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 December 31, 2002
Commission File No. 001-31326
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, New Jersey 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 January 31, 2003:
Class Number of Shares
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Common Stock, $0.01 par value 11,880,045
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 December 31, 2002 (unaudited) and June 30, 2002...... 2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the
Three Months Ended December 31, 2002 and December 31,
2001, For the Six Months Ended December 31, 2002 and
December 31, 2001, and From Inception on July 1, 1998
through December 31, 2002 (unaudited)...................... 3
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY
From Inception on July 1, 1998 through December 31, 2002
(unaudited)................................................ 4
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended December 31, 2002 and December
31, 2001, and From Inception on July 1, 1998 through
December 31, 2002 (unaudited).............................. 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)..................................... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 11
Overview................................................... 11
Factors That May Affect Our Business, Future Operating
Results and Financial Condition............................ 22
Liquidity and Capital Resources............................ 32
Changes to Critical Accounting Policies and Estimates...... 35
Results of Operations...................................... 36
Item 3. Controls and Procedures.............................. 39
PART II. OTHER INFORMATION.
Item 2. Changes in Securities and Use of Proceeds............ 40
Item 4. Stockholder Vote..................................... 40
Item 5. Other Information.................................... 41
Item 6. Exhibits and Reports on Form 8-K..................... 42
SIGNATURES AND CERTIFICATIONS
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PART I. FINANCIAL INFORMATION.
-----------------------------
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, and its wholly owned subsidiary, Senesco, Inc., a New
Jersey corporation (collectively, "Senesco" or the "Company"), 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
------------------------------------
December 31, June 30,
2002 2002
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(unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents..................................................... $ 436,784 $ 798,711
Short-term investments........................................................ 3,136,791 2,872,432
Accounts receivable........................................................... -- 75,000
Prepaid expenses and other current assets..................................... 217,032 55,772
-------------- --------------
Total Current Assets..................................................... 3,790,607 3,801,915
Long-term investments......................................................... -- 993,535
Property and equipment, net................................................... 69,323 79,581
Intangibles................................................................... 404,436 347,978
Security deposit.............................................................. 7,187 7,187
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TOTAL ASSETS............................................................. $ 4,271,553 $ 5,230,196
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable.............................................................. $ 47,481 $ 80,201
Accrued expenses.............................................................. 299,201 296,347
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Total Current Liabilities.............................................. 346,682 376,548
Grant payable................................................................. 79,061 67,972
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TOTAL LIABILITIES........................................................ 425,743 444,520
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STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; authorized 5,000,000 shares,
no shares issued........................................................... -- --
Common stock, $0.01 par value; authorized 30,000,000 shares,
issued and outstanding 11,880,045 shares................................... 118,800 118,800
Capital in excess of par...................................................... 12,234,373 12,157,679
Deficit accumulated during the development stage.............................. (8,507,363) (7,430,321)
Deferred compensation related to issuance of options and warrants............. -- (60,482)
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Total Stockholders' Equity................................................. 3,845,810 4,785,676
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................. $ 4,271,553 $ 5,230,196
============== ==============
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 on
For the Three For the Three For the Six For the Six July 1, 1998
Months Ended Months Ended Months Ended Months Ended through
December 31, December 31, December 31, December 31, December 31,
2002 2001 2002 2001 2002
------------- ------------- ------------ ------------ -----------------
Revenue................................ $ -- $ 125,000 $ 10,000 $ 125,000 $ 210,000
------------- ------------- ------------ -------------- ---------------
Operating Expenses:
General and administrative........... 398,789 395,409 762,013 676,128 5,789,790
Research and development............. 215,803 93,821 360,087 156,976 1,859,663
Stock based compensation............. 97,497 387,192 137,177 541,040 1,498,435
------------- ------------- ------------ -------------- ---------------
Total Operating Expenses............... 712,089 876,422 1,259,277 1,374,144 9,147,888
------------- ------------- ------------ -------------- ---------------
Loss From Operations................... (712,089) (751,422) (1,249,277) (1,249,144) (8,937,888)
Sale of state income tax loss.......... 130,952 150,551 130,952 150,551 341,834
Interest income (expense), net......... 18,727 (3,895) 41,283 (7,448) 88,691
----------- ----------- ------------ -------------- -------------
Net Loss............................... $ (562,410) $ (604,766) $ (1,077,042) $ (1,106,041) $ (8,507,363)
=========== =========== ============ ============== =============
Basic and Diluted Net Loss Per Common
Share.................................. $ (0.05) $ (0.07) $ (0.09) $ (0.14)
=========== =========== ============ ==============
Basic and Diluted Weighted Average
Number of Common
Shares Outstanding..................... 11,880,045 8,403,231 11,880,045 8,138,262
=========== =========== ============ ==============
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
--------------------------------------------------------
FROM INCEPTION ON JULY 1, 1998 THROUGH DECEMBER 31, 2002
--------------------------------------------------------
(unaudited)
Deferred
Deficit Compensation
Accumulated Related to the
Capital in During the Issuance of
Excess of Development Options and
Common Stock Par Value Stage Warrants Total
---------------------- --------------- ------------- --------------- -----------
Shares Amount
------ ------
Common stock outstanding............. 2,000,462 $ 20,005 $ (20,005) -- -- --
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
Issuance of common stock for cash on
February 4, 2000 at $2.934582 per
share................................ 85,191 852 249,148 -- -- 250,000
(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
--------------------------------------------------------
FROM INCEPTION ON JULY 1, 1998 THROUGH DECEMBER 31, 2002
--------------------------------------------------------
(unaudited)
Deferred
Deficit Compensation
Accumulated Related to
Capital in During the the Issuance
Excess of Development of Options
Common Stock Par Value Stage and Warrants Total
------------------- ------------ ------------- ------------- -----------
Shares Amount
------ ------
Issuance of common stock for
cash on March 15, 2000 at
$2.527875 per share................... 51,428 $ 514 $ 129,486 -- -- $ 130,000
Issuance of common stock for cash on
June 22, 2000 at $1.50 per
share................................. 1,471,700 14,718 2,192,833 -- -- 2,207,551
Commissions, legal and bank fees
associated with issuances for the
year ended June 30, 2000.............. -- -- (260,595) -- -- (260,595)
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
Fair market value of warrants
granted on October 15, 2001........... -- -- 40,498 -- -- 40,498
Fair market value of options and
warrants granted on November 1, 2001.. -- -- 138,714 -- -- 138,714
Issuance of common stock and
warrants for cash from
November 30, 2001 through
April 17, 2002........................ 3,701,430 37,014 6,440,486 -- -- 6,477,500
Fair market value of options
and warrants granted on December 1,
2001.................................. -- -- 262,550 -- -- 262,550
(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
--------------------------------------------------------
FROM INCEPTION ON JULY 1, 1998 THROUGH DECEMBER 31, 2002
--------------------------------------------------------
(unaudited)
Deferred
Deficit Compensation
Accumulated Related to the
Capital in During the Issuance of
Excess of Development Options and
Common Stock Par Value Stage Warrants Total
-------------------- ---------- ----------- -------------- ----------
Shares Amount
------ ------
Issuance of common stock and
warrants associated with bridge
loan conversion on December 3,
2001............................... 305,323 $ 3,053 $ 531,263 -- -- $ 534,316
Fair market value of options
vested and extended on January 1,
2002............................... -- -- 94,146 -- -- 94,146
Commissions, legal and
bank fees associated with
issuances for the year ended
June 30, 2002...................... -- -- (846,444) -- -- (846,444)
Fair market value of warrants
vested on October 15, 2002......... -- -- 27,832 -- -- 27,832
Fair market value of warrants
vested on November 1, 2002......... -- -- 69,665 -- -- 69,665
Fair value of options and warrants
vested and change in
fair value of options and warrants
granted............................ -- -- 118,695 -- $ 180,732 299,427
Net loss........................... -- -- -- $ (8,507,363) -- (8,507,363)
---------- ---------- -------------- ------------ ----------- -----------
Balance at December 31, 2002....... 11,880,045 $ 118,800 $ 12,234,373 $ (8,507,363) $ -- $ 3,845,810
========== ========== ============== ============ =========== ===========
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 on
For the Six Months Ended July 1, 1998 through
December 31, December 31,
2002 2001 2002
---------------- ------------------ -----------------------
Cash flows from operating activities:
Net loss........................................................ $ (1,077,042) $ (1,106,041) $ (8,507,363)
Adjustments to reconcile net loss
to net cash used in operating activities:
Noncash capital contribution.................................... -- -- 85,179
Noncash conversion of accrued expenses into equity.............. -- -- 131,250
Issuance of common stock and warrants for interest.............. -- 9,316 9,316
Issuance and vesting of stock options and warrants
for services.................................................... 137,177 541,040 1,498,435
Depreciation and amortization................................... 12,237 11,371 83,470
(Increase) decrease in operating assets:
Accounts receivable............................................. 75,000 -- --
Prepaid expense and other current assets........................ (161,260) 6,464 (217,032)
Security deposit................................................ -- -- (7,187)
Increase (decrease) in operating liabilities:
Accounts payable................................................ (32,720) (143,774) 47,481
Accrued expenses................................................ 2,854 279,124 299,201
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Net cash used in operating activities........................... (1,043,754) (402,500) (6,577,250)
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Cash flows from investing activities:
Patent costs.................................................... (56,458) (72,315) (414,453)
Redemption (purchase) of investments, net....................... 729,176 -- (3,136,791)
Purchase of property and equipment.............................. (1,980) (9,616) (142,776)
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Net cash provided by (used in) investing activities............. 670,738 (81,931) (3,694,020)
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Cash flows from financing activities:
Proceeds from grant............................................. 11,089 11,051 79,061
Proceeds from issuance of bridge notes.......................... -- 525,000 525,000
Proceeds from issuance of common stock and warrants, net........ -- 2,750,478 10,103,993
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Cash provided by financing activities........................... 11,089 3,286,529 10,708,054
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Net increase (decrease) in cash and cash equivalents............ (361,927) 2,802,098 436,784
Cash and cash equivalents at beginning of period................ 798,711 14,330 --
--------------- -------------- ----------------
Cash and cash equivalents at end of period...................... $ 436,784 $ 2,816,428 $ 436,784
=============== ============== ================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest...................... $ -- $ -- $ 22,317
=============== ============== ================
Supplemental schedule of noncash financing activity:
Conversion of bridge notes into stock......................... $ -- $ -- $ 534,316
=============== ============== ================
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 unaudited 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, 2002.
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 December 31, 2002 and as of June 30, 2002,
the results of its operations for the three-month periods ended December 31,
2002 and 2001, the results of its operations and cash flows for the six-month
periods ended December 31, 2002 and 2001 and for the period from inception on
July 1, 1998 through December 31, 2002.
Interim results are not necessarily indicative of results for the full
fiscal year.
Senesco is a development stage functional genomics company whose mission is
to (i) enhance the quality and productivity of fruits, flowers, vegetables and
agronomic crops through the control of cell death in plants (senescence); and
(ii) develop novel approaches to treat programmed cell death diseases in humans
(apoptosis) (e.g., arthritis, macular degeneration, glaucoma, heart disease,
Alzheimer's disease and Parkinson's disease), which are the result of premature
cell death in humans, and cancer, a group of diseases in which apoptosis is
blocked. Agricultural results to date include longer shelf life of perishable
produce, increased seed and biomass yield and greater tolerance to environmental
stress. Mammalian results to date include determining the expression of the
Company's patent pending genes in both ischemic and non-ischemic heart tissue
and inducing apoptosis in human cancer cell lines derived from tumors.
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, for the
three months ended December 31, 2002 and 2001, shares to be issued upon the
exercise of options and warrants aggregating 5,838,696 and 2,064,105,
respectively, at an average exercise price of $2.62 and $2.62, respectively, and
for the six months ended December 31, 2002 and 2001, shares to be issued upon
the exercise of options and warrants aggregating 5,828,425 and 1,462,379,
respectively, at an average exercise price of $2.62 and $2.62, respectively, are
not included in the computation of diluted loss per share as the 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:
AUTHORIZED STOCK, STOCK INCENTIVE PLAN, OPTION AND WARRANT GRANTS
On October 9, 2002, the Board of Directors of the Company (the "Board")
approved: (i) an amendment to the Company's Certificate of Incorporation to
increase the authorized shares of Common Stock available for issuance from
20,000,000 shares to 30,000,000 shares; and (ii) an amendment to the Company's
1998 Stock Incentive Plan, as amended (the "Plan"), to increase the maximum
number of shares of Common Stock available for issuance under the Plan from
2,000,000 shares to 3,000,000 shares. Stockholder approval for these amendments
was obtained at the Company's Annual Meeting of Stockholders held on December
13, 2002.
On October 9, 2002, the Board unanimously approved and the Company
subsequently granted options under the Plan to purchase an aggregate of 22,500
shares of Common Stock to two of the Company's executive officers at an exercise
price equal to $1.65 per share, with one-third of such options becoming
exercisable on each of the first, second and third anniversaries from the date
of grant.
On December 13, 2002, the Board unanimously approved and the Company
subsequently granted, effective January 7, 2003: (i) options under the Plan to
purchase an aggregate of 75,000 shares of Common Stock to certain members of the
Board at an exercise price equal to $2.35 per share, with one-half of such
options exercisable on the date of grant and one-half of such options becoming
exercisable on the first anniversary from the date of grant; (ii) options under
the Plan to purchase an aggregate of 57,500 shares of Common Stock to the
members of the Company's Scientific Advisory Board, certain research consultants
and an executive officer of the Company, at an exercise price equal to $2.35 per
share, with one-third of such options becoming exercisable on each of the first,
second and third anniversaries from the date of grant; and (iii) a warrant to
purchase 15,000 shares of Common Stock to Forbes, Inc. at an exercise price
equal to $2.35 per share, with one-third of such warrant becoming exercisable on
each of the first, second and third anniversaries from the date of grant.
CONSULTING AGREEMENTS
On November 1, 2002, the Company entered into another one-year consulting
agreement with Dr. Alan Bennett, a member of the Company's Scientific Advisory
Board, who is experienced in plant transformation. The agreement provides for
monthly payments of $2,400 to Dr. Bennett.
On December 23, 2002, the Company entered into a six-month financial
consulting agreement with Perrin, Holden & Davenport Capital Corp. The agreement
is effective on February 1, 2003 and provides for monthly payments of $5,000.
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Effective January 1, 2003, the Company amended its consulting agreement
with John E. Thompson, Ph.D., to increase the monthly payments to Dr. Thompson
from $3,000 to $5,000 through June 2004.
NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY
In December 2002, 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 New Jersey net
operating loss tax benefit in the amount of $151,390 for the fiscal year ended
June 30, 2001. In December 2002, the Company sold its entire New Jersey net
operating loss tax benefit and received net proceeds of $130,952. The Company
may apply to participate in the Program to sell its New Jersey net operating
loss tax benefit in the amount of approximately $132,000 for the fiscal year
ended June 30, 2002. An application must be submitted to the EDA by June 30,
2003. However, there can be no assurance that the Company will be approved to
participate in the Program for the year ended June 30, 2002 or if approved, that
the Company will be able to sell all or part of its New Jersey net operating
loss tax benefit.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
OUR BUSINESS
The primary business of Senesco Technologies, Inc., a Delaware corporation
incorporated in 1999, and its wholly-owned subsidiary, Senesco, Inc., a New
Jersey corporation incorporated in 1998, collectively referred to as "Senesco,"
"we," "us" or "our," is the research, development and commercial exploitation of
a potentially significant platform technology involving the identification and
characterization of genes that we believe control the programmed cell death of
plant cells, also known as senescence, and mammalian cells, also known as
apoptosis.
AGRICULTURAL APPLICATIONS
Our technology goals for agricultural applications are to: (i) extend the
shelf-life of perishable plant products; (ii) produce larger and leafier crops;
(iii) increase yield in horticultural and agronomic crops; and (iv) reduce the
harmful effects of environmental stress.
Senescence is the natural aging of plant 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, or
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. We have 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. We have also shown that reducing
premature senescence allows the plant to allocate more energy toward growth,
leading to larger plants, with increased biomass, and more leafy crops. Most
recently, we have demonstrated that reducing premature senescence results in
crops which exhibit increased resilience to water deprivation and salt stress.
Drought and salt 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.
Our research and development focuses on the discovery and development of
certain gene technologies, which are designed to confer positive traits on
fruits, flowers, vegetables, forestry species and agronomic crops. To date, we
have isolated and characterized the senescence-induced lipase gene,
deoxyhypusine synthase, or DHS, gene and Factor 5A gene in certain species of
plants. Our 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
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resistance to environmental stress, thereby demonstrating proof of concept in
each category of crop. We have licensed this technology to various strategic
partners and have entered into a joint venture, and we intend to continue to
license this technology to additional strategic partners and/or enter into
additional joint ventures.
We are currently working with lettuce, melon, tomato, canola, Arabidopsis,
a model plant that produces oil in a manner similar to canola, banana plants,
and certain species of trees and alfalfa, and have obtained proof of concept for
the lipase and DHS genes in several of these plants. Also, we have initiated
field trials of lettuce and bananas with our respective partners. Near-term
research and development initiatives include: (i) silencing or reducing the
expression of DHS and Factor 5A genes in these plants; and (ii) propagation and
testing of plants with our silenced genes. We have also completed our research
and development initiative in carnation flower, which yielded a 100% increase in
shelf-life through the inhibition of the DHS reaction.
HUMAN HEALTH APPLICATIONS
Inhibiting Apoptosis
--------------------
We have also isolated the DHS and programmed cell death Factor 5A genes in
mammalian tissue. Our preliminary research reveals that DHS and Factor 5A genes
regulate apoptosis in animal and human cells. The mammalian apoptosis isoforms
of the DHS and Factor 5A genes were first isolated from the ovarian tissue of
rats, which undergoes apoptosis naturally at the end of the female reproductive
cycle. The sequences of the mammalian apoptosis DHS and Factor 5A genes are very
similar to those of the corresponding plant genes in keeping with their common
functions. Moreover, inhibiting the function of the Factor 5A gene in rats has
been shown to inhibit the induction of corpus luteum apoptosis. Apoptosis, as
manifested by DNA fragmentation, was clearly detectable in super-ovulated
control female rats within three hours of treatment with prostaglandin F2a. This
hormone induces corpus luteum apoptosis naturally in mammals, but in
super-ovulated animals in which the activation of Factor 5A had been inhibited,
DNA fragmentation reflecting apoptosis was not apparent. Thus, just as these
genes can be used to delay senescence in plants, this experiment shows that they
may also be used to inhibit apoptosis in mammals. We believe that our technology
has potential application as a means of controlling a broad range of diseases
that are attributable to premature apoptosis, including neurodegenerative
diseases, such as Alzheimer's disease and Parkinson's disease, retinal diseases,
such as glaucoma and macular degeneration, heart disease, stroke and arthritis.
We have commenced pre-clinical research on heart tissue samples from both
ischemic and non-ischemic patients with heart disease and have found that Factor
5A is significantly upregulated in ischemic heart tissue. Ischemia is the
restriction of blood supply to the heart that can result in heart attacks and
damage to heart tissue. In addition, we have initiated cell-line studies for
applications of our technology to glaucoma.
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Accelerating Apoptosis
----------------------
Conversely, we have also established in pre-clinical studies that our
apoptosis Factor 5A gene is able to kill cancer cells. Tumors arise when cells
that have been targeted to undergo apoptosis are unable to do so because of an
inability to activate the apoptotic pathways. When our apoptosis Factor 5A gene
was introduced into RKO cells, a cell line derived from human carcinoma and COS7
cells, an immortal, cancer-like cell line from monkeys, virtually all cells
expressing the Factor 5A gene underwent apoptosis. Moreover, just as the
senescence Factor 5A gene appears to facilitate expression of the entire suite
of genes required for programmed cell death in plants, the apoptosis Factor 5A
gene appears to regulate expression of a suite of genes required for programmed
cell death in mammals. For example, over expression of apoptosis Factor 5A up
regulates p53, an important tumor suppressor gene that promotes apoptosis in
cells with damaged DNA and also down regulates bcl 2, a suppressor of apoptosis.
Because the Factor 5A gene appears to function at the initiation point of the
apoptotic pathways, we believe that our gene technology has potential
application as a means of combating a broad range of cancers.
AGRICULTURAL TARGET MARKETS
Our 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 market, we have adopted a
multi-faceted commercialization strategy, in which we plan to enter into
licensing agreements or other strategic relationships with a variety of
companies or other entities on a crop-by-crop basis.
In November 2001, we entered into a worldwide exclusive development and
license agreement, referred to herein as the Harris Moran License, with Harris
Moran Seed Company to commercialize our technology in lettuce and certain melons
for an indefinite term, unless terminated by either party pursuant to the terms
of the agreement. In connection with the Harris Moran License, we received an
initial license fee of $125,000 in November 2001. Upon the completion of certain
marketing and development benchmarks set forth in the Harris Moran License, we
will receive an additional $3,875,000 in development payments over a multi-year
period along with royalties upon commercial introduction.
To date, the development steps performed by Harris Moran and us have all
been completed on schedule in accordance with the protocol set forth in the
Harris Moran License. There has been extensive characterization of our genes in
lettuce in a laboratory setting. The initial lab work has produced genetically
modified seed under greenhouse containment, which has been followed by
substantial field trials for evaluation. These field trials represent a vital
step in the process necessary to develop a commercial product. Harris Moran
foresees additional field trials of our technology by June 2003.
In June 2002, we entered into a three-year worldwide exclusive development
and option agreement, referred to herein as the ArborGen Agreement, with
ArborGen, LLC to develop our technology in certain species of trees. In
connection with the ArborGen Agreement, we received an initial development fee
of $75,000 in July 2002. Upon the completion of certain development benchmarks
set forth in the ArborGen Agreement, we will receive an additional $225,000 in
periodic development payments over the term of the ArborGen Agreement. The
ArborGen
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Agreement also grants ArborGen an option to acquire an exclusive worldwide
license to commercialize our technology in various other forestry products, and
upon the execution of a license agreement, we will receive a license fee and
royalties from ArborGen.
In September 2002, we entered into an exclusive development and license
agreement, referred to herein as the Cal/West License, with Cal/West Seeds to
commercialize our technology in certain varieties of alfalfa. The Cal/West
License will continue until the expiration of the patents set forth in the
agreement, unless terminated earlier by either party pursuant to the terms of
the agreement. The Cal/West License also grants Cal/West an exclusive option to
develop our technology in various other forage crops. In connection with the
execution of the Cal/West License, we received an initial fee of $10,000 from
Cal/West. Upon the completion of certain development benchmarks, we will receive
an additional $20,000 in periodic payments, and upon the commercialization of
certain products, we will receive royalty payments from Cal/West.
In October 2002, we entered into a non-exclusive sales representative
agreement to market and promote our technology in the People's Republic of
China. Under the terms of the agreement, we will pay a commission to the sales
representative based on a percentage of the gross license fees we receive. With
the assistance of the sales representative, in November 2002, we executed a
non-binding letter of intent with the Tianjin Academy of Agricultural Sciences
for the exclusive use of our technology in a variety of fruit and vegetable
crops in China. Due to the size and scope of the proposed agreement and the
complexities of doing business in China, we anticipate that our ongoing
discussions will continue over the course of the next several months.
HUMAN HEALTH TARGET MARKETS
We believe that our gene technology could have broad applicability in the
human health field, by either inhibiting or accelerating apoptosis. Inhibiting
apoptosis may be useful in preventing or treating a wide range of diseases
attributed to premature apoptosis, including stroke, heart disease, arthritis,
retinal diseases such as glaucoma, and macular degeneration and
neurodegenerative diseases such as Alzheimer's disease and Parkinson's disease.
Accelerating apoptosis may be useful in treating certain forms of cancer because
the body's immune system is not able to force cancerous cells to undergo
apoptosis.
COMPETITION
Competitors who are presently attempting to distribute their technology
have generally utilized one of the following distribution channels: (i)
licensing technology to major marketing and distribution partners; or (ii)
entering into strategic alliances. In addition, some competitors are owned by
established distribution companies, which alleviates the need for strategic
alliances, while others are attempting to create their own distribution and
marketing channels.
Our 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; Aventis
Crop Science; Mendel Biotechnology; Bionova Holding Corporation; Renessen LLC;
Exelixis Plant Sciences, Inc.; PlantGenix, Inc.; and Eden Bioscience.
-14-
Companies working in the field of apoptosis research include, among others:
Cell Pathways, Inc.; Trevigen, Inc.; Idun Pharmaceuticals; Novartis; Introgen
Therapeutics, Inc.; Genta, Inc.; and Oncogene, Inc.
MARKETING PROGRAM
Based upon our multi-faceted commercialization strategy, we anticipate that
there may be a significant period of time before plants enhanced using our
technology reach consumers. Thus, we have not begun to actively market our
technology directly to consumers, but rather, we have sought to establish
ourselves within the industry through advertising in a national magazine, as
well as through our website and direct communication with prospective licensees.
RESEARCH PROGRAM
Our subsequent research and development initiatives include: (i) further
developing the lipase, DHS and Factor 5A gene technology in lettuce, melon and
banana, and implementing the technology in a variety of other commercially
important agricultural crops such as tomato, alfalfa and trees; (ii) testing the
resultant crops for new beneficial traits such as increased yield and increased
tolerance to environmental stress; and (iii) assessing the role of the DHS and
Factor 5A genes in human diseases through the accumulation of additional data
from pre-clinical experiments with cell lines, mammalian tissue and animal
models. Our strategy for agriculture focuses on various plants to allow
flexibility that will accommodate different plant reproduction strategies among
the different sectors of the broad agricultural and horticultural markets.
Our research and development is performed by third party researchers at our
direction, pursuant to various research and license agreements. The primary
research and development effort takes place at the University of Waterloo in
Ontario, Canada, where the technology was developed, and at the University of
Colorado. Additional research and development is performed in connection with
the Harris Moran License, the ArborGen Agreement, the Cal/West License and the
Tilligen Agreement, as well as through the joint venture with Rahan Meristem
Ltd. in Israel. During the three months ended December 31, 2002 and December 31,
2001, we incurred aggregate research and development expenses of $215,803 and
$93,821, respectively. During the six months ended December 31, 2002 and
December 31, 2001, we incurred aggregate research and development expenses of
$360,087 and $156,976, respectively. As of December 31, 2002, our aggregate
research and development expenses since inception totaled $1,859,663.
For the three months ended December 31, 2002, approximately 50% of our
research and development expenses were incurred on mammalian research
applications. Since our inception, the proportion of research and development
expenses on mammalian applications has increased, as compared to plant
applications. This change is primarily due to the fact that our research focus
on mammalian applications has increased and some of our research costs for plant
applications have shifted to our research partners.
-15-
JOINT VENTURE
On May 14, 1999, we entered into a joint venture agreement with Rahan
Meristem Ltd., an Israeli company engaged in the worldwide export marketing of
banana germ-plasm, referred to herein as the Rahan Joint Venture. Rahan Meristem
accounts for approximately 10% of the worldwide export of banana seedlings. We
have contributed, by way of a limited, exclusive, world-wide license to the
Rahan Joint Venture, access to our technology, discoveries, inventions and
know-how, whether patentable or otherwise, pertaining to plant genes and their
cognate expressed proteins that are induced during senescence for the purpose of
developing, on a joint basis, genetically enhanced banana plants which will
result in a banana that has a longer shelf-life. Rahan Meristem has contributed
its technology, inventions and know-how with respect to banana plants. Rahan
Meristem and we equally own the Rahan Joint Venture.
The Rahan Joint Venture applied for and received a conditional grant that
totals approximately $340,000, which constitutes 50% of the Rahan Joint
Venture's research and development budget over a four-year period, from the
Israel - U.S. Binational Research and Development Foundation, or BIRD
Foundation, referred to herein as the BIRD Grant. Such grant, along with certain
royalty payments, shall only be repaid to the BIRD Foundation upon the
commercial success of the Rahan Joint Venture's technology. The commercial
success is measured based upon certain benchmarks and/or milestones achieved by
the Rahan Joint Venture. The Rahan Joint Venture reports these benchmarks
periodically to the BIRD Foundation. As of December 31, 2002, we have directly
received a total of $79,061, none of which was received during the current
quarter, from the BIRD Foundation for research and development expenses we have
incurred which are associated with the research and development efforts of the
Rahan Joint Venture. We expect to receive additional installments of the BIRD
Grant as our expenditures associated with the Rahan Joint Venture increase above
certain levels. Our portion of the Rahan Joint Venture's aggregate expenses
totaled approximately $15,000 and $13,000 for the six months ended December 31,
2002 and December 31, 2001, respectively, and is included in research and
development expenses. As of December 31, 2002, our portion of the Rahan Joint
Venture's aggregate expenses to date totaled approximately $145,000.
All aspects of the Rahan 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 Rahan Joint Venture. Both the DHS and lipase genes
have been identified and isolated in banana, and the Rahan Joint Venture is
currently in the process of silencing these genes. The resultant plants will be
tested to assess extended shelf-life of banana fruit and enhanced tolerance to
environmental stress. Banana plants containing our technology are currently
being tested in field trials.
Consistent with our commercialization strategy, we intend to attract other
companies interested in strategic partnerships, joint ventures or licensing our
technology. The Harris Moran License, the ArborGen Agreement, the Cal/West
License and the Rahan Joint Venture are the first successes toward the execution
of our strategy.
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INTELLECTUAL PROPERTY
Research and Development
------------------------
The inventor of our technology, John E. Thompson, Ph.D., is the Associate
Vice-President, Research and former Dean of Science at the University of
Waterloo in Ontario, Canada, and is our Executive Vice President of Research and
Development. Dr. Thompson is also one of our directors and owns 4.8% of the
outstanding shares of our common stock, $0.01 par value, as of December 31,
2002. On September 1, 1998, we entered into a three-year research and
development agreement with the University of Waterloo and Dr. Thompson as the
principal inventor, referred to herein as the First Research and Development
Agreement. Effective September 1, 2001 and 2002, we extended the First Research
and Development Agreement for an additional one-year period and two-year period,
respectively. Effective May 1, 2002, we entered into a new one-year research and
development agreement with the University of Waterloo and Dr. Thompson, referred
to herein as the Second Research and Development Agreement. The First Research
and Development Agreement and the Second Research and Development Agreement are
collectively referred to herein as the Research and Development Agreements.
The Research and Development Agreements provide that the University of
Waterloo will perform research and development under our direction, and we will
pay for the cost of this work and make certain payments to the University of
Waterloo. In return for payments made under the Research and Development
Agreements, we have all rights to the intellectual property derived from the
research. As of December 31, 2002, we have paid the University of Waterloo an
aggregate of approximately US $1,120,000 under the First Research and
Development Agreement. Under the second extension to the First Research and
Development Agreement, we are obligated to pay Can $1,092,800, which represented
approximately US $691,000 as of December 31, 2002. Under the Second Research and
Development Agreement, we are obligated to pay Can $50,000, which represented
approximately US $32,000 as of December 31, 2002. During the three-month periods
ended December 31, 2002 and December 31, 2001, we incurred expenses of $100,643
and $67,022, respectively, in connection with the Research and Development
Agreements. During the six-month periods ended December 31, 2002 and December
31, 2001, we incurred expenses of $190,737 and $114,160, respectively, in
connection with the Research and Development Agreements.
Effective May 1, 1999, we entered into a consulting agreement for research
and development with Dr. Thompson. On July 1, 2001, we renewed the consulting
agreement with Dr. Thompson for an additional three-year term as provided for
under the terms and conditions of the agreement. Effective January 1, 2003, the
agreement was amended to provide for an increase in the monthly payments to Dr.
Thompson from $3,000 to $5,000 through June 2004. The agreement shall
automatically renew for an additional three-year term, unless either of the
parties provides the other with written notice within six months prior to the
end of the term.
In September 2002, we entered into an exclusive worldwide collaboration
agreement, referred to herein as the Tilligen Agreement, with Tilligen, Inc. to
establish a research alliance to develop and commercialize certain genetically
enhanced species of produce. Under the Tilligen Agreement, Tilligen will license
its proprietary technology to us and will also perform certain transformation
functions in order to develop seeds in certain species of produce that have been
enhanced with our technology. The Tilligen Agreement will continue until the
expiration of the
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patents set forth in the agreement, unless terminated earlier by either party
pursuant to the terms of the agreement. In connection with the execution of the
Tilligen Agreement, we incurred an initial research and development fee of
$200,000, which is being amortized over the term of the research to be performed
under the agreement. Upon the completion of certain development benchmarks, we
will incur additional research and development fees, and upon commercialization
of the enhanced produce, we will make certain royalty payments to Tilligen.
Our future research and development program focuses on the discovery and
development of certain gene technologies which intend to extend shelf life and
to confer other positive traits on fruits, flowers, vegetables and agronomic row
crops and on expanding our mammalian research programs. Over the next twelve
months, we are planning the following research and development initiatives: (i)
the development of plants that possess new beneficial traits, such as protection
against drought, with emphasis on lettuce, melon, corn, forestry products,
alfalfa and the other species described below with several entities, including
Tilligen; (ii) the development of enhanced lettuce and melon plants through the
Harris Moran License; (iii) the development of enhanced trees through the
ArborGen Agreement; (iv) the development of enhanced alfalfa through the
Cal/West License; (v) the isolation of new genes in the Arabidopsis, tomato,
lettuce, soybean, rape seed (canola) and melon plants, among others, at the
University of Waterloo; (vi) the isolation of new genes in the banana plant
through the Rahan Joint Venture; (vii) the transformation of seed enhanced with
our technology; and (viii) assessing the function of the DHS and Factor 5A genes
in human diseases at the University of Waterloo and the University of Colorado.
We may further expand our 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, referred to herein as 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, or 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. We 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, referred to herein as 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 to us 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. Drs. Thompson, Hong and Hudak have
received shares of our common stock 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. We believe that the
inventions provide a means for delaying deterioration and spoilage, which could
greatly
-18-
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.
We filed a second patent application, referred to herein as 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 to us 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. Drs. Thompson, Wang and Lu have received options to
purchase our common stock as 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.
We have broadened the scope of our intellectual property protection by
utilizing the Patent Cooperation Treaty to facilitate international filing and
prosecution of the Patent Applications. The First Patent Application was
published through the Patent Cooperation Treaty 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, which has
twenty member states. Israel and Mexico are the last remaining countries in
which we have opted to file that have yet to issue a filing date. The Patent
Cooperation Treaty published the Second Patent Application in January 2001.
We have filed several new Continuations in Part and Divisional Patent
Applications on both the First Patent Application and the Second Patent
Application to protect our intellectual property pertaining to new technological
developments. We have also filed one additional application (the "Third Patent
Application") followed by a substantial Continuation in Part, in addition to
those listed above, which pertain to the possible mammalian applicability of our
technology. The Third Patent Application is focused on suppressing cell death as
a prospective therapy for a wide range of diseases and the Continuation in Part
focuses on accelerating cell death as a means of treating cancer. We have filed
a second Continuation in Part on the Third Patent Application based on data we
gathered in studies of ischemic heart tissue. We intend to continue our strategy
of enhancing these new patent applications through the addition of data as it is
collected.
-19-
GOVERNMENT REGULATION
At present, the U.S. federal government regulation of biotechnology is
divided among three agencies: (i) the U.S. Department of Agriculture regulates
the import, field-testing and interstate movement of specific types of genetic
engineering that may be used in the creation of transformed plants; (ii) the
Environmental Protection Agency regulates activity related to the invention of
plant pesticides and herbicides, which may include certain kinds of transformed
plants; and (iii) the Food and Drug Administration 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.
We believe that our current activities, which to date have been confined to
research and development efforts, do not require licensing or approval by any
governmental regulatory agency. However, we, or our licensees, may be required
to obtain such licensing or approval from governmental regulatory agencies prior
to the commercialization of our genetically transformed plants and mammalian
technology.
EMPLOYEES
In addition to the scientists performing funded research for us at the
University of Waterloo and the University of Colorado, as of December 31, 2002
and currently, we have five employees and one consultant, four of whom are
executive officers and are involved in our management.
The officers are assisted by a Scientific Advisory Board that consists of
prominent experts in the fields of plant and mammalian cell biology. Alan
Bennett, Ph.D., who serves as the Chairman of the Scientific Advisory Board, is
the Executive Director of the Office of Technology Transfer at the University of
California. His research interests include: the molecular biology of tomato
fruit development and ripening; the molecular basis of membrane transport; and
cell wall disassembly. Charles A. Dinarello, M.D., who serves as a member of the
Scientific Advisory Board, is a Professor of Medicine at the University of
Colorado School of Medicine, a member of the U.S. National Academy of Sciences
and the author of over 500 published research articles. In addition to his
active academic research career, Dr. Dinarello has held advisory positions with
two branches of the National Institutes of Health and positions on the Board of
Governors of both the Weizmann Institute and Ben Gurion University. Russell L.
Jones, Ph.D., who serves as a member of the Scientific Advisory Board, is a
professor at the University of California, Berkeley and an expert in plant cell
biology and cell death. Dr. Jones is also an editor of Planta, Annual Review of
Plant Physiology and Plant Molecular Biology as well as Research Notes in Plant
Science. Additionally, he has held positions on the editorial boards of Plant
Physiology and Trends in Plant Science.
-20-
In addition to his service on the Scientific Advisory Board, we utilize Dr.
Bennett as a consultant experienced in plant transformation. Effective November
1, 2001, we had entered into a one-year consulting agreement with Dr. Bennett,
which provided for monthly payments of $2,400 to Dr. Bennett through October 31,
2002. Effective November 1, 2002, we entered into another one-year consulting
agreement with Dr. Bennett on the same terms and conditions.
Furthermore, pursuant to the Research and Development Agreements, the
majority of our research and development activities are conducted at the
University of Waterloo under the supervision of Dr. Thompson. We utilize the
University's substantial research staff including graduate and post-graduate
researchers.
We have also undertaken pre-clinical apoptosis research at the University
of Colorado under the supervision of Dr. Dinarello. This research is performed
pursuant to specific project proposals that have agreed-upon research outlines,
timelines and budgets. We may also contract research to additional university
laboratories or to other companies in order to advance the development of our
technology.
We may hire additional employees over the next twelve months to meet the
needs created by possible expansion of our operations.
-21-
SAFE HARBOR STATEMENT
The statements contained in this Quarterly Report on Form 10-QSB that are
not historical facts are forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements may be
identified by, among other things, the use of forward-looking terminology such
as "believes," "expects," "may," "will," "should," or "anticipates" or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy that involve risks and uncertainties. In particular, our
statements regarding the anticipated growth in the markets for our technologies,
the continued advancement of our research, the approval of our 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 our commercialization strategy, including the
success of the Harris Moran License, the ArborGen Agreement, the Cal/West
License, the Tilligen Agreement and the Research and Development Agreements, the
successful implementation of the Rahan Joint Venture, the conversion of the
letter of intent with the Tianjin Academy of Agricultural Sciences into an
executed agreement, statements relating to our Patent Applications, the
anticipated longer term growth of our business, and the timing of the projects
and trends in future operating performance are examples of such forward-looking
statements. The forward-looking statements include risks and uncertainties,
including, but not limited to, the timing of revenues due to the variability in
size, scope and duration of research projects, regulatory delays, research study
results which lead to cancellations of research projects, and other factors,
including general economic conditions and regulatory developments, not within
our control. The factors discussed herein and expressed from time to time in our
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 forward-looking statements are made only as of the date
of this filing, and we undertake no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.
FACTORS THAT MAY AFFECT OUR BUSINESS, FUTURE OPERATING RESULTS AND FINANCIAL
CONDITION
The more prominent risks and uncertainties inherent in our business are
described below. However, additional risks and uncertainties may also impair our
business operations. If any of the following risks actually occur, our business,
financial condition or results of operations may suffer.
WE HAVE A LIMITED OPERATING HISTORY AND HAVE INCURRED SUBSTANTIAL LOSSES AND
EXPECT FUTURE LOSSES.
We are a developmental stage biotechnology company with a limited operating
history and limited assets and capital. We have incurred losses each year since
inception and have an accumulated deficit of $8,507,363 at December 31, 2002. We
have generated minimal revenues by licensing certain of our technology to
companies willing to share in our development costs. However, our technology may
not be ready for widespread commercialization for several years. We expect to
continue to incur losses over the next two to three years because we anticipate
that our expenditures on research and development, commercialization and
administrative activities will significantly exceed our revenues during that
period. We cannot predict when, if ever, we will become profitable.
-22-
WE DEPEND ON A SINGLE PRINCIPAL TECHNOLOGY.
Our primary business is the development and commercial exploitation of
technology to identify, isolate, characterize, and silence genes which control
the aging and death of cells in plants and mammals. Our future revenue and
profitability critically depend upon our ability to successfully develop
senescence and apoptosis gene technology and later market and license such
technology at a profit. We have conducted experiments on certain crops with
favorable results and have conducted certain preliminary cell-line experiments,
which have provided us with data upon which we have designed additional research
programs. However, we cannot give any assurance that our technology will be
commercially successful or economically viable for all crops or mammalian
applications.
In addition, no assurance can be given that adverse consequences might not
result from the use of our technology such as the development of negative
effects on plants or mammals or reduced benefits in terms of crop yield or
protection. Our failure to develop a commercially viable product, to obtain
market acceptance of our technology or to successfully commercialize such
technology would have a material adverse effect on our business.
WE OUTSOURCE ALL OF OUR RESEARCH AND DEVELOPMENT ACTIVITIES.
We rely on third parties to perform all of our research and development
activities. Our primary research and development efforts take place at the
University of Waterloo in Ontario, Canada, where our technology was developed,
at the University of Colorado, at Tilligen, Inc. and with our commercial
partners. At this time, we do not have the internal capabilities to perform our
research and development activities. Accordingly, the failure of third-party
research partners, such as the University of Waterloo, to perform under
agreements entered into with us, or our failure to renew important research
agreements with these third parties, would have a material adverse effect on our
ability to develop and exploit our technology.
WE HAVE SIGNIFICANT FUTURE CAPITAL NEEDS.
As of December 31, 2002, we had cash and highly-liquid investments valued
at $3,573,575 and working capital of $3,443,925. We believe that we can operate
according to our current business plan for at least twelve months using our
available reserves. To date, we have generated minimal revenues and anticipate
that our operating costs will exceed any revenues generated over the next
several years. Therefore, we anticipate that we will be required to raise
additional capital in the future in order to operate according to our current
business plan. We may require additional funding in less than twelve months, and
additional funding may not be available on favorable terms, if at all. In
addition, in connection with such funding, if we need to issue more equity
securities than our certificate of incorporation currently authorizes, or more
than 20% of the shares of our common stock outstanding, we may need stockholder
approval. If stockholder approval is not obtained or if adequate funds are not
available, we may be required to curtail operations significantly or to obtain
funds through arrangements with collaborative partners or others that may
require us to relinquish rights to certain of our technologies, product
candidates, products or potential markets. Investors may experience dilution in
their investment from future offerings of our common stock. For example, if we
raise additional capital by issuing equity securities, such an issuance would
reduce the percentage ownership of existing stockholders. In addition, assuming
the exercise of all options and warrants granted, as of December 31, 2002, we
had 12,131,802 shares of common stock authorized but unissued, which may be
issued from time to time by our board of directors without stockholder approval.
Furthermore, we may need to issue securities that have rights, preferences and
privileges senior
-23-
to our common stock. Failure to obtain financing on acceptable terms would have
a material adverse effect on our liquidity.
Since inception, we have financed all of our operations through private
equity financings. Our future capital requirements depend on numerous factors,
including:
o the scope of our research and development;
o our ability to attract business partners willing to share in our
development costs;
o our ability to successfully commercialize our technology;
o competing technological and market developments;
o our ability to enter into collaborative arrangements for the
development, regulatory approval and commercialization of other
products; and
o the cost of filing, prosecuting, defending and enforcing patent claims
and other intellectual property rights.
OUR BUSINESS DEPENDS ON OUR PATENTS, LICENSES AND PROPRIETARY RIGHTS AND THE
ENFORCEMENT OF THESE RIGHTS.
As a result of the substantial length of time and expense associated with
developing products and bringing them to the marketplace in the agricultural and
biotechnology industries, obtaining and maintaining patent and trade secret
protection for technologies, products and processes is of vital importance. Our
success will depend in part on several factors, including, without limitation:
o our ability to obtain patent protection for technologies, products and
processes;
o our ability to preserve trade secrets; and
o our ability to operate without infringing the proprietary rights of
other parties both in the United States and in foreign countries.
We have filed three patent applications in the United States for our
technology which is vital to our primary business, two of which have been filed
internationally. We have also filed seven Continuations in Part on these patent
applications. Our success depends in part upon patents being granted from our
pending patent applications and, if granted, the enforcement of our patent
rights.
Furthermore, although we believe that our technology is unique and will not
violate or infringe upon the proprietary rights of any third party, there can be
no assurance that such claims will not be made or if made, could be successfully
defended against. If we do not obtain and maintain patent protection, we may
face increased competition in the United States and internationally, which would
have a material adverse effect on our business.
Since patent applications in the United States are maintained in secrecy
until patents are issued, and since publication of discoveries in the scientific
and patent literature tend to lag behind actual discoveries by several months,
we cannot be certain that we were the first creator of the inventions covered by
our pending patent applications or that we were the first to file patent
applications for these inventions.
-24-
In addition, among other things, we cannot guarantee that:
o our patent applications will result in the issuance of patents;
o any patents issued or licensed to us will be free from challenge and
that if challenged, would be held to be valid;
o any patents issued or licensed to us will provide commercially
significant protection for our technology, products and processes;
o other companies will not independently develop substantially equivalent
proprietary information which is not covered by our patent rights;
o other companies will not obtain access to our know-how;
o other companies will not be granted patents that may prevent the sale of
one or more of our products; or
o we will not require licensing and the payment of significant fees or
royalties to third parties for the use of their intellectual property
in order to enable us to conduct our business.
If any relevant claims of third-party patents which are adverse to us are
upheld as valid and enforceable, we could be prevented from commercializing our
technology or could be required to obtain licenses from the owners of such
patents. We cannot guarantee that such licenses would be available or, even if
available, would be on acceptable terms.
We could become involved in infringement actions to enforce and/or protect
our patents. Regardless of the outcome, patent litigation is expensive and time
consuming and would distract our management from other activities.
The laws of some foreign countries do not protect proprietary rights to the
same extent as the laws of the United States, and many companies have
encountered significant problems and costs in protecting their proprietary
rights in these foreign countries.
Patent law is still evolving relative to the scope and enforceability of
claims in the fields in which we operate. We are like most biotechnology
companies in that our patent protection is highly uncertain and involves complex
legal and technical questions for which legal principles are not yet firmly
established. In addition, if issued, our patents may not contain claims
sufficiently broad to protect us against third parties with similar technologies
or products, or provide us with any competitive advantage.
The U.S. Patent and Trademark Office and the courts have not established a
consistent policy regarding the breadth of claims allowed in biotechnology
patents. The allowance of broader claims may increase the incidence and cost of
patent interference proceedings and the risk of infringement litigation. On the
other hand, the allowance of narrower claims may limit the value of our
proprietary rights.
Our success also depends upon know-how, unpatentable trade secrets, and the
skills, knowledge and experience of our scientific and technical personnel. As a
result, we require all employees to agree to a confidentiality provision that
prohibits the disclosure of confidential information to anyone outside of our
company, during the term of employment and thereafter. We also require all
employees to disclose and assign to us the rights to their ideas, developments,
discoveries and inventions. We also attempt to enter into similar agreements
with our consultants, advisors and research collaborators. We cannot guarantee
adequate protection for our trade secrets, know-how or other proprietary
information against unauthorized use or disclosure. We occasionally provide
information to research collaborators in academic institutions and request the
collaborators to conduct certain tests. We cannot guarantee that the
-25-
academic institutions will not assert intellectual property rights in the
results of the tests conducted by the research collaborators, or that the
academic institutions will grant licenses under such intellectual property
rights to us on acceptable terms, if at all. If the assertion of intellectual
property rights by an academic institution is substantiated, and the academic
institution does not grant intellectual property rights to us, these events
could have a material adverse effect on our business and financial results.
WE WILL HAVE TO PROPERLY MANAGE OUR GROWTH.
As our business grows, we may need to add employees and enhance our
management, systems and procedures. We will need to successfully integrate our
internal operations with the operations of our marketing partners,
manufacturers, distributors and suppliers to produce and market commercially
viable products. Although we do not presently intend to conduct research and
development activities in-house, we may undertake those activities in the
future. Expanding our business will place a significant burden on our management
and operations. Our failure to effectively respond to changes brought about by
our growth may have a material adverse effect on our business and financial
results.
WE HAVE NO MARKETING OR SALES HISTORY AND DEPEND ON THIRD-PARTY MARKETING
PARTNERS.
We have no history of marketing, distributing or selling biotechnology
products and we are relying on our ability to successfully establish marketing
partners or other arrangements with third parties to market, distribute and sell
a commercially viable product both here and abroad. Our business plan also
envisions creating strategic alliances to access needed commercialization and
marketing expertise. We may not be able to attract qualified sub-licensees,
distributors or marketing partners, and even if qualified, such marketing
partners may not be able to successfully market products or human health
applications developed with our technology. If we fail to successfully establish
distribution channels, or if our marketing partners fail to provide adequate
levels of sales, we will not be able to generate significant revenue.
WE DEPEND ON PARTNERS TO DEVELOP AND MARKET PRODUCTS.
At our current state of development, our technology is not ready to be
marketed to consumers. We intend to follow a multi-faceted commercialization
strategy that involves the licensing of our technology to business partners for
the purpose of further technological development, marketing and distribution. We
are seeking business partners who will share the burden of our development costs
while our products are still being developed, and who will pay us royalties when
they market and distribute our products upon commercialization. The
establishment of joint ventures and strategic alliances may create future
competitors, especially in certain regions abroad where we do not pursue patent
protection. If we fail to establish beneficial business partners and strategic
alliances, our growth will suffer and our product development may be harmed.
-26-
COMPETITION IN THE AGRICULTURAL AND BIOTECHNOLOGY INDUSTRIES IS INTENSE AND
TECHNOLOGY IS CHANGING RAPIDLY.
Many agricultural and biotechnology companies are engaged in research and
development activities relating to senescence and apoptosis. The market for
plant protection and yield enhancement products is intensely competitive,
rapidly changing and undergoing consolidation. We may be unable to compete
successfully against our current and future competitors, which may result in
price reductions, reduced margins and the inability to achieve market acceptance
for our products. Our competitors in the field of plant senescence gene
technology are companies that develop and produce transgenic plants and include
major international agricultural companies, specialized biotechnology companies,
research and academic institutions and, potentially, our joint venture and
strategic alliance partners. Such companies include: Paradigm Genetics; Aventis
Crop Science; Mendel Biotechnology; Bionova Holding Corporation; Renessen LLC;
Exelixis Plant Sciences, Inc.; PlantGenix, Inc.; and Eden Bioscience, among
others. Some of the companies involved in apoptosis research include: Cell
Pathways, Inc.; Trevigen, Inc.; Idun Pharmaceuticals; Novartis; Introgen
Therapeutics, Inc.; Genta, Inc.; and Oncogene, Inc. Many of these competitors
have substantially greater financial, marketing, sales, distribution and
technical resources than us and have more experience in research and
development, clinical trials, regulatory matters, manufacturing and marketing.
We anticipate increased competition in the future as new companies enter the
market and new technologies become available. Our technology may be rendered
obsolete or uneconomical by technological advances or entirely different
approaches developed by one or more of our competitors.
OUR BUSINESS IS SUBJECT TO VARIOUS GOVERNMENT REGULATIONS.
At present, the U.S. federal government regulation of biotechnology is
divided among three agencies: (i) the USDA regulates the import, field testing
and interstate movement of specific types of genetic engineering that may be
used in the creation of transgenic plants; (ii) the EPA regulates activity
related to the invention of plant pesticides and herbicides, which may include
certain kinds of transgenic plants; and (iii) the FDA regulates foods derived
from new plant varieties. The FDA requires that transgenic plants meet the same
standards for safety that are required for all other plants and foods in
general. Except in the case of additives that significantly alter a food's
structure, the FDA does not require any additional standards or specific
approval for genetically engineered foods, but expects transgenic plant
developers to consult the FDA before introducing a new food into the
marketplace. Use of our technology, if developed for human health applications,
will also be subject to FDA regulation.
We believe that our current activities, which to date have been confined to
research and development efforts, do not require licensing or approval by any
governmental regulatory agency. However, federal, state and foreign regulations
relating to crop protection products and human health applications developed
through biotechnology are subject to public concerns and political
circumstances, and, as a result, regulations have changed and may change
substantially in the future. Accordingly, we may become subject to governmental
regulations or approvals or become subject to licensing requirements in
connection with our research and development efforts. We may also be required to
obtain such licensing or approval from the governmental regulatory agencies
described above, or from state agencies, prior to the commercialization of our
genetically transformed plants and mammalian technology. In addition, our
marketing partners who utilize our technology or sell products grown with our
technology may be subject to government regulations. The imposition of
unfavorable governmental regulations on our
-27-
technology or the failure to obtain licenses or approvals in a timely manner
would have a material adverse effect on our business.
THE HUMAN HEALTH APPLICATIONS OF OUR TECHNOLOGY ARE SUBJECT TO A LENGTHY AND
UNCERTAIN REGULATORY PROCESS.
The FDA must approve any drug or biologic product before it can be marketed
in the United States. In addition, prior to being sold outside of the U.S., any
products resulting from the application of our mammalian technology must be
approved by the regulatory agencies of foreign governments. Prior to filing a
new drug application or biologics license application with the FDA, we would
have to perform extensive pre-clinical testing and clinical trials, which could
take several years and may require substantial expenditures. Any failure to
obtain regulatory approval could delay or prevent us from commercializing our
mammalian technology.
CLINICAL TRIALS ON OUR HUMAN HEALTH APPLICATIONS MAY BE UNSUCCESSFUL IN
DEMONSTRATING EFFICACY AND SAFETY, WHICH COULD DELAY OR PREVENT REGULATORY
APPROVAL.
Clinical trials may reveal that our mammalian technology is ineffective or
harmful, which would significantly limit the possibility of obtaining regulatory
approval for any drug or biologic product manufactured with our technology. The
FDA requires submission of extensive pre-clinical, clinical and manufacturing
data to assess the efficacy and safety of potential products. Furthermore, the
success of preliminary studies does not ensure commercial success, and
later-stage clinical trials may fail to confirm the results of the preliminary
studies.
CONSUMERS MAY NOT ACCEPT OUR TECHNOLOGY.
We cannot guarantee that consumers will accept products containing our
technology. Recently, there has been consumer concern and consumer advocate
activism with respect to genetically engineered consumer products. The adverse
consequences from heightened consumer concern in this regard could affect the
markets for our proposed products and could also result in increased government
regulation in response to that concern. If the public or potential customers
perceive our technology to be genetic modification or genetic engineering,
agricultural products grown with our technology may not gain market acceptance.
WE DEPEND ON OUR KEY PERSONNEL.
We are highly dependent on our scientific advisors, consultants and
third-party research partners. Dr. Thompson is the inventor of our technology
and the driving force behind our current research. The loss of Dr. Thompson
would severely hinder our technological development. Our success will also
depend in part on the continued service of our key employees and our ability to
identify, hire and retain additional qualified personnel in an intensely
competitive market. We do not maintain key person life insurance on any member
of management. The failure to attract and retain key personnel could limit our
growth and hinder our research and development efforts.
-28-
CERTAIN PROVISIONS OF OUR CHARTER, BY-LAWS AND DELAWARE LAW COULD MAKE A
TAKEOVER DIFFICULT.
Certain provisions of our certificate of incorporation and by-laws could
make it more difficult for a third party to acquire control of us, even if the
change in control would be beneficial to stockholders. Our certificate of
incorporation authorizes our board of directors to issue, without stockholder
approval, except as may be required by the rules of the American Stock Exchange,
5,000,000 shares of preferred stock with voting, conversion and other rights and
preferences that could adversely affect the voting power or other rights of the
holders of our common stock. Similarly, our by-laws do not restrict our board of
directors from issuing preferred stock without stockholder approval.
In addition, we are subject to the Business Combination Act of the Delaware
General Corporation Law which, subject to certain exceptions, restricts certain
transactions and business combinations between a corporation and a stockholder
owning 15% or more of the corporation's outstanding voting stock for a period of
three years from the date such stockholder becomes a 15% owner. These provisions
may have the effect of delaying or preventing a change of control of us without
action by our stockholders and, therefore, could adversely affect the value of
our common stock.
Furthermore, in the event of our merger or consolidation with or into
another corporation, or the sale of all or substantially all of our assets in
which the successor corporation does not assume outstanding options or issue
equivalent options, our board of directors is required to provide accelerated
vesting of outstanding options.
OUR MANAGEMENT AND OTHER AFFILIATES HAVE SIGNIFICANT CONTROL OF OUR COMMON STOCK
AND COULD CONTROL OUR ACTIONS IN A MANNER THAT CONFLICTS WITH OUR INTERESTS AND
THE INTERESTS OF OTHER STOCKHOLDERS.
As of December 31, 2002, our executive officers, directors and affiliated
entities together beneficially own approximately 45.9% of the outstanding shares
of our common stock, assuming the exercise of options and warrants which are
currently exercisable, held by these stockholders. As a result, these
stockholders, acting together, will be able to exercise considerable influence
over matters requiring approval by our stockholders, including the election of
directors, and may not always act in the best interests of other stockholders.
Such a concentration of ownership may have the effect of delaying or preventing
a change in control of us, including transactions in which our stockholders
might otherwise receive a premium for their shares over then current market
prices.
OUR STOCKHOLDERS MAY EXPERIENCE SUBSTANTIAL DILUTION AS A RESULT OF OUTSTANDING
OPTIONS AND WARRANTS TO PURCHASE OUR COMMON STOCK.
As of December 31, 2002, we have granted options outside of our stock
option plan to purchase 10,000 shares of our common stock and warrants to
purchase 4,207,153 shares of our common stock. In addition, as of December 31,
2002, we have reserved 3,000,000 shares of our common stock for issuance upon
the exercise of options granted pursuant to our stock option plan, 1,771,000 of
which have been granted and 1,229,000 of which may be granted in the future. The
exercise of these options and warrants will result in dilution to our existing
stockholders and could have a material adverse effect on our stock price.
-29-
SHARES ELIGIBLE FOR PUBLIC SALE.
As of December 31, 2002, we had 11,880,045 shares of our common stock
issued and outstanding, of which approximately 8,000,000 shares are registered
pursuant to a registration statement on Form S-3, which was deemed effective on
June 28, 2002, and the remainder of which are in the public float. In addition,
we intend to register 3,000,000 shares of our common stock underlying options
granted or to be granted under our stock option plan. Consequently, sales of
substantial amounts of our common stock in the public market, or the perception
that such sales could occur, may adversely affect the market price of our common
stock.
OUR STOCK HAS A LIMITED TRADING MARKET.
Our common stock is quoted on the American Stock Exchange and currently has
a limited trading market. We cannot assure that an active trading market will
develop or, if developed, will be maintained. As a result, our stockholders may
find it difficult to dispose of shares of our common stock and, as a result, may
suffer a loss of all or a substantial portion of their investment.
OUR STOCK PRICE MAY FLUCTUATE.
The market price of our common stock may fluctuate significantly in
response to a number of factors, some of which are beyond our control. These
factors include:
o quarterly variations in operating results;
o the progress or perceived progress of our research and development
efforts;
o changes in accounting treatments or principles;
o announcements by us or our competitors of new product and service
offerings, significant contracts, acquisitions or strategic
relationships;
o additions or departures of key personnel;
o future offerings or resales of our common stock or other securities;
o stock market price and volume fluctuations of publicly-traded companies
in general and development companies in particular; and
o general political, economic and market conditions.
IF OUR COMMON STOCK IS DELISTED FROM THE AMERICAN STOCK EXCHANGE, IT MAY BE
SUBJECT TO THE "PENNY STOCK" REGULATIONS WHICH MAY AFFECT THE ABILITY OF OUR
STOCKHOLDERS TO SELL THEIR SHARES.
In general, regulations of the SEC define a "penny stock" to be an equity
security that is not listed on a national securities exchange or Nasdaq and that
has a market price of less than $5.00 per share or with an exercise price of
less than $5.00 per share, subject to certain exceptions. If the American Stock
Exchange delists our common stock, it could be deemed a penny stock, which
imposes additional sales practice requirements on broker-dealers that sell such
securities to persons other than certain qualified investors. For transactions
involving a penny stock, unless exempt, a broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
consent to the transaction prior to the sale. In addition, the rules on penny
stocks require delivery, prior to and after any penny stock transaction, of
disclosures required by the SEC.
If our common stock were subject to the rules on penny stocks, the market
liquidity for our common stock could be severely and adversely affected.
Accordingly, the ability of holders of our common stock to sell their shares in
the secondary market may also be adversely affected.
-30-
INCREASING POLITICAL AND SOCIAL TURMOIL, SUCH AS TERRORIST AND MILITARY ACTIONS,
INCREASE THE DIFFICULTY FOR US AND OUR STRATEGIC PARTNERS TO FORECAST ACCURATELY
AND PLAN FUTURE BUSINESS ACTIVITIES.
Recent political and social turmoil, including the terrorist attacks of
September 11, 2001 and the current crisis in the Middle East, can be expected to
put further pressure on economic conditions in the United States and worldwide.
These political, social and economic conditions may make it difficult for us to
plan future business activities. Specifically, if the current crisis in Israel
continues to escalate, the Rahan Joint Venture could be adversely affected.
-31-
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
As of December 31, 2002, our cash balance and investments totaled
$3,573,575, and we had working capital of $3,443,925. As of December 31, 2002,
we had a federal tax loss carry-forward of approximately $6,625,000 and a state
tax loss carry-forward of approximately $2,525,000 to offset future taxable
income. There can be no assurance, however, that we 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
We have research and development agreements with the University of
Waterloo, which provide for research and development services to be performed at
the direction of our company and Dr. Thompson. Effective September 1, 2002, we
extended our First Research and Development Agreement for an additional two-year
period, in the amount of Can $1,092,800, which represented approximately US
$691,000 as of December 31, 2002. Effective May 1, 2002, we entered into a
Second Research and Development for a one-year period, under which we are
obligated to pay Can $50,000, which represented approximately US $32,000 as of
December 31, 2002.
In September 2002, we entered into the Tilligen Agreement, which provides
us with a license to use their technology to develop and commercialize enhanced
species of produce. The agreement will continue until the expiration of the
patents set forth in the agreement, unless terminated earlier by either party
pursuant to the terms of the agreement. In connection with the execution of the
agreement, we incurred an initial fee of $200,000, which is being amortized over
the term of the research to be performed under the agreement. Upon the
completion of certain benchmarks, we will incur additional research and
development fees and will make certain royalty payments to Tilligen.
We lease office space in New Brunswick, New Jersey for a monthly rental fee
of $2,838, subject to certain escalations for our proportionate share of
increases in the building's operating costs. The lease expires in May 2006.
We have employment agreements with certain employees, some of whom are also
our stockholders, which provide for a base compensation and additional amounts,
as set forth in each agreement. The agreements expire between January 2004 and
October 2004. As of December 31, 2002, future base compensation to be paid under
the agreements through October 2004 totals $441,875.
We have consulting agreements with each of Dr. Thompson and Dr. Bennett,
which provide for monthly payments in exchange for research and development
services. The agreement with Dr. Thompson provides for monthly payments of
$5,000 through June 2004, and is automatically renewable unless terminated by
either party within six months prior to the end of the term. The agreement with
Dr. Bennett provides for monthly payments of $2,400 until November 2003.
In February 2002, we entered into scientific advisory board agreements with
each of Dr. Russell A. Jones and Dr. Charles A. Dinarello, which provide for
payments of $10,000 per year,
-32-
payable in quarterly installments, to each of Drs. Jones and Dinarello,
respectively, through February 28, 2005 and may be terminated by either party
within 90 days written notice.
In December 2002, we entered into a six-month financial consulting
agreement with Perrin, Holden & Davenport Capital Corp. The agreement is
effective on February 1, 2003 and provides for monthly payments of $5,000.
The following table lists our cash contractual obligations as of December
31, 2002:
-------------------------------------------------------------------------------------------------------------------
Payments Due by Period
-------------------------------------------------------------------------------------------------------------------
Less than More than
Contractual Obligations Total 1 year 1 - 3 years 4 - 5 years 5 years
-------------------------------------------------------------------------------------------------------------------
Research and Development
Agreements (1) $ 585,668 $ 355,668 $ 230,000 $ -- $ --
-------------------------------------------------------------------------------------------------------------------
Facility, Rent and
Operating Leases (2) $ 113,520 $ 34,056 $ 68,112 $ 11,352 $ --
-------------------------------------------------------------------------------------------------------------------
Employment, Consulting
and Scientific Advisory Board
Agreements (3) $ 687,510 $ 483,500 $ 204,010 $ -- $ --
===================================================================================================================
Total Contractual
Cash Obligations $ 1,386,698 $ 873,224 $ 502,122 $ 11,352 $ --
===================================================================================================================
(1) Certain of our research and developments agreements disclosed herein
provide that payment is to be made in Canadian dollars and, therefore, the
contractual obligations are subject to fluctuations in the exchange rate.
(2) The lease for our office space in New Brunswick, New Jersey is subject to
certain escalations for our proportionate share of increases in the
building's operating costs.
(3) Certain of our employment and consulting agreements provide for automatic
renewal (which is not reflected in the table), unless terminated earlier by
the parties to the respective agreements.
We expect our capital requirements to increase significantly over the next
several years as we commence new research and development efforts, increase our
business and administrative infrastructure and embark on developing in-house
business capabilities and facilities. Our future liquidity and capital funding
requirements will depend on numerous factors, including, but not limited to, the
levels and costs of our research and development initiatives and the cost and
timing of the expansion of our sales and marketing efforts.
CAPITAL RESOURCES
Since inception, we have generated revenues of $210,000 in connection with
the initial fees received under the Harris Moran License, the ArborGen Agreement
and the Cal/West License, none of which was generated during the three months
ended December 31, 2002. We have not been profitable since inception, we will
continue to incur additional operating losses in the future, and we will require
additional financing to continue the development and subsequent
commercialization of our technology. While we do not expect to generate
significant revenues from the sale of our products in the near future, we may
enter into additional licensing or other
-33-
agreements with marketing and distribution partners that may result in
additional license fees, receive revenues from contract research, or other
related revenue.
In November 2001, we entered into a worldwide exclusive development and
license agreement with Harris Moran Seed Company to commercialize our technology
in lettuce and certain melons for an indefinite term, unless terminated by
either party pursuant to the terms of the agreement. In connection with the
Harris Moran License, we received an initial license fee of $125,000 in November
2001. Upon the completion of certain marketing and development benchmarks set
forth in the Harris Moran License, we will receive an additional $3,875,000 in
development payments over a multi-year period along with certain royalties upon
commercial introduction.
In June 2002, we entered into a three-year worldwide exclusive development
and option agreement with ArborGen to develop our technology in certain species
of trees. In connection with the ArborGen Agreement, we received an initial
development fee of $75,000 in July 2002. Upon the completion of certain
development benchmarks set forth in the ArborGen Agreement, we will receive an
additional $225,000 in periodic development payments over the term of the
ArborGen Agreement. The ArborGen Agreement also grants ArborGen an option to
acquire an exclusive worldwide license to commercialize our technology in
various forestry products, and upon the execution of a license agreement, we
will receive a license fee and royalties from ArborGen.
In September 2002, we entered into an exclusive development and license
agreement with Cal/West to develop our technology in certain varieties of
alfalfa. The Cal/West License will continue until the expiration of the patents
set forth in the agreement, unless terminated earlier by either party pursuant
to the terms of the agreement. The Cal/West License also grants Cal/West an
exclusive option to develop our technology in various other forage crops. In
connection with the execution of the Cal/West License, we received an initial
fee of $10,000 in September 2002. Upon the completion of certain development
benchmarks, we will receive an additional $20,000 in periodic payments, and upon
the commercialization of certain products, we will receive royalty payments from
Cal/West.
In September 2002, we received $11,089 from the BIRD Foundation for
research and development expenses that we have incurred in connection with the
Rahan Joint Venture. We anticipate receiving additional funds from the BIRD
Grant in the future to assist in funding the Rahan Joint Venture, subject to the
Rahan Joint Venture achieving its stated research and development objectives.
In December 2002, pursuant to the New Jersey Technology Tax Credit Transfer
Program (the "Program"), we received approval from the New Jersey Economic
Development Authority (the "EDA") to sell our New Jersey net operating loss tax
benefit in the amount of $151,390 for the fiscal year ended June 30, 2001. In
December 2002, we sold our entire New Jersey net operating loss tax benefit and
received net proceeds of $130,952. We may apply to participate in the Program to
sell our New Jersey net operating loss tax benefit in the amount of
approximately $132,000 for the fiscal year ended June 30, 2002. An application
must be submitted to the EDA by June 30, 2003. However, there can be no
assurance that we will be approved to participate in the Program for the fiscal
year ended June 30, 2002 or if approved, that we will be able to sell all or
part of our New Jersey net operating loss tax benefit.
-34-
We anticipate that, based upon our current cash and investments, that we
will be able to fund operations for at least the next twelve months. Over the
next twelve months, we plan to fund our research and development and
commercialization activities by utilizing our current cash balance and
investments, achieving the milestones set forth in our current licensing
agreements, and through the consummation of additional licensing agreements for
our technology.
CHANGES TO CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our critical accounting policies and estimates are set forth in our Annual
Report on Form 10-KSB for the fiscal year ended June 30, 2002, as updated by our
Quarterly Report on Form 10-QSB for the quarterly period ended September 30,
2002. The following sets forth changes to such critical accounting policies and
estimates:
We are amortizing the cost of an initial $200,000 non-refundable payment
made under a research agreement over the estimated eighteen-month term of the
project. As of December 31, 2002, $166,667, which will be amortized over the
remaining estimated fifteen months of the research project, is included in the
balance sheet as a prepaid expense.
As of December 31, 2002, we have determined that the estimated future
undiscounted cash flows related to our patent applications will be sufficient to
recover their carrying value.
-35-
RESULTS OF OPERATIONS
Three Months Ended December 31, 2002 and Three Months Ended December 31, 2001
-----------------------------------------------------------------------------
We are a development stage company. We had no revenue during the
three-month period ended December 31, 2002 compared to revenue of $125,000 for
the three-month period ended December 31, 2001, which consisted of the initial
license fee in connection with the Harris Moran License.
Operating expenses consist of general and administrative expenses, research
and development expenses and stock-based compensation. Operating expenses for
the three-month periods ended December 31, 2002 and December 31, 2001 were
$712,089 and $876,422, respectively, a decrease of $164,333, or 18.8%. This
decrease in operating expenses was primarily the result of a decrease in
stock-based compensation which was partially offset by an increase in general
and administrative and research and development expenses.
General and administrative expenses consist primarily of payroll and
benefits, professional and consulting services, investor relations, office rent
and corporate insurance. General and administrative expenses for the three-month
periods ended December 31, 2002 and December 31, 2001 were $398,789 and
$395,409, respectively, an increase of $3,380, or 0.9%. This increase was
primarily the result of an increase in payroll and benefits and investor
relations, which were mostly offset by a decrease in recruiting costs,
professional fees and consulting services. Professional services decreased
during the three-month period ended December 31, 2002, primarily as a result of
reduced legal costs in connection with the preparation of certain regulatory
filings. Consulting services decreased during the three-month period ended
December 31, 2002, as a result of the hiring of Mr. Galton on October 4, 2001,
as our President and Chief Executive Officer. During the three-month period
ended December 31, 2001, the positions of President and CEO were held by two
non-employee board members and accordingly, their compensation for those
functions was categorized as consulting services. The decrease in consulting
services was partially offset by an increase in employee payroll and benefits
during the three-month period ended December 31, 2002 as a result of the
President and CEO compensation being classified as payroll instead of consulting
services. In connection with our strategy to increase our recognition in the
public market, expenses related to investor relations increased during the
three-month period ended December 31, 2002, primarily as a result of fees
incurred for our investor relations firm, listing fees for the American Stock
Exchange, financial consulting fees and costs associated with presentations to
various analysts, money managers and funds, all of which were not incurred
during the three months ended December 31, 2001.
Research and development expenses consist primarily of fees associated with
the Research and Development Agreements, costs associated with the research
being performed at the University of Colorado, amortization of the initial fee
in connection with the Tilligen Agreement and consulting fees to the Scientific
Advisory Board, Dr. Thompson and Dr. Bennett. Research and development expenses
for the three-month periods ended December 31, 2002 and December 31, 2001 were
$215,803 and $93,821, respectively, an increase of $121,982, or 130.0%. This
increase was primarily the result of an increase in the research and development
costs incurred in connection with the expanded research undertaken by the
University of Waterloo, the implementation of our mammalian cell research
programs and the implementation of new plant research being conducted in
connection with the Tilligen Agreement.
-36-
Stock-based compensation consists of non-employee stock options and
warrants granted and vesting as consideration for certain professional,
consulting, legal and advertising services. Stock-based compensation for the
three-month periods ended December 31, 2002 and December 31, 2001 was $97,497
and $387,192, respectively, a decrease of $289,695, or 74.8%. The decrease was
primarily the result of a decrease in stock options granted to members of the
Scientific Advisory Board and consultants and warrants granted to certain
financial advisors during the three-month period ending December 31, 2002.
Six Months Ended December 31, 2002 and Six Months Ended December 31, 2001
-------------------------------------------------------------------------
We are a development stage company. Revenue for the six-month period ended
December 31, 2002 was $10,000, which represented the initial license fee in
connection with the Cal/West License. Revenue for the six-month period ended
December 31, 2001 was $125,000, which represented the initial license fee in
connection with the Harris Moran License.
Operating expenses consist of general and administrative expenses, research
and development expenses and stock-based compensation. Operating expenses for
the six-month periods ended December 31, 2002 and December 31, 2001 were
$1,259,277 and $1,374,144, respectively, a decrease of $114,867, or 8.4%. This
decrease in operating expenses was primarily the result of a decrease in
stock-based compensation which was mostly offset by an increase in general and
administrative and research and development expenses.
General and administrative expenses consist primarily of payroll and
benefits, professional and consulting services, investor relations, office rent
and corporate insurance. General and administrative expenses for the six-month
periods ended December 31, 2002 and December 31, 2001 were $762,013 and
$676,128, respectively, an increase of $85,885, or 12.7%. This increase was
primarily the result of an increase in payroll and benefits and investor
relations, which were partially offset by a decrease in consulting services and
recruiting costs. Consulting services decreased during the six-month period
ended December 31, 2002, as a result of the hiring of Mr. Galton on October 4,
2001, as our President and Chief Executive Officer. During the six-month period
ended December 31, 2001, the positions of President and CEO were held by two
non-employee board members and accordingly, their compensation for those
functions was categorized as consulting services. The decrease in consulting
services was partially offset by an increase in employee payroll and benefits
during the six-month period ended December 31, 2002 as a result of the President
and CEO compensation being classified as payroll instead of consulting services.
In connection with our strategy to increase our recognition in the public
market, expenses related to investor relations increased during the six-month
period ended December 31, 2002, primarily as a result of fees incurred for our
investor relations firm, listing fees for the American Stock Exchange, financial
consulting fees and costs associated with presentations to various analysts,
money managers and funds, all of which were not incurred during the six months
ended December 31, 2001.
Research and development expenses consist primarily of fees associated with
the Research and Development Agreements, costs associated with the research
being performed at the University of Colorado, amortization of the initial fee
in connection with the Tilligen Agreement and consulting fees to the Scientific
Advisory Board, Dr. Thompson and Dr. Bennett. Research and development expenses
for the six-month periods ended December 31, 2002 and December 31, 2001 were
$360,087 and $156,976, respectively, an increase of $203,111, or 129.4%. This
increase was primarily the result of an increase in the research and development
costs incurred in connection with research undertaken by the University of
Waterloo and the implementation of our mammalian cell research programs. The
increase in costs incurred in
-37-
connection with the research undertaken by the University of Waterloo was
primarily due to an inadvertent overcharge of approximately $40,000 during the
year ended June 30, 2001. Had the overcharge not occurred, research and
development expenses for the six month period ended December 31, 2001 would have
been approximately $206,976. Therefore, had the overcharge not occurred,
research and development expenses for the six-month period ended December 31,
2002 would have increased by $153,111, or 97.5%, from the six-month period ended
December 31, 2001. This increase was the result of the implementation of our
mammalian cell research programs and the implementation of new plant research
being conducted in connection with the Tilligen Agreement.
Stock-based compensation consists of non-employee stock options and
warrants granted and vesting as consideration for certain professional,
consulting, legal and advertising services. Stock-based compensation for the
six-month periods ended December 31, 2002 and December 31, 2001 was $137,177 and
$541,040, respectively, a decrease of $403,863, or 74.6%. The decrease was
primarily the result of a decrease in stock options granted to members of the
Scientific Advisory Board and consultants and warrants granted to certain
financial advisors during the six months ending December 31, 2002.
Period From Inception on July 1, 1998 through December 31, 2002
---------------------------------------------------------------
We are a development stage company. From inception of operations on July 1,
1998 through December 31, 2002, we had revenues of $210,000, which consisted of
the initial license fees in connection with our various development and license
agreements.
We have incurred losses each year since inception and have an accumulated
deficit of $8,507,363 at December 31, 2002. We expect to continue to incur
losses as a result of expenditures on research, product development and
administrative activities.
We do not expect to generate significant revenues from product sales for
approximately the next two to three years, during which time we will engage in
significant research and development efforts. However, we have entered into the
Harris Moran License, the ArborGen Agreement and the Cal/West License to develop
and commercialize our technology in certain varieties of lettuce, melons, trees
and alfalfa. These agreements provide that, upon the achievement of certain
benchmarks, we will receive an aggregate of $4,130,000 in development payments
over a multi-year period. The Harris Moran License and the Cal/West License also
provide for royalty payments to us upon commercial introduction. The ArborGen
Agreement contains an option for ArborGen to execute a license to commercialize
developed products, and upon the execution of a license agreement, we will
receive a license fee and royalties from ArborGen. The Cal/West License contains
an option for Cal/West to develop our technology in various other forage crops.
Consistent with our commercialization strategy, we intend to attract other
companies interested in strategic partnerships or licensing our technology that
may result in additional license fees, revenues from contract research and other
related revenues. Successful future operations will depend on our ability to
transform our research and development activities into commercializable
technology.
-38-
ITEM 3. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Based on their evaluation of our disclosure controls and procedures, as
defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of
1934, as of a date within 90 days of the filing date of this Quarterly Report on
Form 10-QSB, our President and Chief Executive Officer, considered our principal
executive officer, and our Chief Financial Officer, considered our principal
financial and accounting officer, have concluded that our disclosure controls
and procedures are designed to ensure that information we are required to
disclose in the reports we file or submit under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms and are operating in an effective manner.
CHANGES IN INTERNAL CONTROLS
There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their most recent evaluation.
-39-
PART II. OTHER INFORMATION.
--------------------------
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On October 9, 2002, pursuant to our 1998 Stock Incentive Plan, as amended,
we granted options to purchase an aggregate of 22,500 shares of our common stock
to two of our executive officers at an exercise price equal to $1.65 per share,
with one-third of such options becoming exercisable on each of the first, second
and third anniversaries from the date of grant.
On December 13, 2002, our Board of Directors unanimously approved and we
subsequently granted, effective January 7, 2003: (i) options under the plan to
purchase an aggregate of 75,000 shares of common stock to certain members of our
Board of Directors at an exercise price equal to $2.35 per share, with one-half
of such options exercisable on the date of grant and one-half of such options
becoming exercisable on the first anniversary from the date of grant; (ii)
options under the plan to purchase an aggregate of 57,500 shares of common stock
to the members of our Scientific Advisory Board, certain research consultants
and an executive officer of our company, at an exercise price equal to $2.35 per
share, with one-third of such options becoming exercisable on each of the first,
second and third anniversaries from the date of grant; and (iii) a warrant to
purchase 15,000 shares of common stock to Forbes, Inc. at an exercise price
equal to $2.35 per share, with one-third of such warrant becoming exercisable on
each of the first, second and third anniversaries from the date of grant.
We did not employ an underwriter in connection with the issuance of the
securities described above. We believe that the issuance of the foregoing
securities was exempt from registration under Section 4(2) of the Securities Act
of 1933, 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 our company.
ITEM 4. STOCKHOLDER VOTE.
(a) Our Annual Meeting was held on December 13, 2002.
(b) The following is a complete list of our current directors, each of
whom were elected to a one-year term at the meeting, and whose term
of office continued after the meeting.
Ruedi Stalder
Bruce C. Galton
John E. Thompson, Ph.D.
Christopher Forbes
Thomas C. Quick
David Rector
Philip E. Livingston
(c) There were 6,402,527 shares of common stock present at the meeting in
person or by proxy, out of a total number of 11,880,045 shares of
common stock issued and outstanding and entitled to vote at the
meeting.
-40-
The proposals and results of the vote of the stockholders taken at the
meeting by ballot and by proxy as solicited by us on behalf of our
Board of Directors were as follows:
(A) For the election of the nominees for our Board of Directors:
Nominee For Against Withheld
----------------------- ------------ ------- --------
Ruedi Stalder 6,401,381 1,146 -
Bruce C. Galton 6,359,481 43,046 -
John E. Thompson, Ph.D. 6,401,381 1,146 -
Christopher Forbes 6,401,381 1,146 -
Thomas C. Quick 6,401,381 1,146 -
David Rector 5,665,029 737,498 -
Philip E. Livingston 6,401,381 1,146 -
(B) For the proposal to approve an amendment to our Certificate of
Incorporation to increase the maximum number of authorized shares
of common stock from 20,000,000 shares to 30,000,000 shares:
For Against Abstain
--------------- --------------- --------------
6,257,076 145,171 280
(C) For the proposal to approve an amendment to our 1998 Stock
Incentive Plan to increase the maximum number of shares of common
stock available for issuance under the plan from 2,000,000 shares
to 3,000,000 shares:
For Against Abstain Broker Non-Votes
----------- ------------ --------- ----------------
4,144,573 165,871 1,646 2,090,437
(D) For the proposal to ratify the appointment of Goldstein Golub and
and Kessler, LLP as our independent auditors for the fiscal year
ending June 30, 2003:
For Against Abstain
------------ ---------------- --------------
5,604,665 778,252 19,610
ITEM 5. OTHER INFORMATION.
On October 9, 2002, our Board of Directors approved: (i) an amendment to
our Certificate of Incorporation to increase the authorized shares of common
stock available for issuance from 20,000,000 shares to 30,000,000 shares; and
(ii) an amendment to our 1998 Stock Incentive Plan, as amended, to increase the
maximum number of shares of common stock available for issuance under the plan
from 2,000,000 shares to 3,000,000 shares. Stockholder approval for these
increases was obtained at our Annual Meeting of Stockholders held on December
13, 2002.
-41-
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
3.1 Amended and Restated Certificate of Incorporation of Senesco
Technologies, Inc., filed with the Secretary of State of the
State of Delaware on December 26, 2002.
10.1 1998 Stock Incentive Plan of Senesco Technologies, Inc., as
amended on December 13, 2002.
10.2 Amendment to Consulting Agreement of July 12, 1999, as modified
on February 8, 2001, by and between Senesco Technologies, Inc.
and John E. Thompson, Ph.D., dated December 13, 2002.
10.3 Sales Representative Agreement by and between Senesco
Technologies, Inc. and DP, Inc., dated October 14, 2002.
10.4 Financial Consulting Agreement by and between Senesco
Technologies, Inc. and Perrin, Holden & Davenport Capital Corp.,
dated December 23, 2002.
99.1 Certification of principal executive officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350.
99.2 Certification of principal financial and accounting officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18
U.S.C. 1350.
(b) Reports on Form 8-K.
None.
-42-
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: February 14, 2003 By: /s/ Bruce C. Galton
--------------------------------------------
Bruce C. Galton, President
and Chief Executive Officer
(Principal Executive Officer)
DATE: February 14, 2003 By: /s/ Joel Brooks
--------------------------------------------
Joel Brooks, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)
CERTIFICATION
I, Bruce C. Galton, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Senesco
Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures, as
defined in Exchange Act Rules 13a-14 and 15d-14, for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report; and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of a date within 90 days prior to
the filing date of this quarterly report;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors, or persons
performing the equivalent function:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: February 14, 2003 /s/ Bruce C. Galton
-------------------------------------
Bruce C. Galton
President and Chief Executive Officer
(principal executive officer)
CERTIFICATION
I, Joel Brooks, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Senesco
Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures, as
defined in Exchange Act Rules 13a-14 and 15d-14, for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report; and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of a date within 90 days prior to
the filing date of this quarterly report;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors, or persons
performing the equivalent function:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: February 14, 2003 /s/ Joel Brooks
--------------------------------------------
Joel Brooks
Chief Financial Officer and Treasurer
(principal financial and accounting officer)