SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
Commission File No. 0-22307
SENESCO TECHNOLOGIES, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 84-1368850
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
303 George Street, Suite 420, New Brunswick, NJ 08901
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(Address of Principal Executive Offices) (Zip Code)
(732) 296-8400
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(Issuer's Telephone Number, Including Area Code)
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes: X No:
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State the number of shares outstanding of each of the Issuer's classes of
common stock, as of September 30, 2001:
Class Number of Shares
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Common Stock, $.01 par value 7,872,626
Transitional Small Business Disclosure Format (check one):
Yes: No: X
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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
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TABLE OF CONTENTS
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Page
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PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements......................................... 1
CONDENSED CONSOLIDATED BALANCE SHEET
as of September 30, 2001 (unaudited) and June 30, 2001.............. 2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 2001 and
September 30, 2000, and From Inception on July 1, 1998
through September 30, 2001 (unaudited).............................. 3
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DEFICIENCY) From Inception on July 1, 1998 through
September 30, 2001 (unaudited)...................................... 4
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended September 30, 2001 and
September 30, 2000, and From Inception on July 1, 1998
through September 30, 2001 (unaudited).............................. 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (unaudited).............................................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Plan of Operation.............................. 9
Liquidity and Capital Resources..................................... 17
Results of Operations............................................... 19
PART II. OTHER INFORMATION.
Item 2. Changes in Securities and Use of Proceeds.................... 21
Item 5. Other Information............................................ 24
Item 6. Exhibits and Reports on Form 8-K............................. 24
SIGNATURES................................................................. 25
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PART I. FINANCIAL INFORMATION.
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ITEM 1. FINANCIAL STATEMENTS.
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted from the following
consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission. However, Senesco Technologies, Inc., a
Delaware corporation (the "Company"), and its wholly-owned subsidiary, Senesco,
Inc., a New Jersey corporation ("Senesco"), believe that the disclosures are
adequate to assure that the information presented is not misleading in any
material respect.
The results of operations for the interim periods presented herein are not
necessarily indicative of the results to be expected for the entire fiscal year.
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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
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(A DEVELOPMENT STAGE COMPANY)
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CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
September 30, June 30,
2001 2001
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(unaudited)
ASSETS
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CURRENT ASSETS:
Cash............................................................ $ 38,158 $ 14,330
Prepaid expenses and other current assets....................... 24,188 15,554
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Total Current Assets........................................ 62,346 29,884
Property and equipment, net..................................... 73,391 78,757
Intangible assets, net.......................................... 197,152 157,920
Security deposit................................................ 7,187 7,187
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TOTAL ASSETS................................................ $ 340,076 $ 273,748
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES:
Accounts payable................................................ $ 129,343 $ 168,922
Accrued expenses................................................ 319,066 265,732
Notes payable................................................... 400,000 --
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Total Current Liabilities................................... 848,409 434,654
Grant payable................................................... 45,807 45,807
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TOTAL LIABILITIES........................................... 894,216 480,461
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STOCKHOLDERS' DEFICIENCY:
Preferred stock, authorized 5,000,000 shares, $0.01 par value,
no shares issued.............................................. -- --
Common stock, authorized 20,000,000 shares, $0.01 par value,
7,872,626 shares issued and outstanding....................... 78,726 78,726
Capital in excess of par........................................ 5,452,807 5,469,758
Deficit accumulated during the development stage................ (5,992,177) (5,490,902)
Deferred compensation related to issuance of options and
warrants...................................................... (93,496) (264,295)
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Total Stockholders' Deficiency.............................. (554,140) (206,713)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY.............. $ 340,076 $ 273,748
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
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(A DEVELOPMENT STAGE COMPANY)
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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(unaudited)
From Inception
For the Three For the Three on July 1, 1998
Months Ended Months Ended through
September 30, September 30, September 30,
2001 2000 2001
------------- ------------- ---------------
Operating expenses:
General and administrative......... $ 280,719 $ 334,434 $ 3,999,640
Research and development........... 63,155 117,118 1,192,540
Non-cash charges for options and
warrants issued in exchange for
services........................... 153,848 71,020 879,920
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Total operating expenses............. 497,722 522,572 6,072,100
Sale of state income tax loss........ -- -- (60,331)
Interest expense (income), net....... 3,553 (16,282) (19,592)
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Net Loss............................. $ (501,275) $ (506,290) $ (5,992,177)
=========== =========== ============
Basic and diluted net loss per
common share......................... $ (0.06) $ (0.06)
=========== ===========
Basic and diluted weighted
average number of common shares
outstanding.......................... 7,872,626 7,872,626
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See Notes to Condensed Consolidated Financial Statements.
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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
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(A DEVELOPMENT STAGE COMPANY)
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CONDENSED CONSOLIDATED STATEMENT OF
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STOCKHOLDERS' EQUITY (DEFICIENCY)
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FROM INCEPTION ON JULY 1, 1998 THROUGH SEPTEMBER 30, 2001
---------------------------------------------------------
(unaudited)
Deferred
Deficit Compensation
Accumulated Related to the
Capital in During the Issuance of
Excess of Par Development Options and
Common Stock Value Stage Warrants Total
------------------- ------------- ----------- -------------- -----------
Shares Amount
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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 $0.01 per share......... 3,400,000 34,000 (34,000) -- -- --
Issuance of common stock for
cash on May 21, 1999 at
$2.63437 per share.............. 759,194 7,592 1,988,390 -- -- 1,995,982
Issuance of common stock for
placement fees on May 21, 1999
at $0.01 per share.............. 53,144 531 (531) -- -- --
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 at
$2.867647 per share............. 17,436 174 49,826 -- -- 50,000
Issuance of common stock for
cash on January 31, 2000 at
$2.87875 per share.............. 34,737 347 99,653 -- -- 100,000
(continued)
See Notes to Condensed Consolidated Financial Statements.
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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
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(A DEVELOPMENT STAGE COMPANY)
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CONDENSED CONSOLIDATED STATEMENT OF
-----------------------------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
---------------------------------
FROM INCEPTION ON JULY 1, 1998 THROUGH SEPTEMBER 30, 2001
---------------------------------------------------------
(unaudited)
Deferred
Deficit Compensation
Accumulated Related to the
Capital in During the Issuance of
Excess of Par Development Options and
Common Stock Value Stage Warrants Total
------------------- ------------- ----------- -------------- -----------
Shares Amount
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Issuance of common stock for
cash on February 4, 2000 at
$2.934582 per share............. 85,191 852 249,148 -- -- 250,000
Issuance of common stock for
cash on March 15, 2000 at
$2.527875 per share............. 51,428 514 129,486 -- -- 130,000
Issuance of common stock for
cash on June 22, 2000 for
$1.50 per share................. 1,471,700 14,718 2,192,833 -- -- 2,207,551
Commissions, legal and bank fees
associated with issuances for
the year ended June 30, 2000.... -- -- (260,595) -- -- (260,595)
Fair market value of warrants
granted on October 2, 2000...... -- -- 80,700 -- -- 80,700
Fair market value of warrants
granted on September 4, 2001.... -- -- 41,800 -- -- 41,800
Change in fair market value of
options and warrants granted.... -- -- 95,832 -- 87,236 183,068
Net loss........................ -- -- -- (5,992,177) -- (5,992,177)
--------- -------- ----------- ----------- --------- -----------
Balance at September 30, 2001... 7,872,626 $ 78,726 $ 5,452,807 $(5,992,177) $ (93,496) $ (554,140)
========= ======== =========== =========== ========= ===========
See Notes to Condensed Consolidated Financial Statements.
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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
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(A DEVELOPMENT STAGE COMPANY)
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
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(unaudited)
From Inception
For the Three For the Three on July 1, 1998
Months Ended Months Ended through
September 30, September 30, September 30,
2001 2000 2001
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Cash flows used in operating activities:
Net loss............................................ $(501,275) $ (506,290) $(5,992,177)
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. 153,848 71,020 879,920
Depreciation and amortization....................... 5,366 4,516 52,243
(Increase) decrease in operating assets:
Prepaid expense and other current assets............ (8,634) 7,548 (24,188)
Security deposit.................................... -- -- (7,187)
Increase (decrease) in operating liabilities:
Accounts payable.................................... (39,579) 15,406 129,343
Accrued expenses.................................... 53,334 (16,778) 319,066
--------- ---------- -----------
Net cash used in operating activities............... (336,940) (424,578) (4,557,801)
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Cash flows from investing activities:
Patent costs........................................ (39,232) (1,643) (207,169)
Purchase of property and equipment.................. -- (2,163) (115,617)
--------- ---------- -----------
Net cash used in investing activities............... (39,232) (3,806) (322,786)
--------- ---------- -----------
Cash flows provided from financing activities:
Proceeds from grant................................. -- -- 45,807
Proceeds from issuance of notes..................... 400,000 -- 400,000
Proceeds from issuance of common stock, net......... -- -- 4,472,938
--------- ---------- -----------
Cash flows provided by financing activities......... 400,000 -- 4,918,745
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Net increase (decrease) in cash..................... 23,828 (428,384) 38,158
Cash at beginning of period......................... 14,330 1,555,749 --
--------- ---------- -----------
Cash at end of period............................... $ 38,158 $1,127,365 $ 38,158
========= ========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest............ $ -- $ -- $ 22,317
============ ============ ===========
See Notes to Condensed Consolidated Financial Statements.
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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
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(A DEVELOPMENT STAGE COMPANY)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(unaudited)
NOTE 1 - BASIS OF PRESENTATION:
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended June
30, 2001.
In the opinion of the Company's management, the accompanying unaudited
condensed consolidated financial statements contain all adjustments, consisting
solely of those which are of a normal recurring nature, necessary to present
fairly its financial position as of September 30, 2001 and as of June 30, 2001,
the results of its operations and cash flows for the three month periods ended
September 30, 2001 and 2000, and for the period from inception on July 1, 1998
through September 30, 2001.
Interim results are not necessarily indicative of results for the full
fiscal year.
Senesco is a development stage company that was organized to commercially
exploit technology acquired and developed in connection with the identification
and characterization of genes which control the aging (senescence) of all
flowers, fruits and vegetables (plant tissues), increase crop production (yield)
in horticultural and agronomic crops and reduce the harmful effects of
environmental stress.
NOTE 2 - LOSS PER SHARE:
Net loss per common share is computed by dividing the loss by the weighted
average number of common shares outstanding during the period. Since September
7, 1999, the Company has had outstanding options and warrants to purchase its
common stock, $0.01 par value per share (the "Common Stock"), however, shares to
be issued upon the exercise of options and warrants are not included in the
computation of diluted loss per share as their effect is anti-dilutive.
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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
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(A DEVELOPMENT STAGE COMPANY)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(unaudited)
NOTE 3 - SIGNIFICANT EVENTS:
During the period from July 10, 2001 through September 30, 2001, the
Company issued three (3) unsecured promissory notes payable to Christopher
Forbes, a director of the Company, in the aggregate principal amount of $300,000
and issued one (1) unsecured promissory note payable to Thomas C. Quick, a
director of the Company, in the principal amount of $100,000 (collectively, the
"Notes"). The Notes bear interest at an annual rate equal to the prime rate on
the date that the Notes were issued (6.50% to 6.75%), and such interest is
payable upon maturity of the Notes. The Notes and accrued interest are due on
January 15, 2002.
In connection with the hiring of Mr. Galton, the Company's new President
and Chief Executive Officer, the Company issued to Christenson, Hutchinson,
McDowell, LLC, an executive management recruiter, a five (5) year warrant,
effective September 4, 2001, to purchase twenty thousand (20,000) shares of its
Common Stock at an exercise price of $0.01 per share, with such warrant being
fully vested on the date of grant.
NOTE 4 - SUBSEQUENT EVENTS:
On October 4, 2001, the Board of Directors unanimously approved the grant
of (i) options to purchase one million one hundred thirty-six thousand
(1,136,000) shares of the Company's Common Stock, of which four hundred
ninety-one thousand (491,000) shares were issued at a weighted average exercise
price equal to $2.76 and the remaining options to purchase six hundred
forty-five thousand (645,000) shares will be issued on December 1, 2001 at an
exercise price equal to the closing price of the Company's Common Stock as
quoted on the NASD OTC Bulletin Board on November 30, 2001 and (ii) warrants to
purchase an aggregate of an additional one hundred sixty thousand (160,000)
shares of the Company's Common Stock at a weighted average exercise price equal
to $1.79. The effective date of the above grants are from October 2, 2001
through December 1, 2001.
-8-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATION.
OVERVIEW
Business of the Company
Senesco Technologies, Inc. (the "Company") is a Delaware corporation and
its business is currently operated through its wholly-owned subsidiary, Senesco,
Inc., a New Jersey corporation ("Senesco"). The primary business of the Company
is the research, development and commercial exploitation of a potentially
significant platform technology involving the identification and
characterization of genes that the Company believes control the aging
(senescence) of plant cells and may also control the programmed cell death
(apoptosis) of mammalian cells. The Company's technology goals for plant
applications are 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.
-9-
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
also completed its research and development initiative in carnation flower,
which yielded a 100% increase in shelf-life through the inhibition of the DHS
reaction.
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 and melon; (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.
Agricultural 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, in which it
plans to enter into licensing agreements or other strategic relationships with a
variety of companies on a crop-by-crop basis. On May 14, 2001, the Company
signed a non-binding letter of intent with Harris Moran Seed Company to enter
into a worldwide exclusive license to commercialize its 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, it intends to attract other companies interested in strategic
partnerships or licensing its technology. The proposed Harris Moran licensing
arrangement and the joint venture with Rahan Meristem Ltd. are steps toward the
execution of its strategy. There can be no assurance, however, that the letter
of intent with Harris
-10-
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. 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.
Agricultural Marketing
Based upon the Company's multi-faceted commercialization strategy described
above, it anticipates that there may be a significant period of time before
plants enhanced using its technology reach consumers. Thus, the Company has not
begun to actively market its technology directly to consumers, but rather, it
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.
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"). Rahan accounts for
approximately ten percent (10%) of the worldwide export of banana seedlings. 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") Foundation (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 September 30,
2001, Senesco has directly received a total of $45,807, none of which was
received during the current quarter, from the BIRD Foundation for research and
development expenses the Company has incurred which are associated with the
research and development efforts of the Joint Venture. The Company expects to
receive additional installments of the BIRD Grant as its expenditures associated
with the Joint Venture increase above certain levels. As of September 30, 2001,
the Company's portion of the Joint Venture's expenses totaled approximately
$140,000.
-11-
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.
INTELLECTUAL PROPERTY
Research and Development
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 as of September 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 approximately CDN$1,250,000 (as specified therein). As of
September 30, 2001, such amount represented approximately US $783,000. In return
for these payments, the Company has all rights to the intellectual property
derived from the research. Effective September 1, 2001, the Company extended the
Research and Development Agreement for an additional one-year period in the
amount of CDN$433,700. As of September 30, 2001, such amount represented
approximately US $275,000. During the three (3) month periods ended September
30, 2001 and September 30, 2000, the Company has spent approximately $47,128 and
$79,150, respectively, in connection with the Research and Development
Agreement.
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
automatically renew 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 aim to extend
shelf-life and to confer other positive traits on fruits, flowers, vegetables
and agronomic row crops and on the commencement of additional mammalian cell
research. Over the next twelve (12) months, the Company plans the following
research and development initiatives: (i) the development of transformed plants
that possess new beneficial traits, such as protection against drought and
disease, with emphasis on lettuce, melon, corn, forestry products and the other
species noted in (ii) through (iv); (ii) the development of enhanced banana
plants through the Joint Venture with Rahan; (iii) the isolation
-12-
of new genes in the Arabidopsis, tomato, lettuce, soybean, rape seed (canola)
and melon plants, among others, at the University of Waterloo; and (iv)
assessing the function of the DHS and Factor 5A genes in mammalian tissue. The
Company may further expand its research and development initiative 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 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.
-13-
The Company has broadened the scope of its intellectual property protection
by utilizing the Patent Cooperation Treaty ("PCT") to facilitate international
filing and prosecution of the First and Second Patent Applications. The First
Patent Application was published through the PCT in August 2000, and then
between August 2001 and October 2001 was filed in Australia, Canada, China,
Japan, Korea, New Zealand and Europe through the European Patent Office ("EPO")
which has twenty (20) member states. Israel is the last remaining country in
which the Company opted to file that has yet to issue a filing date. The Second
Patent Application was published by the PCT in January 2001.
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 all the foregoing 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.
Agricultural Market Competition and Industry Trends
The Company's competitors in the agricultural 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.
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, among others: Paradigm
Genetics; AgrEvo; Bionova Holding Corporation; Renessen LLC; Exelixis Plant
Sciences, Inc.; and Eden Bioscience.
The Company believes that its proprietary technology is unique and,
therefore, places it at a competitive advantage in the industry. However, there
can be no assurance that the Company's competitors will not develop a similar
product with properties superior to its own or at greater cost-effectiveness.
-14-
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.
Employees
In addition to the scientists performing funded research for the Company at
the University of Waterloo, as of September 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. On 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,
the Company's Vice Chairman, stepped down as a director. Additionally, on
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. After the Company's management restructuring on October 4, 2001, the
Company had five (5) employees and three (3) consultants, four (4) of whom were
executive officers and were 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. Alan Bennett, Ph.D. 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. A. Carl Leopold, Ph.D., and
William R. Woodson, Ph.D. were the other members of the Scientific Advisory
Board. Dr. Leopold served as Chairman of the Scientific Advisory Board. He is
currently a member and a W.H. Crocker
-15-
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. 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 stepped 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.
Safe Harbor Statement
Certain statements included in this Form 10-QSB, including, without
limitation, statements regarding the anticipated growth in the markets for the
Company's services, the continued development of the Company's genetic
technology, the approval of the Company's Patent Applications, the possibility
of governmental approval in order to sell or offer for sale to the general
public a genetically engineered plant or plant product, the successful
implementation of the Joint Venture with Rahan, the success of the Research and
Development Agreement, statements relating to the Company's Patent Applications,
the anticipated longer term growth of the Company's business, and the timing of
the projects and trends in future operating performance, are forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. The factors discussed herein and others expressed from time to
time in the Company's filings with the Securities and Exchange Commission could
cause actual results and developments to be materially different from those
expressed in or implied by such statements. The Company does not undertake to
update any forward-looking statements.
-16-
LIQUIDITY AND CAPITAL RESOURCES
Overview
As of September 30, 2001, the Company's cash balance was $38,158, and the
Company had a working capital deficit of $786,063. As of September 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 to off-set future
taxable income. There can be no assurance, however, that the Company will be
able to take advantage of any or all of such tax loss carry-forwards, if at all,
in future fiscal years.
Financing Needs
To date, the Company has not generated any revenues. The Company has not
been profitable since inception, may incur additional operating losses in the
future, and will require additional financing to continue the development and
subsequent commercialization of its technology. While the Company does not
expect to generate significant revenues in the near future, the Company may
enter into licensing or other agreements with marketing and distribution
partners that may result in license fees, revenues from contract research, or
other related revenue.
The Company expects its capital requirements to increase significantly over
the next several years as it commences new research and development efforts,
undertakes new product developments, increases marketing 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 marketing efforts.
During the period from July 10, 2001 through November 9, 2001, the Company
issued six (6) unsecured promissory notes (the "Notes") payable to certain
directors of the Company in the aggregate principal amount of $525,000. 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. All other terms of the Notes are substantially similar.
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.
-17-
Pursuant to the New Jersey Technology Tax Credit Transfer Program (the
"Program"), the Company has applied to the New Jersey Economic Development
Authority (the "EDA") to sell the Company's June 30, 2000 New Jersey net
operating loss tax benefit of approximately $163,000. Although the Company
received approval and sold its New Jersey net operating loss tax benefit for the
year ended June 30, 1999, there can be no assurance that the Company will be
approved to participate in the program for the year ended June 30, 2000, or if
approved, that the Company will be able to sell all or part of the June 30, 2000
New Jersey net operating loss tax benefit.
In October 2001, the Company received $11,076 from the BIRD Foundation for
research and development expenses that the Company has incurred in connection
with the Joint Venture. The Company anticipates receiving additional funds from
the BIRD Grant in the future to assist in funding its Joint Venture.
On October 4, 2001, the Board of Directors unanimously approved the grant
of options to purchase one million one hundred thirty-six thousand (1,136,000)
shares of the Company's Common Stock and warrants to purchase one hundred sixty
thousand (160,000) shares of the Company's Common Stock. The effective date of
these grants covers the period between October 2, 2001 and December 1, 2001. The
exercise of these options and warrants would generate some cash flow for the
Company, however, it may also have a material adverse effect on the Company's
stock price.
The Company believes it has sufficient cash on hand to support its
operating plan through approximately the end of November 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 restricted equity securities with certain investors at a discount to
the public registration market price with certain rights. 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.
- 18 -
RESULTS OF OPERATIONS
Three Months Ended September 30, 2001 and Three Months Ended September 30, 2000
-------------------------------------------------------------------------------
The Company is a development stage company. From its inception of
operations on July 1, 1998 through September 30, 2001, the Company had no
revenues. Operating expenses in each of the three month periods ended September
30, 2001 and September 30, 2000 were comprised of general and administrative
expenses, research and development expenses and non-cash advertising, consulting
and professional costs. Operating expenses for the three month periods ended
September 30, 2001 and September 30, 2000 were $497,722 and $522,572,
respectively, a decrease of $24,850, or 4.8%.
General and administrative expenses in each of the three month periods
ended September 30, 2001 and September 30, 2000 consisted primarily of
professional salaries and benefits, depreciation and amortization, professional
and consulting services, office rent and corporate insurance. General and
administrative expenses were $280,719 for the three month period ended September
30, 2001 and $334,434 for the three month period ended September 30, 2000. The
decrease during the three month period ended September 30, 2001 of $53,715, or
16.1%, from the corresponding three month period ended September 30, 2000,
resulted primarily from decreases in professional fees, investor relations
expenses, office rent and corporate insurance which were partially offset by an
increase in payroll expenses.
Research and development expenses in each of the three month periods ended
September 30, 2001 and September 30, 2000 consisted primarily of professional
salaries and benefits, fees associated with the Research and Development
Agreement, direct expenses charged to research and development projects and
allocated overhead charged to research and development projects. Research and
development expenses for the three month periods ended September 30, 2001 and
September 30, 2000 were $63,155 and $117,118, respectively. The decrease during
the three month period ended September 30, 2001 of $53,963, or 46.1%, from the
corresponding three month period ended September 30, 2000, resulted primarily
from a reconciling adjustment for the period from June 1, 2000 through August
31, 2001 in connection with the Research and Development Agreement with the
University of Waterloo, a reduction in the amount of consulting fees incurred
for Dr. Bennett due to the expiration of his consulting agreement and a
reduction in the amount of fees incurred for the Scientific Advisory Board.
Non-cash charges for options and warrants issued in exchange for services
for the three month periods ended September 30, 2001 and September 30, 2000 were
$153,848 and $71,020, respectively. Such costs consisted primarily of
non-employee stock options and warrants granted as consideration for certain
advertising, consulting and professional costs. The increase during the three
month period ended September 30, 2001 of $82,828, or 116.6%, from the
corresponding three month period ended September 30, 2000, resulted primarily
from the issuance of warrants for professional services on September 4, 2001.
- 19 -
Period From Inception on July 1, 1998 through September 30, 2001
----------------------------------------------------------------
The Company is a development stage company. From inception through
September 30, 2001, the Company had no revenues.
The Company has incurred losses each year since inception and has an
accumulated deficit of $5,992,177 at September 30, 2001. The Company expects to
continue to incur losses over, approximately, the next two to three years from
expenditures on research, product development, marketing and administrative
activities.
The Company does not expect to generate significant revenues for
approximately the next two 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
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.
-20-
PART II. OTHER INFORMATION.
---------------------------
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Affiliates
On October 4, 2001, the Board of Directors unanimously approved the grant
of options and warrants as described below:
The Company shall grant or has granted the following to Ruedi Stalder, a
current director and former executive officer of the Company: (i) effective
October 2, 2001, options to purchase seventy-five thousand (75,000) shares of
the Company's Common Stock with an exercise price equal to $1.50 per share, with
all such options vesting on the date of grant; (ii) options to purchase one
hundred fifty thousand (150,000) shares of the Company's Common Stock, effective
November 1, 2001, with an exercise price equal to $4.00 per share, with
one-third (1/3) of such options vesting on the date of grant, one-third (1/3) of
such options vesting on January 15, 2002 and one-third (1/3) of such options
vesting on January 15, 2003; (iii) options to purchase sixty-five thousand
(65,000) shares of the Company's Common Stock to be granted effective December
1, 2001, with an exercise price equal to the fair market value of the Company's
Common Stock on such date, as defined in the Company's 1998 Stock Plan (the
"Plan"), with all such options vesting on the date of grant (options shall be
granted in lieu of receiving cash compensation for services provided as an
officer of the Company during the period from January 1, 2000 through September
30, 2001); and (iv) options to purchase forty thousand (40,000) shares of the
Company's Common Stock to be granted effective December 1, 2001, with an
exercise price equal to the fair market value of the Company's Common Stock on
such date, as defined in the Plan, with one-half (1/2) of such options vesting
on the date of grant and one-half (1/2) of such options vesting on December 1,
2002.
The Company shall grant or has granted the following to Bruce C. Galton,
the Company's President and Chief Executive Officer: (i) effective October 5,
2001, pursuant to the Plan, options to purchase an aggregate of one hundred
thirty thousand (130,000) shares of the Company's Common Stock with an exercise
price equal to $2.10 per share, with one hundred thousand (100,000) of such
options vesting on the date of grant and ten thousand (10,000) of such options
vesting on each of October 31, 2001, November 30, 2001, and December 31, 2001;
and (ii) effective December 1, 2001, options to purchase three hundred thousand
(300,000) shares of the Company's Common Stock, with an exercise price equal to
the fair market value of the Company's Common Stock on such date, as defined in
the Plan, with one-third (1/3) of such options vesting on each of the first,
second and third anniversaries of the date of grant.
The Company shall grant to John E. Thompson, Ph.D., the Executive
Vice-President of Research and Development and a director of the Company,
effective December 1, 2001, options to purchase eighty thousand (80,000) shares
of the Company's Common Stock, with an exercise price equal to 110% of the fair
market value of the Company's Common Stock on such date, as defined in the Plan,
with one-third (1/3) of such options vesting on the date of grant and one-third
(1/3) of such options vesting on each of the first and second anniversaries of
the date of grant.
-21-
The Company shall grant to Christopher Forbes, a director of the Company,
effective December 1, 2001, options to purchase forty thousand (40,000) shares
of the Company's Common Stock, with an exercise price equal to the fair market
value of the Company's Common Stock on such date, as defined in the Plan, and
with one-half (1/2) of such options vesting on the date of grant and one-half
(1/2) of such options vesting on December 1, 2002.
The Company shall grant to Thomas C. Quick, a director of the Company,
effective December 1, 2001, options to purchase forty thousand (40,000) shares
of the Company's Common Stock, with an exercise price equal to the fair market
value of the Company's Common Stock on such date, as defined in the Plan, and
with one-half (1/2) of such options vesting on the date of grant and one-half
(1/2) of such options vesting on December 1, 2002.
The Company shall grant or has granted the following to Steven Katz, a
director and former executive officer of the Company: (i) effective October 2,
2001, options to purchase twenty-five thousand (25,000) shares of the Company's
Common Stock with an exercise price equal to $1.50 per share, with all such
options vesting on the date of grant; (ii) effective November 1, 2001, options
to purchase fifty thousand (50,000) shares of the Company's Common Stock, with
an exercise price equal to $4.00 per share, with one-third (1/3) of such options
vesting on the date of grant, one-third (1/3) of such options vesting on January
15, 2002 and one-third (1/3) of such options vesting on January 15, 2003; and
(iii) options to purchase forty thousand (40,000) shares of the Company's Common
Stock to be granted effective December 1, 2001, with an exercise price equal to
the fair market value of the Company's Common Stock as defined in the Plan, with
one-half (1/2) of such options vesting on the date of grant and one-half (1/2)
of such options vesting on December 1, 2002.
The Company granted to Sascha Fedyszyn, the Vice-President of Corporate
Development and Secretary of the Company, effective November 1, 2001, options to
purchase ten thousand (10,000) shares of the Company's Common Stock, with an
exercise price equal to $2.15, with one-third (1/3) of such options vesting on
the date of grant and one-third (1/3) of such options vesting on each of the
first and second anniversaries of the date of grant.
The Company granted to Joel Brooks, the Chief Financial Officer and
Treasurer of the Company, effective November 1, 2001, options to purchase
fifteen thousand (15,000) shares of the Company's Common Stock, with an exercise
price equal to $2.15, with one-third (1/3) of such options vesting on the date
of grant and one-third (1/3) of such options vesting on each of the first and
second anniversaries of the date of grant.
Non-Affiliates
In connection with the hiring of Mr. Galton, the Company's new President
and Chief Executive Officer, the Company issued to Christenson, Hutchinson,
McDowell, LLC, an executive management recruiter, a five (5) year warrant,
effective September 4, 2001, to purchase twenty thousand (20,000) shares of its
Common Stock at an exercise price of $0.01 per share, with such warrant being
fully vested on the date of grant.
The Company granted to a former employee of the Company, effective November
1, 2001, options to purchase one thousand (1,000) shares of the Company's Common
Stock, with an exercise price equal to $2.15, with all such options vesting on
the date of the grant.
-22-
The Company shall grant to a former director of the Company, effective
December 1, 2001, options to purchase forty thousand (40,000) shares of the
Company's Common Stock, with an exercise price equal to 110% of the fair market
value of the Company's Common Stock as defined in the Plan, and with one-half
(1/2) of such options vesting on the date of grant and one-half (1/2) of such
options vesting on December 1, 2002.
The Company granted to a member of the Company's Scientific Advisory Board,
effective November 1, 2001, options to purchase ten thousand (10,000) shares of
the Company's Common Stock, with an exercise price equal to $2.15, with all such
options vesting on the date of the grant.
The Company granted to each of two (2) former members of the Company's
Scientific Advisory Board, effective November 1, 2001, options to purchase an
aggregate of twenty-five thousand (25,000) shares of the Company's Common Stock,
with an exercise price equal to $2.15, with all such options vesting on the date
of the grant.
For services rendered, including providing the Company with advertising,
introductions to strategic alliance partners and, from time to time, use of its
office space, entertainment facilities and various other support services, the
Company granted to a certain entity, effective as of November 1, 2001, a ten
(10) year warrant to purchase eighty thousand (80,000) shares of the Company's
Common Stock, at an exercise price equal to $2.15 per share, the closing price
of the Company's Common Stock as quoted on the NASD OTC Bulletin Board on
October 31, 2001. The warrant shall vest as follows: one-third (1/3) on the date
of grant and one-third (1/3) on each of the first and second anniversaries of
the date of grant.
For investment advisory services rendered, the Company granted to certain
individuals, effective as of October 15, 2001, seven (7) year warrants to
purchase an aggregate of fifty thousand (50,000) shares of the Company's Common
Stock, at an exercise price equal to $1.00 per share. The warrants shall vest as
follows: one-third (1/3) on the date of grant and one-third (1/3) on each of the
first and second anniversaries of the date of grant.
For legal services rendered, the Company granted to certain entities,
effective as of November 1, 2001, ten (10) year warrants to purchase an
aggregate of thirty thousand (30,000) shares of the Company's Common Stock, at
an exercise price equal to $2.15 per share, the closing price of the Company's
Common Stock as quoted on the NASD OTC Bulletin Board on October 31, 2001. The
warrants shall vest as follows: one-third (1/3) on the date of grant and
one-third (1/3) on each of the first and second anniversaries of the date of
grant.
No underwriter was employed by the Company in connection with the issuance
of the securities described above. The Company believes that the issuance of the
foregoing securities was exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended, as transactions not involving a public
offering. Each of the recipients acquired the securities for investment purposes
only and not with a view to distribution and had adequate information about the
Company.
-23-
ITEM 5. OTHER INFORMATION.
Management Restructuring
On 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, the Company's Vice Chairman, resigned as a director.
On 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 resigned as Chief Executive Officer and Steven Katz resigned as
President and Chief Operating Officer of the Company. Mr. Stalder continues to
serve as the Chairman and a director and Mr. Katz will continue to serve as a
director until the end of his term on November 29, 2001.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
4.1 Warrant Agreement by and between the Company and Christenson,
Hutchinson, McDowell, LLC.
(b) Reports on Form 8-K.
None.
-24-
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SENESCO TECHNOLOGIES, INC.
DATE: November 14, 2001 By: /s/ Bruce C. Galton
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Bruce C. Galton, President
and Chief Executive Officer
(Principal Executive Officer)
DATE: November 14, 2001 By: /s/ Joel Brooks
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Joel Brooks, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting
Officer)