SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
Commission File No. 0-22307
SENESCO TECHNOLOGIES, INC.
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(Exact Name of Small Business Issuer 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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(Issuer's Telephone Number, Including Area Code)
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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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State the number of shares outstanding of each of the Issuer's classes of
common stock, as of September 30, 2000:
Class Number of Shares
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Common Stock, $.01 par value 7,872,626
Transitional Small Business Disclosure Format (check one):
Yes: No: X
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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
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TABLE OF CONTENTS
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Page
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements....................................... 1
CONDENSED CONSOLIDATED BALANCE SHEET
as of September 30, 2000 (unaudited) and June 30, 2000......... 2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 2000 and
September 30, 1999, and From Inception on July 1, 1998
through September 30, 2000 (unaudited).......................... 3
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY (DEFICIT) From Inception on July 1, 1998
through September 30, 2000 (unaudited).......................... 4
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended September 30, 2000
and September 30, 1999, and From Inception on July 1, 1998
through September 30, 2000 (unaudited).......................... 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)..................................................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Plan of Operation.............................. 8
Liquidity and Capital Resources................................. 14
Results of Operations........................................... 16
PART II OTHER INFORMATION
Item 5. Other Information............................................ 18
Item 6. Exhibits and Reports on Form 8-K............................. 18
SIGNATURES ............................................................. 19
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PART I. FINANCIAL INFORMATION.
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ITEM 1. FINANCIAL STATEMENTS.
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted from the following
consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission, however, Senesco Technologies, Inc. (the
"Company") and its subsidiary, Senesco, Inc., a New Jersey corporation
("Senesco"), believe that the disclosures are adequate to assure that the
information presented is not misleading in any material respect.
The results of operations for the interim periods presented herein are not
necessarily indicative of the results to be expected for the entire fiscal year.
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<TABLE>
<CAPTION>
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
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(A DEVELOPMENT STAGE COMPANY)
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CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
(unaudited)
September 30, June 30,
2000 2000
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ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash.......................................................................... $ 1,127,365 $ 1,555,749
Prepaid expense and other current assets...................................... 1,675 9,223
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Total Current Assets..................................................... 1,129,040 1,564,972
Equipment, net................................................................ 68,727 70,613
Intangible assets, net........................................................ 98,590 97,414
Security deposit.............................................................. 10,863 10,863
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TOTAL ASSETS............................................................. $ 1,307,220 $ 1,743,862
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable.............................................................. $ 91,550 $ 76,143
Accrued expenses.............................................................. 121,809 138,588
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Total Current Liabilities................................................ 213,359 214,731
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Grant payable................................................................. 10,573 10,573
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TOTAL LIABILITIES........................................................ 223,932 225,304
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STOCKHOLDERS' EQUITY:
Preferred stock, authorized 5,000,000 shares, $0.01 par value,
no shares issued and outstanding........................................... -- --
Common stock, authorized 20,000,000 shares, $0.01 par value, 7,872,626 issued
and outstanding............................................................ 78,726 78,726
Capital in excess of par...................................................... 5,371,005 5,234,475
Deficit accumulated during the development stage.............................. (4,120,201) (3,613,911)
Deferred compensation related to issuance of options and warrants (246,242) (180,732)
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Total Stockholders' Equity................................................. 1,083,288 1,518,558
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................. $ 1,307,220 $ 1,743,862
============== ==============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
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(A DEVELOPMENT STAGE COMPANY)
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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(unaudited)
<TABLE>
<CAPTION>
From Inception
For the Three For the Three on July 1, 1998
Months Ended Months Ended through
September 30, September 30, September 30,
2000 1999 2000
--------------------------------------------------
<S> <C> <C> <C>
Operating Expenses:
General and administrative............ $ 334,434 $ 291,135 $ 2,710,892
Research and development.............. 117,118 119,200 767,035
Non-cash charges for options and
warrants issued in exchange for
services.............................. 71,020 95,996 645,372
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Total Operating Expenses................ 522,572 506,331 4,123,299
Interest (income) expense, net.......... (16,282) -- (3,098)
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Net Loss................................ $(506,290) $(506,331) $(4,120,201)
========= ========= ============
Basic and Diluted Loss Per Common
Share................................. $(0.06) $(0.08)
====== ======
Basic and Diluted Weighted Average
Number of Common Shares
Outstanding........................... 7,872,626 6,212,134
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
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(A DEVELOPMENT STAGE COMPANY)
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CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
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FROM INCEPTION ON JULY 1, 1998 THROUGH SEPTEMBER 30, 2000
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(unaudited)
<TABLE>
<CAPTION>
Deferred
Deficit Compensation
Accumulated Related to the
During the Issuance of
Capital in Excess Development Options
Common Stock of Par Value Stage and Warrants Total
------------ ----------------- ----------- --------------- ---------
Shares Amount
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<S> <C> <C> <C> <C> <C> <C>
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 at
$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) -- -- --
Fair market value of options
and warrants granted on
September 7, 1999.................. -- -- 356,408 -- $(145,142) 211,266
Fair market value of warrants
granted on October 1, 1999......... -- -- 204,100 -- (141,300) 62,800
Fair market value of warrants
granted on December 15, 1999....... -- -- 331,106 -- 40,200 371,306
Issuance of common stock for cash
on January 26, 2000 at $2.867647
per share.......................... 17,436 174 49,826 -- -- 50,000
Issuance of common stock for cash
on January 31, 2000 at $2.87875
per share.......................... 34,737 347 99,653 -- -- 100,000
(continued)
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
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(A DEVELOPMENT STAGE COMPANY)
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CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
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FROM INCEPTION ON JULY 1, 1998 THROUGH SEPTEMBER 30, 2000
---------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Deferred
Deficit Compensation
Accumulated Related to the
During the Issuance of
Capital in Excess Development Options
Common Stock of Par Value Stage and Warrants Total
------------ ----------------- ----------- --------------- ---------
Shares Amount
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<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock for cash
on February 4, 2000 at $2.924582
per share.......................... 85,191 852 249,148 -- -- 250,000
Issuance of common stock for cash
on March 15, 2000 at $2.527875
per share.......................... 51,428 514 129,486 -- -- 130,000
Issuance of common stock for cash
on June 22, 2000 at $1.50
per share.......................... 1,471,700 14,718 2,192,833 -- -- 2,207,551
Commissions, legal and bank fees
associated with issuances for
the year ended June 30, 2000....... -- -- (260,595) -- -- (260,595)
Net loss........................... -- -- -- $(4,120,201) -- (4,120,201)
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Balance at September 30, 2000...... 7,872,626 $ 78,726 $ 5,371,005 $(4,120,201) $(246,242) $ 1,083,288
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</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
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(A DEVELOPMENT STAGE COMPANY)
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
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(unaudited)
<TABLE>
<CAPTION>
From Inception
For the Three For the Three on July 1, 1998
Months Ended Months Ended through
September 30, September 30, September 30,
2000 1999 2000
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<S> <C> <C> <C>
Cash flows used in operating activities:
Net loss....................................................... $ (506,290) $ (506,331) $(4,120,201)
Adjustments to reconcile net loss
to cash used in operating activities:
Capital contributed through payment of expenses
by stockholder.............................................. -- -- 85,179
Issuance of stock options and warrants for services............ 71,020 95,996 645,372
Depreciation and amortization.................................. 4,516 4,097 27,232
(Increase) decrease in operating assets:
Prepaid expense and other current assets....................... 7,548 5,770 (1,675)
Patent costs................................................... (1,643) (13,278) (103,177)
Security deposit............................................... -- -- (10,863)
Increase (decrease) in operating liabilities:
Accounts payable............................................... 15,406 (90,012) 91,550
Accrued expenses............................................... (16,778) 8,612 121,809
----------- ---------- -----------
Net cash used in operating activities.......................... (426,221) (495,146) (3,264,774)
----------- ---------- -----------
Cash flows used in investing activity:
Purchase of equipment.......................................... (2,163) (4,877) (91,372)
----------- ---------- -----------
Cash flows provided by financing activities:
Proceeds from grant............................................ -- 10,573 10,573
Net proceeds from issuance of common stock..................... -- -- 4,472,938
----------- ---------- -----------
Cash flows provided by financing activities.................... -- 10,573 4,483,511
----------- ---------- -----------
Net (decrease) increase in cash................................ (428,384) (489,450) 1,127,365
Cash at beginning of period.................................... 1,555,749 946,691 --
Cash at end of period.......................................... $ 1,127,365 $ 457,241 $ 1,127,365
=========== ========== ===========
Supplemental disclosures of cash flow information:
Interest paid.................................................. $ -- $ -- $ 22,317
=========== ========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(unaudited)
NOTE 1 - BASIS OF PRESENTATION:
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended June
30, 2000.
In the opinion of the Company's management, the accompanying unaudited
condensed consolidated financial statements contain all adjustments, consisting
solely of those which are of a normal recurring nature, necessary to present
fairly its financial position as of September 30, 2000, the results of its
operations and cash flows for the three month periods ended September 30, 2000
and 1999 and for the period from inception on July 1, 1998 through September 30,
2000.
Interim results are not necessarily indicative of results for the full
fiscal year.
Senesco, a wholly-owned subsidiary of the Company, 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 interest with the recording of net assets
acquired at their historical book value.
Senesco 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, flowers,
vegetables and crops.
NOTE 2 - LOSS PER SHARE:
Net loss per common share is computed by dividing the loss by the weighted
average number of common shares outstanding during the period. Since September
7, 1999, the Company has had outstanding options and warrants to purchase its
common stock, $0.01 par value per share (the "Common Stock"), however, shares to
be issued upon the exercise of options and warrants are not included in the
computation of loss per share as their effect is anti-dilutive.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATION.
OVERVIEW
HISTORY AND ORGANIZATION
On March 27, 1997, Nava Leisure USA, Inc., an Idaho Corporation ("Nava"),
voluntarily registered its common stock under Section 12(g) of the Securities
Exchange Act of 1934, as amended, in order to make information concerning itself
more readily available to the public. On January 22, 1999, Senesco, Inc., a New
Jersey corporation ("Senesco"), merged with and into a wholly-owned subsidiary
of Nava, 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 referred to
as the "Company"), and Senesco remained a wholly-owned subsidiary of the
Company.
On September 29, 1999, the Company declared a 2-for-1 stock split (the
"Stock Split") of its common stock (the "Common Stock") which 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 reincorporated from the state of Idaho
to the state of Delaware.
BUSINESS OF THE COMPANY
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),
increase crop production (yield) in horticultural and agronomic crops and reduce
the harmful effects of environmental stress.
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 which 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
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. Most recently, the Company has shown
that delaying senescence yields crops which exhibit increased resilience to
water deprivation.
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<PAGE>
Drought resistant crops are ultimately more cost effective, due to reduced loss
in the field and less time spent on crop management.
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 has also 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, increase yield and increase resistance to environmental
stress, thereby demonstrating "proof of concept" in each category of crop. The
Company then plans to 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 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 discretion 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 with Rahan Meristem in Israel.
TARGET MARKETS
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 wordwide produce market
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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.
JOINT VENTURE
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 germ-plasm (the "Joint Venture"). The Company has
contributed, 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 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 September 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 Foundation by the Joint
Venture. To date, Senesco has received $10,573 directly 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. The
Company expects to receive the second installment of the BIRD Grant as its
expenditures associated with the Joint Venture increase above certain levels.
INTELLECTUAL PROPERTY
RESEARCH AND DEVELOPMENT
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 September 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 September 30, 2000,
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such amount represented US $548,782. In return for these payments, the Company
has all rights to the intellectual property derived from the research. During
the quarter ended September 30, 2000 and September 30, 1999, the Company has
spent approximately $117,118 and $119,200, 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 further plans to expand its research and
development initiative beyond these four plants into a variety of other crops.
PATENT APPLICATIONS
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 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
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<PAGE>
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.
COMPETITION
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.
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, 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 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.
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<PAGE>
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.
EMPLOYEES
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 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 one year 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.
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<PAGE>
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
Certain statements included in this Form 10-QSB, 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 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.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
As of September 30, 2000, the Company's cash balance was $1,127,365, and
the Company's working capital was $915,681. As of September 30, 2000, the
Company had a tax loss carry-forward of approximately $4,120,000 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.
FINANCING NEEDS
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.
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<PAGE>
In order to fund its research and development and commercialization
efforts, including the hiring of additional employees, the Company issued an
aggregate of 1,471,700 shares of its restricted Common Stock, at $1.50 per
share, for an aggregate gross proceeds equal to $2,207,551, in connection with a
private placement completed on June 22, 2000 (the "Private Placement"). The
Company believes that the net proceeds it received in connection with the
Private Placement will enable it to fund its planned operations for at least the
next twelve (12) months.
In addition, the Company anticipates receiving additional funds from the
BIRD Grant to assist in funding its Joint Venture. See "Management's Discussion
and Analysis of Financial Condition and Plan of Operation."
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<PAGE>
RESULTS OF OPERATIONS
Three Months Ended September 30, 2000 and Three Months Ended September 30, 1999
--------------------------------------------------------------------------------
The Company is a development stage company, and revenues for each of the
three month periods ended September 30, 2000 and September 30, 1999 were $0.
Operating expenses in each of the three month periods ended September 30, 2000
and September 30, 1999 were comprised 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 three month
periods ended September 30, 2000 and September 30, 1999 were $522,572 and
$506,331, respectively, an increase of $16,241 or 3.2%.
General and administrative expenses in each of the three month periods
ended September 30, 2000 and September 30, 1999 consisted primarily of
professional salaries and benefits, depreciation and amortization, professional
and consulting services, office rent and corporate insurance. General and
administrative expenses were $334,434 for the three month period ended September
30, 2000 and $291,135 for the three month period ended September 30, 1999. The
increase during the three month period ended September 30, 2000 of $43,299, or
14.9%, from the corresponding three month period in 1999, resulted primarily
from increases in investor relations, professional and consulting services and
payroll expenses.
Research and development expenses in each of the three month periods ended
September 30, 2000 and September 30, 1999 consisted primarily of professional
salaries and benefits, fees associated with the Research and Development
Agreement, direct expenses charged to research and development projects and
allocated overhead charged to research and development projects. Research and
development expenses for the three month periods ended September 30, 2000 and
September 30, 1999 were $117,118 and $119,200, respectively. The decrease during
the three month period ended September 30, 2000 of $2,082, or 1.7%, from the
three month period ended September 30, 1999, resulted primarily from decreases
in certain contract research, offset by increases in the cost of research
activities pursuant to the Research and Development Agreement with the
University of Waterloo.
Non-cash charges for options and warrants issued in exchange for services
for the three month periods ended September 30, 2000 and September 30, 1999 were
approximately $71,020 and $95,996, respectively. Such costs consisted primarily
of non-employee stock options and warrants granted as consideration for certain
professional consulting and advertising services.
Period From Inception on July 1, 1998 through September 30, 2000
----------------------------------------------------------------
The Company is a development stage company. From inception through
September 30, 2000, the Company had no revenues.
The Company has incurred losses each year since inception and has an
accumulated deficit of $4,120,201 at September 30, 2000. The Company expects to
continue to incur losses over, approximately, the next two to three years from
expenditures on research, product development, marketing and administrative
activities.
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<PAGE>
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.
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PART II. OTHER INFORMATION.
---------------------------
ITEM 5. OTHER INFORMATION.
RECONSTITUTION OF AUDIT AND COMPENSATION COMMITTEES
On October 2, 2000, the Board of Directors of the Company reduced the size
of its Audit Committee, changing the total number of members of such committee
from three (3) directors to two (2) directors. Effective October 2, 2000, the
Board of Directors appointed Christopher Forbes and Thomas C. Quick to serve on
the Audit Committee. Messrs. Forbes and Quick are independent directors as
defined in Rule 4200(a)(15) of the NASD's listing standards.
Also, on October 2, 2000, the Board of Directors of the Company reduced the
size of its Compensation Committee, changing the total number of members of such
committee from three (3) directors to two (2) directors. Effective October 2,
2000, the Board of Directors appointed Christopher Forbes and Thomas C. Quick to
serve on the Compensation Committee. Messrs. Forbes and Quick are independent
directors as defined in Rule 4200(a)(15) of the NASD's listing standards.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27 Financial Data Schedule for the period ended September 30,
2000.
(b) Reports on Form 8-K.
None
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SENESCO TECHNOLOGIES, INC.
DATE: November 14, 2000 By:/s/ Steven Katz
------------------------------------
Steven Katz, President
and Chief Operating Officer
(Principal Executive Officer)
DATE: November 14, 2000 By:/s/ Richard Sirkin
------------------------------------
Richard Sirkin, Chief Financial
Officer and Treasurer
(Principal Financial and Accounting
Officer)
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