Genta, Inc (fka GNTAQ)

[vawedo]

I spent some time this Saturday to review:
1) the structure of the Section 144 financing concluded in June 2008 and
2)what caused the "cliff fall" in Dec of 2008

In June certain institutional and accredited investors were found ready to place up to $40 million in senior secured convertable notes of which $20M were placed in an (b)initial(/b)closing
here ius the full text:
"The notes bear interest at an annual rate of 15% payable at quarterly intervals in stock or cash at our option, and the notes are convertible into shares of our common stock at a conversion rate of 100,000 shares of common stock for every $1,000.00 of principal. Holders of the notes have the right, but not the obligation, for the 12 months following the initial closing date to purchase in whole or in part up to an additional $20 million of the notes. We have the right to force conversion of the notes in whole or in part if the closing bid price of our common stock exceeds $0.50 for a period of 20 consecutive trading days. Certain members of our senior management participated in this offering. The notes include certain events of default, including a requirement that we obtain stockholder approval within a specified period of time to amend our certificate of incorporation to authorize additional shares of common stock. In addition, the notes prohibit any additional financing without the approval of holders of more than two-thirds of the principal amount of the notes.


Upon the occurrence of an event of default, holders of the notes have the right to require us to prepay all or a portion of their notes as calculated as the greater of (a) 150% of the aggregate principal amount of the note plus accrued interest or (b) the aggregate principal amount of the note plus accrued interest divided by the conversion price; multiplied by a weighted average price of our common stock. Pursuant to a general security agreement, entered into concurrent with the notes, the notes are secured by a first lien on all of our assets." end of quote

NOte of interest: Dr Warrell and his wife Dr Itri participated with 11% in the initial $20M

now I quote from the securities registration:
"Irrespective of whether an NDA or MAA for Genasense ® are approved, we will require additional cash in order to maximize this commercial opportunity and to continue its clinical development opportunities. We have had discussions with other companies regarding partnerships for the further development and global commercialization of Genasense ® .

Additional alternatives available to us to sustain our operations include financing arrangements with potential corporate partners, debt financing, asset-based loans, royalty-based financing, equity financing, profits from named-patient sales, and other potential sources of financing.

However, there can be no assurance that any such collaborative agreements or other sources of funding will be available to us on favorable terms, if at all."end of quote

All of the above to make us realize that should all of the above means of finance(preferably non-dilutive) should fail, they can always fall back on the second portion of $20M conv debentures to see our clinical testing through.This would mean further dilution by a max of 2 Billion shares.

As for the sudden fall in pps in Dec(end of 6 month lock-up period), I first thought of an often seen phenomenon with PIPE finance projects for distressed companies, whereby the financiers sell short the number of shares(often naked)and cash in, prior to obtaining their shares from the company they are financing, only to use the obtained shares to cover their shorted shares after a steep fall in pps.
But the fact that Senior Management participated in the finance deal, makes me doubt that was the case.I have no good explanation...unless management was naive and were not aware of machinations by other groups...far be it from me to suggest a conspiracy theory.

I am very enthusiastic about the potential for my long term hold, but will keep 2 feet on the ground, since I am convinced our Management is, and will go through a difficult time getting moneys in place in a timely fashion.But succeed they will, since their underlying Pipeline is so strong.So much for my weekend ramblings