UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
FOR ANNUAL AND TRANSITIONAL REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998
[ ] 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)
99 Hayden Avenue, Suite 200
Lexington, Massachusetts 02421
(Address of principal executive offices) (Zip Code)
(781) 860-5150
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to
Section 12(g) of the Act: Common Stock, $.001 par value
Preferred Stock Purchase Rights,
Par Value $.001
(Title of Class)
1
<PAGE>
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K/A or any amendment to
this Form 10-K/A.
[X]
The approximate aggregate market value of the voting common equity held by
non-affiliates of the registrant was $25,164,644 as of April 12, 1999. For
purposes of determining this number, 4,049,249 shares of Common Stock held by
affiliates are excluded.
As of April 12, 1999, the registrant had 15,080,326 shares of Common Stock
outstanding. As of April 12, 1999, 386 persons held shares of Common Stock of
the registrant.
Documents Incorporated by Reference
None.
2
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GENTA INCORPORATED
FORM 10-K/A
INDEX
Page
----
PART III
Item 10. Directors and Executive Officers of the Registrant.................. 4
Item 11. Executive Compensation.............................................. 7
Item 12. Security Ownership of Certain Beneficial Owners and Management..... 10
Item 13. Certain Relationships and Related Transactions..................... 16
Signatures
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Amendment No. 1
to the Form 10-K filed by
Genta Incorporated on April 30, 1998
The following Items were omitted from the Form 10-K filed by Genta
Incorporated on April 26, 1999. That Form 10-K is hereby amended to include the
information set forth below.
Capitalized terms used but not defined in this Amendment No. 1 are as
defined in the Form 10-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors and Executive Officers
Set forth below is certain information regarding the Company's directors
and executive officers.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Kenneth G. Kasses, Ph.D............... 54 President, Chief Executive Officer, and Chairman of
Board of Directors
Robert E. Klem, Ph.D.................. 54 Vice President of Discovery, Chief Scientific Officer,
and Director
Gerald M. Schimmoeller................ 55 Vice President and Chief Financial Officer
Peter Salomon, M.D.................... 39 Director
Andrew J. Stein....................... 54 Director
Harlan J. Wakoff...................... 32 Director
Glenn L. Cooper, M.D.................. 46 Director
Lawrence J. Kessel, M.D............... 45 Director
Bobby W. Sandage, Jr., Ph.D........... 45 Director
Donald G. Drapkin..................... 51 Director
Michael S. Weiss...................... 33 Director
</TABLE>
Kenneth G. Kasses, Ph.D., has been Genta's President and Chief Executive
Officer since October 1997. Dr. Kasses has been a member of the Board of
Directors since September 1997 and has served as Chairman of the Board since
October 1998. From 1991 to 1997, Dr. Kasses was affiliated with the
Radiopharmaceutical Division of The Dupont Merck Pharmaceutical Company, serving
as Senior Vice President and General Manager until 1994 when he was appointed
President. From 1988 through 1990, he served as Director, Business Development
and Planning, for the Medical Products Department of E.I. DuPont de Nemours &
Company, Inc. In that capacity he played a key role in the formation of The
Dupont Merck Pharmaceutical Company, a joint venture between DuPont and Merck
and Co., Inc. Prior to that he served as Director, U.S. Pharmaceuticals, for
DuPont from 1987 to 1988 and as President of DuPont Critical Care from 1986 to
1987. Prior to this, Dr. Kasses held a variety of executive positions from 1973
to 1986 at American Critical Care, CIBA-GEIGY Pharmaceuticals, Ayerst
Laboratories and Block Drug Company. Dr. Kasses received a B.S. in biology from
Dickinson College in 1966 and a Ph.D. in pharmacology from New York Medical
College in 1974.
Robert E. Klem, Ph.D., has been a member of the Genta Board of
Directors since February 1991 and Vice President of the Company since October
1991. Dr. Klem co-founded JBL Scientific, Inc. ("JBL"), a
4
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wholly-owned subsidiary of the Company, in 1973 and, since then, has been
Chairman of the Board and Chief Technical Officer of JBL with responsibility for
research, development and marketing activities. Previously, Dr. Klem was the
Plant Manager for E.I. DuPont in Victoria, Texas from 1970 to 1974. Dr. Klem
received his Ph.D. in Organic Chemistry from the University of California at
Riverside.
Gerald M. Schimmoeller has been Vice President and Chief Financial
Officer of the Company since February 1999. From 1997 until February 1999, he
was the Vice President and Chief Financial Officer for Alphagene, Inc., a
privately-held biotechnology development company focused on functional genomics
technology. From 1987 to 1993, he served as Vice President and Chief Financial
Officer of Artel Communications Corporation, a data communications company. From
1994 to 1996, he served as Vice President and Chief Financial Officer of
Concentra Corporation, a software development company. Both of these companies
are publicly held, and at each of them he had significant experience in managing
the financial, management information systems, human resources, and investor
relations functions, and was involved in managing an initial public offering and
significant private placements. From 1983 to 1987, he was Controller at Telco
Systems, a telecommunications company. He held various senior financial
positions with GTE Corporation. He received his MBA from Northeastern
University's Executive MBA Program and a BS Degree from the State University of
New York.
Peter Salomon, M.D., FACG, has been a member of the Genta Board of
Directors since September 1997. His principal employment during the last five
years has been as a Board Certified Gastroenterologist in private practice in
Boca Raton and Delray Beach, Florida with Gastroenterology Consultants of South
Florida. In addition, he is an expert consultant for several insurance companies
and law firms in the areas of gastroenterology and liver diseases. Dr. Salomon
graduated magna cum laude from New York University in 1981. He received his
Medical Degree from New York University in 1985. Following this he received his
training in Internal Medicine and Gastroenterology at The Mount Sinai Hospital
in New York, where he also held a grant from the Crohn's and Colitis Foundation
to perform research in inflammatory bowel disease. He was also selected to
receive advanced training in therapeutic endoscopic techniques at Aarhus
Kommunehospital in Aarhus, Denmark. He has been elected to the Phi Beta Kappa
society and is a member of MENSA. He has done extensive research in the field of
gastroimmunology and has published numerous articles and book chapters in
various leading scientific journals and textbooks. He is also currently a
director of Precision Pharmaceuticals and PolaRx, both privately-held
biotechnology companies.
Andrew J. Stein has been a member of the Genta Board of Directors since
September 1997. In addition, he is President of Benake Corporation, Equity
Partner in Metromedia Asia and a member of the Board of Directors of News
Communications. Mr. Stein is also a member of the New York State Commission of
Privatization and the New York State Research Council on Privatization. He was
the Chairman of the Commission for the Study of Youth Crime and Violence and
Reform of the Juvenile Justice System from 1993 to 1995. From 1986 to 1993, he
was President of the Council, New York City. From 1978 to 1985, he was President
of the Borough of Manhattan and from 1969 to 1977, he was a member of the New
York State Assembly where he served on the Health Committee and was appointed by
Governor Nelson Rockefeller as Chairman of the Commission on Living Costs and
the Economy, which reformed the nursing home industry in New York State. He was
also Chairman of the New York City Commission on Public Information and
Communication, and has been a Trustee of the New York City Employees Retirement
System and an ex officio member of The Museum of The City of New York, The New
York Public Library, The Metropolitan Museum of Art and The Queens Borough
Public Library.
Harlan J. Wakoff has been a member of the Genta Board of Directors
since September 1997. Mr. Wakoff has been a Vice President of the Media and
Entertainment Investment Banking Group at ING Baring Furman Selz LLC since June
1996. He was previously affiliated with the investment banking groups at NatWest
Markets from January 1995 to June 1996 and Kidder Peabody & Co. from August 1993
to January 1995. Mr. Wakoff received an M.B.A. from The Wharton School at the
University of Pennsylvania in May 1993 and a B.S. in accounting, summa cum
laude, from the State University of New York at Albany.
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Glenn L. Cooper, M.D., has been a member of the Genta Board of
Directors since September 1997. He has also been President, Chief Executive
Officer and a director of Interneuron Pharmaceuticals, Inc. since May 1993. From
September 1992 to June 1994 Dr. Cooper was President, Chief Executive Officer
and a director of Progenitor, Inc. and is currently Chairman at Progenitor. He
is also Chairman of Intercardia, Inc., Chairman and Acting President of
Transcell Technologies, Inc. and a director of InterNutria, Inc., all of which
are subsidiaries of Interneuron. In addition, Dr. Cooper serves as a director of
Aeolus Pharmaceuticals, Inc., a subsidiary of Intercardia. Dr. Cooper also
served as President and Chief Executive Officer of Intercardia from March 1994
to January 1995. Prior to joining Progenitor, Dr. Cooper was Executive Vice
President and Chief Operating Officer of Sphinx Pharmaceuticals Corporation
since August 1990. Dr. Cooper had been associated with Eli Lilly since 1985,
most recently, from June 1987 to July 1990, as Director, Clinical Research,
Europe, of Lilly Research Center Limited; from October 1986 to May 1987 as
International Medical Advisor, International Research Coordination of Lilly
Research Laboratories; and from June 1985 to September 1986 as Medical Advisor,
Regulatory Affairs, Chemotherapy Division at Lilly Research Laboratories. Dr.
Cooper received his M.D. from Tufts University School of Medicine, performed his
postdoctoral training in Internal Medicine and Infectious Diseases at the New
England Deaconess Hospital and Massachusetts General Hospital and is a magna cum
laude graduate of Harvard College.
Lawrence J. Kessel, M.D., FACP, CMD, has been a member of the Genta
Board of Directors since September 1997. Dr. Kessel is a physician in private
practice in Philadelphia and a diplomate in both internal medicine and geriatric
medicine, as well as a Fellow of the American College of Physicians and a
Certified Medical Director of Long-Term Nursing Facilities. Dr. Kessel is
affiliated with Chestnut Hill Hospital, Roxborough Memorial Hospital and
Chestnut Hill Rehabilitation Hospital and serves as a clinical instructor at
Jefferson Medical College. He is also a medical director at Integrated Health
Services (IHS) and a staff physician at Fairview Paper Mill, Green Acres Ivy
Hill and St. Joseph's Villa. Dr. Kessel graduated Magna Cum Laude from the
University of Pittsburgh with a B.S. in 1975 and Temple Medical School in 1980
with an M.D. He completed his residency in internal medicine at Abington
Memorial Hospital in 1994. Dr. Kessel is a director of PolaRx, a privately-held
biotechnology company.
Bobby W. Sandage, Jr., Ph.D., has been a member of the Genta Board of
Directors since September 1997. Dr. Sandage joined Interneuron Pharmaceuticals,
Inc. in November 1991 as Vice President, Medical and Scientific Affairs. Since
December 1995 he has been Executive Vice President, Research and Development and
Chief Scientific Officer of Interneuron. From February 1989 to November 1991 he
held management positions in the Cardiovascular Research and Development
division of The DuPont Merck Pharmaceutical Company. From May 1985 to February
1989 he was affiliated with the Medical Department of DuPont Critical Care. Dr.
Sandage is an adjunct professor in the Department of Pharmacology at the
Massachusetts College of Pharmacy. Dr. Sandage received his Ph.D. in Clinical
Pharmacy from Purdue University and his B.S. in Pharmacy from the University of
Arkansas. Dr. Sandage is a director of Aeolus Pharmaceuticals, Inc., a
subsidiary of Intercardia, Inc.
Donald G. Drapkin has ben a member of the Genta Board of Directors since
September 1997, and was Chairman of the Genta Board of Directors from September
1997 until October 1998. Mr. Drapkin has been a director and Vice Chairman of
MacAndrews & Forbes Holdings, Inc. and various of its affiliates since March
1987. Prior to joining MacAndrews & Forbes, Mr. Drapkin was a partner in the law
firm of Skadden, Arps, Meagher & Flom in New York for more than five years. Mr.
Drapkin also is a director of the following corporations which file reports
pursuant to the Securities Exchange Act of 1934: Algos Pharmaceutical
Corporation, Anthracite Capital, Inc., BlackRock Asset Investors, Cardio
Technologies, Inc., The Molson Companies, Playboy Enterprises, Inc., Revlon,
Inc., Revlon Consumer Products Corporation, VIMRx Pharmaceuticals Inc. and
Weider Nutrition International, Inc.
Michael S. Weiss has been Vice Chairman of the Genta Board of Directors
since May 1997. Mr. Weiss is currently the President and CEO of eOncology.com,
Inc., an Internet-based cancer information company. From 1993 until April 1999,
Mr. Weiss was Senior Managing Director of Paramount Capital, Inc., an investment
banking firm, and served in a similar capacity for certain affiliated entities.
Prior to that, Mr. Weiss was an attorney with Cravath, Swaine & Moore. Mr. Weiss
also serves on the Board of Directors of
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Palatin Technologies, Inc. and AVAX Technologies, Inc., as Secretary of Atlantic
Pharmaceuticals, Inc. and as Chairman of the Board of Procept Inc., all
publicly-traded biotechnology companies. Additionally, Mr. Weiss is a member of
the board of directors of several privately-held biopharmaceutical companies.
Mr. Weiss received his J.D. from Columbia University School of Law and a B.S. in
Finance from the State University of New York at Albany.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires each director and each executive officer of the
Company and each holder of more than 10% of the outstanding shares of the
Company's Common Stock to file with the Securities and Exchange Commission (the
"Commission") an initial statement of ownership and, as required, a statement of
changes in ownership of equity securities of the Company. Each such person is
required by Commission regulations to furnish the Company with a copy of each
Section 16(a) statement it files with respect to the Company. Based solely on
its review of copies of filed Section 16(a) statements, the Company believes
that during 1998 all directors and executive officers of the Company and all
holders of more than 10% of the outstanding shares of Common Stock complied with
the requirements of the Section 16(a) of the Exchange Act
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth information concerning the compensation
of the following executive officers (collectively, the "Named Executive
Officers") for each of the Company's last three fiscal years.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation Awards
-------------------------------------------------------------- -------------------------
Name and Other Annual Securities Underlying
Principal Position Year Salary ($) Bonus ($) Compensation Options (#)
- ------------------ ---- ---------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Thomas H. Adams, Ph.D. 1998 $109,034(1) -- -- --
Chairman of the Board and 1997 285,000(1) -- -- 100,000(2)
Chief Executive Officer 1996 285,000(3) -- -- 2,799(3)
Kenneth G. Kasses, Ph.D. 1998 300,000 100,000(4) --
President and 62,500(4) 2,236,263
Chief Executive Officer --
Robert E. Klem, Ph.D. 1998 168,731 -- -- --
Vice President 1997 170,000(5) -- -- --
1996 155,000(3) -- 2,580(6) 853(3)
</TABLE>
(1) Dr. Adams resigned as Chief Executive Officer and Chairman of the Board
and a Director on May 5, 1997. Pursuant to a severance and consulting
agreements with the Company, the Company agreed to continue to pay Dr.
Adams' salary at the then-current rate of $285,000 per year for a
one-year period, agreed to continue eligibility for coverage under the
Company's health insurance plan for a one-year period and agreed to
grant options to purchase 100,000 shares of Common Stock exercisable at
$3.00 per share (100% of the fair market value of such stock on May 5,
1997) as consideration for consulting services of at least 24 days.
(2) See Footnote 1 above. These options were granted to Dr. Adams in May
1998.
7
<PAGE>
(3) Options were granted to the named officers during the year ended
December 31, 1996 to compensate them for accepting deferral of the
payment of a portion of base salary in 1995 and 1996. The portions of
salaries so deferred are included in the 1996 salary figures in this
table, consisting of $11,875 and $6,458 for Drs. Adams and Klem,
respectively.
(4) Salary payments commenced on October 1, 1997. See "Compensation of
President and Chief Executive Officer," below.
(5) This amount does not include the payment in 1997 of the full salary
amounts deferred from 1995 and 1996, as discussed in Footnote 3 above.
(6) Represents payment for an insurance policy covering Dr. Klem.
Compensation of Directors
Directors of the Company receive no fees for their services as directors
or committee members. Non-employee directors are reimbursed by the Company for
their out-of-pocket expenses incurred in attending meetings of the Board of
Directors and its committees and receive annual grants of stock options under
the Company's 1991 Stock Option Plan. Pursuant to the Company's 1998 Stock
Incentive Plan, employee directors are eligible for stock options.
Compensation of the President and Chief Executive Officer
Pursuant to a Letter Agreement, dated September 4, 1997, between Michael
Weiss, then the Interim Chairman of the Board of the Company, and Dr. Kasses
(the "Letter Agreement"), Dr. Kasses was appointed President and Chief Executive
Officer of the Company, effective October 1, 1997, subject to Board
ratification. Among other items, the Letter Agreement provided the following:
1. Dr. Kasses would receive a base salary of $300,000 per annum, subject
to semi-annual review commencing on October 1, 1998. In the event Dr. Kasses is
terminated without cause or terminates his employment for cause, Dr. Kasses
would become entitled to receive this amount as severance for one year following
such termination, subject to set-off for amounts earned from alternative
employment. At the end of Dr. Kasses' first year of employment, he would become
entitled to a bonus of $100,000, assuming he is then employed by the Company.
Dr. Kasses would also be entitled to an additional bonus of up to $100,000,
subject to achievement of agreed-upon milestones.
2. Dr. Kasses would be entitled to receive, subject to stockholder
approval, a grant of stock options to purchase 5% of the fully diluted Common
Stock of the Company outstanding as of an agreed-upon date, with quarterly
vesting over four years (assuming continued employment).
3. Dr. Kasses and his dependents would receive such medical, long-term
disability, life insurance and such other health benefits as the Company makes
available to its other senior officers and directors.
The Letter Agreement contemplated that these and certain other
provisions would be incorporated into an employment agreement between Dr. Kasses
and the Company. This has not yet occurred. At the end of his first year of
employment, Dr. Kasses received the bonus contemplated in the Letter Agreement
Compensation Committee Interlocks and Insider Participation
For the Company's fiscal year ended December 31, 1997, the Company had
no Compensation Committee. By resolution dated January 29, 1998, the Board of
Directors appointed a Compensation Committee consisting of Glenn L. Cooper,
Andrew J. Stein, and Michael S. Weiss. None of the members of the Compensation
Committee had any "interlock" relationship to report during the Company's fiscal
year ended December 31, 1998.
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See "Business--Genta Jago" and "Directors and Executive Officers of the
Registrant--Certain Relationships and Related Transactions" for a description of
certain arrangements between the Company and Genta Jago. Michael S. Weiss, a
director of the Company, is a managing director of Genta Jago.
Pension and Long-Term Incentive Plans
The Company has no pension or long-term incentive plans.
Option Grants in the Last Fiscal Year
The following table sets forth certain information concerning grants of
stock options made during fiscal 1998 to the following Named Executive Officer:
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
INDIVIDUAL GRANTS
----------------------------------
PERCENTAGE POTENTIAL REALIZABLE VALUE
NUMBER OF OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS EXERCISE STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE EXPIRA- FOR OPTION TERMS(1)
OPTIONS EMPLOYEES IN PER TION
GRANTED FISCAL YEAR SHARE DATE(1) 0% 5% 10%
-------- ----------- ------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Kenneth G. Kasses... 2,236,263 78.8% $0.94375 9/30/07 $474,647 $3,437,738 $5,474,024
</TABLE>
- ---------------
(1) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10%, compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the Common Stock, the
optionholder's continued employment through the option period, and the date
on which the options are exercised.
Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
- ----------------------------------------------------------------------
The following table sets forth certain information concerning the number
and value of unexercised options held by each of the Named Executive Officers on
December 31, 1998:
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<TABLE>
<CAPTION>
Option Exercises in Last Fiscal Year and
Fiscal Year End Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Year End(#) Fiscal Year End($)(1)
------------------ ---------------------
Shares Acquired Value
Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Thomas H. Adams, Ph.D. -- -- 82,877 17,123(2) -- --
Kenneth G. Kasses, Ph.D. -- -- 279,533 1,956,730 $94,272
Robert E. Klem, Ph.D. -- -- 5,353 -- --
</TABLE>
(1) Calculated on the basis of the fair market value of the underlying
securities as of December 31, 1998 ($1.281 per share), minus the
exercise price.
(2) Does not include options to purchase 100,000 shares of Common Stock that
were granted to Dr. Adams in May 1998 pursuant to a consulting services
agreement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information as of April 20, 1999 as to
shares of Common Stock beneficially owned by (i) the Company's directors, (ii)
the Company's executive officers named in the Summary Compensation Table set
forth herein, (iii) the directors and executive officers of the Company as a
group and (iv) each person known by the Company to be the beneficial owner of
more than five percent of the outstanding shares of the Common Stock of the
Company. As of April 20, 1999, each share of Series A Preferred Stock was
convertible at the option of the holder into approximately 7.43 shares of Common
Stock and each share of Series D Preferred Stock is convertible at the option of
the holder into approximately 105.96 shares of Common Stock. Except as required
by law or with respect to the creation or amendment of senior classes of
preferred stock or creation of different series or classes of Common Stock, and
in certain other instances, the holders of Series A Preferred Stock do not have
voting rights until conversion into Common Stock. The conversion price of the
Series A and the Series D Preferred Stock and the numbers of shares of Common
Stock issuable upon conversion thereof may be adjusted in the future, based on
the provisions in the Certificate of Incorporation, as amended.
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<PAGE>
<TABLE>
<CAPTION>
Common Stock Series D Preferred Stock
------------ ------------------------
<S> <C> <C> <C> <C>
Amount and Nature of Amount and Nature of
Name and Address of Beneficial Percent of Beneficial Percent of
Beneficial Owner Ownership(1) Class Ownership(1) Class
CERTAIN BENEFICIAL
HOLDERS;
Lindsay A. Rosenwald, M.D. 24,032,930 (2) 69.7%(3) 102,247 (2) 59.8%
787 Seventh Avenue
New York, NY 10019
Paramount Capital Asset 21,166,537 (4) 66.9%(3) 76,415 (4) 52.6%
Management, Inc.
787 Seventh Avenue
New York, NY 10019
United Congregations Mesora 1,159,600 (5) 7.1% 10,000 (5) 6.9%
c/o Aetna Realty
1 State Street Plaza
New York, NY 10004
Attn: Chana Adelstein
MANAGEMENT:
Michael S. Weiss 703,939 (6) 4.4% 6,084 (6) 4.1%
Robert E. Klem, Ph.D. 28,711 (7) 0.2% 0 .0%
Lawrence J. Kessel, M.D. 57,115 (8) 0.4% 250 (8) 0.2%
Peter Salomon, M.D. 28,625 (9) 0.2% 0 .0%
Glenn L. Cooper, M.D. 126,563(10) 0.8% 0 .0%
Donald G. Drapkin 253,125(11) 1.6% 0 .0%
Kenneth G. Kasses, Ph.D. 838,599(12) 5.2% 0 .0%
Bobby W. Sandage, Jr., Ph.D. 126,563(13) 0.8% 0 .0%
Andrew J. Stein 28,125(14) 0.2% 0 .0%
Harlan J. Wakoff 28,125(15) 0.2% 0 .0%
All directors and executive 1,625,356 9.7% 6,334 4.2%
officers as a group (10 persons)
(1) The number of shares beneficially owned is determined under rules
promulgated by the Commission, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under those
rules, beneficial ownership includes any shares as to which the
individual has sole or shared voting power or investment power and also
any shares which the individual has the right to acquire within 60 days
of April 20, 1999, through the exercise or conversion of any stock
option, convertible security, warrant or other right. The inclusion
herein of those shares, however, does not constitute an
</TABLE>
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<PAGE>
admission that the named stockholder is a direct or indirect beneficial
owner of those shares. Unless otherwise indicated, each person or entity
named in the table has sole voting power and investment power (or shares
that power with that person's spouse) with respect to all shares of
capital stock listed as owned by that person or entity. The Common Stock
represented here includes the Common Stock that the beneficial holders
would directly possess if they converted their Series D Preferred Stock
holdings, set forth under the "Series D Preferred Stock" caption.
(2) Dr. Rosenwald may be deemed to have shared voting and investment power
over the 21,166,537 shares of Common Stock, 250,800 shares of Series A
Preferred Stock and 76,415 shares of Series D Preferred Stock that may
be deemed to be beneficially owned by Paramount Capital Asset
Management, Inc. ("Paramount"), of which Dr. Rosenwald is the sole
stockholder. See footnote 4 below. In addition, Dr. Rosenwald may be
deemed to have sole voting and investment power over approximately
2,866,393 shares of Common Stock that he may be deemed beneficially to
own, consisting of approximately 1,951,801 shares of Common Stock
issuable upon conversion of 18,420 shares of Series D Preferred Stock,
which are themselves issuable upon exercise of warrants, 92,101 shares
of Common Stock issuable upon exercise of warrants, which are themselves
issuable upon exercise of warrants, 785,429 shares of Common Stock
issuable upon conversion of 7,412 shares of Series D Preferred Stock,
which are themselves issuable upon exercise of warrants, and 37,062
shares of Common Stock issuable upon exercise of warrants, which are
themselves issuable upon exercise of warrants. Dr. Rosenwald may be
deemed to have sole voting and investment power over the approximately
25,832 shares of Series D Preferred Stock issuable upon exercise of
warrants that are listed in the preceding sentence.
(3) The Series D Preferred Stock is entitled to vote with the Common Stock
on all matters submitted to a vote of Genta stockholders. Dr. Rosenwald
may be deemed beneficially to own (within the meaning of Rule 13d-3
under the Exchange Act) 57.5% of the aggregate voting power of the
outstanding shares of Common Stock and Series D Preferred Stock.
Similarly, Paramount may be deemed beneficially to own 54.4% of the
aggregate voting power of the outstanding shares of Common Stock and
Series D Preferred Stock.
(4) Paramount may be deemed to have shared voting and investment power over
the 7,009,767 and 14,156,770 shares of Common Stock, and 70,100 and
180,700 shares of Series A Preferred Stock, respectively, which may be
deemed to be beneficially owned by The Aries Domestic Fund, L.P. (the
"Aries Domestic Fund"), a limited partnership, and The Aries Fund, a
Cayman Islands Trust (the "Aries Trust"), for which Paramount is the
General Partner and Investment Advisor, respectively. As of April 20,
1998 Paramount may be deemed to own beneficially the following shares of
Common Stock held by the Aries Trust: 3,351,192 shares of Common Stock;
1,341,832 shares of Common Stock issuable upon conversion of 180,700
shares of Series A Preferred Stock; 5,194,172 shares of Common Stock
issuable upon conversion of 49,020 shares of Series D Preferred Stock;
and 4,302,074 shares of Common Stock issuable upon the exercise of
warrants. Paramount may be deemed to own beneficially the following
shares of Common Stock held by the Aries Domestic Fund: 1,393,399 shares
of Common Stock; 520,545 shares of Common Stock issuable upon conversion
of 70,100 shares of Series A Preferred Stock; 2,796,821 shares of Common
Stock issuable upon conversion of 26,395 shares of Series D Preferred
Stock; and 2,316,502 shares of Common Stock issuable upon exercise of
warrants. Paramount may also be deemed the beneficial owner of the
26,395 shares of Series D Preferred Stock held by the Aries Domestic
Fund and the 49,020 shares of Series D Preferred Stock held by the Aries
Trust.
(5) United Congregations Mesora owns beneficially 10,000 shares of Series D
Preferred Stock (which are convertible into approximately 1,059,600
shares of Common Stock) and Class D Warrants to purchase up to 50,000
shares of Common Stock.
(6) Mr. Weiss's beneficial ownership consists of approximately 15,894 shares
of Common Stock issuable upon conversion of 150 shares of Series D
Preferred Stock; 7,434 shares of Common Stock issuable upon exercise of
warrants; approximately 125,749 shares of Common Stock issuable upon
conversion
12
<PAGE>
of approximately 1,187 shares of Series D Preferred Stock issuable upon
exercise of warrants; and options to purchase up to 28,125 shares of
Common Stock. In addition, Mr. Weiss may be deemed to be the beneficial
owner of 503,002 shares of Common Stock issuable upon conversion of
4,747 shares of Series D Preferred Stock issuable upon exercise of
warrants, and 23,735 shares of Common Stock issuable upon exercise of
warrants, that are held by an entity of which Mr. Weiss is the managing
member.
(7) Dr. Klem's beneficial ownership consists of 23,358 shares of Common
Stock and options to purchase 5,353 shares of Common Stock. This
includes 1,875 shares held for Dr. Klem's children in trust, as to which
Dr. Klem has shared voting and investment power, and 150 shares of
Common Stock owned by Dr. Klem's wife, as to which he disclaims
beneficial ownership.
(8) Dr. Kessel's beneficial ownership consists of 250 shares of Series D
Preferred Stock (which are convertible into approximately 26,490 shares
of Common Stock), warrants to purchase up to 2,500 shares of Common
Stock, and options to purchase up to 28,125 shares of Common Stock.
(9) Dr. Salomon's beneficial ownership consists of 500 shares of Common
Stock and options to purchase up to 28,125 shares of Common Stock.
(10) Dr. Cooper's beneficial ownership consists entirely of options to
purchase Common Stock.
(11) Mr. Drapkin's beneficial ownership consist entirely of options to
purchase Common Stock.
(12) Dr. Kasses' beneficial ownership consist entirely of options to
purchase Common Stock.
(13) Dr. Sandage's beneficial ownership consist entirely of options to
purchase Common Stock.
(14) Mr. Stein's beneficial ownership consist entirely of options to purchase
Common Stock.
(15) Mr. Wakoff's beneficial ownership consist entirely of options to
purchase Common Stock.
Compensation Committee Report to Stockholders on Compensation
Overview
- --------
The Company seeks to achieve three objectives which serve as guidelines
in making compensation decisions:
o Providing a total compensation package which is competitive and,
therefore, enables the Company to attract and retain, on a long-term
basis, high-caliber executive personnel;
o Integrating compensation programs with the Company's short-term and
long-term strategic plan and business objectives; and
o Encouraging achievement of business objectives and enhancement of
stockholder value by providing executive management long-term incentive
through equity ownership.
In making its compensation determinations, the Compensation Committee of
the Board of Directors has relied, in part, on independent surveys and analyses
of management compensation of executives of companies in the biotechnology and
pharmaceutical industries (including companies in the Nasdaq Pharmaceutical
Stock Index used in the Company's Stock Price Performance Graph set forth in
this Annual Report on Form 10-K and recommendations of management. The
Compensation Committee believes it has established executive compensation levels
that are competitive with companies in the biotechnology and pharmaceutical
industries
13
<PAGE>
when taking into account relative company size, stage of development, individual
responsibilities and experience, individual and overall corporate performance
and geographic location.
Compensation of Executive Compensation
- --------------------------------------
The Company's potential therapeutic products are in various stages of
research and development, and no revenues have as yet been generated from
therapeutic product sales. As a result, the use of traditional performance
standards, such as corporate profitability, are not believed to be appropriate
in the evaluation of the performance of the Company or its individual
executives. The compensation of the Company's executive officers is based, in
substantial part, on the achievement of individual and overall corporate
objectives. Such objectives are established and modified as necessary to reflect
changes in market conditions and other factors. Individual and overall corporate
performance is measured by reviewing whether these corporate objectives have
been achieved.
The Company's compensation package for executive officers generally
consists of annual cash compensation and long-term compensation in the form of
stock options. In light of the Company's stage of development, considerable
emphasis is placed on equity-based compensation in an effort to preserve cash to
finance the Company's research and development efforts.
Annual Cash Compensation
- ------------------------
Compensation levels for the Company's executive officers are determined
in part through comparisons with companies of a similar size, stage of
development and level of complexity in the biotechnology and pharmaceutical
industries, and other companies with which the Company competes for personnel.
In addition, the compensation level for each executive officer reflects an
evaluation of the responsibilities required for each respective position,
individual experience levels, and individual performance and contributions
toward achievement of the Company's business objectives. The compensation levels
for the Company's executive officers are designed to be competitive within a
range that the Compensation Committee or the Board of Directors determines to be
reasonable in light of the aforementioned factors. The salary levels of each
executive officer are reviewed on an annual basis and adjustments are made as
deemed necessary.
Stock Options
- -------------
The Compensation Committee believes that by providing all full-time
employees, including executive officers who have responsibility for the
management and growth of the Company, with an opportunity to obtain an equity
interest in the Company, the best interests of stockholders and its employees
will be closely aligned. Accordingly, all full-time employees, including
executive officers, are eligible to receive stock option grants from time to
time, giving them the right to purchase shares of the Company's Common Stock at
a specified price.
Compensation of Executive Officers
- ----------------------------------
In making compensation decisions for 1998, the Compensation Committee
into account the Company's limited cash resources, its weakened financial
condition, the general financial performance of the Company during 1997 and 1998
and the importance of retaining the Company's cash to finance its development
programs. The Compensation Committee also considered the importance to the
Company of retaining highly qualified key personnel due to the complex and
technologically sophisticated nature of the Company's business. In light of
these factors, the only bonus compensation awarded to any executive officer was
to Dr. Kenneth G. Kasses, in accordance with his employment agreement when he
was hired as the Company's President and Chief Executive Officer effective
October 1, 1997. See "Compensation of President and Chief Executive Officer,"
above.
This Compensation Report shall not be deemed incorporated by reference
by any general statement incorporating by reference this Annual Report on Form
10-K into any filing under the Securities Act of 1933, as
14
<PAGE>
amended, or under the Exchange Act, except to the extent the Company
specifically incorporates this report by reference, and shall not otherwise be
deemed filed under such Acts.
Glenn L. Cooper, M.D.
Andrew J. Stein
Michael S. Weiss
Stock Price Performance Graph
The following graph illustrates a comparison of the five-year cumulative
total stockholder return (change in stock price plus reinvested dividends) of
the Company's Common Stock with the CRSP Total Return Index for The Nasdaq
National Market (U.S. and Foreign) (the "Nasdaq Composite Index") and the CRSP
Total Return Index for Nasdaq Pharmaceutical Stocks (the "Nasdaq Pharmaceutical
Index"). The comparisons in the graph are required by the SEC and are not
intended to forecast or be indicative of possible future performance of the
Company's Common Stock.
[GRAPHIC OMITTED]
15
<PAGE>
<TABLE>
<CAPTION>
December 31, December 31, December 31, December 31, December 31, December 31,
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Genta Incorporated....... $100.00 $69.49 $30.51 $5.93 $1.06 $1.74
Nasdaq Composite......... 100.00 75.26 138.04 138.47 142.98 183.02
Nasdaq Pharmaceutical /1/ 100.00 97.00 136.23 186.79 203.98 281.69
</TABLE>
Assumes a $100 investment on December 31, 1993 in each of the Company's
Common Stock, the securities comprising the Nasdaq Composite Index, and the
securities comprising the Nasdaq Pharmaceutical Index.
- -------------------------
/1/ The Nasdaq Pharmaceutical Index includes all companies on Nasdaq within
SIC code 283. A copy of the list of companies that comprise the Nasdaq
Pharmaceutical Index may be obtained upon request by contacting Genta
Incorporated, Investor Relations, 99 Hayden Avenue, Suite 200, Lexington,
Massachusetts 02421, Tel. (781) 860-5150.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1991, in connection with the acquisition of JBL, the Company
assumed a lease between JBL and Granada Associates, and a lease between JBL and
and Sueldo Associates. Drs. Lauren Brown and Robert E. Klem are each Managers of
Granada Associates and General Partners of Sueldo Associates. Dr. Brown is also
Vice President of the Company and Vice-President of JBL, and Dr. Klem is also a
director and the Vice President of the Company and a director and the Chief
Financial Officer and Secretary of JBL. The aggregate monthly payment under
these leases for April 1999 was $34,828.
Michael Weiss is a managing director of Genta Jago Technologies B.V. See
"Business--Genta Jago."
During 1998 and through March of 1999, the Company rented office space
from Interneuron Pharmaceuticals, Inc. on a month-to-month basis at $600 a
month. The Company and Interneuron Pharmaceuticals, Inc. entered into a lease
effective April 1, 1999, pursuant to which the Company rents approximately 2,300
square feet of office space. The rent under this lease is $3,621 per month,
subject to a standard escalation clause. The lease has a term of two years. Dr.
Glenn L. Cooper is a director and President and Chief Executive Officer of
Interneuron Pharmaceuticals, and Dr. Bobby W. Sandage, Jr., is Executive Vice
President, Research and Development, and Chief Scientific Officer of Interneuron
Pharmaceuticals. Drs. Cooper and Sandage are also directors of the Company.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on this
April 30, 1998.
Genta Incorporated
/s/ Kenneth G. Kasses
------------------------------
Kenneth G. Kasses, Ph.D.
President, Principal Executive Officer and
Director
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
/s/ Kenneth G. Kasses President, Principal Executive April __, 1999
- --------------------------------------- Officer and Chairman of the Board
Kenneth G. Kasses, Ph.D of Directors
/s/ Robert E. Klem Vice President and Director April __, 1999
- ---------------------------------------
Robert E. Klem, Ph.D
/s/ Gerald M. Schimmoeller Principal Accounting Officer, April __, 1999
- --------------------------------------- Principal Financial Officer,
Gerald M. Schimmoeler Vice President
/s/ Glenn L. Cooper Director April __, 1999
- ---------------------------------------
Glenn L. Cooper, M.D.
/s/ Donald G. Drapkin Director April __, 1999
- ---------------------------------------
Donald G. Drapkin
/s/ Lawrence J. Kessel Director April __, 1999
- ---------------------------------------
Lawrence J. Kessel, M.D.
/s/ Peter Salomon Director April __, 1999
- ---------------------------------------
Peter Salomon, M.D.
/s/ Bobby W. Sandage, Jr. Director April __, 1999
- ---------------------------------------
Bobby W. Sandage, Jr., Ph.D.
17
<PAGE>
/s/ Andrew J. Stein Director April __, 1999
- ---------------------------------------
Andrew J. Stein
/s/ Harlan J. Wakoff Director April __, 1999
- ---------------------------------------
Harlan J. Wakoff
/s/ Michael S. Weiss Director April __, 1999
- ---------------------------------------
Michael S. Weiss
</TABLE>
18
