SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
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, 2001
Commission File No. 0-22307
SENESCO TECHNOLOGIES, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 84-1368850
------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
303 George Street, Suite 420, New Brunswick, New Jersey 08901
--------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(732) 296-8400
-------------------------------
(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
------------------- -----------------------------------------
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value per share.
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:
----- -----
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, 2001: $0
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant: $14,957,989 at September 28, 2001 based on the closing sales
price on that date.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of September 28, 2001:
Class Number of Shares
----- ----------------
Common Stock, $.01 par value 7,872,626
Transitional Small Business Disclosure Format
Yes: No: X
----- -----
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 2001 Annual Meeting of Stockholders are incorporated by reference into
Part III of this Report.
TABLE OF CONTENTS
-----------------
Item Page
---- ----
PART I 1. Business.................................................... 1
2. Properties.................................................. 8
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... 9
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
-i-
PART I
ITEM 1. BUSINESS.
BUSINESS OF THE COMPANY
The business of Senesco Technologies, Inc., a Delaware corporation (the
"Company"), is currently operated through Senesco, Inc., a New Jersey
corporation ("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 characterization of
genes that the Company believes control the aging (senescence) of all flowers,
fruits and vegetables (plant tissues) in an effort to: (i) extend the shelf-life
of perishable plant products; (ii) produce larger and more leafy crops; (iii)
increase crop production (yield) in horticultural and agronomic crops; and (iv)
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 and extends the plant's growth timeframe, which 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
agricultural function. For example, oil-bearing crops store oil in their seeds.
The Company has also shown that delaying senescence allows the plant to allocate
more energy toward growth, leading to larger plants (increased biomass) and more
leafy crops. Most recently, the Company has demonstrated that delaying
senescence results in crops which exhibit increased resilience to water
deprivation. Drought resistant crops may ultimately be 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.
The Company's technology is novel in that its research and development
focuses on the discovery and development of new gene technologies, which are
designed to confer positive traits on fruits, flowers, vegetables, forestry
species 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 goal is to inhibit
the expression of (or silence) these genes to delay senescence, which will in
turn 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/or enter into joint ventures.
-1-
The Company is currently working with tomato, canola, Arabidopsis (a model
plant which produces oil in a manner similar to canola) and banana plants, and
has obtained "proof of concept" for the lipase and DHS genes in several of these
plants. Near-term research and development initiatives include: (i) silencing
the Factor 5A gene in these four (4) types of plants; and (ii) further
propagation of transformed plants with the Company's silenced genes.
Additionally, the Company has isolated the DHS and Factor 5A genes in mammalian
tissue. The Company is assessing the function of these genes in animals and
humans through the accumulation of additional experimental data.
The Company has completed its research and development initiative in
carnation flower. "Proof of concept" was obtained through the inhibition of the
DHS reaction, which yielded a 100% increase in shelf life.
Subsequent initiatives include: (i) expanding the lipase, DHS and Factor 5A
gene technology into a variety of other commercially viable agricultural crops
such as lettuce, melon and strawberries; (ii) developing transformed plants that
possess new beneficial traits such as increased tolerance to disease and
environmental stress; and (iii) assessing the function of the DHS and Factor 5A
genes in mammalian tissue. 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 as well as through the Company's Joint Venture (as defined
below) with Rahan Meristem Ltd. in Israel.
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-plasma (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 and 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 enhanced 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
approximately $340,000, which constitutes 50% of the Joint Venture's research
and development budget over a four year period, from the Israel - U.S.
Binational Research and Development (the "BIRD")
-2-
Foundation (the "BIRD Grant"). 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. The commercial 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. As of June 30, 2001, Senesco has directly received a total
of $45,807, of which $35,234 was received during the year ended June 30, 2001,
from the BIRD Foundation for 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 additional installments of the
BIRD Grant as its expenditures associated with the Joint Venture increase above
certain levels. The Company's portion of the Joint Venture's expenses
approximated $69,000 and $57,000 for the years ended June 30, 2001 and 2000,
respectively, and is included in research and development expenses.
All aspects of the Joint Venture's research and development initiative are
proceeding on time, or are ahead of the original schedule laid out at the
inception of the Joint Venture. Both the DHS and lipase genes have been
identified and isolated in banana, and the Joint Venture is currently in the
process of silencing these genes. Once silenced, the goal is to transform banana
plants, thereby yielding fruit with extended shelf life and plants which are
more tolerant to disease and environmental stress.
TARGET MARKETS
The Company's technology embraces crops that are reproduced both through
seeds and propagation, which are the only two means of commercial crop
reproduction. Propagation is 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. In order to address the complexities
associated with marketing and distribution in the worldwide produce market, the
Company has adopted 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 with companies having well-established channels of
distribution, and in such cases, the Company will have more direct control over
commercialization activities.
INDUSTRY MARKET TRENDS
The Company's competitors in the industry are primarily focused on research
and development rather than commercialization. Those competitors 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.
-3-
INTELLECTUAL PROPERTY
Research and Development Agreement
The inventor of the Company's technology, John E. Thompson, Ph.D., is the
Associate Vice-President, Research and former 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 director and stockholder
of the Company and owns 10.8% of the outstanding shares of the Company's common
stock, $0.01 par value (the "Common Stock"), as of June 30, 2001. 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 $1,250,000 (as
specified therein). As of June 30, 2001, such amount represented US $783,000. 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, 2001 and June 30, 2000, the Company has spent approximately $348,985 and
$300,493, respectively, in connection with the Research and Development
Agreement. Effective September 1, 2001, the Company extended the Research and
Development Agreement for an additional one-year period in the amount of Can
$433,700. As of September 1, 2001, such amount represented approximately
$280,000.
Effective May 1, 1999, the Company entered into a consulting agreement for
research and development with Dr. Thompson. On July 1, 2001, the Company and Dr.
Thompson renewed the consulting agreement for an additional three (3) year term
as provided for under the terms and conditions of the agreement. This agreement
provides for monthly payments of $3,000 through June 2004. The agreement shall
be automatically renewable for an additional three (3) year term, 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 intend to extend shelf
life and to confer other positive traits on fruits, flowers, vegetables and
agronomic row crops. Over the next twelve (12) months, the Company plans the
following research and development initiatives: (i) the isolation of new genes
in the Arabidopsis, tomato, lettuce, soybean, rape seed (canola) and melon
plants, among others, at the University of Waterloo; (ii) the isolation of new
genes in the banana plant through the Joint Venture; (iii) the development of
transformed plants that possess new beneficial traits, such as protection
against drought and disease, which will then be developed in each of the above
varieties; and (iv) assessing the function of the DHS and Factor 5A genes in
mammalian tissue. The Company may further expand its research and development
program beyond the initiatives listed above.
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
-4-
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 the 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.
The Company is in the process of drafting various patent applications for
new aspects of the Company's senescence technology. The Company has filed
several new Continuations in Part ("CIPs") on both the Original Patent
Application and the Second Patent Application to ensure, on an ongoing basis
that its intellectual property pertaining to new technological developments is
appropriately protected.
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.
-5-
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.
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 governmental regulatory
agencies prior to the commercialization of its transformed 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, the Company may be subject
to additional regulations or require such licensing or approval in the future.
COMPETITION
The Company's competitors in the field of delaying plant senescence are
companies that develop and produce transformed plants in which ethylene
biosynthesis has been silenced. Such companies include: Paradigm Genetics;
AgrEvo; Bionova Holding Corporation; Renessen LLC; Exelixis Plant Sciences, Inc.
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
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 enhanced using the Company's technology reaches 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, a
national magazine, as well as through direct communication with prospective
licensees.
EMPLOYEES
As of June 30, 2001, the Company had four (4) employees and three (3)
consultants, five (5) of whom were executive officers and were involved in the
management of the Company. Effective October 4, 2001, John E. Thompson, Ph.D.,
the Company's Executive Vice President of Research and Development, was elected
to the Board of Directors and Phillip O. Escaravage,
-6-
the Company's Vice Chairman, stepped down as a director. Additionally, effective
October 4, 2001, Bruce C. Galton was appointed President and Chief Executive
Officer of the Company. In connection with Mr. Galton's appointment, Ruedi
Stalder stepped down as Chief Executive Officer and Steven Katz stepped down as
President and Chief Operating Officer of the Company. Mr. Stalder continues to
serve as the Chairman and a director and Mr. Katz continues to serve as a
director. Currently, the Company has four (4) employees and three (3)
consultants, four (4) 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. Due
to the expanding scope of the Company's research and development program, the
Company is recruiting scientists with a broader field of expertise than
currently exists on the Scientific Advisory Board. In connection with this
recruitment effort, Drs. Leopold and Woodson will step down from the Scientific
Advisory Board on October 31, 2001.
In addition to his service on the Scientific Advisory Board, the Company
utilizes Dr. Bennett as a consultant experienced in plant transformation. The
Company entered into a one-year consulting agreement for research and
development with Dr. Bennett, which expired on July 15, 2000. Dr. Bennett has
continued to provide services to the Company since July 15, 2000 and is
currently negotiating a new agreement with the Company.
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 may hire additional employees over the next twelve (12) months
to meet needs created by possible expansion of its marketing activities and
product development.
-7-
SAFE HARBOR STATEMENT
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, the timing of the
projects and trends in future operating performance, the Company's prospect of
licensing its technology and forming strategic partnerships, the availability of
additional sources of financing for the business and the Company's ability to
sustain liquidity and meet its operating plan are forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). 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 leases office space in New Brunswick, New Jersey for a monthly
rental fee of $2,838, subject to certain escalations for the Company's
proportionate share of increases, over the base year of 2001, in the building's
operating costs. The lease expires in May 2006. The space is in good condition
and the Company believes it will adequately serve as the Company's headquarters
over the term of the lease. The Company believes that 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.
-8-
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Since January 25, 1999, the Company's Common Stock has been traded on the
NASD OTC Bulletin Board under the symbol SENO.
The following table sets forth the range of the high and low sales price
for the Common Stock for each of the quarters since the quarter ended June 30,
1999 as reported on the NASD OTC Bulletin Board and as adjusted for stock
splits.(1)
Quarter Common
Ended Stock
------------------ -------------------
High Low
---- ---
June 30, 1999 $3.9375 $2.375
September 30, 1999 $3.875 $2.2969
December 31, 1999 $5.50 $2.625
March 31, 2000 $4.4375 $1.875
June 30, 2000 $3.1875 $1.25
September 30, 2000 $4.5625 $1.875
December 31, 2000 $3.375 $1.75
March 31, 2001 $4.3125 $1.75
June 30, 2001 $5.00 $2.50
------------
(1) In prior disclosures contained in the Company's Form 10-KSB for the
years ended June 30, 1999 and June 30, 2000, the Company reported the range of
high and low bid quotations for its Common Stock for each of the appropriate
quarters. In accordance with the Securities and Exchange Commission's
interpretation of its existing rules, registrants now may report high and low
sales prices. Accordingly, the Company has restated the stock prices for
quarters ended from June 30, 1999 until June 30, 2000 to reflect the high and
low sales prices.
As of September 28, 2001, the approximate number of holders of record of
the Common Stock was 303.
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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2001, the Company's cash balance was $14,330, and the
Company had a working capital deficit of $404,770. As of June 30, 2001, the
Company had a federal tax loss carry-forward of approximately $4,370,000, and a
state tax loss carry-forward of approximately $3,640,000 available to offset
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-forwards in
future fiscal years.
-9-
To date, the Company has not generated any revenues. The Company has not
been profitable since inception, will incur additional operating losses in the
future, and will 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 development, increases its 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.
In October 2000, pursuant to the New Jersey Technology Tax Credit Transfer
Program (the "Program"), the Company received approval from the New Jersey
Economic Development Authority (the "EDA") to sell the Company's June 30, 1999
New Jersey net operating loss tax benefit of $71,296. In December 2000, the
Company sold this tax benefit and received net proceeds of $60,331, pursuant to
the sale of the entire New Jersey net operating loss tax benefit. The Company
has applied to sell its New Jersey net operating loss tax benefit in the amount
of approximately $163,000 for the year ended June 30, 2000. However, there can
be no assurance that the Company will be approved, or if approved, that the
Company will be able to sell all or part of the New Jersey net operating loss
tax benefit.
During the year ended June 30, 2001, the Company received $35,234 from the
BIRD Foundation for research and development expenses that the Company has
incurred in connection with the Joint Venture. In addition, the Company
anticipates receiving additional funds from the BIRD Foundation in the future to
assist in funding its Joint Venture. See "Item 1. Business - Joint Venture."
During the period from July 10, 2001 through October 9, 2001, the Company
issued five unsecured promissory notes (the "Notes") payable to certain
directors of the Company in the aggregate principal amount of $475,000. The
Notes bear interest at an annual rate equal to the prime rate on the date that
the Notes were issued (5.50% to 6.75%), and such interest is payable upon
maturity of the Notes. The Notes and accrued interest are due on January 15,
2002.
On May 14, 2001, the Company signed a letter of intent with Harris Moran
Seed Company to enter into a worldwide exclusive license to commercialize the
Company's technology in lettuce, cantaloupe and honeydew melons. The letter of
intent provides that the Company would receive $4,000,000 in development
payments over a multi-year period. The letter of intent also provides for
royalty payments to the Company upon commercial introduction. Consistent with
the Company's commercialization strategy, the Company intends to attract other
companies interested in strategic partnerships or licensing the Company's
technology. There can be no assurance, however, that the Company's letter of
intent with Harris Moran Seed Company will result in an agreement or that the
Company will be successful in attracting other companies willing to form
strategic partnerships or license its technology.
-10-
The Company anticipates that, based upon it current cash balance, it will
be able to fund operations until approximately the end of October, 2001.
However, the Board of Directors has made an oral commitment to fund the
Company's operations for a non-specified short-term period. Over the next twelve
(12) months, the Company plans to fund its research and development and
commercialization activities by raising additional capital through the issuance
and sale of equity securities and the consummation of licensing agreements for
the Company's technology. The Company is currently in the process of negotiating
the issuance and sale of equity securities with certain investors. However,
there can be no assurance that the Company will be able to complete these
negotiations, be able to obtain additional financing, or enter into licensing
agreements in the near term on terms acceptable to the Company.
EUROPEAN MONETARY UNION
Currently, twelve (12) of the fifteen (15) member countries of the European
Union have locked the exchange rates of their legacy currencies to that of the
euro. As such, these participating countries have agreed to adopt the euro as
their common legal currency. The twelve (12) participating countries will issue
sovereign debt exclusively in euro and will redenominate outstanding sovereign
debt. Euro coins are currently in circulation and euro notes will be issued on
January 1, 2002. Both euro and existing legacy currencies may be used for all
transactions until December 31, 2001. Thereafter, all non-cash transactions must
be in euro. Existing legacy currencies may be used for cash transactions until
approximately January or February 2002, depending on the particular country.
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.
RESEARCH AND DEVELOPMENT INITIATIVES
The Company's future research and development programs focus on the
discovery and development of new gene technologies whose goals are to: (i)
extend shelf life; (ii) increase biomass; (iii) increase yield; (iv) increase
resistance to environmental stress; and (v) confer other positive traits on
fruits, flowers, vegetables and row crops. Over the next twelve (12) 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.
Additionally, the Company will be assessing the function of the DHS and Factor 5
genes in animals and humans through the accumulation of additional data.
-11-
RESULTS OF OPERATIONS
Fiscal Years ended June 30, 2001 and June 30, 2000
--------------------------------------------------
The Company is a development stage company. From its inception of
operations on July 1, 1998 through June 30, 2001, the Company had no revenues.
Operating expenses consist of general and administrative expenses, research and
development expenses, non-cash advertising, consulting and professional costs
and sales and marketing expenses. Operating expenses for the twelve (12) month
periods ending June 30, 2001 ("Fiscal 2001") and June 30, 2000 ("Fiscal 2000")
were $1,971,071 and $2,447,449, respectively, a decrease of $476,378 or 19%.
General and administrative expenses consist primarily of professional
salaries and benefits, depreciation and amortization, professional and
consulting services, office rent and corporate insurance. General and
administrative expenses for Fiscal 2001 and Fiscal 2000 were $1,339,883 and
$1,396,641, respectively, a decrease of $56,758 or 4%. This decrease was
primarily the result of a decrease in professional services and investor
relations, which was partially offset by an increase in employee salaries,
consulting services and corporate insurance.
Research and development expenses consist 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 Fiscal 2001 and Fiscal 2000 were $479,468 and $476,456,
respectively, an increase of $3,012 or 1%. This increase is a result of an
increase in the research and development budget at the University of Waterloo,
which was partially offset by a reduction in the amount of consulting fees
incurred for Dr. Bennett due to the expiration of his consulting agreement, as
well as the amount of fees paid to Dr. Sasha Vainstein due to the conclusion of
his portion of the carnation research program, which was being conducted at
Hebrew University.
For Fiscal 2001 and Fiscal 2000, non-cash advertising, consulting and legal
costs were $151,720 and $574,352, respectively, a decrease of $422,632 or 74%.
Such costs consist of non-employee stock options and warrants granted as
consideration for certain professional consulting and advertising services. This
decrease was primarily the result of a decrease in the amount of options and
warrants issued in Fiscal 2001.
For Fiscal 2001 and Fiscal 2000, respectively, sales and marketing expenses
were $0.
The Company has incurred losses since inception and had an accumulated
deficit of $5,490,902 at June 30, 2001. 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 (2) to three (3) years during which the
Company will engage in significant research and development efforts. However, on
May 14, 2001, the Company signed a letter of intent with Harris Moran Seed
Company to enter into a worldwide exclusive license to commercialize the
Company's technology in lettuce, cantaloupe and honeydew melons. The letter of
intent provides that the Company would receive $4,000,000 in development
payments over a multi-year period. The letter of intent also provides for
royalty payments to the Company
-12-
upon commercial introduction. Consistent with the Company's commercialization
strategy, the Company intends to attract other companies interested in strategic
partnerships or licensing the Company's technology that may result in license
fees, revenues from contract research, and other related revenues. There can be
no assurance, however, that the Company's letter of intent with Harris Moran
Seed Company will result in an agreement or that the Company will be successful
in attracting other companies willing to form strategic partnerships or license
its technology. Furthermore, no assurance can be given that the Company's
research and development efforts will result in any commercially viable
products, or that any licensing or other agreements with marketing and
distribution partners will result in revenues sufficient to support the
business. 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-
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
2001 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 2001 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 2001
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 2001 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-
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 12th day of
October 2001.
SENESCO TECHNOLOGIES, INC.
By: /s/ Bruce C. Galton
--------------------------------
Bruce C. Galton, President and
Chief Executive Officer
-15-
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 and Director October 12, 2001
----------------------
Ruedi Stalder
/s/ Bruce C. Galton President and Chief Executive October 12, 2001
---------------------- Officer (principal
Bruce C. Galton executive officer)
/s/ Joel Brooks Chief Financial Officer October 12, 2001
---------------------- and Treasurer (principal financial
Joel Brooks and accounting officer)
/s/ John E. Thompson Executive Vice-President of October 12, 2001
---------------------- Research and Development
John E. Thompson and Director
/s/ Christopher Forbes Director October 12, 2001
----------------------
Christopher Forbes
/s/ Thomas C. Quick Director October 12, 2001
----------------------
Thomas C. Quick
/s/ Steven Katz Director October 12, 2001
----------------------
Steven Katz
-16-
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 Amended and Restated By-laws of the Company as adopted on October 2,
2000. (Incorporated by reference to the Company's quarterly report on
Form 10-QSB for the period ended December 31, 2000.)
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. (Incorporated by reference to the Company's annual report on
Form 10-KSB for the period ended June 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.
(Incorporated by reference to the Company's annual report on Form
10-KSB for the period ended June 30, 2000.)
-17-
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.
(Incorporated by reference to the Company's annual report on Form
10-KSB for the period ended June 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). (Incorporated by reference to the
Company's annual report on Form 10-KSB for the period ended June 30,
2000.)
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). (Incorporated by reference to the
Company's annual report on Form 10-KSB for the period ended June 30,
2000.)
4.13 Form of Warrant Agreement with Fahnestock & Co. Inc., dated October 2,
2000. (Incorporated by reference to the Company's quarterly report on
Form 10-QSB for the period ended December 31, 2000.)
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-
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, as
amended. (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.)
10.11 Placement Agent Agreement, dated as of March 30, 2000, as amended, by
and between the Company and Fahnestock & Co. Inc. (Incorporated by
reference to the Company's annual report on Form 10-KSB for the period
ended June 30, 2000.)
10.12 Investment Banking Agreement, dated as of March 30, 2000, as amended,
by and between the Company and Fahnestock & Co. Inc. (Incorporated by
reference to the Company's annual report on Form 10-KSB for the period
ended June 30, 2000.)
10.13* Consulting Agreement, dated July 16, 1999, by and between the
Company and Alan B. Bennett, Ph.D. (Incorporated by reference to the
Company's annual report on Form 10-KSB for the period ended June 30,
2000.)
10.14* Consulting Agreement, dated July 12, 1999, by and between the
Company and John E. Thompson, Ph.D. (Incorporated by reference to the
Company's annual report on Form 10-KSB for the period ended June 30,
2000.)
10.15 Investment Banking Agreement, dated as of October 2, 2000, by and
between the Company and Fahnestock & Co. Inc. (Incorporated by
reference to the Company's quarterly report on Form 10-QSB for the
period ended December 31, 2000.)
10.16 Office lease, dated March 16, 2001, by and between the Company and
Matrix/AEW NB, LLC. (Incorporated by reference to the Company's
quarterly report on Form 10-QSB for the period ended March 31, 2001.)
10.17+ Form of Promissory Note issued to Directors.
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.)
-----------
* 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.
-19-
SENESCO TECHNOLOGIES, INC.
AND SUBSIDIARY
(a development stage company)
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
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 (Deficiency) F-5 - F-6
Statement of Cash Flows F-7
Notes to Consolidated Financial Statements F-8 - F-16
F-1
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,
2001, and the related consolidated statements of operations, stockholders'
equity (deficiency), and cash flows for each of the two years in the period then
ended and cumulative amounts from inception to June 30, 2001. 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 auditing standards generally accepted
in the United States of America. 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, 2001, 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, 2001 in conformity with
accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has a working capital deficiency
and a stockholders' deficiency that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
August 13, 2001
F-2
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED BALANCE SHEET
-------------------------------------------------------------------------------------------------
June 30, 2001
-------------------------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash $ 14,330
Prepaid expenses and other current assets 15,554
-------------------------------------------------------------------------------------------------
Total current assets 29,884
Property and Equipment, at cost, net of accumulated depreciation and
amortization of $36,860 78,757
Intangibles, net of accumulated amortization of $10,017 157,920
Deferred Income Tax Asset, net of valuation allowance of $1,814,000 -
Security Deposit 7,187
-------------------------------------------------------------------------------------------------
Total Assets $ 273,748
=================================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable $ 168,922
Accrued expenses 265,732
-------------------------------------------------------------------------------------------------
Total current liabilities 434,654
Grant Payable 45,807
-------------------------------------------------------------------------------------------------
Total liabilities 480,461
-------------------------------------------------------------------------------------------------
Commitments
Stockholders' Deficiency:
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 5,469,758
Deferred compensation related to issuance of options and warrants (264,295)
Deficit accumulated during the development stage (5,490,902)
-------------------------------------------------------------------------------------------------
Stockholders' deficiency (206,713)
-------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Deficiency $ 273,748
=================================================================================================
See Notes to Consolidated Financial Statements
F-3
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
-----------------------------------------------------------------------------------------------------
Cumulative
Year ended June 30, Amounts from
2001 2000 Inception
-----------------------------------------------------------------------------------------------------
Operating expenses:
General and administrative $ 1,339,883 $ 1,396,641 $ 3,718,921
Research and development 479,468 476,456 1,129,385
Noncash advertising, consulting and legal costs 151,720 574,352 726,072
-----------------------------------------------------------------------------------------------------
Total operating expenses 1,971,071 2,447,449 5,574,378
Sale of state income tax loss (60,331) - (60,331)
Interest income - net (33,749) (2,533) (23,145)
-----------------------------------------------------------------------------------------------------
Net loss $(1,876,991) $(2,444,916) $(5,490,902)
=====================================================================================================
Basic and diluted loss per common share $ (.24) $ (.39) -
=====================================================================================================
Basic and diluted weighted-average number
of common shares outstanding 7,872,626 6,346,678 -
=====================================================================================================
See Notes to Consolidated Financial Statements
F-4
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
---------------------------------------------------------------------------------------------------------------------------------
Years ended June 30, 1999, 2000 and 2001
---------------------------------------------------------------------------------------------------------------------------------
Deferred
Deficit Compensation
Accumulated Related to Total
Common Stock Capital During the Issuance of Stockholders'
Number in Excess Development Options and Equity
of Shares Amount of Par Stage Warrants (Deficiency)
---------------------------------------------------------------------------------------------------------------------------------
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
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
---------------------------------------------------------------------------------------------------------------------------------
Years ended June 30, 1999, 2000 and 2001
---------------------------------------------------------------------------------------------------------------------------------
Deferred
Deficit Compensation
Accumulated Related to Total
Common Stock Capital During the Issuance of Stockholders'
Number in Excess Development Options and Equity
of Shares Amount of Par Stage Warrants (Deficiency)
---------------------------------------------------------------------------------------------------------------------------------
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
Fair market value of warrants
granted on October 2, 2000 - - 80,700 - - 80,700
Change in fair market value of
options and warrants granted - - 154,583 - (83,563) 71,020
Net loss - - - (1,876,991) - (1,876,991)
-------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2001 7,872,626 $78,726 $5,469,758 $(5,490,902) $(264,295) $ (206,713)
================================================================================================================================
See Notes to Consolidated Financial Statements
F-6
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
---------------------------------------------------------------------------------------------------------------------
Cumulative
Year ended June 30, Amounts from
2001 2000 Inception
---------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $(1,876,991) $(2,444,916) $(5,490,902)
Adjustments to reconcile net loss to net cash used in
operating activities:
Noncash capital contribution - 85,179
Issuance of stock options and warrants for services 151,720 574,352 726,072
Depreciation and amortization 24,161 18,713 46,877
(Increase) decrease in operating assets:
Prepaid expenses and other current assets (6,331) 3,319 (15,554)
Security deposit 3,676 - (7,187)
Increase (decrease) in operating liabilities:
Accounts payable 92,779 (93,590) 168,922
Accrued expenses 127,144 135,734 265,732
--------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (1,483,842) (1,806,388) (4,220,861)
--------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Patent costs (66,403) (58,399) (167,937)
Purchase of property and equipment (26,408) (13,684) (115,617)
--------------------------------------------------------------------------------------------------------------------
Cash used in investing activities (92,811) (72,083) (283,554)
--------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from grant 35,234 10,573 45,807
Proceeds from issuance of common stock - net - 2,476,956 4,472,938
--------------------------------------------------------------------------------------------------------------------
Cash provided by financing activities 35,234 2,487,529 4,518,745
--------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (1,541,419) 609,058 14,330
Cash at beginning of period 1,555,749 946,691 -
--------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 14,330 $ 1,555,749 $ 14,330
====================================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ - $ 47 $ 22,317
====================================================================================================================
See Notes to Consolidated Financial Statements
F-7
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. PRINCIPAL The accompanying consolidated financial statements include
BUSINESS the accounts of Senesco Technologies, Inc. ("ST") and its
ACTIVITY AND wholly owned subsidiary, Senesco, Inc. ("SI") (collectively,
SUMMARY OF the "Company"). All significant intercompany accounts and
SIGNIFICANT transactions have been eliminated in consolidation.
ACCOUNTING
POLICIES: SI, a New Jersey corporation, was incorporated on November
24, 1998 and is the successor entity to Senesco, L.L.C., a
New Jersey limited liability company, which was formed on
June 25, 1998 but commenced operations on July 1, 1998. This
transfer was accounted for at historical cost in a manner
similar to a pooling of interests with the recording of net
assets acquired at their historical book value.
The Company is a development stage company that was
organized to commercially exploit technology acquired and
developed in connection with the identification and
characterization of genes which control the aging and other
characteristics 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, the
Company, an Idaho corporation, on September 30, 1999, merged
with and into the newly formed Senesco Technologies, Inc., a
Delaware corporation.
The Company has a working capital deficiency of $404,770,
and a stockholders' deficiency of $206,713 as of June 30,
2001. These conditions raise doubt about the Company's
ability to continue as a going concern. The Company's
ability to continue as a going concern is dependent upon it
ability to generate sufficient cash flows to meet its
obligations as they come due, which management believes it
will be able to do. The Company is currently in the process
of raising capital, and is in discussions with several
investors. Additionally, as discussed in Note 9, certain
directors of the Company have provided short-term financing
to the Company.
Intangible assets consist of costs related to acquiring
patents, which are being amortized using the straight-line
method over 20 years.
F-8
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Depreciation of property and equipment is provided for by
the straight-line method over the estimated useful lives of
the assets. Leasehold improvements are amortized over the
lesser of the assets' useful lives or the remaining term of
the lease.
The Company maintains its cash in bank deposit accounts
which, at times, may exceed federally insured limits. The
Company believes that there is no significant credit risk
with respect to these accounts.
Deferred income tax assets and liabilities are recognized
for the future tax consequences attributable to differences
between financial statement carrying amounts of existing
assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using
enacted rates expected to apply when the differences are
expected to be realized.
Research and development expenses are charged to operations
when incurred.
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
accounting principles generally accepted in the United
States of America 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.
In June 2001, the Financial Accounting Standards Board
("FASB") issued SFAS No. 142, Goodwill and Other
Intangibles. Under FASB No. 142, an acquired intangible
asset should be separately recognized if the benefit of the
intangible asset is obtained through contractual or other
legal rights, or if the intangible asset can be sold,
transferred, licensed, rented or exchanged, regardless of
the acquirer's intent to do so. The Company believes this
pronouncement will have no significant impact on its
financial position and results of operations.
Certain reclassifications have been made to the prior-year
accounts to conform to the current-year's presentation.
F-9
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
2. PROPERTY AND Property and equipment, at cost, consists of the following:
EQUIPMENT:
Estimated
Useful Life
------------------------------------------------------------
Equipment $ 34,038 4 years
Leasehold improvements 22,800 5 years
Furniture and fixtures 58,779 7 years
------------------------------------------------------------
115,617
Accumulated depreciation and
amortization (36,860)
------------------------------------------------------------
$ 78,757
============================================================
Depreciation and amortization aggregated $18,264 and $15,345
for the years ended June 30, 2001 and 2000, respectively.
3. ACCRUED The following are included in accrued expenses at June 30,
EXPENSES: 2001:
Accrued consulting $166,250
Accrued accounting 45,000
Accrued legal 36,443
Accrued insurance 8,000
Other accrued expenses 10,039
------------------------------------------------------------
$265,732
============================================================
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 was
for a monthly rental of approximately $5,500 and was on a
month-to-month basis. The stockholder's lease was for
approximately $5,500 per month with an unrelated party. The
stockholder's lease expired on April 30, 2001. Effective May
2001, the Company directly entered into a lease with an
unrelated party.
5. STOCKHOLDERS' On May 21, 1999, the Company consummated a private placement
EQUITY of 759,194 shares of its Common Stock for cash consideration
(DEFICIENCY): 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
F-10
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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 three 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 piggyback registration rights for a three-year period
from the closing date. Certain directors of the Company
participated in the Private Placement. Specifically, such
directors of the Company purchased, in the aggregate,
341,636 shares of Restricted Common Stock on the same terms
and conditions as all purchasers thereunder.
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 three 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 provide
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.
F-11
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
In June 2000, the Company consummated a private placement of
1,471,700 shares of Common Stock for cash consideration of
$2,207,551 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 provide 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 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.
Stock option activity under the Plan is summarized as
follows:
Year ended June 30, 2001 2000
-------------------------------------------------------------------------------------------
Weighted- Weighted-
average average
Exercise Exercise
Shares Price Shares Price
-------------------------------------------------------------------------------------------
Options outstanding at beginning of year 432,000 $3.56 - -
Granted 60,000 2.25 432,000 $3.56
Expired (42,000) 3.43 - -
-------------------------------------------------------------------------------------------
Options outstanding at end of year 450,000 $3.40 432,000 $3.56
===========================================================================================
Options exercisable at end of year 374,666 $3.47 307,167 $3.56
===========================================================================================
Weighted-average fair value of options
granted during the year 60,000 $2.25 432,000 $3.56
===========================================================================================
F-12
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The following table summarizes information about stock
options outstanding at June 30, 2001:
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, 2001 Life (Years) Price June 30, 2000 Price
-----------------------------------------------------------------------------------------
$2.25 - $3.85 450,000 8.41 $3.40 374,666 $3.47
=========================================================================================
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 No. 123, the Company's net loss and
net loss per share would have been increased to the pro
forma amounts indicated below:
Year ended June 30, 2001 2000
-----------------------------------------------------------
Net loss:
As reported $(1,876,991) $(2,444,916)
===========================================================
Pro forma $(2,009,235) $(3,199,331)
============================================================
Loss per share:
As reported $ (.24) $ (.39)
===========================================================
Pro forma $ (.26) $ (.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 of 5 and 10 years; (iii) a
risk-free rate range of 5.46% to 5.73% 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 147.83%; 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
F-13
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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.
On October 2, 2000, the Company granted to a financial
advisor, as partial consideration for services rendered, a
five-year warrant to purchase 30,000 shares of common stock
at an exercise price of $3.1875.
As of June 30, 2001, the Company had warrants outstanding
for the purchase of 410,000 shares of Common Stock.
Information on outstanding warrants is as follows:
Exercise Price Warrants
------------------------------------------------------------
$3.50 280,000
3.19 30,000
1.50 100,000
------------------------------------------------------------
410,000
============================================================
For the years ended June 30, 2001 and 2000, the Company
incurred a compensation charge of $151,720 and $451,506,
respectively, relating to the above warrants. As of June 30,
2001, 320,000 of the above warrants are exercisable.
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:
Year ended June 30, 2001 2000
------------------------------------------------------------
Federal statutory rate (34)% (34)%
Increase in valuation allowance 34 34
------------------------------------------------------------
-0- -0-
============================================================
At June 30, 2001, the deferred income tax asset consists of
the following:
Deferred tax asset:
Net operating loss carryforward $ 1,814,000
Valuation allowance (1,814,000)
------------------------------------------------------------
Net deferred tax asset $ -0-
============================================================
F-14
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
In December 2000, the Company sold its entire state net
operating loss for the year ended June 30, 1999 and received
net proceeds of $60,331.
At June 30, 2001, the Company has federal and state net
operating loss carryforwards of approximately $4,370,000 and
$3,640,000, respectively, available to offset future taxable
income expiring on various dates through 2021.
7. COMMITMENTS: Effective September 1, 1998, the Company entered into a
three-year research and development agreement with 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 $1,250,000. Research and development
expense under this agreement for the years ended June 30,
2001 and 2000 aggregated US $348,985 and US $300,492,
respectively, and US $818,617 for the cumulative period
through June 30, 2001. Effective September 1, 2001, the
Company extended the research and development agreement for
an additional one-year period in the amount of Can $433,700,
or approximately US $280,000.
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 2004. The agreement shall be
automatically renewable for an additional three-year term,
unless either of the parties provides the other with written
notice within six months of the end of the term.
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 in January 2002. Future base
compensation to be paid through January 2002 under the
agreements as of June 30, 2001 is $45,600.
Effective May 18, 2001, the Company entered into a five-year
lease for office space. Rent is payable in monthly
installments of $2,838, subject to certain escalations.
Future minimum rent payments as of June 30, 2001 are as
follows:
Year ending June 30,
2002 $ 34,056
2003 34,056
2004 34,056
2005 34,056
2006 28,380
-----------------------------------------------------------
$164,604
===========================================================
Rent expense charged to operations for the years ended June
30, 2001 and 2000 is $65,726 and $69,104, respectively.
F-15
SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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.
For the period from inception on May 14, 1999 to June 30,
2001, the Joint Venture had no revenue. The Company's
portion of the Joint Venture's expenses approximated $69,000
and $57,000 for the years ended June 30, 2001 and 2000,
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 years ended June 30, 2001 and 2000, the Company
received $35,234 and $10,573, respectively, 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.
9. SUBSEQUENT Subsequent to June 30, 2001, the Company issued five
EVENTS: unsecured promissory notes (the "Notes") payable to certain
directors of the Company in the aggregate principal amount
of $475,000. The Notes bear interest at an annual rate equal
to the prime rate on the date that the Notes were issued
(5.50% to 6.75%) and such interest is payable upon maturity
of the Notes. The Notes and accrued interest are due on
January 15, 2002.
F-16
PROMISSORY NOTE
Principal amount: [see Schedule A]
Date: [see Schedule A]
Due Date: January 15, 2002
FOR VALUE RECEIVED the undersigned Maker (i.e. Senesco Technologies, Inc.,
a Delaware Corporation, with principal offices at 303 George Street, New
Brunswick, New Jersey 08901) hereby promises to pay to the order of [see
Schedule A] at [see Schedule A] the sum of [see Schedule A] $[see Schedule A])
dollars, together with interest thereon at the prime rate from the date hereof
on the unpaid balance. This Promissory Note is due and payable in full on or
before January 15, 2002.
1. NO OFFSETS. Maker agrees to pay this Note free from any offset, deduction,
or counterclaim.
2. DEFAULT AND ACCELERATION. Maker shall be immediately in default upon the
occurrence of any of the following events: (a) Maker violates or otherwise
fails to perform or observe any term, covenant, or agreement contained in
this Note; (b) the winding up, liquidation, or dissolution of Maker; (c)
sale or transfer of substantially all of Maker's assets; (d) a receiver is
appointed for all or any part of Maker's property; (e) Maker makes an
assignment for the benefit of its creditors; or (f) Maker files or has
filed for protection under any bankruptcy law. In the event that Maker
defaults under this Note, then, at the option of the holder of this Note,
the entire unpaid balance of principal plus accrued interest shall become
immediately due and payable.
3. WAIVERS. Maker waives presentment, protest and demand, notice of protest,
dishonor and nonpayment of this Note and expressly agrees that this Note,
or any payment hereunder, may be extended from time to time at the written
consent of the holder, all without in any way affecting the liability of
Maker.
4. ATTORNEY'S FEES AND INTEREST. If an event of default has occurred and the
holder of this Note refers it to any attorney for collection, Maker agrees
to pay all costs and reasonable attorney's fees incurred by the holder of
this Note in connection therewith. Interest shall accrue from the date of
default at the rate of Prime plus 3% per annum or the maximum legal
interest rate, whichever is greater.
5. CONSTRUCTION. This Note shall be governed by and construed and enforced
under the laws of the state of New York.
6. SUCCESSORS. The terms and conditions of this Note shall inure to the
benefit of and be binding jointly and severally upon the successors,
assigns, heirs, survivors, and personal representatives of Maker and shall
inure to the benefit of any holder, its legal representatives, successors,
and assigns.
7. NO BREACH. No breach of any provision of this Note shall be deemed waived
unless it is waived in writing. Waiver of any one breach shall not be
deemed a waiver of any other breach of the same or any other provision of
this Note.
8. AMENDMENTS. This Note may be amended or modified only by written agreement
duly executed by Maker and Payee or the holder of this Note.
9. NO DEFAULT. If the due date of any payment under this Note falls on a
Saturday, Sunday, or public holiday, such payment may be made on the next
business day without constituting a default in payment under this Note.
SENESCO TECHNOLOGIES, INC.
(Maker)
By:
------------------------ -----------------------------
Attest
CORPORATE SEAL:
STATE OF )
----------------
ss:
COUNTY OF )
----------------
On the day of , 2001 before me came , to me
----- ---------- --------------
known , who, being by me duly sworn, did depose and say that he resides at No.
, that he is the of
------------------------------------------ -----------------
Senesco Technologies, Inc., the corporation described in, and which executed,
the foregoing instrument; that he knows the seal of said corporation; that the
seal affixed to said instrument is such corporate seal; that it was so affixed
by order of the board of directors of said corporation; and that he signed his
name thereto by like order.
----------------------------
Notary Public
SCHEDULE A
----------
Date of Note Amount Payee
------------ ------ -----
July 10, 2001 $200,000 Christopher Forbes
August 16, 2001 $ 50,000 Christopher Forbes
September 5, 2001 $ 50,000 Christopher Forbes
September 5, 2001 $100,000 Thomas C. Quick
October 9, 2001 $ 75,000 Thomas C. Quick