SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1999
Commission File No. 0-22307
SENESCO TECHNOLOGIES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Idaho 84-1368850
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
34 Chambers Street, Princeton, New Jersey 08542
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(Address of Principal Executive Offices) (Zip Code)
(609) 252-0680
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(Registrant's Telephone Number,
Including Area Code)
Securities registered under to Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
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None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.0015 par value per share.
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Check whether the Registrant: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act during the past 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:
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [X]
State Registrant's revenues for fiscal year ended June 30, 1999: $0
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant: $12,372,150 at August 31, 1999 based on the average bid and
asked prices on that date.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of August 31, 1999:
Class Number of Shares
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Common Stock, $.0015 par value 3,106,067
Transitional Small Business Disclosure Format
Yes: No: X
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The following documents are incorporated by reference into the Annual
Report on Form 10-KSB: Portions of the Registrant's definitive Proxy Statement
for its 1999 Annual Meeting of Shareholders are incorporated by reference into
Part III of this Report.
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TABLE OF CONTENTS
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Item Page
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PART I 1. Business.....................................................1
2. Properties...................................................7
3. Legal Proceedings............................................7
4. Submission of Matters to a Vote of Security Holders..........7
PART II 5. Market for the Company's Common Equity and Related
Stockholder Matters..........................................8
6. Management's Discussion and Analysis or Plan of Operation....9
7. Financial Statements........................................12
8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.........................12
PART III 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16 (a) of the
Exchange Act................................................13
10. Executive Compensation......................................13
11. Security Ownership of Certain Beneficial Owners
and Management..............................................13
12. Certain Relationships and Related Transactions..............13
13. Exhibits, List and Reports on Form 8-K......................13
SIGNATURES .................................................................14
EXHIBIT INDEX ..............................................................16
FINANCIAL STATEMENTS.......................................................F-1
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PART I
ITEM 1. BUSINESS.
GENERAL
The predecessor entity to the registrant, Nava Leisure USA, Inc. (the
registrant, prior to the Merger (defined below), is referred to herein, as
"Nava"), was organized on April 1, 1964 under the laws of the State of Idaho
under the name, "Felton Products, Inc.," having the stated purpose of engaging
in various investment activities, without limitation of its general corporate
powers to engage in any lawful activities. Nava engaged in limited investment
and business development operations and, from the time of its inception, Nava
has undergone several name and business changes. Until the Merger and since
approximately 1988, Nava had no assets, capital or income. Prior to the Merger,
Nava was considered a development stage company and, due to its status as a
"shell" corporation, its principal business purpose was to merge with or
otherwise acquire an operating entity.
On March 27, 1997, Nava voluntarily registered its Common Stock under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), in order to make information concerning itself more readily available to
the public. On October 9, 1998, Nava entered into an Agreement and Plan of
Merger by which, subject to approval of the stockholders of Nava, Nava Leisure
Acquisition Corp., a New Jersey corporation and a wholly-owned subsidiary of
Nava, was to merge with and into Senesco, Inc., a New Jersey corporation
("Senesco"), and the stockholders of Senesco were to receive newly issued,
unregistered and restricted common stock of Nava such that the stockholders of
Senesco would acquire a majority of Nava's outstanding common Stock (the
"Merger"). On January 21, 1999, the stockholders of Nava approved the Merger and
the transactions contemplated thereby, and the Merger became effective on
January 22, 1999. Pursuant to the Merger, Nava changed its name to Senesco
Technologies, Inc. (herein referred to as the "Company"), and Senesco remained a
wholly-owned subsidiary of the Company. Senesco was incorporated on November 24,
1998 under the name, "Senesco of New Jersey, Inc." and is the successor entity
to Senesco, L.L.C., a New Jersey limited liability company which was formed on
June 25, 1998.
BUSINESS OF THE COMPANY
The business of the Company is currently operated through Senesco. The
primary business of the Company is the development and commercial exploitation
of potentially significant technology in connection with the identification and
characterization of a gene (a lipase gene) and other genes which the company
believes control the aging (senescence) of all plant tissues (flowers, fruits
and vegetables).
Senescence in plant tissues is the natural aging of these tissues. Loss of
cellular membrane integrity attributable to lipase gene expression is an early
event during the senescence of all plant tissues that prompts the deterioration
of fresh flowers, fruits and vegetables. This loss of
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integrity, which is attributable to the formation of lipid metabolites in
membrane bilayers that "phase-separate," causes the membranes to become "leaky."
A decline in cell function ensues leading to deterioration and eventual death
(spoilage) of the tissue.
Presently, the technology utilized by the industry for controlling
senescence and increasing the shelf life of flowers, fruits and vegetables
relies on reducing ethylene biosynthesis, and hence only has application to a
limited number of plants that are ethylene-sensitive.
The Company's research and development plan focuses on four major groups of
consumer products: fruits, vegetables, flowers and agronomic crops. The
Company's research and development efforts seek to isolate and characterize the
lipase gene in an example from each of these four categories. Once a gene is
characterized, the Company seeks to create a transgenic (i.e., genetically
altered) example of each to show proof of concept in each category. The Company
is presently focusing on tomato, carnation, arabidopsis and banana plants. The
Company has successfully proceeded towards the benchmarks for ultimate gene
isolation and gene characterization, and transformation for these four plants
according to the internal time-table defined in the Company's research and
development plan.
Within the next year, as work is completed on these four plants, the
Company will continue its research and development strategy by expanding the
altered lipase technology into a variety of other commercially viable
agricultural crops. Such plants are expected to include corn, lettuce and
strawberries, among others. The company is also identifying and characterizing
other genes that are involved in the aging (senescence) process. Following
development of altered lipase seedlings and seeds, if successful, the Company's
overall marketing strategy is expected to be flexible in order to allow for
differences in plant reproduction and farming procedures customarily utilized in
different sectors of the broad agricultural and horticultural markets. There can
be no assurance, however, that the Company's research and development efforts
will be successful, or if successful, that the Company will successfully
commercially exploit its technology.
JOINT VENTURE
On May 14, 1999, the Company entered into a joint venture agreement with
Rahan Meristem Ltd., an Israeli company engaged in the worldwide export
marketing of banana germ-plasm (the "Joint Venture"). The Company will
contribute, by way of a limited, exclusive world-wide license to the Joint
Venture, access to its technology, discoveries, inventions, know-how (patentable
or otherwise), pertaining to plant genes and their cognate expressed proteins
that are induced during senescence (plant aging) for the purpose of developing,
on a joint basis, genetically altered banana plants which will result in a
"longer shelf life" banana. Rahan Meristem Ltd. will contribute its technology,
inventions and know-how with respect to banana plants. The Joint Venture is
equally owned by each of the parties. There can be no assurance, however, that
the Company's Joint Venture will be successful, or if successful, that the
Company will successfully commercially exploit its technology.
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The Joint Venture applied for and received a conditional grant which totals
$340,000 over a four year period from the Israel - U.S. Binational Research and
Development (the "BIRD") Foundation (the "BIRD Grant"). The Joint Venture will
receive a conditional grant in the first year equal to $94,890 which constitutes
50% of the Joint Venture's year one research and development budget. Pursuant to
the BIRD Grant, such grant, along with certain royalty payments, shall only be
repaid to the BIRD Foundation upon the commercial success of the Joint Venture's
technology, which success is measured based upon certain benchmarks and/or
milestones achieved by the Joint Venture. Such benchmarks are reported
periodically to the Foundation by the Joint Venture. Moreover, to date, the
Company has independently received $10,573 from the BIRD Foundation for research
and development expenses the Company has incurred which are associated with the
research and development efforts of the Joint Venture.
TARGET MARKETS
The complexities associated with marketing and distribution in the
worldwide produce market will require the Company to adopt a multi-faceted
commercialization strategy. The Company plans on utilizing three channels of
distribution, depending on the reproductive system of the plant in question.
First, for plants which reproduce via seeds, the Company intends to license its
technology to a major marketing and distribution partner in return for
development and royalty payments. Second, for plants which are grown using
seedlings, the Company intends to distribute such plants directly to growers
because these markets are traditionally more segmented and more readily entered
by smaller companies. Third, where the Company may not have access to a major
distribution partner or the ability to create a distribution channel "in house",
the Company intends to enter into strategic alliances to access needed
commercialization and marketing expertise, as was done with the Joint Venture in
the case of banana plants.
INDUSTRY MARKET TRENDS
The Company's competitors in the industry are primarily focused on research
and development rather than commercialization. Those which are presently
attempting to distribute their technology have generally utilized one of the
three possible commercialization distribution channels outlined above. In
addition, some competitors are owned by established produce distribution
companies, which alleviates the need for strategic alliances, while others are
attempting to create their own distribution and marketing channels.
INTELLECTUAL PROPERTY
Research and Development Agreement
The inventor of the Company's technology, John E. Thompson, Ph.D., is the
Dean of Science at the University of Waterloo in Waterloo, Ontario and was
recently appointed as the President and Chief Executive Officer of the Company.
Dr. Thompson is also a shareholder of the Company and owns approximately 13.68%
of the outstanding shares of the Common Stock of the Company as of June 30,
1999. Senesco entered into a three-year research and development agreement,
dated as of September 1, 1998, with Dr. Thompson and the University of Waterloo
(the "Research and Development Agreement"). The Research and Development
Agreement provides that the University of Waterloo shall perform research and
development under the direction of Senesco, and Senesco shall pay for the cost
of such work and make certain payments totaling $750,000 Canadian (as specified
therein).
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Patent Applications
Dr. Thompson and his colleagues, Yuwen Hong and Katalin Hudak, filed a
patent application on June 26, 1998 (the "Original Patent Application") to
protect their invention, which is directed to methods for controlling senescence
in plants. By assignment dated June 25, 1998 and recorded with the United States
Patent and Trademark Office (the "PTO") on June 26, 1998, Dr. Thompson and
Messrs. Hong and Hudak assigned all of their rights in and to the Original
Patent Application and any other applications filed in the United States or
elsewhere with respect to the invention and/or improvements thereto to Senesco,
L.L.C. The Company succeeded to the assignment and ownership of the Original
Patent Application. Dr. Thompson, and Messrs. Hong and Hudak filed an amendment
to the Original Patent Application on February 16, 1999 (the "Amended Patent
Application" and together with the Original Patent Application, the "Patent
Application") titled "DNA Encoding A Plant Lipase, Transgenic Plants and a
Method for Controlling Senescence in Plants." The Amended Patent Application
serves as a continuation of the Original Patent Application. Concurrent with the
filing of the Amended Patent Application with the PTO and as in the case of the
Original Patent Application, Dr. Thompson, Messrs. Hong and Hudak assigned all
of their rights in and to the Amended Patent Application and any other
applications filed in the United States or elsewhere with respect to such
invention and/or improvements thereto to Senesco. Dr. Thompson and Messrs. Hong
and Hudak have received shares of restricted common stock of the Company in
consideration for the assignment of the Patent Application. The inventions,
which were the subject of the Patent Application, include a method for
controlling senescence of plants, a vector containing a cDNA whose expression
regulates senescence, and a transformed microorganism expressing the lipase of
cDNA. Management believes that the inventions provide a means for delaying
deterioration and spoilage, which could greatly increase the shelf-life of
fruits, vegetables, and flowers by silencing or substantially repressing the
expression of the lipase gene induced coincident with the onset of senescence.
The Company filed a second patent application (the "New Patent
Application") on July 6, 1999, titled "DNA Encoding A Plant Deoxyhypusine
Synthase, Transgenic Plants and A Method for Controlling Programmed Cell Death
in Plants." The inventors named on the patent are Dr. John E. Thompson,
Tzann-Wei Wang and Dongen Lily Lu. Concurrent with the filing of the New Patent
Application with the PTO and as in the case of the Patent Application, Dr.
Thompson, Messrs. Wang and Lu assigned all of their rights in and to the New
Patent Application and any other applications filed in the United States or
elsewhere with respect to such invention and/or improvements thereto to Senesco.
Dr. Thompson and Messrs. Wang and Lu have received options to purchase common
stock of the Company in consideration for the assignments of the New Patent
Application. The inventions include a method for the genetic modification of
plants to control the onset of either age-related or stress-induced senescence,
an isolated DNA molecule encoding a senescence induced gene, and an isolated
protein encoded by the DNA molecule listed above. There can be no assurance that
patent protection will be granted with respect to the Patent Application or the
New Patent Application or that, if granted, the validity of such patents will
not be challenged. Furthermore, there can be no assurance that claims of
infringement upon the proprietary rights of others will not be made, or if made,
could be successfully defended against.
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GOVERNMENT REGULATION
At present, the U.S. federal government regulation of biotechnology is
divided among three agencies. The U.S. Department of Agriculture (the "USDA")
regulates the import and interstate movement of specific types of genetic
engineering that may be used in the creation of transgenic plants. The
Environmental Protection Agency (the "EPA") regulates activity related to the
invention of plant pesticides and herbicides, which may include certain kinds of
transgenic plants. The Food and Drug Administration (the "FDA") regulates foods
derived from new plant varieties. The FDA requires that transgenic plants meet
the same standards for safety that are required for all other plants and foods
in general. Except in the case of additives that significantly alter a food's
structure, the FDA does not require any additional standards or specific
approval for genetically engineered foods but expects transgenic plant
developers to consult the FDA before introducing a new food into the market
place.
The Company believes that its current activities, which to date have been
confined to research and development efforts, do not require licensing or
approval by any governmental regulatory agency. The Company may be required,
however, to obtain such licensing or approval from the governmental regulatory
agencies described above prior to the commercialization of its genetically
engineered plants. There can be no assurance that such licensing or approval by
any governmental regulatory agency will be obtained in a timely manner, if at
all. In addition, government regulations are subject to change and, in such
event, there can be no assurance that the Company may not be subject to
additional regulations or require such licensing or approval in the future.
COMPETITION
The Company's competitors in the field of delaying plant senescence through
genetic modification are companies that develop and produce transgenic plants.
Such companies include: Agritope Inc.; Dekalb Genetics; ArgEvo; DNAP Holding
Corporation; and Garst Seed Company, among others. The Company believes that its
proprietary technology is unique and, therefore, places the Company at a
competitive advantage in the industry. However, there can be no assurance that
its competitors will not develop a similar product with superior properties or
at greater cost-effectiveness than the Company.
MARKETING
Based upon the Company's multi-faceted commercialization strategy described
above, the Company anticipates that there may be a significant period of time
before plants altered using the Company's technology reach consumers. Thus, the
Company has not begun to actively market its technology directly to consumers,
but the Company has sought to establish itself within the industry through its
advertising program in trade journals, newspapers and a national magazine.
EMPLOYEES
The Company currently has five employees, four of whom are currently
executive officers and are involved in the management of the Company.
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Moreover, the officers are assisted by a Scientific Advisory Board made up
of prominent experts in the field of transgenic plants. A. Carl Leopold, Ph.D.
serves as Chairman of the Scientific Advisory Board. He is currently a member
and a W.H. Crocker Scientist Emeritus of the Boyce Thompson Institute for Plant
Research at Cornell University. Dr. Leopold has held numerous academic
appointments and memberships, including staff member of the Science and
Technology Policy Office during the Nixon and Ford Administrations, and
positions with the National Science Foundation and the National Aeronautics and
Space Administration. Alan B. Bennett, Ph.D., and William R. Woodson, Ph.D. are
the other members of the Scientific Advisory Board. Dr. Bennett is the Associate
Dean of the College of Agricultural and Environmental Sciences at the University
of California, Davis. His research interests include: the molecular biology of
tomato fruit development and ripening; the molecular basis of membrane
transport; and cell wall disassembly. Dr. Woodson is the Associate Dean of
Agriculture and Director of Agricultural Research Programs at Purdue University.
He has been a visiting professor at many universities worldwide including the
John Innis Institute in England and the Weizmann Institute of Science in Israel.
Dr. Woodson is a world-recognized expert in horticultural science and serves on
numerous international and national committees and professional societies.
In addition to his service on the Scientific Advisory Board, the Company
utilizes Dr. Bennett as a consultant experienced in the transgenic plant
industry.
Furthermore, pursuant to the Research and Development Agreement, the
majority of the Company's research and development activities are conducted at
the University of Waterloo under the supervision of Dr. Thompson. The Company
utilizes the University's substantial research staff including graduate and
post-graduate researchers.
The Company anticipates hiring additional employees in the next year to
meet needs created by possible expansion of its marketing activities and product
development.
SAFE HARBOR STATEMENT
Certain statements included in the Form 10-KSB, including, without
limitation, statements regarding the anticipated growth in the markets for the
Company's services, the continued development of the lipase technology, the
approval of the Company's Patent Applications, the possibility of governmental
approval in order to sell or offer for sale to the general public a genetically
engineered plant or plant product, the successful implementation of the Joint
Venture with Rahan Meristem Ltd., the success of the Research and Development
Agreement, statements relating to the Company's Patent Applications, the
anticipated longer term growth of the Company's business, and the timing of the
projects and trends in future operating performance, are forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. The factors discussed herein and others expressed from time to
time in the Company's filings with the Securities and Exchange Commission could
cause actual results and developments to be materially different from those
expressed in or implied by such statements.
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ITEM 2. PROPERTIES.
The Company subleases office space in Princeton, New Jersey from a company
controlled by a director and stockholder of the Company for a monthly rental of
approximately $5,500 on a month-to-month basis. The space is in excellent
condition and the Company believes it can use these offices for the foreseeable
future. This office space is adequately insured by the lessor.
Over the past year the Company has purchased certain office equipment for
$21,623. The Company believes this equipment meets its needs and has an
estimated useful life of four years. The Company also leases computers at a cost
of approximately $400 per month. In addition, the Company has purchased certain
office furniture for $53,902. The Company believes this furniture is suitable
and has an estimated useful life of seven years.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Since January 25, 1999, the Company's Common Stock has been traded on the
NASD OTC Bulletin Board under the symbol SENO.
The following table sets forth the range of the high and low sales bid
quotations for the Common Stock for each of the quarters since the quarter ended
March 31, 1999 as reported on the NASD OTC Bulletin Board. Such quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions.
Quarter Common
Ended Stock
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High Low
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March 31, 1999 $7.00 $4.00
(since January 25, 1999)
June 30, 1999 $6.625 $4.75
As of August 31, 1999, the approximate number of holders of record of the
Common Stock was 381.
The Company has neither paid nor declared dividends on its Common Stock
since its inception and does not plan to pay dividends on its Common Stock in
the foreseeable future. The Company expects that any earnings which the Company
may realize will be retained to finance the growth of the Company.
Change in Securities and Use of Proceeds
On January 21, 1999, in connection with the Merger, Nava effected a
three-for-one reverse stock split whereby the 3,000,025 shares of issued and
outstanding common stock of Nava, $.0005 par value, was reduced to 1,000,008
shares of common stock, $.0015 par value (the "Common Stock"). The actual number
of shares was reduced to 999,898 due to adjustments for fractional shares. In
addition, the number of shares of authorized Common Stock was decreased from
50,000,000 shares, $.0005 par value, to 16,666,667 shares, $.0015 par value.
On January 22, 1999, Nava issued an aggregate of 1,700,000 shares of
restricted Common Stock of Nava, on a post-split basis, to the shareholders of
Senesco in connection with the Merger.
On May 21, 1999, the Company issued an aggregate of 379,597 shares of
restricted Common Stock of the Company to accredited investors in connection
with the Private Placement (as defined below). Certain directors of the Company
participated in the Private Placement. Specifically, such directors of the
Company purchased, in the aggregate, 170,818 shares of restricted Common Stock
on the same terms and conditions as the other purchasers thereunder.
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No underwriter was employed by the Company in connection with the issuance
of the securities described above; however, the Company did engage the services
of a placement agent in connection with the Private Placement. The placement
agent was entitled to receive a 10% sales commission on the first $800,000
raised and a 5% sales commission on the remaining balance, and elected to
receive 26,572 shares of restricted Common Stock of the Company as compensation.
The Company believes that the issuance of the foregoing shares of Common Stock
of the Company was exempt from registration under Section 4(2) of the Securities
Act of 1933, as amended (the "Act"), as transactions not involving a public
offering. No public offering was involved and the securities were acquired by
accredited investors for investment and not with a view to distribution.
Appropriate legends have been affixed to the stock certificates issued to the
shareholders of Senesco and the purchasers of the Private Placement. All
purchasers had adequate access to information about the Company.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, the Company's cash balance was $946,691, and the
Company's working capital was $786,646. As of June 30, 1999, the Company had a
tax loss carry-forward of $1,168,995 to off-set future taxable income. There can
be no assurance, however, that the Company will be able to take advantage of the
entire amount of such tax loss carry-forward, if at all, in future fiscal years.
To date, the Company has not generated any revenues. The Company has not
been profitable since inception, may incur additional operating losses in the
future, and may require additional financing to continue the development and
commercialization of its technology. While the Company does not expect to
generate significant revenues from the sale of products in the near future, the
Company may enter into licensing or other agreements with marketing and
distribution partners that may result in license fees, revenues from contract
research, or other related revenue.
On October 22, 1998, as amended on October 23, 1998, Senesco entered into a
loan agreement with South Edge International Limited providing for a bridge loan
in the aggregate amount of $352,000 (the "South Edge Loan"). In addition, on
October 23, 1998, Senesco entered into a loan agreement with the Parenteau
Corporation providing for a bridge loan in the aggregate amount of $108,000 (the
"Parenteau Loan" and, together with the South Edge Loan, the "Bridge
Financing"). The Bridge Financing is evidenced by promissory notes bearing
interest at an annual rate equal to the prime rate as reported in the Wall
Street Journal plus 2%. The Bridge Financing was made in anticipation of the
Merger, and provided that in the event the Company consummated an equity
financing in excess of $1,500,000, the entire loan amount outstanding under the
Bridge Financing, plus accrued interest, will become immediately due and
payable. At the consummation of the Private Placement discussed below, the
Company repaid all amounts due under the Bridge Financing, equal to an aggregate
of $480,314, which included accrued interest of $20,314.
The Company expects its capital requirements to increase significantly over
the next several years as it commences new research and development efforts,
undertakes new product
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developments, increases sales and administration infrastructure and embarks on
developing in-house business capabilities and facilities. The Company's future
liquidity and capital funding requirements will depend on numerous factors,
including, but not limited to, the levels and costs of the Company's research
and development initiatives and the cost and timing of the expansion of the
Company's sales and marketing efforts.
The Company anticipates that it will be able to fund operations over the
next twelve (12) months. To enable the Company to fund its research and
development and commercialization efforts, including the hiring of additional
employees, and in order to pay off the Bridge Financing, the Company, on May 21,
1999, consummated a private placement of 379,597 shares of its Common Stock, at
$5.26875 per share, for an aggregate gross proceeds of $2,000,000 (the "Private
Placement"). See "Item 5. Market for the Company's Common Equity and Related
Stockholder Matters - Change in Securities and Use of Proceeds."
The Company engaged Lionheart Services, Inc. as its placement agent (the
"Placement Agent"), pursuant to the Placement Agency Agreement dated as of April
30, 1999 (the "Placement Agency Agreement"). The Placement Agency Agreement
provided for, among other things, a 10% sales commission on the first $800,000
raised and a 5% sales commission on the remaining balance, to be in cash or in
Common Stock of the Company. The Placement Agent elected to be paid in stock,
and as a result, the Company issued 26,572 shares of restricted Common Stock of
the Company to the Placement Agent in consideration of such commissions.
In connection with the Private Placement, the Company also executed a
Common Stock Purchase Agreement with each purchaser of Common Stock, dated as of
May 11, 1999 (the "Stock Purchase Agreement"). Pursuant to the Stock Purchase
Agreement, the purchase price per share of Common Stock was equal to $5.26875,
calculated based upon 80% of the average closing bid and ask prices of the
Company's Common Stock during the twenty (20) trading days ending three days
prior to the Closing Date (as defined therein). The Stock Purchase Agreement
also provided for price protection whereby upon the issuance or sale by the
Company of any additional Common Stock or Common Stock equivalents within a
period of sixty (60) days following the Closing Date, other than options or
warrants currently outstanding as of the date of the Stock Purchase Agreement,
for a consideration per share less than the purchase price provided for in the
Stock Purchase Agreement (the "Reduced Purchase Price"), then the Company shall
immediately issue such additional shares of Common Stock to the purchaser which
each such purchaser's investment would have purchased at the Reduced Purchase
Price. To date, the Company has not issued any Common Stock at such Reduced
Purchase Price. In addition, the Company entered into a Registration Rights
Agreement with each purchaser dated as of May 11, 1999 (the "Registration Rights
Agreement"). The Registration Rights Agreement provides for, among other things,
a demand registration right beginning after January 22, 2000, as well as
piggy-back registration rights for a three-year period from the Closing Date.
The shares issued to each purchaser in the Private Placement are identical to
the Common Stock held by all of the Company's shareholders.
Furthermore, certain directors of the Company participated in the Private
Placement. Specifically, such directors of the Company purchased, in the
aggregate, 170,818 shares of restricted Common Stock on the same terms and
conditions as the other purchasers thereunder.
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EUROPEAN MONETARY UNION
On January 1, 1999, eleven of the fifteen member countries of the European
Union set fixed conversion rates between their existing legacy currencies and
the euro. As such, these participating countries have agreed to adopt the euro
as their common legal currency. The eleven participating countries will issue
sovereign debt exclusively in euro and will redenominate outstanding sovereign
debt. The legacy currencies will continue to be used as legal tender through
January 1, 2002, at which point the legacy currencies will be canceled and euro
bills and coins will be used for cash transactions in the participating
countries.
Except for the Company's Research and Development Agreement with The
University of Waterloo which is payable in Canadian dollars, the Company has no
other agreements or transactions denominated in foreign currency. Thus, the
Company currently does not believe that the euro conversion will have a material
impact on the Company's financial condition or results of operations.
YEAR 2000 COMPLIANCE
Historically, certain computer programs have been written using two digits
rather than four to define the applicable year, which could result in the
computer recognizing a date using "00" as the year 1900 rather than the year
2000. This, in turn, could result in major system failures or miscalculations,
and is generally referred to as the "Year 2000 Problem." The Company has
assessed its state of readiness with respect to the Year 2000 Problem. The
Company's management has reviewed and tested the Company's internal business
systems for Year 2000 compliance. The Company believes that, based on results of
such review and testing, the Company's internal business systems, including its
computer systems, are Year 2000 compliant. The Company has not and does not
anticipate any material future expenditures relating to the Year 2000 compliance
of its internal systems. There can be no assurance, however, that the Year 2000
Problem will not adversely affect the Company's business, financial condition,
results of operations or cash flows.
In addition, the Company receives data derived from the computer systems of
various sources, which data or software may or may not be Year 2000 compliant.
Although the Company is currently taking steps to address the impact, if any, of
the Year 2000 Problem relating to the data received from its clients, failure of
such computer systems to properly address the Year 2000 Problem may adversely
affect the Company's business, financial condition, results of operations or
cash flows.
The Year 2000 disclosures discussed above are based on numerous
expectations which are subject to uncertainties. Certain risk factors which
could have a material adverse effect on the Company's results of operations and
financial condition include but are not limited to: failure to identify critical
systems which will experience failures, errors in the remediation efforts,
inability to obtain new replacements for non-compliant systems or equipment,
general economic downturn relating to Year 2000 failures in the U.S. and in
other countries, failures in global banking systems and capital markets, or
extended failures by public and private utility companies or common carriers
supplying services to the Company.
-11-
<PAGE>
RESULTS OF OPERATIONS
Fiscal Year ended June 30, 1999
- -------------------------------
The Company is a development stage company. From its inception of
operations on July 1, 1998 through June 30, 1999 ("Fiscal 1999"), the Company
had no revenues. In addition, operating expenses, consisting of general and
administrative expenses, sales and marketing expenses and research and
development expenses, were $1,168,995 for Fiscal 1999.
For Fiscal 1999, general and administrative expenses were $982,347,
consisting primarily of professional salaries and benefits, depreciation and
amortization, professional and consulting services, office rent and corporate
insurance.
For Fiscal 1999, sales and marketing expenses were $0.
For Fiscal 1999, research and development expenses were $173,461,
consisting primarily of professional salaries and benefits, fees associated with
the Research and Development Agreement and allocated overhead charged to
research and development projects.
The Company has incurred losses since inception and had an accumulated
deficit of $1,168,995 at June 30, 1999. The Company expects to continue to incur
expenditures for research, product development, marketing and administrative
activities.
The Company does not expect to generate significant revenues from product
sales for, approximately, the next two to three years during which the Company
will engage in significant research and development efforts. However, the
Company may enter into licensing or other agreements with marketing and
distribution partners that may result in license fees, revenues from contract
research, and other related revenues. No assurance can be given, however, that
such research and development efforts will result in any commercially viable
products, or that any licensing or other agreements with marketing and
distribution partners will be entered into and result in revenues. Successful
future operations will depend on the Company's ability to transform its research
and development activities into commercializable products.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements required to be filed pursuant to this Item 7 are
included in this Annual Report on Form 10-KSB. A list of the financial
statements filed herewith is found at "Item 13. Exhibits, List, and Reports on
Form 8-K."
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
-12-
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The information relating to the Company's directors, nominees for election
as directors and executive officers under the headings "Election of Directors"
and "Executive Officers" in the Company's definitive proxy statement for the
1999 Annual Meeting of Shareholders is incorporated herein by reference to such
proxy statement.
ITEM 10. EXECUTIVE COMPENSATION.
The discussion under the heading "Executive Compensation" in the Company's
definitive proxy statement for the 1999 Annual Meeting of Shareholders is
incorporated herein by reference to such proxy statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The discussion under the heading "Security Ownership of Certain Beneficial
Owners and Management" in the Company's definitive proxy statement for the 1999
Annual Meeting of Shareholders is incorporated herein by reference to such proxy
statement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The discussion under the heading "Certain Relationships and Related
Transactions" in the Company's definitive proxy statement for the 1999 Annual
Meeting of Shareholders is incorporated herein by reference to such proxy
statement.
ITEM 13. EXHIBITS, LIST, AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements.
Reference is made to the Index to Financial Statements on Page F-1.
(a) (2) Financial Statement Schedules.
None.
(a) (3) Exhibits.
Reference is made to the Index to Exhibits on Page 16.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the Company's fourth fiscal
quarter.
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 this 28th day of
September, 1999.
SENESCO TECHNOLOGIES, INC.
By: /s/Phillip O. Escaravage
--------------------------------
Phillip O. Escaravage, Chairman and
Chief Operating Officer
-14-
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Phillip O. Escaravage Chairman, Chief Operating September 28, 1999
- --------------------------
Phillip O. Escaravage Officer and Director
(principal executive officer)
/s/Sascha P. Fedyszyn Vice President September 28, 1999
- --------------------------
Sascha P. Fedyszyn (principal financial and
accounting officer)
/s/Christopher Forbes Director September 28, 1999
- --------------------------
Christopher Forbes
/s/Steven Katz Director September 28, 1999
- --------------------------
Steven Katz
/s/Thomas Quick Director September 28, 1999
- --------------------------
Thomas Quick
/s/Ruedi Stalder Director September 28, 1999
- --------------------------
Ruedi Stalder
-15-
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
- ------- ----------------------
2.1 Merger Agreement and Plan of Merger dated as of October 9, 1998 made
by and among Nava Leisure USA, Inc., an Idaho corporation, the
Principal Stockholders (as defined therein), Nava Leisure Acquisition
Corp., and Senesco, L.L.C. (Incorporated by reference to the Company's
definitive proxy statement on Schedule 14A dated January 11, 1999.)
3.1 Articles of Incorporation of the Company, as amended. (Incorporated by
reference to Exhibit 2(i) of the Company's Form 10-SB, as amended, and
as filed with the Securities and Exchange Commission on February 26,
1997.)
3.2 By-laws of the Company, as amended. (Incorporated by reference to
Exhibit 2(ii) of the Company's Form 10-SB, as amended, and as filed
with the Securities and Exchange Commission on February 26, 1997.)
3.3 Certificate of Amendment to the Company's Articles of Incorporation
filed with the Secretary of State of the State of Idaho on January 21,
1999. (Incorporated by reference to the Company's quarterly report on
Form 10-QSB for the period ended December 31, 1998.)
4.1 Loan Agreement dated as of October 22, 1998 made by and among Senesco,
L.L.C., Phillippe O. Escaravage, and South Edge International Limited.
(Incorporated by reference to the Company's quarterly report on Form
10-QSB for the period ended December 31, 1998.)
4.2 Amended Loan Agreement dated as of October 23, 1998 made by and among
Senesco, L.L.C., Phillippe O. Escaravage and South Edge International
Limited. (Incorporated by reference to the Company's quarterly report
on Form 10-QSB for the period ended March 31, 1999.)
4.3 Loan Agreement dated as of October 23, 1998 made by and among Senesco,
L.L.C., Phillippe O. Escaravage and Parenteau Corporation.
(Incorporated by reference to the Company's quarterly report on Form
10-QSB for the period ended March 31, 1999.)
4.4 Form of Stock Purchase Agreement dated as of May 11, 1999 made by and
among the Company and the Purchasers (as defined therein).
(Incorporated by reference to the Company's quarterly report on Form
10-QSB for the period ended March 31, 1999.)
4.5 Form of Registration Rights Agreement dated as of May 11, 1999 made by
and among the Company and the Purchasers (as defined therein).
(Incorporated by reference to the Company's quarterly report on Form
10-QSB for the period ended March 31, 1999.)
4.6 Placement Agency Agreement dated as of April 30, 1999 made by and
between the Company and Lionheart Services, Inc. (Incorporated by
reference to the Company's quarterly report on Form 10-QSB for the
period ended March 31, 1999.)
10.1* 1998 Stock Option Plan. (Incorporated by reference to the Company's
definitive proxy statement on Schedule 14A dated January 11, 1999.)
-16-
<PAGE>
Exhibit
No. Description of Exhibit
- ------- ----------------------
10.2 Indemnification Agreement dated as of January 21, 1999 made by and
between the Company and Phillippe O. Escaravage. (Incorporated by
reference to the Company's quarterly report on Form 10-QSB for the
period ended December 31, 1998.)
10.3 Indemnification Agreement dated as of January 21, 1999 made by and
between the Company and Christopher Forbes. (Incorporated by reference
to the Company's quarterly report on Form 10-QSB for the period ended
December 31, 1998.)
10.4 Indemnification Agreement dated as of January 21, 1999 made by and
between the Company and Steven Katz. (Incorporated by reference to the
Company's quarterly report on Form 10-QSB for the period ended
December 31, 1998.)
10.5 Indemnification Agreement dated as of February 23, 1999 made by and
between the Company and Thomas C. Quick. (Incorporated by reference to
the Company's quarterly report on Form 10-QSB for the period ended
March 31, 1999.)
10.6 Indemnification Agreement dated as of March 1, 1999 made by and
between the Company and Ruedi Stalder. (Incorporated by reference to
the Company's quarterly report on Form 10-QSB for the period ended
March 31, 1999.)
10.7* Employment Agreement dated as of January 21, 1999 made by and between
Senesco, Inc. and Phillippe O. Escaravage. (Incorporated by reference
to the Company's quarterly report on Form 10-QSB for the period ended
December 31, 1998.)
10.8* Employment Agreement dated as of January 21, 1999 made by and between
Senesco, Inc. and Sascha P. Fedyszyn. (Incorporated by reference to
the Company's quarterly report on Form 10-QSB for the period ended
December 31, 1998.)
10.9* Employment Agreement dated as of January 21, 1999 made by and between
Senesco, Inc. and Christian P.R. Ahrens. (Incorporated by reference to
the Company's quarterly report on Form 10-QSB for the period ended
December 31, 1998.)
10.10 Research Agreement dated as of September 1, 1998 made by and among
Senesco, Inc., Dr. John E. Thompson and The University of Waterloo.
(Incorporated by reference to the Company's quarterly report on Form
10-QSB for the period ended March 31, 1999.)
21 Subsidiaries of the Registrant.
27 Financial Data Schedule for the year ended June 30, 1999.
- ---------------
* A management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 13(a) of Form 10-KSB.
(b) Reports of Form 8-K
None.
-17-
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Balance Sheet F-3
Statement of Operations F-4
Statement of Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 - F-11
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
Senesco Technologies, Inc.
We have audited the accompanying consolidated balance sheet of Senesco
Technologies, Inc. and Subsidiary as of June 30, 1999, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Senesco
Technologies, Inc. and Subsidiary as of June 30, 1999, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
August 6, 1999
F-2
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
June 30, 1999
- --------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash $ 946,691
Prepaid expense 12,542
- --------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 959,233
Property and Equipment, at cost, net of accumulated depreciation
of $3,251 72,274
Intangibles, net of accumulated amortization of $752 42,383
Deferred Income Tax Asset, net of valuation allowance of $473,000 --
Security Deposit 10,863
- --------------------------------------------------------------------------------
TOTAL ASSETS $ 1,084,753
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 169,733
Accrued expenses 2,854
- --------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 172,587
- --------------------------------------------------------------------------------
Commitments
Stockholders' Equity:
Preferred stock - $.001 par value; authorized 5,000,000 shares;
no shares issued --
Common stock - $.0015 par value; authorized
16,666,667 shares; issued and outstanding 3,106,067 shares 4,659
Capital in excess of par 2,076,502
Deficit accumulated during the development stage (1,168,995)
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY 912,166
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,084,753
================================================================================
See Notes to Consolidated Financial Statements
F-3
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
Revenue --
Operating expenses:
General and administrative $ 982,397
Research and development 173,461
- --------------------------------------------------------------------------------
Total operating expenses 1,155,858
Interest expense, net of interest income of $9,133 13,137
- --------------------------------------------------------------------------------
Net loss $(1,168,995)
================================================================================
Loss per common share $ (.65)
================================================================================
Weighted-average number of common shares outstanding 1,784,958
================================================================================
See Notes to Consolidated Financial Statements
F-4
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK CAPITAL DURING THE TOTAL
------------
NUMBER IN EXCESS DEVELOPMENT STOCKHOLDERS'
OF SHARES AMOUNT OF PAR STAGE EQUITY
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common stock outstanding 999,898 $1,500 $ (1,500) -- --
Contribution of capital through
payment of expenses -- -- 85,179 -- $ 85,179
Issuance of common stock in
reverse merger on January 22,
1999 at $.0015 per share 1,700,000 2,550 (2,550) -- --
Issuance of common stock for cash
on May 21, 1999 for $5.26875 per
share 379,597 569 1,995,413 -- 1,995,982
Issuance of common stock for
placement fees on May 21, 1999
at $.0015 per share 26,572 40 (40) -- --
Net loss -- -- -- $(1,168,995) (1,168,995)
- ------------------------------------------------------------------------------------------------------
Balance at June 30, 1999 3,106,067 $4,659 $2,076,502 $(1,168,995) $ 912,166
======================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $(1,168,995)
Adjustments to reconcile net loss to net cash used in
operating activities:
Capital contributed through payment of expenses by stockholder 85,179
Depreciation and amortization 4,003
Increase in operating assets:
Prepaid expense (12,542)
Patent costs (43,135)
Security deposit (10,863)
Increase in operating liabilities:
Accounts payable 169,733
Accrued expenses 2,854
- --------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (973,766)
Cash flows used in investing activity - purchase of property
and equipment (75,525)
Cash flows from financing activity - proceeds from issuance
of common stock 1,995,982
================================================================================
Net increase in cash and cash at end of year $ 946,691
================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 22,270
================================================================================
See Notes to Consolidated Financial Statements
F-6
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. PRINCIPAL The accompanying consolidated financial statements include
BUSINESS the accounts of Senesco Technologies, Inc. ("ST") and its
ACTIVITY AND wholly owned subsidiary, Senesco, Inc. ("SI"), collectively
SUMMARY OF the "Company." All significant intercompany accounts and
SIGNIFICANT transactions have been eliminated in consolidation.
ACCOUNTING
POLICIES: SI, a New Jersey corporation, was incorporated on November
24, 1998 and is the successor entity to Senesco, L.L.C., a
New Jersey limited liability company, which was formed on
June 25, 1998 but commenced operations on July 1, 1998. This
transfer was accounted for at historical cost in a manner
similar to a pooling of interests with the recording of net
assets acquired at their historical book value.
The Company is a development stage company that was
organized to commercially exploit technology acquired and
developed in connection with the identification and
characterization of genes which control the aging of fruits,
vegetables, flowers and crops.
On January 21, 1999, Nava Leisure USA, Inc. ("Nava"), an
Idaho corporation and the predecessor registrant to the
Company, effected a one-for-three reverse-stock-split,
restating the number of shares of common stock outstanding
from 3,000,025 to 999,898. In addition, the number of
authorized common stock was decreased from 50,000,000
shares, $.0005 par value, to 16,666,667 shares, $.0015 par
value (the "Common Stock").
On January 22, 1999, Nava consummated a merger (the
"Merger") with SI. Nava issued 1,700,000 shares of Common
Stock, on a post-split basis, for all of the outstanding
capital stock of SI. Pursuant to the Merger, the
stockholders of SI acquired majority control of Nava, and
the name of Nava was changed to Senesco Technologies, Inc.
and SI remained a wholly owned subsidiary of ST. For
accounting purposes, the Merger has been treated as a
recapitalization of the Company with SI as the acquirer (a
reverse acquisition).
Intangible assets consist of costs related to acquiring
patents, which are being amortized using the straight-line
method over 17 years.
Depreciation of property and equipment is provided for by
the straight-line method over the estimated useful lives of
the assets.
The Company maintains its cash in bank deposit accounts
which, at times, may exceed federally insured limits. The
Company believes that there is no significant credit risk
with respect to these accounts.
Deferred income tax assets and liabilities are recognized
for the future tax consequences attributable to differences
between financial statement carrying amounts of existing
assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using
enacted rates expected to apply when the differences are
expected to be realized.
Research and development expenses are charged to operations
when incurred.
F-7
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company measures stock-based compensation cost using APB
Opinion No. 25 as is permitted by Statement of Financial
Accounting Standards ("SFAS") No. 123, Accounting for
Stock-Based Compensation.
Loss per common share is computed by dividing the loss by
the weighted-average number of common shares outstanding
during the period. During the year ended June 30, 1999,
there were no dilutive securities outstanding.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of expenses
during the reporting period. Actual results could differ
from those estimates.
Management does not believe that any recently issued, but
not yet effective, accounting standards if currently adopted
would have a material effect on the accompanying
consolidated financial statements.
2. PROPERTY AND Property and equipment, at cost, consists of the following:
EQUIPMENT:
Estimated
Useful Life
------------------------------------------------------------
Equipment $21,623 4 years
Furniture and fixtures 53,902 7 years
------------------------------------------------------------
75,525
Accumulated depreciation (3,251)
------------------------------------------------------------
$72,274
============================================================
Depreciation aggregated $3,251 for the year ended June 30,
1999.
3. RELATED PARTY During the year ended June 30, 1999, a director and
TRANSACTIONS: stockholder of the Company paid expenses, on its behalf,
aggregating $85,179. These amounts were contributed by the
stockholder as capital to the Company.
In January 1999, the Company entered into an arrangement to
sublease office space from a company controlled by a
director and stockholder of the Company. This sublease is
for a monthly rental of approximately $5,500 and is on a
month-to-month basis. The Company believes that this
arrangement is on terms at least as favorable as the Company
would have received from a third party.
F-8
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. STOCKHOLDERS' On May 21, 1999, the Company consummated a private placement
EQUITY: of 379,597 shares of its Common Stock for cash consideration
of $2,000,000 less costs of $4,018. Pursuant to the
Placement Agency Agreement, the Placement Agent was to
receive $140,000 in either cash or common stock, as defined.
The Placement Agent received 26,572 shares of common stock
valued at $5.26875 per share for its services. In connection
with the Private Placement, the Company also executed a
Common Stock Purchase Agreement with each purchaser of
Common Stock, dated as of May 11, 1999 (the "Stock Purchase
Agreement"). Pursuant to the Stock Purchase Agreement, the
purchase price per share of Common Stock was determined by
taking 80% of the average closing bid and ask prices of the
Company's Common Stock during the 20 trading days ending 3
days prior to the closing date, as defined. The Stock
Purchase Agreement also provides for price protection
whereby upon issuance or sale by the Company of any
additional Common Stock or Common Stock equivalents within a
period of 60 days following the closing date, other than
options or warrants currently outstanding as of the date of
the Stock Purchase Agreement, for a consideration per share
less than the purchase price provided for in the Stock
Purchase Agreement (the "Reduced Purchase Price"), then the
Company shall immediately issue such additional shares of
Common Stock to the purchaser which each such purchaser's
investment would have purchased at the Reduced Purchase
Price. In addition, the Company entered into a Registration
Rights Agreement with each purchaser dated May 11, 1999 (the
"Registration Rights Agreement"). The Registration Rights
Agreement provides for, among other things, a demand
registration right beginning after January 22, 2000, as well
as piggy-back registration rights for a three-year period
from the closing date. Certain directors of the Company
participated in the Private Placement. Specifically, such
directors of the Company purchased, in the aggregate,
170,818 shares of Restricted Common Stock on the same terms
and conditions as all purchasers thereunder.
On October 22, 1998, as amended on October 23, 1998, the
Company entered into a loan agreement with South Edge
International Limited providing for a bridge loan in the
aggregate amount of $352,000 (the "South Edge Loan"). In
addition, on October 23, 1998, the Company entered into a
loan agreement with the Parenteau Corporation providing for
a bridge loan in the aggregate amount of $108,000 (the
"Parenteau Loan"). The Parenteau Loan and the South Edge
Loan constitute the "Bridge Financing." The Bridge Financing
is evidenced by promissory notes bearing interest at an
annual rate equal to the prime rate as reported in the Wall
Street Journal plus 2%. The Bridge Financing was made in
anticipation of the Merger (see Note 1), and provided that
in the event the Company consummated an equity financing in
excess of $1,500,000, the outstanding amounts due under the
Bridge Financing, plus accrued interest, would become
immediately due and payable. Upon completion of the Private
Placement discussed above, the Company repaid all amounts
due under the Bridge Financing.
During the year ended June 30, 1999, the Company adopted the
1998 Stock Incentive Plan (the "Plan") which provides for
the grant of stock options and stock purchase rights to
certain designated employees and certain other persons
performing services for the Company, as designated by the
board of directors. Pursuant to the Plan, an aggregate of
500,000 shares of common stock have been reserved for
issuance. During the year ended June 30, 1999, no options or
rights were granted.
F-9
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. INCOME TAXES: The Company files a consolidated federal income tax return.
The subsidiary files separate state and local income tax
returns.
The provision for income taxes differs from the amount
computed using the federal statutory rate of 34% as a result
of the following:
Federal statutory rate (34)%
Increase in valuation allowance 34
------------------------------------------------------------
- 0 -
============================================================
At June 30, 1999, the deferred income tax asset
consists of the following:
Deferred tax asset:
Net operating loss carryforward $ 473,000
Valuation allowance (473,000)
------------------------------------------------------------
Net deferred tax asset $ - 0 -
============================================================
At June 30, 1999, the Company has net operating loss
carryforwards of approximately $1,169,000 available to
offset future taxable income through 2019.
6. COMMITMENTS: Effective September 1, 1998, the Company entered into a
three-year research and development agreement with a
stockholder of the Company and the university with whom he
is affiliated. The stockholder and the university will
provide research and development under the direction of the
Company. The agreement is renewable annually by the Company
which has the right of termination upon 30 days' advance
written notice. Total amounts due under the agreement for
the three-year period shall be limited to $735,000. Research
and development expense under this agreement for the year
ended June 30, 1999 aggregated $169,140.
Effective May 1, 1999, the Company entered into a consulting
agreement for research and development with such
stockholder. This agreement provides for monthly payments of
$3,000 through June 2001. The agreement shall be
automatically renewable for two additional three-year terms,
unless either of the parties provides the other with written
notice within six months of the end of the term.
F-10
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company has employment agreements with certain employees
who are also stockholders of the Company. These agreements
provide for a base compensation and additional amounts, as
defined. The agreements expire at various dates through
January 2002. Future base compensation to be paid under the
agreements as of June 30, 1999 is as follows:
Year ending June 30,
2000 $127,200
2001 97,000
2002 33,000
------------------------------------------------------------
$257,200
============================================================
7. JOINT VENTURE: On May 14, 1999, the Company entered into a joint venture
agreement ("Joint Venture") with an Israeli partnership that
is engaged in the worldwide marketing of genetically
engineered banana plants. The purpose of the Joint Venture
is to develop genetically altered banana plants which will
result in a longer shelf life banana. The Joint Venture is
owned 50% by the Company and 50% by the Israeli partnership.
During the period from May 14, 1999 to June 30, 1999, the
Joint Venture had no revenue. The Company's portion of the
Joint Venture's expenses approximated $15,000 and is
included in research and development expenses for the year
ended June 30, 1999.
8. SUBSEQUENT In July 1999, the Joint Venture applied for and received a
EVENT: conditional grant from the Israel - United States Binational
Research and Development Foundation (the "BIRD Foundation").
This agreement will allow the Joint Venture to receive
$340,000 over a four-year period. Grants received from the
BIRD Foundation will be paid back only upon the commercial
success of the Joint Venture's technology, as defined.
F-11
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
------------------------------
Senesco, Inc., a New Jersey corporation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS AT JUNE 30, 1999 AND FOR THE TWELVE MONTH
PERIOD ENDED JUNE 30, 1999 WHICH ARE INCLUDED IN THE REGISTRANT'S FORM 10-KSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001035354
<NAME> Senesco Technologies, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 946,691
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 959,233
<PP&E> 72,274
<DEPRECIATION> 3,251
<TOTAL-ASSETS> 1,084,753
<CURRENT-LIABILITIES> 172,587
<BONDS> 0
0
0
<COMMON> 4,659
<OTHER-SE> 2,076,502
<TOTAL-LIABILITY-AND-EQUITY> 1,084,753
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 1,168,995
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,270
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> .65 <F1>
<EPS-DILUTED> .65 <F2>
<FN>
<F1> This amount represents Basic Earnings per Share in accordance with the
requirements of Statement of Financial Accounting Standards No. 128 -
"Earnings per Share".
<F2> This amount represents Diluted Earnings per Share in accordance with
the requirements of Statement of Financial Accounting Standards No.
128 - "Earnings per Share".
</FN>
</TABLE>
