliance with
GMP to the satisfaction of the FDA can result in delays in, or prohibition from,
initiating clinical trials or commercial marketing of a 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


                                       18

<PAGE>

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 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. Finally, given the above
potential  market  constraints  on  pricing,  the  availability  of  competitive
products in these  markets  may further  limit the  Company's  and Genta  Jago's
flexibility in pricing and in obtaining adequate reimbursement for its potential
products.  See "MD&A -- Certain Trends and  Uncertainties  -- Potential  Adverse
Effect of Technological Change and Competition."

Need for and Dependence on Qualified Personnel.

        The Company's success is highly dependent on the hiring and retention of
key personnel and scientific  staff. The loss of key personnel or the failure to
recruit necessary  additional  personnel or both is likely further to 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  attract  and  retain  the  qualified
personnel necessary for the development of its business. The Company is actively
engaged in the search for a new Chief  Financial  Officer.  In March  1998,  the
Company's Controller resigned and a replacement is being sought.

Product Liability Exposure; Limited Insurance Coverage.

        The  Company's,  JBL's  and  Genta  Jago's  businesses  expose  them  to
potential   product   liability   risks  that  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 that
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.

Fundamental Change.

        The Company's Restated  Certificate of Incorporation  currently provides
that upon the  occurrence  of a  "Fundamental  Change,"  the holders of Series A
Preferred  Stock have the option of requiring the Company to  repurchase  all of
each such holder's shares of Series A Preferred  Stock at the Redemption  Price,
an event that could result in the Company  being  required to pay to the holders
of Series A  Preferred  Stock stock or (in  certain  circumstances)  cash in the
aggregate amount of approximately $27.1 million.  Furthermore, if the Company is
required to redeem


                                       19

<PAGE>

the Series A  Preferred  Stock it would  also be  required  (subject  to certain
conditions)  to offer to redeem  the  Series D  Preferred  Stock on a pari passu
basis with the Series A Preferred Stock and with the same type of  consideration
paid in redemption of the Series A Preferred Stock;  upon a Fundamental  Change,
the Company could, under certain  circumstances,  be required to pay the holders
of Series D Preferred Stock cash in the aggregate amount of approximately  $31.8
million  (not  including an  additional  $5.7 million that could be payable upon
redemption of 40,395 shares of Series D Preferred  Stock  issuable upon exercise
of certain  warrants).  "Fundamental  Change" is defined  as: (i) a "person"  or
"Group"  (as  defined),  together  with any  affiliates  thereof,  becoming  the
beneficial  owner (as  defined)  of Voting  Shares (as  defined)  of the Company
entitled to exercise more than 60% of the total voting power of all  outstanding
Voting  Shares of the  Company  (including  any Voting  Shares that are not then
outstanding  of which  such  person or Group is  deemed  the  beneficial  owner)
(subject to certain exceptions);  (ii) any consolidation of the Company with, or
merger of the Company into, any other person,  any merger of another person into
the Company,  or any sale, lease or transfer of all or substantially  all of the
assets of the Company to another person (subject to certain  exceptions);  (iii)
the sale, transfer or other disposition (or the entry into a commitment to sell,
transfer or otherwise dispose) of all or any portion of the shares of Genta Jago
held at any time by the Company (or the  imposition of any material lien on such
shares which lien is not removed within 30 days of imposition)  and the sale (or
functional  equivalent of a sale) of all or  substantially  all of the assets of
Genta Jago or (iv) the  substantial  reduction or elimination of a public market
for the Common Stock as the result of repurchases,  delisting or  deregistration
of the Common Stock or corporate  reorganization or recapitalization  undertaken
by the Company.

        The SEC Staff is currently  in the process of  reviewing a  registration
statement filed by the Company,  and has raised certain questions  regarding the
Company's  classification  of the  Preferred  Stock as  permanent  (rather  than
"mezzanine")  equity.  Management  of  the  Company  believes,  based  upon  its
Certificate of Incorporation  and the agreement  pursuant to which the Preferred
Stock was issued, and after discussion with Company counsel, that the conditions
for redemption of the Preferred Stock require  volitional acts undertaken by the
Company and are therefore  solely within the control of the Company.  If the SEC
Staff does not accept the Company's position, the Company will file an amendment
to this Form 10-Q  reclassifying the Preferred Stock as "mezzanine"  rather than
permanent equity.

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 or regulations. See "MD&A -- Certain Trends
and Uncertainties -- No Assurance of Regulatory Approval; Government Regulation"
for a discussion of the Spill.

Volatility  of  Stock  Price;  Market  Overhang  from  Outstanding   Convertible
Securities and Warrants.

        The market price of the Company's Common Stock,  like that of the common
stock of many other  biopharmaceutical  companies,  has been highly volatile and
may be so in the future.  Factors  such as, among other  things,  the results of
pre-clinical  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


                                       20

<PAGE>

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,  Genta Jago or their respective  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 August 6, 1998, the
Company had 6,516,089 shares of Common Stock  outstanding.  The Company obtained
stockholder approval of two for three, one for two, two for five, one for three,
one for four,  one for five,  one for seven and one for ten reverse stock splits
at its annual stockholders' meeting held on July 14, 1998, and the Board may, in
its discretion, effect one of these reverse stock splits at any time on or prior
to the  Company's  next annual  meeting of  stockholders  and would  abandon the
remaining  alternative  reverse  stock  splits  without  further  action  by the
stockholders of the Company.  Future sales of shares of Common Stock by existing
stockholders,  holders of preferred stock who might convert such preferred stock
into Common Stock,  and option and warrant holders also could  adversely  affect
the market price of the Common Stock.

        No predictions can be made of the effect that future market sales of the
shares of Common  Stock  underlying  the  convertible  securities  and  warrants
referred  to under the caption  "MD&A -- Certain  Trends and  Uncertainties  - -
Subordination of Common Stock to Series A and Series D Preferred Stock;  Risk of
Dilution; Anti-dilution Adjustments," or the availability of such securities for
sale, will have on the market price of the Common Stock  prevailing from time to
time. Sales of substantial  amounts of Common Stock, or the perception that such
sales might occur, could adversely affect prevailing market prices.

Certain Interlocking Relationships; Potential Conflicts of Interest.

        The Aries Funds have the contractual  right to appoint a majority of the
members  of the  Board  of  Directors  of the  Company.  The  Aries  Funds  have
designated Michael S. Weiss, Glenn L. Cooper, M.D., Donald G. Drapkin,  Bobby W.
Sandage,  Jr., Ph.D., and Andrew J. Stein as nominees to the Board of Directors.
Such persons were  elected as  Directors  of the Company.  David R. Walner,  the
Secretary of the Company,  is an Associate  Director and  Secretary of Paramount
Capital Asset  Management,  Inc.  ("PCAM").  PCAM is the investment  manager and
general  partner  of  The  Aries  Trust  and  the  Aries  Domestic  Fund,  L.P.,
respectively.  The Aries  Funds  currently  do not hold a  controlling  block of
voting  stock,  although  the Aries  Funds have the  present  right to appoint a
majority of the Board of Directors, and to convert and exercise their securities
into a significant portion of the outstanding Common Stock. See "MD&A -- Certain
Trends and  Uncertainties  --  Concentration of Ownership and Control" below. In
addition to the Aries Funds'  investments  in the Company that are  disclosed in
"Market for Registrant's Common Equity and Related Stockholder Matters -- Recent
Sales of Unregistered  Securities,"  in the 1997 Annual Report,  the Aries Funds
also engaged in the following transactions: as of June 30, 1997, the Aries Funds
purchased an aggregate of 10,000  shares of Series D Preferred  Stock and 50,000
Class D Warrants in a private placement (the "Private  Placement");  on December
2, 1997,  the Aries Funds  purchased an  aggregate of 54,000  shares of Series A
Preferred  Stock;  on December  29,  1997,  warrants to purchase an aggregate of
1,000  shares  of Series D  Preferred  Stock and  5,000  Class D  Warrants  were
allocated to the Aries Funds by Paramount  Capital,  Inc.,  which  warrants were
received in connection  with the Private  Placement;  on December 31, 1997,  the
Aries Funds  converted  the  outstanding  principal  of, and  interest on, their
respective  Senior  Secured  Convertible  Bridge  Notes of the  Company  into an
aggregate of 52,415 shares of Series D Preferred  Stock;  and in July 1998,  the
Aries Funds purchased  40,000 shares of Series A Preferred  Stock.  Furthermore,
the Company may be required to issue  Penalty  Warrants to the Aries Funds.  See
"Risk  Factors--Subordination of Common Stock to Series A and Series D Preferred
Stock; Risk of Dilution;  Anti-Dilution  Adjustments." Dr. Lindsay A. Rosenwald,
the President and sole  stockholder  of PCAM, is also the President of Paramount
Capital,  Inc.  and of  Paramount  Capital  Investments  LLC,  a New  York-based
merchant banking and venture capital firm specializing in biotechnology


                                       21

<PAGE>


companies  ("PCI").  In the  regular  course of its  business,  PCI  identifies,
evaluates and pursues investment  opportunities in biomedical and pharmaceutical
products, technologies and companies. Generally, Delaware corporate law requires
that any transactions  between the Company and any of its affiliates be on terms
that, when taken as a whole,  are  substantially  as favorable to the Company as
those then  reasonably  obtainable  from a person who is not an  affiliate in an
arms-length  transaction.  Nevertheless,  neither  such  affiliates  nor  PCI is
obligated  pursuant to any agreement or  understanding  with the Company to make
any additional products or technologies  available to the Company, nor can there
be any  assurance,  and the Company does not expect and investors in the Company
should not expect,  that any biomedical or pharmaceutical  product or technology
identified by such affiliates or PCI in the future will be made available to the
Company.  In  addition,  certain of the current  officers  and  directors of the
Company  or  certain of any  officers  or  directors  of the  Company  hereafter
appointed  may  from  time to time  serve  as  officers  or  directors  of other
biopharmaceutical  or  biotechnology  companies.  There can be no assurance that
such other  companies  will not have  interests  in  conflict  with those of the
Company.

Concentration of Ownership and Control.

        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.  See "MD&A - -
Certain  Trends  and  Uncertainties  --  Certain   Interlocking   Relationships;
Potential Conflicts of Interest." 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.  These arrangements may discourage or prevent any proposed takeover of
the  Company,  including  transactions  in which  stockholders  might  otherwise
receive a premium for their shares over the then  current  market  prices.  Such
stockholders may influence corporate actions, including influencing elections of
directors and significant corporate events. See also "MD&A -- Certain Trends and
Uncertainties -- Effect of Certain Anti-Takeover Provisions" below.

Effect of Certain Anti-Takeover Provisions.

        The Company's Restated  Certificate of Incorporation and By-laws 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  amendment  of the By-laws.
Additionally, the Company has contractual obligations to certain of its security
holders that may impair  potential  takeovers.  See "MD&A -- Certain  Trends and
Uncertainties  -- Certain  Interlocking  Relationships;  Potential  Conflicts of
Interest." 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 $3  million  private  placement  in  February  1997 and the
Private Placement in June 1997. Additionally, pursuant to the Company's Restated
Certificate of Incorporation,  if any "person" or "Group" (as defined), together
with any affiliates thereof, becomes the beneficial owner (as defined) of Voting
Shares (as  defined)  of the Company  entitled to exercise  more than 60% of the
total voting power of all  outstanding  Voting Shares of the Company  (including
any Voting Shares that are not then outstanding of which such person or Group is
deemed the beneficial owner) (subject to certain exceptions), then a Fundamental
Change (as defined) would occur and the Company would be obligated to redeem the
Series  A and  Series D  Preferred  Stocks.  See  "MD&A --  Certain  Trends  and
Uncertainties  -- Fundamental  Change." This  Fundamental  Change provision is a
further  disincentive  for any person  attempting  to acquire 60% or more of the
total voting power of the Company's Voting Shares.

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


                                       22

<PAGE>

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).  Rule 15g-9 defines "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  including  (i) the  securities  being quoted on the Nasdaq  National
Market or SmallCap  Market;  (ii) the  securities'  issuer  having net  tangible
assets in excess of $2,000,000  and having been in  continuous  operation for at
least three years and (iii) the securities' issuer having average revenues of at
least $6,000,000 for the last three years (all three exceptions enumerated above
are currently met by the Company).  For  transactions  covered by Rule 15g-9,  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. 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 SEC 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.  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 Company's  securities in the secondary
market.

        There can be no assurance that the Company's securities will continue to
qualify for exemption from the penny stock  restrictions.  In any event, even if
the Company's  securities are exempt from such  restrictions,  the Company would
remain subject to Section  15(b)(6) of the Exchange Act, which gives the SEC the
authority to restrict any person from  participating  in a distribution of penny
stock, if the SEC 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 could be materially adversely
affected.


                                       23

<PAGE>

PART II.    OTHER INFORMATION

Item 1.     Legal Proceedings

        LBC Capital Resources, Inc. ("LBC"), a Philadelphia-based broker/dealer,
has asserted claims against the Company and others,  including Paramount Capital
Inc., of which Dr.  Rosenwald is the sole  stockholder and Mr. Weiss is a Senior
Managing Director, and various related entities and persons. LBC's claims relate
to the alleged  breach by the Company of certain  letter  agreements,  allegedly
entered  into by LBC and the Company in 1995 and 1996 with  respect to brokerage
and/or investment banking services, particularly in connection with a $3 million
investment  for which LBC is seeking a fee. In April 1998 a Complaint  was filed
in the United States  District  Court for the Southern  District of New York (98
Civ. 2491) by LBC against the Company and the same other parties.
The Company is engaged in settlement discussions with LBC.

        On June 4,  1998,  the  Company's  statutory  process  agent  received a
Summons and Complaint in a lawsuit  brought by Johns Hopkins against the Company
in Maryland Circuit Court for Baltimore City (Case No. 98120110).  Johns Hopkins
alleges  in the  Complaint  that the  Company  has  breached  the Johns  Hopkins
Agreement and owes it licensing  royalty fees and related expenses in the amount
of  $308,832.24.  Johns Hopkins also alleges the  existence of a separate  March
1993 letter agreement wherein the Company agreed to support a fellowship program
at the Johns  Hopkins  School of  Hygiene  and Public  Health and the  Company's
breach thereof,  with damages of $326,829.00.  On August 10, 1998, the Company's
statutory  process agent  received a Summons and Complaint in a related  lawsuit
brought by the  Ts'o/Miller  Partnership  and others  against the Company in the
same court (Case No. 98182113).  The Ts'o/Miller  Partnership  claims that it is
owed licensing royalty fees in the amount of $287,671.23.  The Company currently
intends  to retain  Maryland  counsel  so that it can  properly  evaluate  these
lawsuits and respond.

        On June 30, 1998,  the  Director  General of the  Company's  subsidiary,
Genta  Europe,  was served  notice of a suit in  Marseille,  France by Marseille
Amenagement,  the manager of the Company's facilities in Marseille.  On July 30,
1998, the Company's office in San Diego,  California was also served with Notice
of the suit.  The suit seeks the  payment of unpaid  past rents in the amount of
473,464.50 FF (as of August 11, 1998, approximately $79,000), the removal of the
Company from the facility and an indemnity payment of 1,852,429 FF (as of August
11, 1998,  approximately  $310,000),  which is allegedly equal to the balance of
the first nine years' rent. On July 1, 1998,  the ANVAR notified Genta Europe of
its claim that the Company  remains  liable for  4,187,423  FF (as of August 11,
1998, approximately $701,000) and is required to pay this amount immediately. In
view of these  events,  the Board of  Directors  of Genta  Europe  directed  the
Director  General to declare  "Cessation of Payment" in the commercial  court in
France, which declaration was made in July 1998.

        No material legal  proceedings were terminated in the quarter ended June
30, 1998.

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

        (a) The Company  held its Annual  Meeting of  Stockholders  (the "Annual
Meeting") on July 14, 1998.  After voting on certain of the matters,  the Annual
Meeting was temporarily  adjourned and then reconvened and permanently adjourned
on July 28, 1998.

        (b) Proxies for the meeting were solicited pursuant to Regulation 14A of
the Exchange Act. There was


                                       24


<PAGE>

no solicitation in opposition to the Board of Directors'  nominees for the Class
I directors  listed in the definitive proxy statement of the Company dated as of
June 22, 1998.

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

               (i)  Approval  of  the  amendment  to  the   Company's   Restated
Certificate  of  Incorporation  to  effectuate  a  reverse  stock  split  of the
Company's outstanding Common Stock. Total combined voting power of the shares of
Common Stock and Series D Preferred Stock voted was 18,735,940 in favor, 938,894
against, 8,265 abstained and no broker non-votes.

               (ii)  Approval  of  the  amendment  to  the  Company's   Restated
Certificate of Incorporation  to remove the requirement that stockholder  action
be taken at a meeting. Total combined voting power of the shares of Common Stock
and Series D Preferred  Stock voted was  20,047,308 in favor,  695,117  against,
81,550 abstained and 2,997,831 broker non-votes.

               (iii)  Approval  of  the  amendment  to  the  Company's  Restated
Certificate  of  Incorporation  to  remove  the  classification  of the Board of
Directors.  Total combined voting power of the shares of Common Stock and Series
D Preferred  Stock  voted was  20,138,695  in favor,  575,644  against,  109,636
abstained and 2,997,831 broker non-votes.

               (iv) Election of four Class I directors.  Total  combined  voting
power of the  shares of Common  Stock and  Series D  Preferred  Stock  voted and
withheld for the election of each director was as follows:

        Directors                            Votes For             Withheld
        ---------                            ---------             --------
        Kenneth G. Kasses, Ph.D.             19,503,907            179,193
        Peter Salomon, M.D.                  19,504,307            178,793

        Andrew J. Stein                      19,503,437            179,663

        Harlan J. Wakoff                     19,503,097            180,003

               (v)  Approval of the 1998 Stock  Incentive  Plan and  approval of
grants of option under such Plan.  Total combined  voting power of the shares of
Common Stock and Series D Preferred Stock voted was 15,494,338 in favor, 878,636
against, 99,614 abstained and 3,210,511 broker non-votes.

               (vi) Approval of the Non-Employee Directors' 1998 Stock Incentive
Plan and approval of grants of option  under such Plan.  Total  combined  voting
power of the  shares of Common  Stock and  Series D  Preferred  Stock  voted was
15,517,715 in favor,  813,906  against,  140,967  abstained and 3,210,511 broker
non-votes.

Item 6. Exhibits and Reports on Form 8-K

        (a) Exhibits.

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


10.1(1)        Genta Incorporated 1998 Stock Incentive Plan


                                       25

<PAGE>




10.2(1)        Genta Incorporated Non-Employee Directors' 1998 Stock Option Plan

10.3(1)        Stock  Option  Agreement  dated as of May 28,  1998  between  the
               Company and Kenneth G. Kasses,  Ph.D.  pursuant to the  Company's
               1998 Stock Incentive Plan                                        
               
10.4(1)        Form of Stock Option  Agreement  dated as of May 28, 1998 between
               the Company and each of the  directors  listed in Section 5(c) of
               the Company's Non-Employee Directors' 1998 Stock Option Plan
                                                                                
27.1(1)        Financial Data Schedule

99.1(1)        Genta  Jago  Technologies  B.V.  (a  development  stage  company)
               Statement of Operations (unaudited)


(1)            Filed herewith.

        (b)    Reports on Form 8-K

        (i) On April 2, 1998, the Company filed a Report on Form 8-K dated as of
April 1, 1998  reporting  under Item 5 that the Company  issued a press  release
entitled  "Genta  Announces  Issue of Patent for Lead  Antisense  Compound  that
Targets the BCL-2 Gene, Implicated in Prostate and Other Cancers."

        (ii) On May 20, 1998, the Company filed a Report on Form 8-K dated as of
May 19,  1998  reporting  under Item 5 that the Company  issued a press  release
entitled "Genta Incorporated Announces First Quarter 1998 Results."

        (iii) On June 17, 1998,  the Company filed a Report on Form 8-K dated as
of June 17, 1998 reporting  under Item 5 that the Company issued a press release
entitled "Genta  Announces the Issuance of Two Patents  Directed To High Potency
Antisense Compounds that Target the Production of Disease Causing pre-RNA."

        (iv) On June 23, 1998,  the Company  filed a Report on Form 8-K dated as
of June 18, 1998 reporting  under Item 5 that the Company issued a press release
entitled  "Genta to  Commence  Phase  I/IIa  Malignant  Melanoma  Trial of bcl-2
Antisense Compound in Combination with a Chemotherapeutic Drug."

        (v) On June 25, 1998, the Company filed a Report on Form 8-K dated as of
June 24, 1998  reporting  under Item 5 that the Company  issued a press  release
entitled  "Genta  Signs  Letter of Intent with  National  Cancer  Institute  for
Collaborative Research & Development Agreement."

        (vi) On July 2, 1998, the Company filed a Report on Form 8-K dated as of
July 1, 1998  reporting  under Item 5 that the  Company  issued a press  release
entitled  "Genta  Receives  Consent  to  Waive   Registration  of  Common  Stock
Underlying Its Series D Preferred Stock."

        (vii) On July 15, 1998,  the Company filed a Report on Form 8-K dated as
of July 14, 1998 reporting  under Item 5 that the Company issued a press release
entitled  "Genta to Commence  Second Phase I/IIa Prostate  Cancer Trial of bcl-2
Antisense Compound."

                                       26


<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/Kenneth G. Kasses, Ph.D.
                                 ---------------------------
                          Name:  Kenneth G. Kasses, Ph.D.
                          Title: President, Principal Executive Officer and
                                 Principal Financial Officer



Date:   August 14, 1998

                                       27