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, 2000
Commission File No. 0-22307
SENESCO TECHNOLOGIES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 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 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, $.01 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. [ ]
State Registrant's revenues for fiscal year ended June 30, 2000: $0
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant: $18,134,484 at August 31, 2000 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, 2000:
Class Number of Shares
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Common Stock, $.01 par value 7,872,626
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 2000 Annual Meeting of Stockholders are incorporated by reference into
Part III of this Report.
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TABLE OF CONTENTS
Item Page
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PART I 1. Business.......................................................1
2. Properties.....................................................7
3. Legal Proceedings..............................................8
4. Submission of Matters to a Vote of Security Holders............8
PART II 5. Market for the Company's Common Equity and Related
Stockholder Matters............................................9
6. Management's Discussion and Analysis or Plan of Operation.....10
7. Financial Statements..........................................13
8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...........................13
PART III 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16 (a) of the
Exchange Act..................................................14
10. Executive Compensation........................................14
11. Security Ownership of Certain Beneficial Owners
and Management................................................14
12. Certain Relationships and Related Transactions................14
13. Exhibits, List and Reports on Form 8-K........................14
SIGNATURES ..............................................................15
EXHIBIT INDEX..............................................................17
FINANCIAL STATEMENTS......................................................F-1
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PART I
ITEM 1. BUSINESS.
General
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Nava Leisure USA, Inc. ("Nava") was organized on April 1, 1964 under the
laws of the State of Idaho under the name, "Felton Products, Inc." Nava has
undergone several name and business changes. 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 January 22, 1999,
Nava Leisure Acquisition Corp., a New Jersey corporation and wholly-owned
subsidiary of Nava, merged with and into Senesco, Inc., a New Jersey corporation
("Senesco"), and the stockholders of Senesco received newly issued, unregistered
and restricted common stock of Nava such that the stockholders of Senesco
acquired a majority of Nava's outstanding common stock (the "Merger"). Pursuant
to the Merger, Nava changed its name to Senesco Technologies, Inc. (herein after
referred to as the "Company"), and Senesco became a wholly-owned subsidiary of
the Company.
On September 29, 1999, the Company declared a 2-for-1 forward stock split
(the "Stock Split") of its common stock (the "Common Stock") for stockholders of
record as of October 8, 1999. The Stock Split became effective on the NASD OTC
Bulletin Board on October 25, 1999. All share amounts and per share prices
stated herein have been adjusted to reflect such Stock Split.
On September 30, 1999, the Company consummated a short form merger in
order to reincorporate from the state of Idaho to the state of Delaware.
Business of the Company
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The business of the Company is currently operated through Senesco, its
wholly-owned subsidiary. The primary business of the Company is the development
and commercial exploitation of potentially significant technology involving the
identification and isolation of genes that the Company believes control the
aging (senescence) of all flowers, fruits and vegetables (plant tissues) and to
increase crop production (yield) in horticultural and agronomic crops.
Senescence in plant tissues is the natural aging of these tissues. Loss of
cellular membrane integrity is an early event during the senescence of all plant
tissues that prompts the deterioration of fresh flowers, fruits and vegetables.
This loss of 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. A delay in senescence increases shelf
life and extends the plant's growth timeframe and allows the plant to devote
more time to the photosynthetic process. The Company has shown that the
additional energy gained in this period leads directly to increased seed
production, and therefore increases crop yield. Seed production is a vital
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economic and agricultural factor because oil-bearing crops store oil in their
seeds. This yields a more efficient crop. The Company has also shown that
delaying senescence allows the plant to allocate more energy toward growth,
leading to larger plants (increased biomass), which is vital for crops used to
feed livestock (forage) and leafy crops.
The technology presently utilized by the industry for increasing the shelf
life in certain flowers, fruits and vegetables relies on reducing ethylene
biosynthesis, and hence only has application to a limited number of plants that
are ethylene-sensitive. Current industry technology for attempting to increase
crop yield relies on delaying leaf senescence which also has proven ineffective
up to this time.
On the other hand, the Company's research and development program focuses
on the discovery and development of new gene technologies which aim to confer
positive traits on fruits, flowers, vegetables and agronomic crops. To date, the
Company has isolated and characterized the senescence-induced lipase gene,
deoxyhypusine synthase ("DHS") gene and Factor 5A gene in certain species of
plants. The Company's initial goal is to inhibit the expression of (or silence)
these genes to delay senescence, which will extend shelf life, increase biomass
and increase yield, thereby demonstrating "proof of concept" in each category of
crop and to then license the technology to strategic partners and enter into
joint ventures.
The Company is currently working with tomato, carnation, Arabidopsis (a
model plant which produces oil in a manner similar to canola) and banana plants,
and it has obtained "proof of concept" for the lipase and DHS genes in several
of these species. Near-term research and development initiatives include: (i)
silencing the Factor 5A gene in these four types of plants; and (ii) further
propagation of transformed plants with the Company's silenced genes.
Subsequent initiatives include: (i) expanding the lipase, DHS and Factor
5A gene technology into a variety of other commercially viable agricultural
crops such as canola, lettuce, melon and strawberries; and (ii) developing
transformed plants that possess new beneficial traits such as protection against
drought and disease. The Company's strategy focuses on various plants to allow
flexibility that will accommodate different plant reproduction strategies among
the various 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 be able to
commercially exploit its technology.
The Company's research and development is performed by third party
researchers at the direction of the Company pursuant to various research
agreements. The primary research and development effort takes place at The
University of Waterloo in Ontario, Canada, where the technology was developed.
Additional research and development is performed at the University of
California, Davis and Hebrew University in Rehovot, Israel as well as through
the Company's Joint Venture (as defined below) with Rahan Meristem in Israel.
Joint Venture
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On May 14, 1999, the Company entered into a joint venture agreement with
Rahan Meristem Ltd., an Israeli company ("Rahan"), engaged in the worldwide
export marketing of banana germplasm (the "Joint Venture"). The Company has
contributed, by way of a limited,
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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
has contributed 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 be able to commercially exploit its
technology.
The Joint Venture applied for and received a conditional grant that totals
$340,000 over a four year period from the Israel - U.S. Binational Research and
Development (the "BIRD") Foundation (the "BIRD Grant"). As of June 30, 2000, the
Joint Venture has received 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.
These benchmarks are reported periodically to the BIRD Foundation by the Joint
Venture. To date, in addition to the above $94,890, Senesco directly has
received $10,573 from the BIRD Grant for reimbursement of research and
development expenses that the Company has incurred which are associated with the
research and development efforts of the Joint Venture. The Company expects to
receive the second installment of the BIRD Grant as its expenditures associated
with the Joint Venture increase above certain levels.
Target Markets
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The Company's technology embraces crops that are reproduced both through
seeds and propagation. Propagation means a process whereby the plant does not
produce fertile seeds and must reproduce through cuttings from the parent plant
which are planted and become new plants. 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
to enter into licensing agreements and strategic relationships with a variety of
companies on a crop-by-crop basis. The Company also plans to enter into joint
ventures where it will have more direct control over commercialization
activities in the end use market for species which have well established
channels of distribution.
Industry Market Trends
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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 following commercialization distribution channels: (i) licensing
technology to major marketing and distribution partners; (ii) distributing
seedlings directly to growers; or (iii) entering into strategic alliances. 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.
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Intellectual Property
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Research and Development Agreement
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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 is the
Executive Vice President of Research and Development of the Company. Dr.
Thompson is also a stockholder of the Company and owns 10.8% of the outstanding
shares of the Company's Common Stock as of June 30, 2000. Senesco entered into a
three-year research and development agreement, dated as of September 1, 1998
(the "Research and Development Agreement"), with the University of Waterloo and
Dr. Thompson as the principal inventor. The Research and Development Agreement
provides that the University of Waterloo will perform research and development
under the direction of Senesco, and Senesco will pay for the cost of this work
and make certain payments totaling Can $825,000 (as specified therein). As of
June 30, 2000, such amount represented US $469,632. In return for these
payments, the Company has all rights to the intellectual property derived from
the research. During the twelve month periods ended June 30, 2000 and June 30,
1999, the Company has spent approximately $476,456 and $173,461, respectively,
on all research and development.
Effective May 1, 1999, the Company entered into a consulting agreement for
research and development with Dr. Thompson. This agreement provides for monthly
payments of $3,000 through June 2001. The agreement shall be automatically
renewable for two (2) additional three (3) year terms, unless either of the
parties provides the other with written notice within six (6) months of the end
of the term.
The Company's future research and development program focuses on the
discovery and development of new gene technologies which aim to extend shelf
life and to confer other positive traits on fruits, flowers, vegetables and
agronomic row crops. Over the next twelve months, the Company plans the
following research and development initiatives: (i) the isolation of new genes
in the Arabidopsis plant and tomato plant at the University of Waterloo; (ii)
the isolation of new genes in the carnation plant pursuant to an informal
agreement with Dr. Sasha Vainstein of Hebrew University; and (iii) the isolation
of new genes in the banana plant through the Joint Venture. The Company also
plans to develop transformed plants that possess new beneficial traits, such as
protection against drought and disease, which will then be developed in each of
these varieties. The Company also plans to expand its research and development
initiative beyond these four plants into a variety of other crops.
Patent Applications
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Dr. Thompson and his colleagues, Dr. Yuwen Hong and Dr. 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, Drs.
Thompson, 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. Senesco succeeded to the assignment and ownership of the Original Patent
Application. Drs. Thompson, Hong and Hudak filed an
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amendment to the Original Patent Application on February 16, 1999 (the "Amended
Patent Application" and together with the Original Patent Application, the
"First 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, Drs. Thompson, 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. Drs. Thompson, Hong and Hudak
have received shares of restricted Common Stock of the Company in consideration
for the assignment of the First Patent Application. The inventions, which were
the subject of the First 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 "Second Patent
Application", and together with the First Patent Application, collectively, the
"Patent Applications") 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 Drs.
John E. Thompson, Tzann-Wei Wang and Dongen Lily Lu. Concurrent with the filing
of the Second Patent Application with the PTO and as in the case of the First
Patent Application, Drs. Thompson, Wang and Lu assigned all of their rights in
and to the Second Patent Application and any other applications filed in the
United States or elsewhere with respect to such invention and/or improvements
thereto to Senesco. Drs. Thompson, Wang and Lu have received options to purchase
Common Stock of the Company in consideration for the assignments of the Second
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. Currently, the Company is in the
process of drafting certain patent applications for new senescence technology
that should be filed with the PTO in the near future. There can be no assurance
that patent protection will be granted with respect to the Patent Applications,
or any other applications, 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.
Government Regulation
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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, field testing and interstate movement of specific types of
genetic engineering that may be used in the creation of transformed plants. The
Environmental Protection Agency (the "EPA") regulates activity related to the
invention of plant pesticides and herbicides, which may include certain kinds of
transformed plants. The Food and Drug Administration (the "FDA") regulates foods
derived from new plant varieties. The FDA requires that transformed plants meet
the same
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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 transformed 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
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The Company's competitors in the field of delaying plant senescence are
companies that develop and produce transformed plants in which ethylene
biosynthesis has been silenced. Such companies include: Agritope Inc.; Paradigm
Genetics; AgrEvo; Bionova Holding Corporation; and Eden Bioscience, 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
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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 rather, the Company has sought to establish itself within the
industry through its advertising program in trade journals, newspapers and a
national magazine.
Employees
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The Company currently has four (4) employees and three (3) consultants,
five (5) of whom are currently executive officers and are involved in the
management of the Company.
The officers are assisted by a Scientific Advisory Board made up of
prominent experts in the field of transformed 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
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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 transformed plant
industry. The Company entered into a consulting agreement for research and
development with Dr. Bennett effective July 16, 1999. This agreement provides
for monthly payments of $5,400 through July 2000. The Company is currently
renegotiating a consulting agreement to continue with Dr. Bennett's services.
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 over the next
twelve months to meet needs created by possible expansion of its marketing
activities and product development.
Safe Harbor Statement
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Certain statements included in this Form 10-KSB, including, without
limitation, statements regarding the anticipated growth in the markets for the
Company's services, the continued development of the Company's genetic
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, 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 (the
"SEC") could cause actual results and developments to be materially different
from those expressed in or implied by such statements. The Company does not
undertake to update any forward-looking statements.
ITEM 2. PROPERTIES.
The Company subleases, on a month-to-month basis, office space in
Princeton, New Jersey from a company controlled by a director and stockholder of
the Company for a monthly rental fee of approximately $5,500. The Company
believes that the terms of the rental fee are at least as favorable as the
Company would have received from a third party. The space is in good
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condition and the Company believes it can use these offices for the next 12 to
24 months. This office space is adequately insured by the lessor.
All office equipment and office furniture used by the Company is in good
working condition and is located at the office described above. The Company
believes such equipment will suit its business needs over the next twelve (12)
months. The Company also leases computers at a cost of approximately $450 per
month.
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 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 and as adjusted for
the Stock Split. Such quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.
Quarter Ended Common Stock
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High Low
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March 31, 1999 $3.50 $2.00
(since January 25, 1999)
June 30, 1999 $3.3125 $2.375
September 30, 1999 $3.875 $2.2969
December 31, 1999 $4.8125 $2.875
March 31, 2000 $4.00 $2.00
June 30, 2000 $3.00 $1.50
As of August 31, 2000, the approximate number of holders of record of the
Common Stock was 353.
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
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During the fourth quarter of fiscal 2000, the Company consummated a
private placement and issued an aggregate of 1,471,700 shares of its restricted
Common Stock, at $1.50 per share, for an aggregate offering price of $2,207,550,
on May 31, 2000 and June 22, 2000, collectively (the "Private Placement").
Except for one sophisticated investor, all other shares of the Company's
restricted Common Stock issued in connection with the Private Placement were
issued to accredited investors. A director and officer of the Company
participated in the Private Placement and purchased 66,667 shares of restricted
Common Stock on the same terms and conditions as the other purchasers
thereunder.
No underwriter was employed by the Company in connection with the issuance
of the securities in the Private Placement, however, the Company did engage the
services Fahnestock & Co. Inc. ("Fahnestock"), to act as the placement agent in
connection with the Private Placement.
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As consideration for acting as the Company's placement agent, Fahnestock
received: (i) a 7% commission, equaling $154,529, on the total offering price
for the Company's restricted Common Stock issued in connection with the Private
Placement; and (ii) a warrant to purchase 100,000 shares of the Company's Common
Stock with certain registration rights (the "Warrant"), granted on March 30,
2000, with an exercise price equal to $1.50 per share. The Warrant vests 100% on
the date of grant. The Company believes that the issuance of shares of Common
Stock in connection with the Private Placement was exempt from registration
under Section 4(2) of the Securities Act of 1933, as amended (the "Act"), and
Rule 506 of Regulation D promulgated under the Act, as a transaction not
involving a public offering. Appropriate legends have been affixed to the stock
certificates issued to the purchasers of the Private Placement. All purchasers
had adequate access to information about the Company and each purchaser acquired
the securities for investment only and not with a view to distribution.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Liquidity and Capital Resources
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As of June 30, 2000, the Company's cash balance was $1,555,749, and the
Company's working capital was $1,339,668. As of June 30, 2000, the Company had a
tax loss carry-forward of approximately $3,614,911 to off-set future taxable
income. There can be no assurance, however, that the Company will be able to
take advantage of any or all 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
subsequent 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.
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 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 for at
least the next twelve (12) months. To enable the Company to fund its research
and development and commercialization efforts, including the hiring of
additional employees, the Company issued 1,471,700 shares of its restricted
Common Stock for aggregate gross proceeds equal to $2,207,550 in connection with
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 Fahnestock as its placement agent (the "Placement
Agent") pursuant to a placement agency agreement by and between the Company and
Fahnestock, dated
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as of March 30, 2000 (the "Placement Agency Agreement"). The Placement Agency
Agreement provided for, among other things: (i) a 7% sales commission to the
Placement Agent on gross proceeds raised in the Private Placement; and (ii) a
warrant to purchase 100,000 shares of the Company's Common Stock, granted to the
Placement Agent on March 30, 2000 with an exercise price equal to $1.50 per
share.
On March 30, 2000, the Company and Fahnestock entered into a financial
advisory and investment banking agreement pursuant to which Fahnestock will
provide the Company with financial advice and will also provide the Company with
investment banking services on an exclusive basis for a six (6) month term (the
"Investment Banking Agreement"). Pursuant to the Investment Banking Agreement,
the investment bank will receive a consulting fee of $7,500 per month, of which,
$22,500 was payable upon the execution of the Investment Banking Agreement and
$22,500 was payable on June 30, 2000.
In connection with the Private Placement, the Company executed Common
Stock Purchase Agreements (the "Stock Purchase Agreements") with each of the
Purchasers (as defined therein) of Common Stock, dated as of May 31, 2000 and
June 14, 2000, respectively. In addition, the Company entered into Registration
Rights Agreements (the "Registration Rights Agreements") with each of the
Purchasers, dated as of May 31, 2000 and June 14, 2000, respectively. The
Registration Rights Agreements provide for, among other things, the Company to
use its best reasonable efforts to cause a shelf registration statement
(covering shares issued pursuant to the Private Placement) to be declared
effective by the SEC within nine (9) months after June 22, 2000. The
Registration Rights Agreements also provide for piggy-back registration rights
for a three-year period from June 22, 2000. The shares issued to each purchaser
in the Private Placement are identical to the Common Stock held by all of the
Company's stockholders. In addition, all directors, officers and holders of more
than 5% of the outstanding shares of Common Stock of the Company (collectively,
the "Affiliates"), have each entered into a Lock-up Agreement (the "Lock-up
Agreement") with the Placement Agent, dated as of March 30, 2000. Pursuant to
the Lock-up Agreements, the Affiliates, without prior written approval of the
Placement Agent, may not sell or otherwise transfer shares of Common Stock of
the Company during the period beginning on March 30, 2000 and ending on the
earlier of: (i) thirty (30) days following the effective date of a registration
statement in which the shares sold in connection with the Private Placement are
included; or (ii) nine (9) months after June 22, 2000.
Furthermore, a certain director and officer of the Company participated in
the Private Placement. Specifically, such director and officer of the Company
purchased, in the aggregate, 66,667 shares of restricted Common Stock of the
Company on the same terms and conditions as the other purchasers thereunder.
In addition, the Company anticipates receiving additional funds from the
BIRD Grant to assist in funding its Joint Venture. See "Item 1. Business - Joint
Venture."
-11-
<PAGE>
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
--------------------
The Company believes that material Year 2000 compliance problems would
have arisen on or immediately after January 1, 2000. As of the date hereof, the
Company is not aware of any Year 2000-related problems associated with its
internal systems or software, or that of its vendors, suppliers, manufacturers,
distributors and marketing partners. It is possible, however, that further Year
2000-related problems may arise in the future.
Other than time spent by the Company's own personnel, to date the Company
has not incurred any significant costs in identifying and remediating Year 2000
problems.
Research and Development Initiatives
------------------------------------
The Company's future research and development program focuses on the
discovery and development of new gene technologies which aim to: (i) extend
shelf life; (ii) increase yield; and (iii) confer other positive traits on
fruits, flowers, vegetables and row crops. Over the next twelve months, the
Company plans the following research and development initiatives: (i) the
isolation of new genes in the Arabidopsis plant and tomato plant at the
University of Waterloo and (ii) the isolation of new genes in the banana plant
through the Joint Venture. Transformed plants that possess new beneficial traits
such as drought and disease resistance will then be developed in each of these
varieties. The Company also plans to expand its research and development
initiative beyond these three plants into a variety of other crops.
Results of Operations
---------------------
Fiscal Years ended June 30, 2000 and June 30, 1999
--------------------------------------------------
The Company is a development stage company. From its inception of
operations on July 1, 1998 through June 30, 2000, the Company had no revenues.
Operating expenses, consists of general and administrative expenses, sales and
marketing expenses, non-cash advertising, consulting and legal costs and
research and development expenses. Operating expenses for the 12 month periods
ending June 30, 2000 ("Fiscal 2000") and June 30, 1999 ("Fiscal 1999") were
$2,444,869 and $1,155,858, respectively, an increase of $1,289,011 or 112%. This
increase is
-12-
<PAGE>
primarily the result of an increase in expenses associated with professional and
consulting services, investor relations, salaries and product development
expenses, and non-cash advertising, consulting and legal costs associated with
the increase in the Company's operating activities and research and development
efforts.
General and administrative expenses consists primarily of professional
salaries and benefits, depreciation and amortization, professional consulting
services, office rent and corporate insurance. General and administrative
expenses for Fiscal 2000 and Fiscal 1999 were $1,394,061 and $982,397,
respectively, an increase of $411,664 or 42%. This increase is primarily the
result of an increase in professional and consulting services, investor
relations and salaries associated with the increase in operating activities.
For Fiscal 2000 and Fiscal 1999, respectively, sales and marketing
expenses were $0.
For Fiscal 2000 and Fiscal 1999, respectively, non-cash advertising,
consulting and legal costs were $574,352 and $0, respectively, an increase of
100%. Such costs consist of non-employee stock options and warrants granted as
consideration for certain professional consulting and advertising services.
Research and development expenses consists primarily of professional
salaries and benefits, fees associated with the Research and Development
Agreement and direct expenses charged to research and development projects.
Research and development expenses for Fiscal 2000 and Fiscal 1999 were $476,456
and $173,461, respectively, an increase of $302,995 or 175%. This increase is a
result of an increase in the research and development budget and consulting
expenses associated with research and development activities.
The Company has incurred losses since inception and had an accumulated
deficit of $3,613,911 at June 30, 2000. The Company expects to continue to incur
expenditures for research, product development, 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 technology.
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.
-13-
<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
2000 Annual Meeting of Stockholders 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 2000 Annual Meeting of Stockholders 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 2000
Annual Meeting of Stockholders 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 2000 Annual
Meeting of Stockholders 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 17
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the Company's fourth
fiscal quarter.
-14-
<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, 2000.
SENESCO TECHNOLOGIES, INC.
By: /s/Steven Katz
----------------------------------
Steven Katz, President and
Chief Operating Officer
-15-
<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/Ruedi Stalder Chairman, Chief Executive September 28, 2000
------------------------ Officer and Director
Ruedi Stalder
/s/Steven Katz President, Chief Operating September 28, 2000
------------------------ Officer and Director
Steven Katz (principal executive officer)
/s/Richard J. Sirkin Chief Financial Officer and September 28, 2000
------------------------ Treasurer (principal financial
Richard J. Sirkin and accounting officer)
/s/Phillip O. Escaravage Vice Chairman and Director September 28, 2000
------------------------
Phillip O. Escaravage
/s/Christopher Forbes Director September 28, 2000
------------------------
Christopher Forbes
/s/Thomas C. Quick Director September 28, 2000
------------------------
Thomas C. Quick
-16-
<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, Inc. (Incorporated by reference to the Company's definitive
proxy statement on Schedule 14A dated January 11, 1999.)
2.2 Merger Agreement and Plan of Merger dated as of September 30, 1999,
made by and between Senesco Technologies, Inc., an Idaho corporation,
and Senesco Technologies, Inc., a Delaware corporation. (Incorporated
by reference to the Company's quarterly report on Form 10-QSB for the
period ended September 30, 1999.)
3.1 Certificate of Incorporation of the Company filed with the State of
Delaware on September 30, 1999. (Incorporated by reference to the
Company's quarterly report on Form 10-QSB for the period ended
September 30, 1999.)
3.2 By-laws of the Company as adopted on September 30, 1999. (Incorporated
by reference to the Company's quarterly report on Form 10-QSB for the
period ended September 30, 1999.)
4.1 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.)
4.2 Form of Warrant with Forbes, Inc. (Incorporated by reference to the
Company's quarterly report on Form 10-QSB for the period ended
September 30, 1999.)
4.3 Form of Option Agreement with Kenyon & Kenyon (Incorporated by
reference to the Company's quarterly report on Form 10-QSB for the
period ended September 30, 1999.)
4.4 Form of Warrant with Parenteau Corporation (Incorporated by reference
to the Company's quarterly report on Form 10-QSB for the period ended
December 31, 1999.)
4.5 Form of Warrant with Strategic Growth International, Inc. (Incorporated
by reference to the Company's quarterly report on Form 10-QSB for the
period ended December 31, 1999.)
4.6+ Form of Warrant with Fahnestock & Co. Inc., dated as of March 30, 2000.
4.7+ Form of Registration Rights Agreement, dated as of March 30, 2000, made
by and between the Company and Fahnestock & Co. Inc.
-17-
<PAGE>
Exhibit No. Description of Exhibit
----------- ----------------------
4.8+ Form of Lock-up Agreement made by and between Fahnestock & Co. Inc. and
each of the affiliates of the Company, dated as of March 30, 2000.
4.9 Form of Common 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.)
4.10 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.)
4.11+ Form of Common Stock Purchase Agreement, dated as of May 31, 2000 and
June 14, 2000, respectively, made by and among the Company and the
Purchasers (as defined therein).
4.12+ Form of Registration Rights Agreement dated as of May 31, 2000 and June
14, 2000, respectively, made by and among the Company and the
Purchasers (as defined therein).
10.1* 1998 Stock Option Plan. (Incorporated by reference to the Company's
definitive proxy statement on Schedule 14A dated January 11, 1999.)
10.2 Indemnification Agreement dated as of January 21, 1999 made by and
between the Company and Phillip 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.)
-18-
<PAGE>
Exhibit No. Description of Exhibit
----------- ----------------------
10.7* Employment Agreement dated as of January 21, 1999 made by and between
Senesco, Inc. and Phillip 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 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.)
10.10 Financial Advisory and Consulting Agreement, dated as of January 22,
1999, as amended, made by and between the Company and the Parenteau
Corporation. (Incorporated by reference to the Company's quarterly
report on Form 10-QSB for the period ended March 31, 2000).
10.12+ Placement Agent Agreement, dated as of March 30, 2000, as amended, by
and between the Company and Fahnestock & Co. Inc.
10.13+ Investment Banking Agreement, dated as of March 30, 2000, as amended,
by and between the Company and Fahnestock & Co. Inc.
10.14*+ Consulting Agreement, dated July 16, 1999, by and between the Company
and Alan B. Bennett, Ph.D.
10.15*+ Consulting Agreement, dated July 12, 1999, by and between the Company
and John E. Thompson, Ph.D.
21 Subsidiaries of the Registrant (Incorporated by reference to the
Company's annual report on Form 10-KSB for the period ended June 30,
1999).
27+ Financial Data Schedule for the year ended June 30, 2000.
* A management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 13(a) Form 10-KSB.
+ Filed herewith.
(b) Reports of Form 8-K
None.
-19-
<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 - F-6
Statement of Cash Flows F-7
Notes to Consolidated Financial Statements F-8 - F-15
<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 (a development stage company) as of June 30,
2000, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the two years in the period then ended and
cumulative amounts from inception to June 30, 2000. 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 audits.
We conducted our audits 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 audits provide 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, 2000, and the results of their
operations and their cash flows for each of the two years in the period then
ended and cumulative amounts from inception to June 30, 2000 in conformity with
generally accepted accounting principles.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
July 25, 2000
F-2
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED BALANCE SHEET
================================================================================
June 30, 2000
--------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash........................................................... $ 1,555,749
Prepaid expense................................................ 9,223
--------------------------------------------------------------------------------
Total current assets......................................... 1,564,972
Property and Equipment, at cost, net of accumulated
depreciation of $18,596........................................ 70,613
Intangibles, net of accumulated amortization of $4,120........... 97,414
Deferred Income Tax Asset, net of valuation allowance
of $1,446,000.................................................. --
Security Deposit................................................. 10,863
--------------------------------------------------------------------------------
Total Assets................................................. $ 1,743,862
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses.......................... $ 214,731
Grant payable.................................................. 10,573
--------------------------------------------------------------------------------
Total current liabilities.................................... 225,304
--------------------------------------------------------------------------------
Commitments:
Stockholders' Equity:
Preferred stock - $.01 par value; authorized
5,000,000 shares; no shares issued........................... --
Common stock - $.01 par value; authorized
20,000,000 shares; issued and outstanding 7,872,626 shares... 78,726
Capital in excess of par....................................... 5,234,475
Deferred compensation related to issuance of options and
warrants..................................................... (180,732)
Deficit accumulated during the development stage............... (3,613,911)
--------------------------------------------------------------------------------
Stockholders' equity......................................... 1,518,558
--------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity................... $ 1,743,862
================================================================================
See Notes to Consolidated Financial Statements
F-3
<PAGE>
<TABLE>
<CAPTION>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
===================================================================================================
Cumulative
Year ended June 30, Amounts from
2000 1999 Inception
---------- ----------- -------------
<S> <C> <C> <C>
Operating expenses:
General and administrative .......................... $ 1,394,061 $ 982,397 $ 2,376,458
Research and development ............................ 476,456 173,461 649,917
Non-cash advertising, consulting and legal costs .... 574,352 -- 574,352
---------------------------------------------------------------------------------------------------
Total operating expenses .............................. 2,444,869 1,155,858 3,600,727
Interest expense - net ................................ 47 13,137 13,184
---------------------------------------------------------------------------------------------------
Net loss .............................................. $(2,444,916) $(1,168,995) $(3,613,911)
===================================================================================================
Basic and diluted loss per common share ............... $ (.39) $ (.33) --
===================================================================================================
Basic and diluted weighted-average number
of common shares outstanding ......................... 6,346,678 3,569,916 --
===================================================================================================
See Notes to Consolidated Financial Statements
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
====================================================================================================================================
Years ended June 30, 1999 and 2000
------------------------------------------------------------------------------------------------------------------------------------
Deferred
Deficit Compensation
Accumulated Related to
Common Stock Capital During the Issuance of Total
Number in Excess Development Options and Stockholders'
of Shares Amount of Par Stage Warrants Equity
------------------------------------------------------------------------------------------------------------------------------------
Common stock outstanding ................. 1,999,796 $ 19,998 $ (19,998) -- -- --
Contribution of capital .................. -- -- 85,179 -- -- $ 85,179
Issuance of common stock in
reverse merger on January 22,
1999 at $.01 per share .................. 3,400,000 34,000 (34,000) -- -- --
Issuance of common stock for cash
on May 21, 1999 for $2.63437 per
share ................................... 759,194 7,592 1,988,390 -- -- 1,995,982
Issuance of common stock for
placement fees on May 21, 1999
at $.01 per share ....................... 53,144 531 (531) -- -- --
Net loss ................................. -- -- -- $(1,168,995) -- (1,168,995)
------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1999 ................. 6,212,134 62,121 2,019,040 (1,168,995) -- 912,166
Fair market value of options and
warrants granted on September 7, 1999 ... -- -- 252,578 -- $ (72,132) 180,446
Fair market value of warrants granted
on October 1, 1999 ...................... -- -- 171,400 -- (108,600) 62,800
Fair market value of warrants granted
on December 15, 1999 .................... -- -- 331,106 -- -- 331,106
Issuance of common stock for cash on
January 26, 2000 for $2.867647
per share ............................... 17,436 174 49,826 -- -- 50,000
Issuance of common stock for cash on
January 31, 2000 for $2.87875
per share ............................... 34,737 347 99,653 -- -- 100,000
Issuance of common stock for cash on
February 4, 2000 for $2.924582
per share ............................... 85,191 852 249,148 -- -- 250,000
Issuance of common stock for cash on
March 15, 2000 for $2.527875
per share ............................... 51,428 514 129,486 -- -- 130,000
Issuance of common stock for cash on
June 22, 2000 for $1.50 per share ....... 1,471,700 14,718 2,192,833 -- -- 2,207,551
(continued)
See Notes to Consolidated Financial Statements
F-5
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
====================================================================================================================================
Years ended June 30, 1999 and 2000
------------------------------------------------------------------------------------------------------------------------------------
Deferred
Deficit Compensation
Accumulated Related to
Common Stock Capital During the Issuance of Total
Number in Excess Development Options and Stockholders'
of Shares Amount of Par Stage Warrants Equity
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commissions, legal and bank fees
associated with issuances for the
year ended June 30, 2000 ................ -- -- $ (260,595) -- -- $ (260,595)
Net loss ................................. -- -- -- $(2,444,916) -- (2,444,916)
------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2000 ................. 7,872,626 $ 78,726 $ 5,234,475 $(3,613,911) $ (180,732) $ 1,518,558
====================================================================================================================================
See Notes to Consolidated Financial Statements
F-6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
=========================================================================================================
Cumulative
Year ended June 30, Amounts from
2000 1999 Inception
-------------------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ................................................ $(2,444,916) $(1,168,995) $(3,613,911)
Adjustments to reconcile net loss to net cash used in
operating activities:
Noncash capital contribution .......................... -- 85,179 85,179
Issuance of stock options and warrants for services ... 574,352 -- 574,352
Depreciation and amortization ......................... 18,713 4,003 22,716
(Increase) decrease in operating assets:
Prepaid expense ..................................... 3,319 (12,542) (9,223)
Patent costs ........................................ (58,399) (43,135) (101,534)
Security deposit .................................... -- (10,863) (10,863)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses ............... 42,144 172,587 214,731
---------------------------------------------------------------------------------------------------------
Net cash used in operating activities .......... (1,864,787) (973,766) (2,838,553)
---------------------------------------------------------------------------------------------------------
Cash flows used in investing activity - purchase
of property and equipment ................................ (13,684) (75,525) (89,209)
---------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from grant ..................................... 10,573 -- 10,573
Proceeds from issuance of common stock - net ............ 2,476,956 1,995,982 4,472,938
---------------------------------------------------------------------------------------------------------
Cash provided by financing activities .......... 2,487,529 1,995,982 4,483,511
---------------------------------------------------------------------------------------------------------
Net increase in cash ...................................... 609,058 946,691 1,555,749
Cash at beginning of period ............................... 946,691 -- --
---------------------------------------------------------------------------------------------------------
Cash at end of period ..................................... $ 1,555,749 $ 946,691 $ 1,555,749
=========================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the year for interest .................. $ 47 $ 22,270 $ 22,317
=========================================================================================================
See Notes to Consolidated Financial Statements
F-7
</TABLE>
<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"),
SUMMARY OF collectively the "Company." All significant intercompany
SIGNIFICANT accounts and transactions have been eliminated in
ACCOUNTING consolidation.
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).
On September 30, 1999, the Board of Directors of the
Company approved the reincorporation of the Company solely
for the purpose of changing its state of incorporation from
Idaho to Delaware. In order to facilitate such
reincorporation, on September 30, 1999, the Company, an
Idaho Corporation, merged with and into the newly formed
Senesco Technologies, Inc., a Delaware Corporation.
Intangible assets consist of costs related to acquiring
patents, which are being amortized using the straight-line
method over 20 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
F-8
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
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.
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. Shares to be issued upon the exercise of
the outstanding options and warrants are not included in
the computation of loss per share as their effect is
antidilutive.
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................... $ 30,430 4 years
Furniture and fixtures...... 58,779 7 years
-----------------------------------------------------------
89,209
Accumulated depreciation.... (18,596)
-----------------------------------------------------------
$ 70,613
===========================================================
Depreciation aggregated $15,345 and $3,251 for the years
ended June 30, 2000 and 1999, respectively.
F-9
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
3. ACCOUNTS The following are included in accounts payable and
PAYABLE AND accrued expenses at June 30, 2000:
ACCRUED
EXPENSES: Accounts payable............................... $ 76,143
Accrued legal.................................. 45,665
Accrued accounting............................. 35,000
Accrued consulting............................. 52,500
Other accrued expenses......................... 5,423
-----------------------------------------------------------
$ 214,731
===========================================================
4. RELATED PARTY During the year ended June 30, 1999, a director and
TRANSACTIONS: stockholder of the Company contributed capital aggregating
$85,179. This capital was used to pay expenses of 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 stockholder's lease is for
approximately $5,500 per month with an unrelated party.
5. STOCKHOLDERS' On May 21, 1999, the Company consummated a private
EQUITY: placement of 759,194 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 53,144 shares of
common stock valued at $2.63437 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.
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 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
F-10
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
aggregate, 341,636 shares of Restricted Common Stock on the
same terms and conditions as all purchasers thereunder.
In 1998, the Company entered into loan agreements (the
"Bridge Financing"), with various parties providing for two
bridge loans in the aggregate amount of $460,000. The
Bridge Financing was 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.
On September 29, 1999, the board of directors of the
Company approved and declared a 2-for-1 stock split (the
"Stock Split"). Stockholders of record as of the close of
business on October 8, 1999 received one additional share
of the Company's Common Stock for every one share of Common
Stock held on that date. The Stock Split became effective
on the NASD OTC Bulletin Board on October 25, 1999. All
share and per share amounts provided in the foregoing
financial statements and notes have been restated to
reflect the Stock Split as of September 29, 1999.
In December 1999, the Company initiated a private placement
of shares of its restricted Common Stock (the "December
Private Placement"). The Company did not engage a placement
agent for the sale of such securities. The Company issued
an aggregate of 188,792 shares of the Company's restricted
Common Stock for a net purchase price of $508,689 (which is
net of $21,311 in legal fees) in connection with the
December Private Placement. The Company also executed
Common Stock Purchase Agreements with each purchaser of
Common Stock. Pursuant to the Stock Purchase Agreements,
the purchase price per share of Common Stock was equal to
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 therein). In
addition, the Company entered into Registration Rights
Agreements with each purchaser. The Registration Rights
Agreements provides for, among other things, a demand
registration right beginning one year from the final
Closing Date of the December Private Placement, as well as
piggy-back registration rights for a three-year period from
the Closing Date. Certain directors of the Company
participated in the December Private Placement.
Specifically, such directors of the Company purchased, in
the aggregate, 52,173 shares of restricted Common Stock on
the same terms and conditions as all purchasers thereunder.
In June 2000, the Company consummated a private placement
of 1,471,700 shares of Common Stock for cash consideration
of $2,207,550 less costs of $239,284. Pursuant to the Stock
Purchase Agreements, the purchase price per share of Common
Stock was equal to $1.50 per share. In addition, the
Company entered into Registration Rights Agreements with
each purchaser. The Registration Rights Agreements provides
for, among other things, a demand registration right
beginning nine months from the final Closing Date of the
Placement, as well as piggy-back registration rights for a
three-year period from
F-11
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
the Closing Date. In addition, the Company has caused its
directors, officers and holders of more than 5% of the
outstanding shares of Common Stock of the Company to enter
into Lock-up Agreements with the Placement Agent for the
benefit of the Purchasers. A director and officer of the
Company participated in this Private Placement.
Specifically, such director and officer of the Company
purchased, in the aggregate, 66,667 shares of Restricted
Common Stock on the same terms and conditions as all
purchasers hereunder.
In 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 1,000,000 shares of common
stock have been reserved for issuance.
A summary of the status of the Company's stock option plan
as June 30, 2000 and changes during the year ended on June
30, 2000 is presented below:
Weighted-
average
Exercise
Shares Price
-----------------------------------------------------------
Granted.......................... 432,000 $3.56
-----------------------------------------------------------
Outstanding at end of year....... 432,000 $3.56
===========================================================
Options exercisable at year-end.. 307,167
===========================================================
The following table summarizes information about stock
options outstanding at June 30, 2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------- -------------------------------
Weighted-
average Weighted- Weighted-
Number Remaining average Number average
Range of Outstanding at Contractual Exercise Exercisable at Exercise
Exercise Prices June 30, 2000 Life (Years) Price June 30, 2000 Price
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$3.375 - $3.85 432,000 9.27 $3.56 307,167 $3.56
==========================================================================================================
</TABLE>
The Company applies APB Opinion No. 25 and related
interpretations in accounting for its plans. Accordingly,
no compensation cost has been recognized for the stock
option plans. Had compensation cost been determined based
on the fair value at the grant dates for those awards
consistent with the method of FASB Statement No. 123,
F-12
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
the Company's net loss and net loss per share should have
been increased to the pro forma amounts indicated below:
-----------------------------------------------------------
Net loss:
As reported............................ $ (2,444,916)
===========================================================
Pro forma.............................. $ (3,199,331)
===========================================================
Loss per share:
As reported............................ $ (.39)
===========================================================
Pro forma.............................. $ (.50)
===========================================================
The estimated grant date present value reflected in the
above table is determined using the Black-Scholes model.
The material factors incorporated in the Black-Scholes
model in estimating the value of the options reflected in
the above table include the following: (i) an exercise
price equal to the fair market value of the underlying
stock on the dates of grant; (ii) an option term ranging
from 5 to 10 years; (iii) a risk-free rate range of 5.81%
to 6.55% that represents the interest rate on a U.S.
Treasury security with a maturity date corresponding to
that of the option term; (iv) volatility of 139.12%; and
(v) no annualized dividends paid with respect to a share of
Common stock at the date of grant. The ultimate values of
the options will depend on the future price of the
Company's Common Stock, which cannot be forecast with
reasonable accuracy.
On September 7, 1999, the Company granted to its patent
counsel, as partial consideration for services rendered,
options to purchase 10,000 shares of the Company's Common
Stock at an exercise price equal to $3.50 per share, with
3,332 options vesting on the date of grant, 3,334 options
vesting on the first anniversary of the date of grant, and
3,334 options vesting on the second anniversary of the date
of grant. Such options were granted outside of the
Company's Plan.
As of June 30, 2000, the Company had warrants outstanding
for the purchase of 380,000 shares of Common Stock.
Information on outstanding warrants is as follows:
Exercise Price
-----------------------------------------------------------
$ 3.50 ....................................... 280,000
1.50 ....................................... 100,000
-----------------------------------------------------------
380,000
===========================================================
For the year ended June 30, 2000, the Company incurred a
compensation charge of $451,506 relating to the above
warrants. As of June 30, 2000, 240,000 of the above
warrants are exercisable.
F-13
<PAGE>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
6. INCOME TAXES: The Company files a consolidated federal income tax
return. The subsidiary files separate state and local
income tax returns.
The reconciliation of the effective income tax rate to the
federal statutory rate is as follows:
2000 1999
-----------------------------------------------------------
Federal statutory rate........... (34)% (34)%
Increase in valuation allowance.. 34 34
-----------------------------------------------------------
- 0 - - 0 -
===========================================================
At June 30, 2000, the deferred income tax asset consists of
the following:
Deferred tax asset:
Net operating loss carryforward.......... $ 1,446,000
Valuation allowance...................... (1,446,000)
-----------------------------------------------------------
Net deferred tax asset $ - 0 -
===========================================================
At June 30, 2000, the Company has net operating loss
carryforwards of approximately $3,614,911 available to
offset future taxable income expiring on various dates
through 2020.
7. COMMITMENTS: Effective September 1, 1998, the Company entered into
a three-year research and development agreement with a
a university that a stockholder of the Company is
affiliated with. Pursuant to the agreement, the university
provides research and development under the direction of
the stockholder and the Company. The agreement is
renewable annually by the Company which has the right of
termination upon 30 days' advance written notice The total
amounts due under the agreement for the three-year period
will be approximately Can $825,000. Research and
development expense under this agreement for the years
ended June 30, 2000 and 1999 aggregated US $300,492 and
US $169,140, respectively, and US $469,632 for the
cumulative period through June 30, 2000.
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-14
<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, 2000 is as follows:
Year ending June 30,
2001...................... $ 73,200
2002...................... 27,600
-----------------------------------------------------------
$ 100,800
===========================================================
8. 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, 2000, the Joint Venture had no revenue. The
Company's portion of the Joint Venture's expenses
approximated $5,000 and $15,000 for the years ended June
30, 2000 and 1999, respectively, and is included in
research and development expenses.
In July 1999, the Joint Venture applied for and received a
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. During the year ended June 30,
2000, the Company received $10,573 from the BIRD Foundation
for research and development expenses the Company has
incurred which are associated with research and development
efforts of the Joint Venture.
F-15
