S-1/A 1 v355122_s1a.htm S-1/A

 

As filed with the Securities and Exchange Commission on September 20, 2013
Registration No. 333-189998            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

Amendment No. 1

To

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

SENESCO TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware 2834 84-1368850
     
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization)

Classification Code Number)

 

Identification Number)
  721 Route 202/206, Suite 130  
  Bridgewater, NJ 08807  
  (908) 864-4444  

(Address, including zip code and telephone number, including area code, of registrant’s principal executive offices)

 

 

 

Leslie J. Browne, Ph.D.

Chief Executive Officer

Senesco Technologies, Inc.

721 Route 202/206, Suite 130

Bridgewater, NJ 08807

(908) 864-4444

(Name, address, including zip code and telephone number, including area code, of agent for service)

 

 

 

Copies to:

 

Joel Brooks

Chief Financial Officer

Senesco Technologies, Inc.

721 Route 202/206, Suite 130

Bridgewater, NJ 08807

(908) 864-4444

 

Emilio Ragosa

Morgan, Lewis & Bockius LLP

502 Carnegie Center

Princeton, NJ 08540

(609) 919-6633

 

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

 

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company x
    (Do not check if a smaller reporting company)  

 

 

CALCULATION OF REGISTRATION FEE

Title of Each Class of
Securities to be Registered
  Proposed Maximum Aggregate
Offering Price(1)
    Amount of Registration Fee(2)  
Units, each unit consisting of five shares of common stock, $0.01 par value per share, and a warrant to purchase five shares of common stock   $ 15,000,000     $ 2,046  
Common stock included in the Units     -       - (3)
Warrants included in the Units     -       - (3)
Common stock issuable upon exercise of the warrants included in the Units   $ 15,000,000     $ 2,046  
Total   $ 30,000,000     $ 4,092 (4)

 

(1)Estimated solely for purpose of calculating registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended (the “Securities Act”).

 

(2)Calculated pursuant to Rule 457(o) under the Securities Act based on an estimate of the proposed maximum offering price.

 

(3) No fee required pursuant to Rule 457(g).

 

(4) Of this fee, (i) $2,046 was previously paid in connection with the initial filing of this Registration Statement on Form S-1 (File No. 333-189998), which was filed by the registrant on July 17, 2013.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 
 

 

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is declared effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

  

Subject to Completion, dated September 20, 2013

 

Prospectus

  

SENESCO TECHNOLOGIES, INC.

 

                         Units, Consisting of

               Shares of Common Stock

Warrants to Purchase               Shares of Common Stock

And               Shares of Common Stock Underlying the Warrants

 

 

 

We are offering                  units, each unit consisting of five shares of our common stock and a warrant to purchase five shares of our common stock. Each unit will be sold at a negotiated offering price of               per unit, resulting in aggregate gross proceeds to the company of                     , before estimated expenses. The warrants will be immediately exercisable at an exercise price of            per share of common stock and will expire on the second anniversary of the issuance date. The units will separate immediately and the common stock and warrants will be issued separately and the common stock will trade separately. Our common stock currently trades on the OTCQB Marketplace, operated by the OTC Markets Group, under the symbol “SNTI.” The last reported sale price of our common stock on the OTCQB Marketplace on September 19, 2013 was $0.05 per share.

 

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 5.

 

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

We expect to deliver the securities on or about              , 2013.

  

The date of this prospectus is           , 2013.

 

 
 

 

TABLE OF CONTENTS

 

  Page
   
PROSPECTUS SUMMARY 1
RISK FACTORS 5
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 17
USE OF PROCEEDS 18
DIVIDEND POLICY 19
COMMON SHARE PRICE RANGE 19
CAPITALIZATION 21
DILUTION 22
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 23
BUSINESS 34
MANAGEMENT 43
EXECUTIVE COMPENSATION 47
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS 64
PRINCIPAL STOCKHOLDERS 66
DESCRIPTION OF SECURITIES 68
PLAN OF DISTRIBUTION 70
LEGAL MATTERS 70
EXPERTS 70
WHERE YOU CAN FIND MORE INFORMATION 71
INDEX TO FINANCIAL STATEMENTS F-1

 

 

 

We have not authorized anyone to provide you with information different from, or in addition to, that contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell or seeking offers to buy these securities in any jurisdiction where, or to any person to whom, the offer or sale is not permitted. The information in this prospectus is accurate only as of its date regardless of the time of delivery of this prospectus or of any sale of our common shares. Our business, financial condition, results of operations and future growth prospects may have changed since those dates.

 

For investors outside the United States, we have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus outside of the United States.

 

This prospectus includes estimates, statistics and other industry and market data that we obtained from industry publications, research, surveys and studies conducted by third parties and publicly available information. Such data involves a number of assumptions and limitations and contains projections and estimates of the future performance of the industries in which we operate that are subject to a high degree of uncertainty. This prospectus also includes data based on our own internal estimates. We caution you not to give undue weight to such projections, assumptions and estimates.

 

i
 

 

 

PROSPECTUS SUMMARY

 

This summary highlights information contained in other parts of this prospectus. Because it is only a summary, it does not contain all of the information that you should consider before investing in our securities and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. You should read the entire prospectus carefully, especially the section entitled “Risk Factors” and our consolidated financial statements and related notes, before deciding to buy our securities. Unless otherwise stated, all references to “us,” “our,” “we,” “Senesco,” the “Company” and similar designations refer to Senesco Technologies, Inc. and its subsidiary Senesco, Inc.

 

Company Overview

 

Senesco Technologies, Inc., a Delaware corporation, is a development stage company. We do not expect to generate significant revenues for several years, during which time we will engage in significant research and development efforts. Our human therapeutic research program, which has consisted of clinical, pre-clinical in-vitro and in-vivo experiments designed to assess the role and method of action of the Factor 5A genes in human diseases, is performed by approximately seven third party researchers at our direction, at the University of Waterloo and other commercial research facilities. We have developed a therapeutic candidate, SNS01-T, for the potential treatment of multiple myeloma. We have also been granted orphan drug status for SNS01-T by the FDA for the potential treatment of multiple myeloma, diffuse large B-cell lymphoma, or DLBCL, and mantle cell lymphoma, or MCL. We initiated a Phase 1b/2a clinical study with SNS01-T for treatment of multiple myeloma in September 2011 and have recently expanded it to include treatment for DLBCL and MCL. We are currently sponsoring the study at Mayo Clinic in Rochester, MN, the University of Arkansas for Medical Sciences in Little Rock, the Mary Babb Randolph Cancer Center in Morgantown, WV, the Fred Hutchinson Cancer Research Center and the John Theurer Cancer Center at Hackensack University Medical Center in Hackensack, NJ. We may consider other human diseases in order to determine the role of eIF5A and SNS01-T.

 

Additionally, we have nine active agricultural license agreements to develop and commercialize our technology in banana plants, corn, soy, cotton, rice, canola, trees, alfalfa, and turf grass. The licenses provide for upfront payments, milestone payments and royalty payments to us upon commercial introduction.

 

Consistent with our commercialization strategy, we may license our technology for human health applications or for additional crops, as the opportunities may arise, that may result in additional license fees, revenues from contract research and other related revenues. Successful future operations will depend on our and our partners’ ability to transform our research and development activities into a commercially feasible technology.

 

Risk Factors

 

Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are described in more detail in the “Risk Factors” section of this prospectus immediately following this prospectus summary. These risks include the following:

 

·We have not experienced positive cash flow from our operations, and the ability to achieve positive cash flow from operations will depend on increasing sales of our products, which may not be achievable.

 

·Our business is subject to continuing regulatory compliance by the FDA and other authorities, which is costly and could result in negative effects on our business.

 

·Failure to protect our intellectual property rights could result in costly and time consuming litigation and our loss of any potential competitive advantage.

 

·The price of our common shares could be highly volatile due to a number of factors, which could lead to losses by investors and costly securities litigation.

 

Corporate Information

 

We were incorporated under the laws of Delaware in 1999. Our principal executive offices are located at 721 Route 202/206, Suite 130, Bridgewater, NJ 08807 and our telephone number is (908) 864-4444. Our website address is www.senesco.com. We have included our website address in this prospectus solely as an inactive textual reference. The information contained on, or that can be accessed through, our website is not part of this prospectus.

 

 

1
 

 

 

The Offering

 

Common shares offered by us  shares
Common shares outstanding after this offering  shares
Warrants offered by us Warrants to purchase            shares of common stock. For each share of common stock, a warrant to purchase one share of common stock will also be issued. The warrants will be immediately exercisable on or before the second anniversary of the issuance date at an exercise price of per share of common stock. This prospectus supplement also relates to the offering of              shares of common stock issuable upon exercise of the warrants.
Use of proceeds We estimate that the net proceeds to us from the sale of common shares and warrants in this offering will be approximately $           million, assuming a public offering price of $      per common share and after deducting estimated offering expenses payable by us. We intend to use the net proceeds from this offering to continue our product commercialization and marketing efforts, development of product pipeline, including product line extension, and for general working capital purposes. See “Use of Proceeds.”
Current trading on OTCQB Marketplace

Our common shares currently trade on the OTCQB Marketplace under the symbol “SNTI.”

   
Risk factors You should read the “Risk Factors” section of this prospectus for a discussion of factors to consider carefully before deciding to invest in our common shares.

 

 

 

(1) The number of our common shares outstanding after this offering is based on 234,820,952 common shares outstanding as of September 16, 2013, and excludes:

 

· 27,724,020 common shares issuable upon the exercise of options outstanding as of September 16, 2013 at a weighted average exercise price of $0.28 per share;

 

· 28,286,612 common shares issuable upon the exercise of warrants outstanding as of September 16, 2013 at an exercise price of $0.36 per share;

 

· 19,333,334 common shares issuable upon the conversion of 580 shares of Series A Convertible Preferred Stock; and

 

· 81,103 additional common shares available for future issuance as of September 16, 2013 under our Senesco Technologies, Inc. 2008 Stock Incentive Plan.

 

Unless otherwise indicated, all information in this prospectus assumes no exercise of the outstanding options and warrants or conversion of the outstanding Series A Convertible Preferred Stock described above.

 

 

2
 

 

 

Summary Consolidated Financial Data

 

The summary financial data below as of and for the years ended June 30, 2013, 2012 and 2011 have been derived from our audited consolidated financial statements. Our audited consolidated financial statements as of June 30, 2013 and 2012 and for the fiscal years ended June 30, 2013, 2012 and 2011 are included elsewhere in this prospectus. Our audited consolidated financial statements as of June 30, 2011 are not included in this prospectus. You should read the summary financial data together with “Capitalization,” “Management’s Discussion and Analysis of Financial Condition” and “Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period.

 

    Fiscal Years ended June 30,  
Statement of operations data:   2013     2012     2011  
   (in thousands, except share & per share data)  
                   
Licensing Revenue   $ -     $ 200     $ -  
Operating expenses:                        
Research and development     2,086       2,566       3,720  
General and administrative     2,500       2,724       2,611  
Write-off of patents abandoned     64       321       1,588  
Total Operating Expenses     4,650       5,611       7,919  
Loss from operations     (4,650 )     (5,411 )     (7,919 )
                         
Total other non-operating income (expense)     (1,472 )     345       650  
Net Loss     (6,122 )     (5,066 )     (7,269 )
Net loss available to common stockholders   $ (6,985 )   $ (6,692 )   $ (9,907 )
Weighted average basic and diluted common shares outstanding     136,638,419       85,703,291       69,332,447  
Loss Per Common Share – basic and diluted   $ (0.05 )   $ (0.08 )   $ (0.14 )

 

 

3
 

 

 

    Years ended June 30,  
Balance sheets data:   2013     2012     2011  
   (in thousands)  
                   
Cash and Cash equivalents   $ 1,602     $ 2,001     $ 3,610  
Total assets   $ 7,098     $ 6,955     $ 8,597  
Total liabilities   $ 3,312     $ 3,502     $ 4,080  
Total stockholders’ equity   $ 3,786     $ 3,453     $ 4,517  

 

    Years ended June 30,  
Statements of cash flows data:   2013     2012     2011  
   (in thousands)  
                   
Net cash used for operating activities   $ (3,902 )   $ (4,386 )   $ (5,391 )
Net cash used for investing activities     (529 )     (450 )     (686 )
Net cash provided by financing activities   $ 4,033     $ 3,228     $ 1,661  

 

 

4
 

 

RISK FACTORS

 

Investing in our common shares involves a high degree of risk. Before you decide to invest in our securities, you should consider carefully the risks described below, as well as the other information contained in this prospectus. The risks described below are not the only ones facing us. Additional risks not presently known to us or that we currently deemed immaterial may also impair our business operations.

 

If any of the following risks actually occurs, our business, financial condition, results of operations and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common shares could decline, and you may lose all or part of your investment.

 

Risk Related To Company

 

Recurring losses and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern and we may not be able to continue as a going concern.

 

Our recurring losses from operations and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern and as a result, our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements for the fiscal year ended June 30, 2013 with respect to this uncertainty. Substantial doubt about our ability to continue as a going concern may create negative reactions to the price of the common shares of our stock and we may have a more difficult time obtaining financing.

 

We have prepared our financial statements on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should we be unable to continue in existence.

 

We have a limited operating history and have incurred substantial losses and expect to incur future losses.

 

We are a development stage biotechnology company with a limited operating history and limited assets and capital. We have incurred losses each year since inception and had an accumulated deficit of $74,425,835 at June 30, 2013. We have generated minimal revenues by licensing our technology for certain crops to companies willing to share in our development costs. In addition, our technology may not be ready for commercialization for several years. We expect to continue to incur losses for the next several years because we anticipate that our expenditures on research and development and administrative activities will significantly exceed our revenues during that period. We cannot predict when, if ever, we will become profitable.

 

We will need additional capital to fund our operations until we are able to generate a profit.

 

Our operations to date have required significant cash expenditures. Our future capital requirements will depend on the results of our research and development activities, preclinical and clinical studies, and competitive and technological advances.

 

We will need to obtain more funding in the future through collaborations or other arrangements with research institutions and corporate partners, or public and private offerings of our securities, including debt or equity financing. We may not be able to obtain adequate funds for our operations from these sources when needed or on acceptable terms. Future collaborations or similar arrangements may require us to license valuable intellectual property to, or to share substantial economic benefits with, our collaborators. If we raise additional capital by issuing additional equity or securities convertible into equity, our stockholders may experience dilution and our share price may decline. Any debt financing may result in restrictions on our spending.

 

If we are unable to raise additional funds, we will need to do one or more of the following:

 

·delay, scale-back or eliminate some or all of our research and product development programs;
·provide licenses to third parties to develop and commercialize products or technologies that we would otherwise seek to develop and commercialize ourselves;
·seek strategic alliances or business combinations;
·attempt to sell our company;
·cease operations; or
·declare bankruptcy.

 

5
 

 

We believe that at the projected rate of spending we should have sufficient cash to maintain our present operations through November 2013. After giving effect to the net proceeds from this offering, we should have sufficient cash to maintain our present operations through June 2014.

 

We may be adversely affected by the current economic environment.

 

Our ability to obtain financing, invest in and grow our business, and meet our financial obligations depends on our operating and financial performance, which in turn is subject to numerous factors. In addition to factors specific to our business, prevailing economic conditions and financial, business and other factors beyond our control can also affect our business and ability to raise capital. We cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

 

Materials necessary to manufacture some of our compounds currently under development may not be available on commercially reasonable terms, or at all, which may delay our development and commercialization of these compounds.

 

Some of the materials necessary for the manufacture of our compounds under development may, from time to time, be available either in limited quantities, or from a limited number of manufacturers, or both. Our contract manufacturers need to obtain these materials for our clinical trials and, potentially, for commercial distribution when and if we obtain marketing approval for these compounds. Suppliers may not sell us these materials at the time we need them or on commercially reasonable terms. If we are unable to obtain the materials needed to conduct our clinical trials, product testing and potential regulatory approval could be delayed, adversely affecting our ability to develop the product candidates. Similarly, if we are unable to obtain critical manufacturing materials after regulatory approval has been obtained for a product candidate, the commercial launch of that product candidate could be delayed or there could be a shortage in supply, which could materially affect our ability to generate revenues from that product candidate. If suppliers increase the price of manufacturing materials, the price for one or more of our products may increase, which may make our products less competitive in the marketplace. If it becomes necessary to change suppliers for any of these materials or if any of our suppliers experience a shutdown or disruption at the facilities used to produce these materials, due to technical, regulatory or other reasons, it could harm our ability to manufacture our products.

 

We depend on a single principal technology and, if our technology is not commercially successful, we will have no alternative source of revenue.

 

Our primary business is the development and licensing of technology to identify, isolate, characterize and promote or silence genes which control the death of cells in humans and plants. Our future revenue and profitability critically depend upon our ability, or our licensees’ ability, to successfully develop apoptosis and senescence gene technology and later license or market such technology. We have conducted experiments on certain crops with favorable results and have conducted certain preliminary cell-line and animal 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 any crops or human therapeutic 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 humans or plants or reduced benefits in terms of crop yield or protection. Our failure to obtain market acceptance of our technology or the failure of our current or potential licensees to successfully commercialize such technology would have a material adverse effect on our business.

 

We outsource all of our research and development activities and, if we are unsuccessful in maintaining our alliances with these third parties, our research and development efforts may be delayed or curtailed.

 

We rely on third parties to perform all of our research and development activities. Our research and development efforts take place at the University of Waterloo in Ontario, Canada, where our technology was discovered, at other commercial research facilities and with our commercial partners. At this time, we do not have the internal capabilities to perform our own research and development activities. Accordingly, the failure of third party research partners to perform under agreements entered into with us, or our failure to renew important research agreements with these third parties, may delay or curtail our research and development efforts.

 

6
 

 

We have significant future capital needs and may be unable to raise capital when needed, which could force us to delay or reduce our research and development efforts.

 

As of June 30, 2013 , we had a cash balance of $1,602,294 and working capital of $309,572. Using our available reserves as of June 30, 2013, we believe that we can operate according to our current business plan through November 2013. After giving effect to the net proceeds from this offering, we should have sufficient cash to maintain our present operations through June 2014.

 

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 will be required to raise additional capital in the future in order to operate in accordance with our current business plan, and this funding may not be available on favorable terms, if at all. If we are unable to raise additional funds, we will need to do one or more of the following:

 

·delay, scale back or eliminate some or all of our research and development programs;
·provide a license to third parties to develop and commercialize our technology that we would otherwise seek to develop and commercialize ourselves;
·seek strategic alliances or business combinations;
·attempt to sell our company;
·cease operations; or
·declare bankruptcy.

 

In addition, in connection with any funding, if we need to issue more equity securities than our certificate of incorporation currently authorizes we will 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 outstanding and the conversion of the preferred stock into common stock, as of June 30, 2013, we had 113,332,828 shares of common stock authorized but unissued and unreserved, which may be issued from time to time by our board of directors. Furthermore, we may need to issue securities that have rights, preferences and privileges senior to our common stock. Failure to obtain financing on acceptable terms would have a material adverse effect on our liquidity.

 

Since our inception, we have financed all of our operations through equity and debt financings. Our future capital requirements depend on numerous factors, including:

 

·the scope of our research and development;
·our ability to attract business partners willing to share in our development costs;
·our ability to successfully commercialize our technology;
·competing technological and market developments;
·our ability to enter into collaborative arrangements for the development, regulatory approval and commercialization of other products; and
·the cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights.

 

Our business depends upon our patents and proprietary rights and the enforcement of these rights. Our failure to obtain and maintain patent protection may increase competition and reduce demand for our technology.

 

As a result of the substantial length of time and expense associated with developing products and bringing them to the marketplace in the biotechnology and agricultural 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:

 

·our ability to obtain patent protection for our technologies and processes;
·our ability to preserve our trade secrets; and
·our ability to operate without infringing the proprietary rights of other parties both in the United States and in foreign countries.

 

7
 

 

As of June 30, 2013, we have been issued twenty-eight (28) patents by the PTO and seventy-three (73) patents from foreign countries. We have also filed numerous patent applications for our technology in the United States and in several foreign countries, which technology is vital to our primary business, as well as several continuations in part on these patent applications. Our success depends in part upon the grant of patents from our pending patent applications.

 

Although we believe that our technology is unique and that it will not violate or infringe upon the proprietary rights of any third party, we cannot assure you that these 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.

 

In addition, among other things, we cannot assure you that:

 

·our patent applications will result in the issuance of patents;
·any patents issued or licensed to us will be free from challenge and if challenged, would be held to be valid;
·any patents issued or licensed to us will provide commercially significant protection for our technology, products and processes;
·other companies will not independently develop substantially equivalent proprietary information which is not covered by our patent rights;
·other companies will not obtain access to our know-how;
·other companies will not be granted patents that may prevent the commercialization of our technology; or
·we will not incur licensing fees and the payment of significant other fees or royalties to third parties for the use of their intellectual property in order to enable us to conduct our business.

 

Our competitors may allege that we are infringing upon their intellectual property rights, forcing us to incur substantial costs and expenses in resulting litigation, the outcome of which would be uncertain.

 

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 PTO 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 scope and value of our proprietary rights.

 

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.

 

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. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we could because they have substantially greater resources. Uncertainties resulting from the initiation and continuation of any patent litigation could limit our ability to continue our operations.

 

8
 

 

If our technology infringes the intellectual property of our competitors or other third parties, we may be required to pay license fees or damages.

 

The current patent landscape surrounding siRNA technology is unclear due to the recent proliferation of siRNA-related patent litigation and grants of third-party patents encompassing this technology. If any relevant claims of third party patents that 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 assure you that such licenses would be available or, if available, would be on acceptable terms. Some licenses may be non-exclusive and, therefore, our competitors may have access to the same technology licensed to us. In addition, if any parties successfully claim that the creation or use of our technology infringes upon their intellectual property rights, we may be forced to pay damages, including treble damages.

 

Our security measures may not adequately protect our unpatented technology and, if we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology may be adversely affected.

 

Our success depends upon know-how, unpatentable trade secrets, and the skills, knowledge and experience of our scientific and technical personnel. As a result, all employees agreed to a confidentiality provision in their employment agreement that prohibited the disclosure of confidential information to anyone outside of our company, during the term of employment and for five (5) years thereafter. The employment agreements have since been terminated, but the period of confidentiality is still in effect. 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 assure you that adequate protection for our trade secrets, know-how or other proprietary information against unauthorized use or disclosure will be available.

 

We occasionally provide information to research collaborators in academic institutions and request that the collaborators conduct certain tests. We cannot assure you that the 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 limit our ability to commercialize our technology.

 

As we evolve from a company primarily involved in the research and development of our technology into one that is also involved in the commercialization of our technology, we may have difficulty managing our growth and expanding our operations.

 

As our business grows, we may need to add employees and enhance our management, systems and procedures. We may 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. We may also need to manage additional relationships with various collaborative partners, suppliers and other organizations. Although we do not presently conduct research and development activities in-house, we may undertake those activities in the future. Expanding our business may place a significant burden on our management and operations. We may not be able to implement improvements to our management information and control systems in an efficient and timely manner and we may discover deficiencies in our existing systems and controls. Our failure to effectively respond to such changes may make it difficult for us to manage our growth and expand our operations.

 

We have no marketing or sales history and depend on third party marketing partners. Any failure of these parties to perform would delay or limit our commercialization efforts.

 

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 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, these marketing partners may not be able to successfully market agricultural products or human therapeutic applications developed with our technology. If our current or potential future marketing partners fail to provide adequate levels of sales, our commercialization efforts will be delayed or limited and we may not be able to generate revenue.

 

9
 

 

We will depend on joint ventures and strategic alliances to develop and market our technology and, if these arrangements are not successful, our technology may not be developed and the expenses to commercialize our technology will increase.

 

In its 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 have and are seeking business partners who will share the burden of our development costs while our technology is still being developed, and who will pay us royalties when they market and distribute products incorporating our technology 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 the continued development of our technology may be harmed.

 

Competition in the human therapeutic and agricultural biotechnology industries is intense and technology is changing rapidly. If our competitors market their technology faster than we do, we may not be able to generate revenues from the commercialization of our technology.

 

Many human therapeutic and agricultural biotechnology companies are engaged in research and development activities relating to apoptosis and senescence. 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 products containing our technology. 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. These companies include: Mendel Biotechnology, Inc.; Ceres, Inc., Archer Daniels Midland and Syngenta International AG; among others. Some of our competitors that are involved in apoptosis research include: Celgene, Inc.; Takeda/Millennium; ONYX Pharmaceuticals, Inc.; Amgen Inc.; Janssen Biotech, Inc.; Novartis AG; and Pharmacyclics, 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, which will prevent or limit our ability to generate revenues from the commercialization of our technology.

 

Our business is subject to various government regulations and, if we or our licensees are unable to obtain regulatory approval, we may not be able to continue our operations.

 

At present, the U.S. federal government regulation of biotechnology is divided among three agencies:

 

·the United States Department of Agriculture, or 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;
·the United States Environmental Protection Agency, or EPA, regulates activity related to the invention of plant pesticides and herbicides, which may include certain kinds of transgenic plants; and
·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 therapeutic applications, is also subject to FDA regulation. 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 United States, any products resulting from the application of our human therapeutic 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 clinical trials, and prior to beginning any clinical trial, we would need to perform extensive preclinical testing which could take several years and may require substantial expenditures.

 

10
 

 

We believe that our current agricultural 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 are performing clinical trials in connection with our human therapeutic applications, which is subject to FDA approval. Additionally, federal, state and foreign regulations relating to crop protection products and human therapeutic 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 human therapeutic technology. In addition, our marketing partners who utilize our technology or sell products grown with our technology may be subject to government regulations. If unfavorable governmental regulations are imposed on our technology or if we fail to obtain licenses or approvals in a timely manner, we may not be able to continue our operations.

 

Preclinical studies of our human therapeutic applications may be unsuccessful, which could delay or prevent regulatory approval.

 

Preclinical studies may reveal that our human therapeutic technology is ineffective or harmful, and/or may be unsuccessful in demonstrating efficacy and safety of our human therapeutic technology, 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 preclinical, clinical and manufacturing data to assess the efficacy and safety of potential products. Any delay in receiving approval for any applicable IND from the FDA would result in a delay in the commencement of the related clinical trial. Additionally, we could be required to perform additional preclinical studies prior to the FDA approving any applicable IND. 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.

 

Our success will depend on the success of our clinical trials of our human therapeutic applications.

 

It may take several years to complete the clinical trials of a product, and failure of one or more of our clinical trials can occur at any stage of testing. We believe that the development of our product candidate involves significant risks at each stage of testing. If clinical trial difficulties and failures arise, our product candidate may never be approved for sale or become commercially viable.

 

There are a number of difficulties and risks associated with clinical trials. These difficulties and risks may result in the failure to receive regulatory approval to sell our product candidate or the inability to commercialize our product candidate. The possibility exists that:

 

·we may discover that the product candidate does not exhibit the expected therapeutic results in humans, may cause harmful side effects or have other unexpected characteristics that may delay or preclude regulatory approval or limit commercial use if approved;
·the results from early clinical trials may not be statistically significant or predictive of results that will be obtained from expanded advanced clinical trials;
·institutional review boards or regulators, including the FDA, may hold, suspend or terminate our clinical research or the clinical trials of our product candidate for various reasons, including noncompliance with regulatory requirements or if, in their opinion, the participating subjects are being exposed to unacceptable health risks;
·subjects may drop out of our clinical trials;
·our preclinical studies or clinical trials may produce negative, inconsistent or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical studies or clinical trials; and
·the cost of our clinical trials may be greater than we currently anticipate.

 

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Clinical trials for our human therapeutic technology will be lengthy and expensive and their outcome is uncertain.

 

Before obtaining regulatory approval for the commercial sales of any product containing our technology, we must demonstrate through clinical testing that our technology and any product containing our technology is safe and effective for use in humans. Conducting clinical trials is a time-consuming, expensive and uncertain process and typically requires years to complete. In our industry, the results from preclinical studies and early clinical trials often are not predictive of results obtained in later-stage clinical trials. Some products and technologies that have shown promising results in preclinical studies or early clinical trials subsequently fail to establish sufficient safety and efficacy data necessary to obtain regulatory approval. At any time during clinical trials, we or the FDA might delay or halt any clinical trial for various reasons, including:

 

·occurrence of unacceptable toxicities or side effects;
·ineffectiveness of the product candidate;
·negative or inconclusive results from the clinical trials, or results that necessitate additional studies or clinical trials;
·delays in obtaining or maintaining required approvals from institutions, review boards or other reviewing entities at clinical sites;
·delays in patient enrollment; or
·insufficient funding or a reprioritization of financial or other resources.

 

Any failure or substantial delay in successfully completing clinical trials and obtaining regulatory approval for our product candidates could severely harm our business.

 

If our clinical trials for our product candidates are delayed, we would be unable to commercialize our product candidates on a timely basis, which would materially harm our business.

 

Planned clinical trials may not begin on time or may need to be restructured after they have begun. Clinical trials can be delayed for a variety of reasons, including delays related to:

 

·obtaining an effective IND or regulatory approval to commence a clinical trial;
·negotiating acceptable clinical trial agreement terms with prospective trial sites;
·obtaining institutional review board approval to conduct a clinical trial at a prospective site;
·recruiting qualified subjects to participate in clinical trials;
·competition in recruiting clinical investigators;
·shortage or lack of availability of supplies of drugs for clinical trials;
·the need to repeat clinical trials as a result of inconclusive results or poorly executed testing;
·the placement of a clinical hold on a study;
·the failure of third parties conducting and overseeing the operations of our clinical trials to perform their contractual or regulatory obligations in a timely fashion; and
·exposure of clinical trial subjects to unexpected and unacceptable health risks or noncompliance with regulatory requirements, which may result in suspension of the trial.

 

We believe that our product candidate has significant milestones to reach, including the successful completion of clinical trials, before commercialization. If we have significant delays in or termination of clinical trials, our financial results and the commercial prospects for our product candidates or any other products that we may develop will be adversely impacted. In addition, our product development costs would increase and our ability to generate revenue could be impaired.

 

Any inability to license from third parties their proprietary technologies or processes which we use in connection with the development of our technology may impair our business.

 

Other companies, universities and research institutions have or may obtain patents that could limit our ability to use our technology in a product candidate or impair our competitive position. As a result, we would have to obtain licenses from other parties before we could continue using our technology in a product candidate. Any necessary licenses may not be available on commercially acceptable terms, if at all. If we do not obtain required licenses, we may not be able to develop our technology into a product candidate or we may encounter significant delays in development while we redesign methods that are found to infringe on the patents held by others.

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Even if we receive regulatory approval, consumers may not accept products containing our technology, which will prevent us from being profitable since we have no other source of revenue.

 

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 agricultural consumer products. The adverse consequences from heightened consumer concern in this regard could affect the markets for agricultural products developed with our technology 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 face potential product liability exposure far in excess of our limited insurance coverage.

 

We may be held liable if any product we or our collaborators develop causes injury or is found otherwise unsuitable during product testing, manufacturing, marketing or sale. Regardless of merit or eventual outcome, product liability claims could result in decreased demand for our product candidates, injury to our reputation, withdrawal of patients from our clinical trials, substantial monetary awards to trial participants and the inability to commercialize any products that we may develop. These claims might be made directly by consumers, health care providers, pharmaceutical companies or others selling or testing our products. We have obtained limited product liability insurance coverage for our clinical trials; however, our insurance may not reimburse us or may not be sufficient to reimburse us for expenses or losses we may suffer. Moreover, if insurance coverage becomes more expensive, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If we obtain marketing approval for any of our product candidates, we intend to expand our insurance coverage to include the sale of commercial products, but we may be unable to obtain commercially reasonable product liability insurance for any products approved for marketing. On occasion, juries have awarded large judgments in class action lawsuits for claims based on drugs that had unanticipated side effects. In addition, the pharmaceutical and biotechnology industries, in general, have been subject to significant medical malpractice litigation. A successful product liability claim or series of claims brought against us could harm our reputation and business and would decrease our cash reserves.

 

We depend on our key personnel and, if we are not able to attract and retain qualified scientific and business personnel, we may not be able to grow our business or develop and commercialize our technology.

 

We are highly dependent on our scientific advisors, consultants and third-party research partners. 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. Although we have a research agreement with Dr. John Thompson, this agreement may be terminated upon short or no notice. Additionally, we do not have employment agreements with our key employees. 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.

 

Certain provisions of our charter, by-laws, Delaware law and stock plans 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, 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.

 

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.

 

13
 

 

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 our outstanding equity awards or issue equivalent equity awards, our current equity plans require the accelerated vesting of such outstanding equity awards.

 

Risks Related to Our Common Stock

 

Penny stock regulations may impose certain restrictions on marketability of our securities.

 

The SEC has adopted regulations which generally define a “penny stock” to be any equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. As a result, our common stock is subject to rules that impose additional sales practice requirements on broker dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by such rules, the broker dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the SEC relating to the penny stock market. The broker dealer must also disclose the commission payable to both the broker dealer and the registered representative, current quotations for the securities and, if the broker dealer is the sole market maker, the broker dealer must disclose this fact and the broker dealer’s presumed control over the market.

 

Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Broker-dealers must wait two business days after providing buyers with disclosure materials regarding a security before effecting a transaction in such security. Consequently, the “penny stock” rules restrict the ability of broker dealers to sell our securities and affect the ability of investors to sell our securities in the secondary market and the price at which such purchasers can sell any such securities, thereby affecting the liquidity of the market for our common stock.

 

Stockholders should be aware that, according to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:

 

· control of the market for the security by one or more broker-dealers that are often related to the promoter or issuer;
· manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
· “boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;
· excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
· the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

 

Our management is aware of the abuses that have occurred historically in the penny stock market.

 

Our management and other affiliates have significant control of our common stock and could significantly influence our actions in a manner that conflicts with our interests and the interests of other stockholders.

 

As of June 30, 2013, our executive officers and directors together beneficially own approximately 16% of the outstanding shares of our common stock, assuming the exercise of options and warrants which are currently exercisable or will become exercisable within 60 days of June 30, 2013, held by these stockholders. As a result, these stockholders, acting together, will be able to exercise significant 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.

 

14
 

 

A significant portion of our total outstanding shares of common stock may be sold in the market in the near future, which could cause the market price of our common stock to drop significantly.

 

As of June 30, 2013, we had 227,206,174 shares of our common stock issued and outstanding and 800 shares of convertible preferred stock outstanding which can convert into 26,666,667 shares of common stock. Except for 24,750,000 shares of our common stock which cannot be sold until January 9, 2014, all of such shares are registered pursuant to registration statements on Form S-3 or are either eligible to be sold under SEC Rule 144 or are in the public float. In addition, we have registered 35,890,007 shares of our common stock underlying warrants previously issued on Form S-3 registration statements and we registered 26,081,023 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 have a material adverse effect on our stock price.

 

Our common stock has a limited trading market, which could limit your ability to resell your shares of common stock at or above your purchase price.

 

Our common stock is currently quoted on the OTCQB Marketplace, operated by the OTC Markets Group, or OTCQB, and our common stock currently has a limited trading market. We cannot assure you 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.

 

The market price of our common stock may fluctuate and may drop below the price you paid.

 

We cannot assure you that you will be able to resell the shares of our common stock at or above your purchase price. 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:

 

·quarterly variations in operating results;
·the progress or perceived progress of our research and development efforts;
·changes in accounting treatments or principles;
·announcements by us or our competitors of new technology, product and service offerings, significant contracts, acquisitions or strategic relationships;
·additions or departures of key personnel;
·future offerings or resales of our common stock or other securities;
·stock market price and volume fluctuations of publicly-traded companies in general and development companies in particular; and
·general political, economic and market conditions.

 

For example, during the year ended June 30, 2013, our common stock traded between $0.02 and $0.31 per share.

 

Because we do not intend to pay, and have not paid, any cash dividends on our shares of common stock, our stockholders will not be able to receive a return on their shares unless the value of our common stock appreciates and they sell their shares.

 

We have never paid or declared any cash dividends on our common stock, and we intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Therefore, our stockholders will not be able to receive a return on their investment unless the value of our common stock appreciates and they sell their shares.

 

15
 

 

Our stockholders may experience substantial dilution as a result of the conversion of convertible preferred stock, the exercise of options and warrants to purchase our common stock, or due to anti-dilution provisions relating to any on the foregoing.

 

As of June 30, 2013, we have outstanding 800 shares of convertible preferred stock which may convert into 26,667,777 shares of our common stock and warrants to purchase 28,315,612 shares of our common stock.  In addition, as of June 30, 2013, we have reserved 26,081,023 shares of our common stock for issuance upon the exercise of options granted or available to be granted pursuant to our stock option plan, all of which may be granted in the future.  Furthermore, in connection with the preferred stock agreements, we are required to reserve an additional 13,923,594 shares of common stock. Additionally, under a securities purchase agreement dated May 8, 2013, which contains a price protection provision, we are required to reserve an additional 62,750,003 shares of common stock. The conversion of the convertible preferred stock and 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. The conversion price of the convertible preferred stock and certain warrants are also subject to certain anti-dilution adjustments.

 

Risks Related to This Offering

 

Our management team will have broad discretion over the use of the net proceeds from this offering.

 

Our management will use their discretion to direct the net proceeds from this offering. We intend to use the net proceeds, together with cash on hand, for general corporate purposes. General corporate purposes may include sales and marketing activities, clinical studies, research and development, capital expenditures, future acquisitions, working capital and repayment of debt. Our management’s judgments may not result in positive returns on your investment and you will not have an opportunity to evaluate the economic, financial or other information upon which our management bases its decisions.

 

Investors in this offering will experience immediate and substantial dilution.

 

The public offering price of the securities offered pursuant to this prospectus supplement is substantially higher than the net tangible book value per share of our common stock. Therefore, if you purchase shares of common stock in this offering, you will incur immediate and substantial dilution in the pro forma net tangible book value per share of common stock from the price per share that you pay for the common stock. If the holders of outstanding options or warrants exercise those options or warrants at prices below the public offering price, you will incur further dilution.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

From time to time, in reports filed with the Securities and Exchange Commission (including this registration statement), in press releases, and in other communications to stockholders or the investment community, we may provide forward-looking statements concerning possible or anticipated future results of operations or business developments. These statements are based on our management’s current expectations or predictions of future conditions, events or results based on various assumptions and our management’s estimates of trends and economic factors in the markets in which we are active, as well as our business plans. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “projects”, “forecasts”, “may”, “should”, variations of such words and similar expressions are intended to identify such forward-looking statements. The forward-looking statements may include, without limitation, statements regarding product development, product potential, regulatory environment, sales and marketing strategies, capital resources or operating performance. The forward-looking statements are subject to risks and uncertainties, which may cause results to differ materially from those set forth in the statements. Forward-looking statements in this registration statement should be evaluated together with the many uncertainties that affect our business and our market, particularly those discussed in the risk factors and cautionary statements in our filings with the Securities and Exchange Commission, including as described in “Risk Factors” included in this registration statement. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from those projected. The forward-looking statements are representative only as of the date they are made, and we assume no responsibility to update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

You should read this prospectus and the documents that we reference in this prospectus and have been filed as exhibits to the registration statement of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from what we expect. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any issuance or sale of our common shares. Except as required by law, we do not assume any obligation to update any forward-looking statements.

 

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USE OF PROCEEDS

 

We estimate that the net proceeds to us from the sale of securities in this offering will be approximately $             million, assuming a public offering price of $       per unit and after deducting estimated offering expenses payable by us. Each $0.01 increase or decrease in the assumed public offering price would increase or decrease, respectively, the net proceeds to us by approximately $             , assuming the number of securities offered by us, as set forth above, remains the same and after deducting estimated offering expenses.

 

We intend to use the net proceeds from this offering for continued development of product pipeline, including product line extension, and for general working capital purposes. We have not determined the amounts we plan to spend on any of the areas listed above or the timing of these expenditures.

 

Therefore, investors will be relying on the judgment of our management, who will have broad discretion regarding the application of the proceeds of this offering. The amounts and timing of our actual expenditures will depend upon numerous factors, including the amount of cash generated by our operations, our cash needs, the rate of adoption of our products by the medical community and efficiency of our product development. We may find it necessary or advisable to use portions of the proceeds from this offering for other purposes.

 

Pending the application of the net proceeds, we intend to invest the net proceeds in investment-grade, interest-bearing securities. Our management has broad discretion over how these proceeds are used and could spend the proceeds in ways with which you may not agree, and the proceeds may not be invested in a manner that yields a favorable or any return.

 

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DIVIDEND POLICY

 

We currently intend to retain earnings, if any, to finance the growth and development of our business, and we do not expect to pay any cash dividends to our stockholders in the foreseeable future.

 

COMMON SHARE PRICE RANGE

 

Our common shares currently trade on the OTCQB Marketplace under the symbol SNTI.

 

The following table sets forth, for each of the calendar periods indicated, the quarterly high and low closing bid prices for our common shares quoted on the OTCQB Marketplace or the NYSE MKT, as applicable. The prices in the table represent prices between dealers and do not include adjustments for retail mark-up, markdown or commission and may not represent actual transactions.

 

    Fiscal Year
Ended June 30,
2014
    Fiscal Year
Ended
June 30, 2013
    Fiscal Year
Ended June 30,
2012
 
    High     Low     High     Low     High     Low  
                                     
First Quarter (through September 19, 2013)   $ 0.06     $ 0.02     $ 0.32     $ 0.17     $ 0.31     $ 0.24  
                                                 
Second Quarter                   $ 0.23     $ 0.12     $ 0.29     $ 0.16  
                                                 
Third Quarter                   $ 0.17     $ 0.08     $ 0.28     $ 0.21  
                                                 
Fourth Quarter                   $ 0.09     $ 0.02     $ 0.31     $ 0.16  

 

The last reported sale price for our common shares on September 19 , 2013 was $0.05 per share. As of September 16 , 2013, there were approximately 240 registered holders of record of our common shares, based upon information received from our stock transfer agent. However, this number does not include beneficial owners whose shares were held of record by nominees or broker dealers. We believe that there are a significantly larger number of beneficial owners of our common shares than the number of record holders.

 

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The following table provides information about the securities authorized for issuance under our equity compensation plans as of June 30, 2013.

 

EQUITY COMPENSATION PLAN INFORMATION

 

    Number of securities
to be issued upon
exercise of outstanding
options, warrants
and rights and restricted
stock units
    Weighted-average
exercise price of
outstanding options,
warrants and rights and
restricted stock units
    Number of securities
remaining
available for future
issuance
under equity
compensation plans
 
                   
Equity compensation plans approved by security holders     23,174,770 (1)   $ 0.35       4,630,353 (2)
                         
Equity compensation plans not approved by security holders                  
                         
Total     23,174,770 (1)   $ 0.35       4,630,353 (2)

 

 

 

(1) Issued pursuant to our 1998 Stock Plan and 2008 Stock Plan.

 

(2) Available for future issuance pursuant to our 2008 Stock Plan.

 

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CAPITALIZATION

 

The following table describes our capitalization as of June 30, 2013:

 

on an actual basis; and

 

on an as adjusted basis to give effect to the sale of             of our shares in this offering at an assumed public offering price of $           per share, after deducting estimated offering expenses.

 

You should read this capitalization table together with our consolidated financial statements and the related notes appearing at the end of this prospectus and the “Use of Proceeds,” “Summary Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and other financial information included in this prospectus.

 

    As of June 30, 2013  
    Actual     As Adjusted  
    (in thousands, except share and per share
data)
 
Long-term debt     100       -  
Stockholders’ equity (deficit):                
Series A Convertible Preferred Stock, $0.01 par value; 5,000,000 shares authorized, 10,297 shares issued and 800 shares outstanding     -          
Common Stock, $.01 par value; 50,000,000 shares authorized, 227,206,174 shares issued and outstanding     2,272          
Additional paid-in capital     75,940          
Accumulated deficit     (74,426 )        
Total stockholders’ equity     3,786          
Total capitalization     3,886     $  

 

The number of our common shares outstanding after this offering is based on 227,206,174 common shares outstanding as of June 30, 2013, and excludes:

 

·23,174,770 common shares issuable upon the exercise of options outstanding as of June 30, 2013 at a weighted average exercise price of $.035 per share;

 

· 28,315,612 common shares issuable upon the exercise of warrants outstanding as of June 30, 2013 at an exercise price of $0.36 per share;

 

·26.666.667 common shares issuable upon the conversion of 800 shares of Series A Convertible Preferred Stock; and

 

·4,630,353 additional common shares available for future issuance as of June 30, 2013 under our Senesco Technologies, Inc. 2008 Stock Incentive Plan.

  

Unless otherwise indicated, all information in this prospectus assumes no exercise of the outstanding options or the warrants described above.

 

21
 

  

DILUTION

 

Our net tangible book value as of June 30, 2013 was approximately $219,570, or $0.001 per common share. Net tangible book value per share is determined by dividing our total tangible assets less total liabilities by the actual number of outstanding shares of our common shares. After giving effect to our issuance of          shares at the assumed public offering price of $      per share, and after deducting estimated offering expenses payable by us, our net tangible book value as of June 30, 2013 would have been $         million or $       per common share. This represents an immediate increase in pro forma net tangible book value of $        per share to our existing stockholders and an immediate dilution of $         per share to new investors in this offering. The following table illustrates this per share dilution:

 

Assumed public offering price per share           $    
Net tangible book value per share as of June 30, 2013   $ 0.001          
Increase per share attributable to new investors   $               
Pro forma net tangible book value per share after this offering                
Dilution per share to new investors           $  

 

Dilution per share to new investors is determined by subtracting pro forma net tangible book value per share after this offering from the assumed public offering price per share paid by a new investor. If any shares are issued in connection with outstanding options, you will experience further dilution. A $      increase or decrease in the assumed public offering price would increase or decrease, respectively, the pro forma as adjusted net tangible book value as of June 30, 2013 by $        million, or $        per common share, and the dilution per share to new investors by $       per share, assuming the number of shares offered by us, as set forth above, remains the same and after deducting estimated offering expenses.

 

22
 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

 

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes, and the financial and other information included elsewhere in this prospectus. Among other things, those financial statements include more detailed information regarding the basis of presentation for the following information. The financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, and are presented in U.S. dollars.

 

This discussion contains forward-looking statements that involve risks and uncertainties based on assumptions about our future business. Our actual results may differ from those contained in the forward-looking statements and such differences may be material as a result of a number of factors. Please read “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

 

Overview

 

We are a development stage company. We do not expect to generate significant revenues for several years, during which time we will engage in significant research and development efforts.

 

Our human therapeutic research program, which has consisted of clinical and pre-clinical in-vitro and in-vivo experiments designed to assess the role and method of action of the Factor 5A genes in human diseases, is performed, at our direction, at the University of Waterloo and other commercial research facilities.

 

We have developed a therapeutic candidate, SNS01-T, for the potential treatment of multiple myeloma, mantle cell lymphoma and diffuse large b-cell lymphoma and have been granted orphan drug status for SNS01-T by the FDA for the potential treatment of multiple myeloma, mantle cell lymphoma and diffuse large B-cell lymphoma.

 

We have initiated a Phase 1b/2a clinical study with SNS01-T in multiple myeloma, mantle cell and diffuse large b-cell lymphoma patients. The clinical study is an open-label, multiple-dose, dose-escalation study, which will evaluate the safety and tolerability of SNS01-T when administered by intravenous infusion to relapsed or refractory multiple myeloma patients. The study design calls for four cohorts of three to six patients each. Patients in each cohort will receive twice-weekly dosing for six weeks followed by a safety data review period before escalating to a higher dose level in the next cohort. While the primary objective of the initial study is to evaluate safety and tolerability, the effect of SNS01-T on tumor response will also be evaluated using multiple, well-established criteria including measurement of the monoclonal protein, or M-protein. We have selected Mayo Clinic, University of Arkansas for Medical Sciences, the Randolph Cancer Center at West Virginia University and the John Theurer Cancer Center at Hackensack University Medical Center as our clinical sites. We have completed the first and second cohorts of the study and the third cohort is open for enrollment and treating patients.

 

We may consider other human diseases in order to determine the role of Factor 5A and SNS01-T.

 

Additionally, we have nine active agricultural license agreements to develop and commercialize our technology in corn, soy, cotton, rice, canola, trees, banana, alfalfa, biofuels and turf grass. The licenses provide for upfront payments, milestone payments and royalty payments to us upon commercial introduction.

 

Consistent with our commercialization strategy, we may license our technology for human health applications or for additional crops, as the opportunities may arise, that may result in additional license fees, revenues from contract research and other related revenues. Successful future operations will depend on our and our partners’ ability to transform our research and development activities into a commercially feasible technology.

 

Critical Accounting Policies and Estimates

 

The discussion and analysis of the Company’s financial condition and results of operations is based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amount of expenses during the period reported. Management bases its estimates and judgments on historical experience, observance of trends in the industry, information provided by outside sources and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

 

23
 

 

Revenue Recognition

 

We record revenue under technology license and development agreements related to the following. Actual fees received may vary from the recorded estimated revenues.

 

· Nonrefundable upfront license fees that are received in exchange for the transfer of our technology to licensees, for which no further obligations to the licensee exist with respect to the basic technology transferred, are recognized as revenue on the earlier of when payments are received or collections are assured.

 

· Nonrefundable upfront license fees that are received in connection with agreements that include time-based payments are, together with the time-based payments, deferred and amortized ratably over the estimated research period of the license.

 

· Milestone payments, which are contingent upon the achievement of certain research goals, are recognized as revenue when the milestones, as defined in the particular agreement, are achieved.

 

The effect of any change in revenues from technology license and development agreements would be reflected in revenues in the period such determination was made. Historically, no such adjustments have been made.

 

Estimates of Expenses

 

Our research and development agreements with third parties provide for an estimate of our expenses and costs, which are variable and are based on the actual services performed by the third party. We estimate the aggregate amount of the expenses based upon the projected amounts that are set forth in the agreements, and we accrue the expenses for which we have not yet been invoiced or prepay the expenses that have been invoiced but the services have not yet been performed. In estimating the expenses, we consider, among other things, the following factors:

 

· the existence of any prior relationship between us and the third party provider;

 

· the past results of prior research and development services performed by the third party provider; and

 

· the scope and timing of the research and development services set forth in the agreement with the third party provider.

 

After the research services are performed and we are invoiced, we make any adjustments that are necessary to accurately report research and development expense for the period.

 

Income Taxes

 

We account for income taxes in accordance with an asset and liability approach requiring the recognition of deferred tax assets and liabilities for the expected tax consequences of events that have been recognized in the financial statements or tax returns. Deferred tax assets and liabilities are recorded without consideration as to their ability to be realized. The deferred tax asset includes net operating loss and credit carryforwards, and the cumulative temporary differences related to stock-based compensation. The portion of any deferred tax asset, for which it is more likely than not that a tax benefit will not be realized, must then be offset by recording a valuation allowance against the asset.

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Management believes it is more likely than not that we will not realize the deferred tax assets in excess of deferred tax liabilities, and as such, a full valuation allowance is maintained against the net deferred tax assets.

 

While we believe that our tax positions are fully supportable, there is a risk that certain positions could be challenged successfully. In these instances, we look to establish reserves. If we determine that a tax position is more likely than not of being sustained upon audit, based solely on the technical merits of the position, we recognize the benefit. We measure the benefit by determining the amount that has likelihood greater than 50% of being realized upon settlement. We presume that all tax positions will be examined by a taxing authority with full knowledge of all relevant information. We regularly monitor our tax positions, tax assets and tax liabilities. We reevaluate the technical merits of our tax positions and recognize an uncertain tax benefit or derecognize a previously recorded tax benefit when (i) there is a completion of a tax audit, (ii) there is a change in applicable tax law including a tax case or legislative guidance, or (iii) there is an expiration of the statute of limitations. Significant judgment is required in accounting for tax reserves.

 

24
 

 

Stock-based Compensation

 

We measure all employee stock-based compensation awards using a fair value method and record such expense in our consolidated financial statements. Such expense is amortized on a straight line basis over the requisite service period of the award.

 

We estimate the grant date fair value of stock options using the Black-Scholes option-pricing model which requires the input of highly subjective assumptions. These assumptions include estimating the expected term of the award, the estimated volatility of our stock price over the expected term and the probability of achievement of any performance goals that may be required to be achieved in order for the stock options to vest. Changes in these assumptions and in the estimated forfeitures of stock option awards may materially affect the amount of stock-based compensation recognized in our consolidated statements of operations.

 

In connection with any performance goals that may be required to be achieved in order for the stock options to vest, our management reviews the specific goals of such plans to determine if such goals have been achieved or are probable that they will be achieved. If the goals have been achieved or are probable of being achieved, then the amount of compensation expense determined on the date of grant related to those specific goals is charged to compensation expense at such time.

 

Intangible Assets

 

We test all intangible assets for recoverability whenever events or changes in circumstances indicate that we may not be able to recover an asset’s carrying amount. We evaluate the recoverability of an asset by comparing its carrying amount to the undiscounted cash flows expected to result from the use and eventual disposition of that asset. If the undiscounted cash flows are not sufficient to recover the carrying amount, we measure any impairment loss as the excess of the carrying amount of the asset over its fair value. Events which could trigger asset impairment include significant underperformance relative to historical or projected future operating results, significant changes in the manner or use of an asset or in our overall business strategy, significant negative industry or economic trends, shortening of product life-cycles, negative changes in third party reimbursement, or changes in technology.

 

As of June 30, 2013, we have determined that market value of our two asset groups is in excess of its carrying value and therefore there was no impairment.

 

Warrant Liability

 

We compute valuations each quarter using the Black-Scholes model, which requires the input of subjective assumptions for volatility, for warrants that have an exercise price reset feature to account for the various possibilities that could occur due to changes in the inputs to the Black-Scholes model as a result of contractually-obligated changes. We effectively weight each calculation based on the likelihood of occurrence to determine the value of the derivative at the reporting date. The fair value of the warrants that have cash settlement features is estimated using the Black-Scholes model. Changes in these assumptions may materially affect the amount of the warrant liability recorded on our consolidated balance sheet.

 

Convertible Preferred Stock

 

During the year ended June 30, 2010, we issued convertible preferred stock and warrants for gross proceeds in the amount of $11,497,000. The proceeds have been allocated between convertible preferred stock and warrants based upon their fair values, whereby the fair value of the warrants have been determined using the Black-Scholes model. Such amount was recorded as a liability. The remaining amounts were allocated to the convertible preferred stock and were recorded as equity.

 

Results of Operations

 

Comparison of the fiscal years ended June 30, 2013 and 2012

 

Revenue

 

We did not earn any revenue during the fiscal year ended June 30, 2013

 

25
 

 

During the fiscal year ended June 30, 2012, we earned revenue in the amount of $200,000, which consisted of a milestone payment in connection with an agricultural license agreement.

 

We anticipate that we will receive future milestone payments in connection with our current agricultural development and license agreements. Additionally, we anticipate that we may receive future royalty payments from our license agreements when and if our partners commercialize their crops containing our technology. However, it is difficult for us to determine our future revenue expectations because we are a development stage biotechnology company with a limited history of receiving development milestone payments or royalties, and the timing and outcome of our experiments, the timing of signing new partners and the timing and success of our partners moving through the development process into commercialization is difficult to accurately predict.

 

Operating expenses

 

    Fiscal Year Ended June 30,  
    2013     2012     Change     %  
                         
General and administrative   $ 2,499,624     $ 2,724,144     $ (224,520 )     (8.2 )%
Research and development     2,086,666       2,566,247       (479,581 )     (18.7 )%
Write-off of patents abandoned     64,210       321,137       (256,927 )     (80.0 )%
Total operating expenses   $ 4,650,500     $ 5,611,528     $ (961,028 )     (17.1 )%

 

We expect operating expenses to increase over the next 12 months as we anticipate that research and development expenses will increase as we continue to expand our research and development activities.

 

General and administrative expenses

 

General and administrative expenses consist of the following:

 

    Fiscal Year ended June 30,  
    2013     2012     Change     %  
                         
Stock-based compensation   $ 639,828     $ 721,197     $ (81,369 )     (11.3 )%
Payroll and benefits     594,456       588,407       6,049       1.0 %
Investor relations     103,816       203,871       (100,055 )     (49.0 )%
Professional fees     475,274       518,473       (43,199 )     (8.3 )%
Director fees     62,375       44,625       17,750       39.8 %
Depreciation and amortization     293,629       258,023       35,606       13.8 %
Other general and administrative expenses     330,246       389,548       (59,302 )     (15.2 )%
Total general and administrative expenses   $ 2,499,624     $ 2,724,144     $ (224,520 )     (8.2 )%

 

· Stock-based compensation for the fiscal years ended June 30, 2013 and June 30, 2012 consisted of the amortized portion of the Black-Scholes value of options, restricted stock units and warrants granted to directors, employees and consultants. During the fiscal years ended June 30, 2013 and 2012, 8,966,978 and 5,274,428 options, respectively, were granted to such individuals.

 

Stock-based compensation for the fiscal year ended June 30, 2013 was lower than the fiscal year ended June 30, 2012 primarily due to management’s assessment of the probability of the vesting of the goal based options granted during the fiscal year ended June 30, 2013 being lower than for the fiscal year ended June 30, 2012. Additionally, the options granted during the fiscal year ended June 30, 2012, vested at a lower percentage than had been estimated at June 30, 2012. Therefore, stock-based compensation for the fiscal year ended June 30, 2013 was further reduced.

 

· Payroll and benefits for the fiscal year ended June 30, 2013 was higher than for the fiscal year ended June 30, 2012, primarily as a result of a 401K contribution made during the fiscal year ended June 30, 2012. There was no 401K contribution during the fiscal year ended June, 2013. This was partially offset by salary increases effective July 1, 2012.

 

· Investor relations fees for the fiscal year ended June 30, 2013 was lower than for the fiscal year ended June 30, 2012 primarily as a result of lower consultant fees.

 

26
 

 

 

· Professional fees for the fiscal year ended June 30, 2013 was lower than for the fiscal year ended June 30, 2012 primarily as a result of a decrease in legal and accounting fees. Legal fees decreased primarily due to higher discounts received during the fiscal year ended June 30, 2013 and a decrease in fees incurred in connection with the exploration of alternative uses of our technology. Accounting fees decreased primarily due to the use of a consultant to prepare a valuation of the Company’s intangible assets during the fiscal year ended June 30, 2012.

 

· Director fees for the fiscal year ended June 30, 2013 were higher than for the fiscal year ended June 30, 2012, primarily as a result of more meetings being held during the fiscal year ended June 30, 2013.

 

· Depreciation and amortization for the fiscal year ended June 30, 2013 was higher than for the fiscal year ended June 30, 2012 primarily as a result of an increase in amortization of patent costs.

 

· Other general and administrative expenses for the fiscal year ended June 30, 2013 were lower than for the fiscal year ended June 30, 2012 primarily due to a decrease in conferences and travel, office supplies, state taxes and transfer agent fees.

 

We expect cash-based general and administrative expenses to increase slightly over the next twelve months.

 

Research and development expenses

 

    Fiscal Year Ended June 30,  
    2013     2012     Change     %  
Stock-based compensation   $ 84,865     $ 44,807     $ 40,058       8.9 %
Payroll     174,360       167,834       6,526       3.9 %
Research contract with the University of Waterloo     628,997       573,368       55,629       9.7 %
Other research and development     1,198,444       1,780,238       (581,794 )     (32.7 )%
Total research and development   $ 2,086,666     $ 2,566,247     $ (479,581 )     (18.7 )%

 

· Stock-based compensation for the fiscal year ended June 30, 2013 was higher than the fiscal year ended June 30, 2012 primarily because the number of options granted during the fiscal year ended June 30, 2013 was higher than the fiscal year ended June 30, 2012.

 

· Payroll for the fiscal year ended June 30, 2013 was higher than for the fiscal year ended June 30, 2012 primarily as a result of a salary increases effective July 1, 2012.

 

· The cost associated with the research contract with the University of Waterloo for the fiscal year ended June 30, 2013 were higher than for the fiscal year ended June 30, 2012 primarily due to an increase in amount being funded for human health research.

 

· Other research and development costs for the fiscal year ended June 30, 2013 was lower than for the fiscal year ended June 30, 2012 primarily due to a decrease in the costs in connection with agricultural research programs and formulation studies.

 

The breakdown of our research and development expenses between our agricultural and human therapeutic research programs are as follows:

 

    Fiscal Year ended June 30,  
    2013     %     2012     %  
Agricultural research programs   $ 53,566       3 %   $ 279,736       11 %
Human therapeutic research programs     2,033,100       97 %     2,286,511       89 %
Total research and development expenses   $ 2,086,666       100 %   $ 2,566,247       100 %

 

· Agricultural research expenses for the fiscal year ended June 30, 2013 were lower than for the fiscal year ended June 30, 2012 primarily due to a reduction in the funding for agricultural research at the University of Waterloo and the amendment to the Rahan Meristem agreement for the development of bananas. Effective January 1, 2012, we amended the Rahan Meristem agreement whereby we no longer incur costs related to such development.

 

27
 

 

· Human therapeutic research expenses for the fiscal year ended June 30, 2013 were lower than for the fiscal year ended June 30, 2012 primarily as a result of the timing of certain aspects of the development of our drug candidate, SNS01-T, for treating multiple myeloma. Specifically, during the nine months ended March 31, 2012, we incurred costs related to the formulation of SNS01-T, which we did not incur during the nine months ended March 31, 2013.

 

We expect our human therapeutic research program to modestly increase as a percentage of the total research and development expenses as we continue our current research projects and begin new human therapeutic initiatives, in particular as they relate to the clinical development of our drug candidate, SNS01-T, for treating multiple myeloma and other cancers.

 

Write-off of patents abandoned

 

During the fiscal years ended June 30, 2013 and June 30, 2012, we reviewed our patent portfolio in order to determine if we could reduce our cost of patent prosecution and maintenance. We identified several patents and patents pending that we believe we no longer need to maintain without having a material impact on the portfolio. We determined that we would no longer incur the cost to prosecute or maintain those patents or patents pending. Therefore, we wrote-off the net book value of those patents and patents pending in the amounts of $64,210 and $321,137, respectively.

 

Other non-operating income and expense

 

Change in fair value of warrant liability

 

The amounts represent the change in the fair value of the warrant liability for the fiscal years ended June 30, 2013 and 2012. During the fiscal year ended June 30, 2013 the fair value of the warrant liability decreased due to the expiration of certain warrants and a decrease in the Black-Scholes values of the remaining warrants as the expected term was shorter in 2013 and there was greater disparity between the market price of our common stock and the exercise price of the warrants.

 

Loss on settlement of warrant liabilities

 

During the fiscal year ended June 30, 2013, certain warrants that were recorded as liabilities were exchanged for common stock. The loss on the settlement of warrant liabilities represents the fair value of the common stock received by the warrant holders less the Black-Scholes value of the warrants exchanged on the date of the exchange.

 

Comparison of the fiscal years ended June 30, 2012 and 2011

 

Revenue

 

During the fiscal year ended June 30, 2012, we earned revenue in the amount of $200,000, which consisted of a milestone payment in connection with an agricultural license agreement.

 

We did not earn any revenue during the fiscal year ended June 30, 2011.

 

Operating expenses

 

    Fiscal Year Ended June 30,  
    2012     2011     Change     %  
                         
General and administrative   $ 2,724,144     $ 2,610,222     $ 113,922       4.4 %
Research and development     2,566,247       3,720,394       (1,154,147 )     (31.0 )%
Write-off of patents abandoned     321,137       1,588,087       (1,266,950 )     (79.8 )%
Total operating expenses   $ 5,611,528     $ 7,918,703     $ (2,307,175 )     (29.1 )%

 

28
 

 

General and administrative expenses

 

General and administrative expenses consist of the following:

 

    Fiscal Year ended June 30,  
    2012     2011     Change     %  
                         
Stock-based compensation   $ 721,197     $ 709,207       11,990       1.7 %
Payroll and benefits     588,407       568,597       19,810       3.5 %
Investor relations     203,871       260,455       (56,584 )     (21.7 )%
Professional fees     518,473       425,640       92,833       21.8 %
Depreciation and amortization     258,023       143,274       114,749       80.0 %
Other general and administrative expenses     434,173       503,049       (68,876 )     (13.7 )%
Total general and administrative expenses   $ 2,724,144     $ 2,610,222       113,922       4.4 %

 

·Stock-based compensation for the fiscal years ended June 30, 2012 and June 30, 2011 consisted of the amortized portion of the Black-Scholes value of options, restricted stock units and warrants granted to directors, employees and consultants. During the fiscal years ended June 30, 2012 and 2011, the following options and warrants were granted to such individuals:

 

   June 30, 2012   June 30, 2011 
Options   5,274,428    4,579,142 
Warrants   None    305,000 

 

Stock-based compensation for the fiscal year ended June 30, 2012 was higher than the fiscal year ended June 30, 2011 primarily due to the greater number of options and warrants granted.

 

·Payroll and benefits for the fiscal year ended June 30, 2012 was higher than for the fiscal year ended June 30, 2011 primarily as a result of a 401K contribution made during the fiscal year ended June 30, 2012 and salary increases effective July 1, 2011. There was no 401K contribution during the fiscal year ended June 30, 2011.

 

·Investor relations fees for the fiscal year ended June 30, 2012 was lower than for the fiscal year ended June 30, 2011 primarily as a result of lower consultant fees.

 

·Professional fees for the fiscal year ended June 30, 2012 was higher than for the fiscal year ended June 30, 2011 primarily as a result of an increase in legal and accounting fees. Legal fees increased primarily due to fees incurred in connection with the exploration of alternative uses of our technology and discounts on legal fees that were recorded during the fiscal year ended June 30, 2011 but were not available during the fiscal year ended June 30, 2012. Accounting fees increased primarily due to the use of a consultant to prepare a valuation of the Company’s intangible assets.

 

·Depreciation and amortization for the fiscal year ended June 30, 2012 was higher than for the fiscal year ended June 30, 2011 primarily as a result of an increase in amortization of patent costs.

 

·Other general and administrative expenses for the fiscal year ended June 30, 2012 was lower than for the fiscal year ended June 30, 2011 primarily due to a decrease in consultant costs, rent and telecom, which was partially offset by an increase in insurance costs.

 

Research and development expenses

 

    Fiscal Year Ended June 30,  
    2012     2011     Change     %  
Stock-based compensation   $ 44,807     $ 41,159     $ 3,648       8.9 %
Payroll     167,834       176,646       (8,812 )     (5.0 )%
Research contract with the                                
University of Waterloo     573,368       622,872       (49,504 )     (8.0 )%
Other research and development     1,780,238       2,879,717       (1,099,479 )     (38.2 )%
Total research and development   $ 2,566,247     $ 3,720,394     $ (1,154,147 )     (31.0 )%

 

29
 

 

·Stock-based compensation for the fiscal year ended June 30, 2012 was higher than the fiscal year ended June 30, 2011 primarily because the number of options granted during the fiscal year ended June 30, 2012 was higher than the fiscal year ended June 30, 2011.

 

·Payroll for the fiscal year ended June 30, 2012 was lower than for the fiscal year ended June 30, 2011 primarily as a result of a bonus that was paid to the VP-Research during the fiscal year ended June 30, 2011. There were no bonuses paid during the fiscal year ended June 30, 2012.

 

·The cost associated with the research contract with the University of Waterloo for the fiscal year ended June 30, 2012 were lower than for the fiscal year ended June 30, 2011 primarily due to a reduction in the amount being funded for agricultural research, effective, March 1, 2011.

 

·Other research and development costs for the fiscal year ended June 30, 2012 was lower than for the fiscal year ended June 30, 2011 primarily due to a decrease in the costs incurred in connection with our development of SNS01-T for multiple myeloma. Specifically, during the fiscal year ended June 30, 2011, we incurred significant costs related to our filing and follow-up of our investigational new drug application, pivotal toxicology study and other preclinical work that we did not incur during the fiscal year ended June 30, 2012. This was partially offset by costs incurred related to the performance of the Phase 1b/2a clinical trial for multiple myeloma which were not incurred during the fiscal year ended June 30, 2011.

 

The breakdown of our research and development expenses between our agricultural and human therapeutic research programs are as follows:

 

    Fiscal Year ended June 30,  
    2012     %     2011     %  
Agricultural research programs   $ 279,736       11 %   $ 467,141       13 %
Human therapeutic research programs     2,286,511       89 %     3,253,253       87 %
Total research and development expenses   $ 2,566,247       100 %   $ 3,720,394       100 %

 

·Agricultural research expenses for the fiscal year ended June 30, 2012 were lower than for the fiscal year ended June 30, 2011 primarily due to a reduction in the funding for agricultural research at the University of Waterloo and a reduction in the funding for banana field trials due to the conversion of the joint collaboration agreement with Rahan Meristem into a license agreement in December 2011.

 

·Human therapeutic research expenses for the fiscal year ended June 30, 2012 were lower than for the fiscal year ended June 30, 2011 primarily as a result of the timing of certain aspects of the development of our drug candidate, SNS01-T, for treating multiple myeloma. Specifically, during the fiscal year ended June 30, 2011, we incurred costs related to our filing and follow-up of our investigational new drug application, pivotal toxicology studies and other pre-clinical work that we did not incur during the fiscal year ended June 30, 2012. This was partially offset by costs incurred related to the performance of the Phase 1b/2a clinical trial for multiple myeloma which were not incurred during the fiscal year ended June 30, 2011.

 

Write-off of patents abandoned

 

During the fiscal years ended June 30, 2012 and June 30, 2011, we reviewed our patent portfolio in order to determine if we could reduce our cost of patent prosecution and maintenance. We identified several patents and patents pending that we believe we no longer need to maintain without having a material impact on the portfolio. We determined that we would no longer incur the cost to prosecute or maintain those patents or patents pending. Therefore, we wrote-off the net book value of those patents and patents pending in the amounts of $321,137 and $1,588,087, respectively.

 

Other non-operating income and expense

 

Grant income

 

We did not receive any grant income during the fiscal year ended June 30, 2012.

 

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We received grant income under the Qualified Therapeutic Discovery Project in the amount of $244,479 during the fiscal year ended June 30, 2011. The funds were granted in connection with our program for the use of our lead therapeutic candidate, SNS01-T, in multiple myeloma.

 

Change in fair value of warrant liability

 

The amounts represent the change in the fair value of the warrant liability for the fiscal years ended June 30, 2012 and 2011. During the fiscal year ended June 30, 2012 the fair value of the warrant liability decreased due to a decrease in the Black-Scholes values of the remaining warrants as the expected term was shorter in 2011 and there was greater disparity between the market price of our common stock and the exercise price of the warrants.

 

Other noncash expense or income

 

During the fiscal year ended June 30, 2011, the exercise price of 4,088,540 warrants was adjusted from $0.50 to $0.32 in exchange for those warrant holders giving up their right to future adjustments to the exercise price. This resulted in a charge to stock-based compensation of $115,869.

 

Effect of Inflation

 

Inflation has not had a significant impact on our operations or cash flows.

 

Liquidity and Capital Resources

 

Overview

 

As of June 30, 2013, our cash balance totaled $1,602,294, and we had working capital of $309,572.

 

Contractual Obligations

 

The following table lists our cash contractual obligations as of June 30, 2013:

 

    Payments Due by Period  
Contractual Obligations   Total     Less than
1 year
    1 - 3 years     3 - 5 years     More than
5 years
 
Research and Development Agreements (1)   $ 819,771     $ 819,771     $     $     $  
Facility, Rent and Operating Leases (2)   $ 62,733     $ 62,733     $     $     $  
Employment, Consulting and Scientific Advisory Board Agreements (3)   $ 67,500     $ 67,500     $     $     $  
Total Contractual Cash Obligations   $ 950,004     $ 950,004     $     $     $  

(1) Certain of our research and development 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 Bridgewater, New Jersey is subject to certain escalations for our proportionate share of increases in the building’s operating costs.
(3) Certain of our consulting agreements provide for automatic renewal, which is not reflected in the table, unless terminated earlier by the parties to the respective agreements.

 

Effective June 20, 2011, we entered into a Master Services Agreement with Criterium under which CRITERIUM will provide professional and technical services in connection with the management of our planned Phase 1b/2a clinical trial for the treatment of multiple myeloma. The agreement, as amended, has an initial term that commences on the date of the agreement and runs for a period of twenty-nine (29) months. Our remaining financial obligation under the agreement, as amended, is estimated to be $455,000 and is included in the above table .

 

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Effective August 15, 2011, we entered into a Clinical Trial Research Agreement with Mayo Clinic, or MAYO, under which MAYO will perform our planned Phase 1b/2a clinical trial for the treatment of multiple myeloma. The agreement has an initial term that commences on the date of the agreement and continues until the study is completed and all final study documentation required to be provided is received and accepted by us. Our financial obligation under the agreement includes a fixed cost and a cost per patient and is not included in the above table.

 

Effective February 28, 2012, we entered into a Clinical Trial Research Agreement with University of Arkansas for Medical Sciences, or ARKANSAS, under which ARKANSAS will perform our planned Phase 1b/2a clinical trial for the treatment of multiple myeloma. The agreement has an initial term that commences on the date of the agreement and continues until the study is completed and all final study documentation required to be provided is received and accepted by us. Our financial obligation under the agreement includes a fixed cost and a cost per patient and is not included in the above table.

 

Effective March 5, 2012, we entered into a Clinical Trial Research Agreement with West Virginia University Research Corporation, or WVU, under which WVU will perform our planned Phase 1b/2a clinical trial for the treatment of multiple myeloma. The agreement has an initial term that commences on the date of the agreement and continues until the study is completed and all final study documentation required to be provided is received and accepted by us. Our financial obligation under the agreement includes a fixed cost and a cost per patient and is not included in the above table.

 

Effective June 15, 2012, we entered into a Clinical Trial Research Agreement with the John Theurer Cancer Center at Hackensack University Medical Center, or HACKENSACK, under which HACKENSACK will perform our planned Phase 1b/2a clinical trial for the treatment of multiple myeloma. The agreement has an initial term that commences on the date of the agreement and continues until the study is completed and all final study documentation required to be provided is received and accepted by us. Our financial obligation under the agreement includes a fixed cost and a cost per patient and is not included in the above table.

 

Effective September 1, 2012, we extended our research and development agreement with the University of Waterloo for an additional one-year period through August 31, 2013, in the amount of CAD $611,550, or approximately USD $612,000. Effective July 1, 2013, the budget for the research and development agreement was amended to reduce the monthly amount from $50,962 to $38,038 through August 31, 2013. Research and development expenses under this agreement for the fiscal years ended June 30, 2013, 2012 and 2011 aggregated U.S. $628,995, U.S. $573,368 and U.S. $622,872, respectively, and U.S. $7,778,296 for the cumulative period through June 30, 2013. Future obligations to be paid under the agreement through August 31, 2013 equal approximately U.S. $76,076.

 

Effective June 4, 2013, the Company entered into a clinical supply agreement with The University of Iowa, or IOWA, under which IOWA will provide manufacturing, vialing and testing services for certain reagents that are used in SNS01-T. The agreement will terminate upon delivery of the reagents, which is estimated to be approximately six months after the effective date of the agreement. The Company’s remaining financial obligation under the agreement is approximately $156,000.

 

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 business development and administrative staff.

 

Capital Resources

 

Since inception, we have generated revenues of $1,790,000 in connection with the initial fees and milestone payments received under our license and development agreements. We have also received $244,479 in grants. 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 licensing of our technology for several years, we may enter into additional licensing or other agreements with marketing and distribution partners that may result in additional license fees, receive revenues from contract research, or other related revenue.

 

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Financing

 

On December 22, 2010, the Company entered into an At Market Issuance Sales Agreement (the “ATM”) under which the Company, from time to time, may issue and sell shares of its common stock, with an aggregate offering price of up to $5,500,000. Such common stock will be offered and sold pursuant to a prospectus supplement filed with the Securities and Exchange Commission in connection with the Company’s shelf registration statement on Form S-3 (File No. 333-170140), which became effective on November 9, 2010. During the fiscal year ended June 30, 2013, the Company issued 353,895 shares of common stock under the ATM for gross proceeds in the amount of $100,570. In November 2012, the Company was delisted from the NYSE MKT exchange and is now quoted on the OTCQB. Since the Company is no longer listed on the NYSE MKT exchange, the Company is no longer able to issue and sell shares of its common stock under the ATM.

 

In January 2013, we issued an aggregate of 30,000,000 shares of common stock and 30,000,000 warrants in a public offering for gross proceeds in the amount of $3,000,000.

 

In May 2013, we issued an aggregate of 41,833,334 shares of common stock in a public offering for gross proceeds in the amount of $1,255,000.

 

We anticipate that, based upon our current cash balance at June 30, 2013, we will be able to fund our operations through November 2013.

 

Over the next 12 months, we plan to fund our research and development and commercialization activities by:

 

· utilizing our current cash balance and investments,
· achieving some of the milestones set forth in our current licensing agreements,
· through the execution of additional licensing agreements for our technology, and
· through the placement of equity or debt instruments.

 

We cannot assure you that we will be able to raise money through any of the foregoing transactions, or on favorable terms, if at all.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

 

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BUSINESS

 

General

 

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 to utilize our patented and patent-pending technology related to certain genes, primarily eukaryotic translation initiation Factor 5A, or Factor 5A, and deoxyhypusine synthase, or DHS, and related technologies for human therapeutic applications to develop novel approaches to treat cancer and inflammatory diseases.

 

For agricultural applications, we have licensed applications of the Factor 5A, DHS and Lipase platforms to enhance the quality, productivity and stress resistance of agronomic crops and biofuel feedstock crops through the control of cell death, referred to herein as senescence, and growth in plants.

 

Human Therapeutic Applications

 

We believe that our Factor 5A gene regulatory technology could have broad applicability in the human therapeutic field, by either inducing or inhibiting programmed cell death, also known as apoptosis, which is the natural process the human body goes through in order to eliminate redundant or defective cells. Inducing apoptosis is useful in treating cancer where the defective cancer cells have failed to respond to the body’s natural apoptotic signals. Conversely, inhibiting apoptosis may be useful in preventing, ameliorating or treating an exaggerated, acute immune response in a wide range of inflammatory and ischemic diseases attributable to or aggravated by premature apoptosis.

 

SNS01-T for Multiple Myeloma

 

We have developed a therapeutic candidate, SNS01-T, an improved formulation of SNS01, for the potential treatment of multiple myeloma and non-Hodgkin B-cell lymphomas. SNS01-T utilizes our Factor 5A technology and comprises two active components: a DNA plasmid, or pDNA, expressing human eIF5A containing a lysine to arginine substitution at amino acid position 50, or eIF5AK50R, and a small inhibitory RNA, or siRNA. These two components are combined in a fixed ratio with a polymer, polyethyleneimine, or PEI, which enables self-assembly of the DNA and RNA into nanoparticles with demonstrated enhanced delivery to tissues and protection from degradation in the blood stream. Under the control of a B cell selective promoter, SNS01-T’s DNA plasmid up-regulates the apoptotic pathways within cancer cells by preferentially expressing the stable arginine form of the Factor 5A death message in target cells. The siRNA, by silencing the eIF5A gene, reduces expression of the hypusine form of Factor 5A that supports cell survival and proliferation. The silencing of the eIF5A gene by an eIF5A siRNA also down-regulates anti-apoptotic proteins, such as NFkB, ICAM and pro-inflammatory cytokines, which protect malignant cells from apoptosis and promote cell growth in multiple myeloma. The PEI, a cationic polymer, promotes auto-assembly of a nanoparticle with the other two components for intravenous delivery and protects the combination from degradation in the bloodstream until it is taken up by the tumor cell, where the siRNA and DNA plasmid are released.

 

We have performed efficacy, toxicological and dose-finding studies in vitro in non-human and human cells and in vivo in mice with SNS01. We have also completed our pivotal GLP toxicology studies in mice and dogs, employing SNS01-T, an improved formulation of SNS01, and have an open investigational new drug application, or IND, with the United States Food and Drug Administration, or FDA.

 

We have been granted orphan drug status for SNS01-T by the FDA for the potential treatment of multiple myeloma, mantle cell lymphoma (MCL) and diffuse large B-cell lymphoma (DLBCL) and are conducting a Phase 1b/2a clinical study with SNS01-T in patients with those indications. The clinical study is an open-label, multiple-dose, dose-escalation study, which is evaluating the safety and tolerability of SNS01-T when administered by intravenous infusion to relapsed or refractory multiple myeloma patients. The study design calls for four cohorts of three to six patients each. Patients in each cohort will receive twice-weekly dosing for six weeks followed by up to a four-week safety data review period before escalating to a higher dose level in the next cohort.

 

While the primary objective of this study is to evaluate safety and tolerability, the effect of SNS01-T on tumor response and time to relapse or progression will be assessed using multiple well-established metrics including measurement of monoclonal protein in multiple myeloma and CT imaging in MCL and DLBCL .

 

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We have selected Mayo Clinic, University of Arkansas for Medical Sciences, the Randolph Cancer Center at West Virginia University, the Fred Hutchinson Cancer Research Center and the John Theurer Cancer Center at Hackensack University Medical Center as our clinical sites. During the fiscal year ended June 30, 2013, the agreement with the Company’s contract research organization was amended to reflect the additional costs involved with adding the three additional clinical sites. We are also considering adding additional sites to increase the rate of enrollment.

 

We have completed our first and second cohorts and the third cohort is open for enrollment and dosing patients. The results of the first and second cohort showed that SNS01-T was safe and well tolerated and met the criteria for Stable Disease in 2 of the 6 evaluable patients.

 

We have demonstrated in human multiple myeloma cell lines that there may be an additional benefit to combining SNS01-T with other approved myeloma drugs, such as bortezomib and lenalidomide. We have shown, in vitro, that these drugs are up to forty (40) times more effective in inhibiting cell growth when used in combination with SNS01-T. These results further reinforce the significance of our target and will guide us in designing future clinical studies. We have demonstrated that a high level of tumor eradication in a mouse model of human multiple myeloma was achieved with a combination of SNS01-T and lenalidomide. While SNS01-T alone performed well by completely eliminating tumors in 40% of the animals, complete tumor eradication was achieved in five out of six or 83% of the treated animals that received SNS01-T combined with the optimal study dose of lenalidomide. This effect lasted throughout 6 weeks of observation after the end of treatment. Neither dose of lenalidomide used alone eliminated tumors in any of the treated mice. Most recently, we have demonstrated the benefits of combining SNS01-T with bortezomib. In a mouse model of human multiple myeloma, SNS01-T as a monotherapy achieved 59% tumor growth inhibition, which exceeded that of bortezomib alone at either the 0.2 mg/kg dose (22% inhibition) or at the 0.5 mg/kg dose (39% inhibition). However, the combination of SNS01-T with 0.5 mg/kg of bortezomib resulted in 89% tumor inhibition, which was significantly more effective than either SNS01-T or bortezomib alone.

 

SNS01-T used in combination with other drugs

 

We have demonstrated that the combination of lenalidomide and SNS01-T performs better than either treatment alone in mouse xenograft models of human mantle cell lymphoma. When SCID mice, implanted with an aggressive human mantle cell lymphoma cell line (JVM2), were treated with either 15 mg/kg lenalidomide (5 times weekly by intra-peritoneal injection) or 0.375 mg/kg SNS01-T (twice weekly by intravenous injection) there was a growth delay of 4 days and 14 days, respectively. Mice treated with a combination of both drugs using the same dose levels and dosing regimens exhibited a tumor growth delay of 27 days (p value = 0.0008).

 

The median survival of mice treated with control nanoparticles was 21 days. Mice treated with lenalidomide or SNS01-T had a median survival of 28 days (33 % increase) and 37 days (76 % increase), respectively. Mice treated with the drug combination had a median survival of 52 days, an increase in survival of 148 %. Survival analysis using the Kaplan-Meier method revealed that treatment of mice with the drug combination resulted in statistically significant increases in survival compared to both SNS01-T (p value = 0.002) and lenalidomide (p value = 0.007) alone. We believe that the results of these studies not only support moving forward in multiple myeloma, but also support extending our clinical evaluation of SNS01-T in other B-cell cancers.

 

We may consider other human diseases in order to determine the role of Factor 5A and SNS01-T. We may further expand our research and development program beyond the initiatives listed above to include other diseases and research centers.

 

Human Therapeutic Target Markets

 

We believe that our eIF5A platform technology may have broad applicability in the human therapeutic field, by either inducing or inhibiting apoptosis. Inducing apoptosis may be useful in treating certain forms of cancer where tumor cells do not respond to immune system signals to undergo apoptosis. Inhibiting apoptosis may be useful in preventing or treating a wide range of inflammatory and ischemic diseases attributed to premature apoptosis, including diabetes, diabetic retinopathy and lung inflammation.

 

We have advanced our research in multiple myeloma, MCL and DLBCL and are conducting a Phase 1b/2a clinical trial for those indications, and may select additional human therapeutic indications to investigate in clinical trials. We believe that the success of our future operations will likely depend on our ability to transform our research and development activities into commercial applications.

 

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We anticipate that we may enter into a collaboration with a biotechnology or pharmaceutical company to support the further development of SNS01-T after we complete our Phase 1b/2a clinical trial in multiple myeloma, MCL and DLBCL. However, there can be no assurance that we will be able to enter into such a collaboration or that one will be available on terms satisfactory to us.

 

Human Therapeutic Research Program

 

Our human therapeutic research program, which consists of pre-clinical in-vitro and in-vivo experiments designed to assess the role and mode of action of Factor 5A in human diseases and a phase 1a/2b clinical trial, is being performed by third party researchers, at our direction, at Criterium, our contract research organization and the University of Waterloo and other facilities. Additionally, we outsource certain projects, such as our clinical trial, to other third party research organizations.

 

On September 1, 1998, we entered into, and have extended through August 31, 2013, a research and development agreement with the University of Waterloo and Dr. Thompson as the principal inventor. The Research and Development Agreement provides that the University of Waterloo will perform research and development under 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.

 

Our research and development expenses incurred on human therapeutic applications were approximately $2,033,100, or 97%, of our total research and development expenses for the year ended June 30, 2013.

 

Our research and development expenses incurred on human therapeutic applications were approximately $2,286,511, or 89%, of our total research and development expenses for the year ended June 30, 2012.

 

Our research and development expenses incurred on human therapeutic applications were approximately $3,253,253, or 87%, of our total research and development expenses for the year ended June 30, 2011.

 

Since inception, the proportion of our research and development expenses on human therapeutic applications has increased, as compared to our research and development expenses on agricultural applications. This change is primarily due to the fact that our research focus on human therapeutics has increased and most of our research costs for plant applications have shifted to our license partners.

 

Our planned future research and development initiatives for human therapeutics include:

 

· Multiple Myeloma, Mantle Cell Lymphoma and Diffuse Large B-Cell Lymphoma. Continue a Phase 1b/2a clinical trial. In connection with the clinical trial, we have engaged Criterium to manage the operational aspects of the Phase 1b/2a clinical study. We have also entered into an agreement with Mayo Clinic, University of Arkansas for Medical Sciences, the Randolph Cancer Center at West Virginia University, the Fred Hutchinson Cancer Research Center and the John Theurer Cancer Center at Hackensack University Medical Center to be our clinical sites. We may add additional clinical sites in order to accelerate patient enrollment into the trial. The trial opened in September 2011 and we are currently treating patients. We estimate that the trial will be completed in the first half of 2014.

 

· We may consider targeting cancers in other tissues by modifying the structure of SNS01-T, e.g., liver cancer.

 

· We are exploring the use of our Factor 5A technology in other disease applications in oncology and inflammation.

 

In order to pursue the above research initiatives, as well as other research initiatives that may arise, we completed placements common stock and warrants on January 4, 2013 and common stock on May 8, 2013. However, it will be necessary for us to raise a significant amount of additional working capital in the future. If we are unable to raise the necessary funds, we may be required to significantly curtail the future development of some or all of our research initiatives and we will be unable to pursue other possible research initiatives.

 

36
 

 

We may further expand our research and development program beyond the initiatives listed above to include other diseases and research centers.

 

Human Therapeutic Suppliers

 

The materials for our lead therapeutic candidate, SNS01-T, for multiple myeloma consists of three parts: a pDNA expressing human eIF5AK50R; an siRNA, whose sequence corresponds to an untranslated region of native eIF5A mRNA; and linear PEI which enables self-assembly of the nucleic acids into nanoparticles. We have entered into supply agreements for the components as follows:

 

On June 27, 2008, we entered into a supply agreement with VGXI, Inc., or VGXI, under which VGXI will supply us with the plasmid portion of the Company’s combination therapy, hereinafter referred to as the VGXI Product. The agreement has an initial term that commenced on the date of the agreement and runs for a period of five (5) years. The agreement shall, upon mutual agreement, renew for consecutive one (1) year periods thereafter. Our financial obligation under the agreement is dependent upon the amount of VGXI Product ordered by the Company.

 

On June 30, 2008, we entered into a supply agreement with Polyplus-transfection, or POLYPLUS, under which POLYPLUS will supply the Company with its “in vivo-jetPEI”, hereinafter referred to as the POLYPLUS Product, which is used in the formulation and systemic delivery of the Company’s combination therapy. The agreement has an initial term which commenced on the date of the agreement and runs until the eighth anniversary of the first sale of our product containing the POLYPLUS Product. The agreement shall automatically renew for consecutive one (1) year periods thereafter, except if terminated by either party upon six (6) months written notice prior to the initial or any subsequent renewal term. The Company’s financial obligation under the agreement is dependent upon the amount of POLYPLUS Product ordered by the Company.

 

On September 4, 2008, we entered into a supply agreement with Avecia Biotechnology, Inc., or AVECIA, under which AVECIA will supply the Company with the siRNA portion of the Company’s combination therapy consisting of the siRNA against Factor 5A, hereinafter referred to as the siRNA Product. The agreement had a term which commenced on the date of the agreement and terminated on the later of the completion of all services to be provided under the agreement or 30 days following delivery of the final shipment of the siRNA Product.

 

Effective June 4, 2013, the Company entered into a clinical supply agreement with The University of Iowa, or IOWA, under which IOWA will provide manufacturing, vialing and testing services for certain reagents that are used in SNS01-T. The agreement will terminate upon delivery of the delivery of the reagents, which is estimated to be approximately six months. The Company’s remaining financial obligation under the agreement is approximately $156,000.

 

Human Therapeutic Competition

 

Our competitors in human therapeutics that are presently attempting to distribute their technology have generally utilized one of the following distribution channels:

 

·Entering into strategic alliances, including licensing technology to major marketing and distribution partners; or

 

·Developing in-house production and marketing capabilities.

 

In addition, some competitors are established distribution companies, which alleviates the need for strategic alliances, while others are attempting to create their own distribution and marketing channels.

 

There are many large companies and development stage companies working in the field of apoptosis and B-cell cancer research including Celgene, Inc., Takeda/Millennium, ONYX Pharmaceuticals, Inc., Amgen Inc., Janssen Biotech, Inc., Novartis AG, and Pharmacyclics, Inc .

 

We do not currently have any commercialized products, and therefore, it is difficult to assess our competitive position in the market. However, we believe that if we are able to develop and commercialize a product or products under our patents to our Factor 5A platform technology, we will have a competitive position in the markets in which we will operate.

 

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Agricultural Applications

 

Our agricultural research 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.

 

We have licensed this technology to various strategic partners. We may continue to license this technology, as opportunities present themselves, to additional strategic partners and/or enter into joint collaborations or ventures.

 

Our ongoing research and development initiatives for agriculture include assisting our license partners to:

 

· further develop and implement the DHS and Factor 5A gene technology in banana, canola, cotton, turfgrass, rice, alfalfa, corn, soybean, biofuels and trees; and

 

·test the resultant crops for new beneficial traits such as increased yield, increased tolerance to environmental stress, disease resistance and more efficient use of fertilizer.

 

Agricultural Target Markets

 

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 have entered into and plan to enter into, as the opportunities present themselves, additional licensing agreements or other strategic relationships with a variety of companies or other entities on a crop-by-crop basis. We anticipate revenues from these relationships in the form of licensing fees, royalties, usage fees, or the sharing of gross profits. In addition, we anticipate payments from certain of our partners upon their achievement of certain research and development benchmarks. This commercialization strategy allows us to generate revenue at various stages of product development, while ensuring that our technology is incorporated into a wide variety of crops. Our optimal partners combine the technological expertise to incorporate our technology into their product line along with the ability to successfully market the enhanced final product, thereby eliminating the need for us to develop and maintain a sales force.

 

Because the agricultural market is dominated by privately held companies or subsidiaries of foreign owned companies, market size and market share data for the crops under our license and development agreements is not readily available. Additionally, because we have entered into confidentiality agreements with our license and development partners, we are unable to report the specific financial terms of the agreements as well as any market size and market share data that our partners may have disclosed to us regarding their companies.

 

Agricultural Development and License Agreements

 

On February 8, 2012, we entered into a research and development agreement with BioCorp Ventures, LLC (“BCV”), a division of technology incubator US Equity Holdings, to use our proprietary eukaryotic translation initiation Factor 5A (eIF5A) technology platform for sustainable energy applications (the “Agreement”). BCV, a newly formed start-up company, will have a license to evaluate our technology for the development of plants and plant products suitable for use in the production of biofuel and biofuel feedstock, including all species of algae and all species in the genus Miscanthus (perennial grasses). Biofuels derived from these organisms include biodiesel and bioethanol. The companies will continue ongoing research and development as BCV works on commercializing the technology. BCV will be fully responsible for further assessing the potential of our technology for all biofuel applications and determining the route to the commercialization of biofuel products. Through our significant know-how at the University of Waterloo, we will be responsible for technology transfer and providing technical advice to facilitate BCV’s operations. After the initial evaluation phase, the Agreement provides annual license maintenance payments to us and royalty payments in the mid-single digits if a product is commercialized by BCV. As part of the Agreement, after the initial evaluation phase, we will have a 15% equity interest in BCV and the right to appoint one member to BCV’s advisory board.

 

In February 2013, BCV was in breach of the Agreement. Specifically, BCV did not make the payment required or issue our equity interest to us on the due date. On March 1, 2013, we sent BCV a notice of breach. As such breach had not been cured by April 1, 2013, the Agreement was terminated in its entirety. In May 2013, we entered into a new Biofuels Evaluation and License Agreement with the BCV under the same terms and conditions as the previous Biofuels Evaluation and License Agreement described above, except that the evaluation period was amended and the amount of the milestone payments was increased.

 

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As of June 30, 2013, we have nine (9) active license agreements with established agricultural biotechnology companies.

 

Agricultural Research Program

 

Over the past year, our agricultural research and development has been performed by one (1) researcher, at our direction, at the University of Waterloo, where the technology was developed. Additional agricultural research and development is performed by our license or joint collaboration partners.

 

Agricultural Competition

 

Our competitors in agriculture that are presently attempting to distribute their technology have generally utilized one of the following distribution channels:

 

·licensing technology to major marketing and distribution partners;
·entering into strategic alliances; or
·developing in-house production and marketing capabilities.

 

In addition, some competitors are 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 with a variety of enhanced traits. Such companies include: Mendel Biotechnology; Renessen LLC; Exelixis Plant Sciences, Inc.; and Syngenta International AG; among others.

 

We do not currently have any commercialized products, and therefore, it is difficult to assess our competitive position in the market. However, we believe that if we or our licensees are able to develop and commercialize a product or products using our technology, we will have a competitive position in the markets in which we or our licensees operate.

 

Agricultural Development Program

 

Generally, projects with our licensees begin by transforming seed or germplasm to incorporate our technology. Those seeds or germplasm are then grown in our partners’ greenhouses. After successful greenhouse trials, our partners will transfer the plants to the field for field trials. After completion of successful field trials, our partners may have to apply for and receive regulatory approval prior to initiation of any commercialization activities.

 

Generally, the approximate time to complete each sequential development step is as follows:

 

Seed Transformation approximately 1 to 2 years
Greenhouse approximately 1 to 2 years
Field Trials approximately 2 to 5 years  

 

The actual amount of time spent on each development phase depends on the crop, its growth cycle and the success of the transformation achieving the desired results. As such, the amount of time for each phase of development could vary, or the time frames may change.

 

The status of each of our projects with our partners is as follows:

 

Project   Partner   Status  
           
Banana   Rahan Meristem      
  - Shelf Life     Field trials  
  - Disease Resistance     Field trials  
Trees   Arborgen      
  - Growth     Field trials  
Alfalfa   Cal/West   Field trials  
Corn   Monsanto   Field trials  
Cotton   Bayer   Greenhouse  
Canola   Bayer   Field trials  
Rice   Bayer   Greenhouse  
Soybean   Monsanto   Field trials  
Turfgrass   The Scotts Company   Greenhouse  
Biofuels   BioCorp Ventures   Initial Evaluation  

 

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Commercialization by our partners may require a combination of traits in a crop, such as both shelf life and disease resistance, or other traits.

 

Based upon our commercialization strategy, we anticipate that there may be a significant period of time before plants enhanced using our technology reach consumers, if at all.

 

Intellectual Property

 

We have twenty-eight (28) issued patents from the United States Patent and Trademark Office, or PTO, and seventy-three (73) issued patents from foreign countries. Of our one hundred and one (101) domestic and foreign issued patents, sixty-two (62) are for the use of our technology in agricultural applications and thirty-nine (39) relate to human therapeutics applications.

 

In addition to our one hundred and one (101) patents, we have a wide variety of patent applications, including divisional applications and continuations-in-part, in process with the PTO and internationally. We intend to continue our strategy of enhancing these new patent applications through the addition of data as it is collected.

 

Our agricultural patents are generally set to expire in 2019 in the United States and 2025 outside the United States. Our core human therapeutic technology patents are set to expire in 2021 in the United States and 2025 outside the United States, and our patents related to multiple myeloma are set to expire, both in and outside the United States in 2029.

 

On June 13, 2013, the Supreme Court of the United States of America ruled that naturally-occurring DNA sequences are unpatentable since they are products of nature. The Court further found that cDNA sequences, which are copies of non-intron containing mRNA sequences created in the laboratory, are patent eligible. We believe that the Supreme Court ruling has little impact on our patent portfolio overall and no impact on our human patents, which do not rely on claims on naturally-occurring DNA sequences. SNS01-T comprises two synthetic constructs, siRNA and a DNA plasmid, which are protected by composition of matter and method of use patent claims.

 

During our 2013, 2012 and 2011 fiscal years, we reviewed our patent portfolio in order to determine if we could reduce our cost of patent prosecution and maintenance. We identified several patents and patents pending that we believe we no longer need to maintain without having a material impact on the portfolio. We determined that we would no longer incur the cost to prosecute or maintain those patents or patents pending.

 

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 FDA regulates foods derived from new plant varieties. The FDA requires that transformed plants meet the same standards for safety that are required for all other plants and foods in general. Except in the case of additives that significantly alter a food’s structure, the FDA does not require any additional standards or specific approval for genetically engineered foods but expects transformed plant developers to consult the FDA before introducing a new food into the market place.

 

In addition, our ongoing preclinical research with cell lines and lab animal models of human disease is not currently subject to the FDA requirements that govern clinical trials. However, use of our technology, SNS01-T, for human therapeutic applications, is subject to FDA regulation. Generally, 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 human therapeutic 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 clinical trials, and prior to beginning any clinical trial, we need to perform extensive preclinical testing which could take several years and may require substantial expenditures.

 

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Our current activities in human therapeutics related to our clinical trial in multiple myeloma, requires approval by the FDA. We have an open IND with the FDA for use of SNS01-T for the treatment of multiple myeloma and are subject to additional reporting to and monitoring by the FDA. Additionally, federal, state and foreign regulations relating to crop protection products and human therapeutic 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 human therapeutic technology. In addition, our marketing partners who utilize our technology or sell products grown with our technology may be subject to government regulations. If unfavorable governmental regulations are imposed on our technology or if we fail to obtain licenses or approvals in a timely manner, we may not be able to continue our operations.

 

Employees

 

In addition to the seven (7) scientists and monitors performing funded research for us at our CRO, the University of Waterloo, and other commercial research facilities, we have four (4) employees and five (5) consultants, four (4) of whom are executive officers and who are involved in our management. We do not anticipate hiring any additional employees over the next 12 months.

 

The officers are assisted by a Scientific Advisory Board that consists of prominent experts in the fields of plant and human cell biology as follows:

 

·Alan Bennett, Ph.D., who serves as the Chairman of the Scientific Advisory Board, is the Associate Vice Chancellor 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.

 

·James E. Mier, M.D., who serves as a member of the Scientific Advisory Board, is an Associate Professor of Medicine at Beth Israel Deaconess Medical Center, a teaching hospital of Harvard Medical School. He is also a practicing physician in the Division of Hematology-Oncology at Beth Israel. Dr. Mier’s research is funded by the NIH and he is a member of numerous professional societies.

 

Furthermore, pursuant to the Research and Development Agreements, a substantial amount of our research and development activities are conducted at the University of Waterloo under the supervision of Dr. Thompson, our Executive Vice President and Chief Scientific Officer. We utilize the University’s research staff including graduate and post-graduate researchers.

 

We may also contract research to additional university laboratories or to other companies in order to advance the development of our technology.

 

Properties

 

Effective May 19, 2011, we lease office space in Bridgewater, New Jersey for a current monthly rental fee of $5,703, subject to certain escalations for our proportionate share of increases, over the base year of 2011, in the building's operating costs. The lease expires on May 31, 2014. The space is in good condition, and we believe it will adequately serve as our headquarters over the term of the lease. We also believe that this office space is adequately insured by the lessor.

 

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Legal Proceedings

 

We are not currently a party to any legal proceedings; however, we may become involved in various claims and legal actions arising in the ordinary course of business.

 

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MANAGEMENT

 

Executive Officers and Directors

 

The following is a list of our current directors and executive officers, as of August 31, 2013, together with their ages and business backgrounds:

 

Name   Age   Capacities in
Which Served
  In Current
Position Since
Leslie J. Browne, Ph.D.   63   President and Chief Executive Officer, Director   May 2010
John E. Thompson, Ph.D.   72   Executive Vice President and Chief Scientific Officer, Director   July 2004
Joel P. Brooks   54   Chief Financial Officer, Treasurer and Secretary   December 2000
Richard Dondero   63   Vice President of Research and Development   July 2004
Harlan W. Waksal, M.D.   60   Chairman of the Board of Directors   June 2009
John. N. Braca (1) (2)   55   Director   October 2003
Christopher Forbes (3)   62   Director   January 1999
Warren J. Isabelle   61   Director   June 2009
Thomas C. Quick (3)   58   Director   February 1999
David Rector (1) (2)   66   Director   February 2002
Rudolf Stalder (2) (3)   72   Director   February 1999
Jack Van Hulst   74   Director   January 2007

 

(1) Member of the Compensation Committee
(2) Member of the Audit Committee

(3) Member of the Nominating and Corporate Governance Committee

 

None of our current executive officers are related to any other executive officer or to any of our directors. Our executive officers are elected annually by our board and serve until their successors are duly elected and qualified.

 

Leslie J. Browne, Ph.D. was appointed our President and Chief Executive Officer in May 2010 and has been our director since March 2011. Dr. Browne has over 30 years of experience in the pharmaceutical industry. Prior to joining Senesco in May 2010, he served from October 2008 to May 2010 as President and CEO, and is currently chair, of Phrixus Pharmaceuticals, Inc., a private biotech working on muscular dystrophy and heart failure. He recently served from January 2007 to January 2009 as chair of the New Jersey Technology Council, where he continues as a member of the board. He also served from April 2007 to January 2009 as an independent director of Genelabs Technologies, which was sold to GSK, and from September 2004 to May 2008 as President, CEO and Director of Pharmacopeia, a Nasdaq listed company, where he transformed the company from a discovery contract research organization to a clinical development stage biopharmaceutical company with multiple internal development programs. Prior to joining Pharmacopeia, Dr. Browne was the Chief Operating Officer at Iconix Pharmaceuticals, Inc., a privately-held chemogenomics company from October 2001 to July 2004. Before Iconix, Dr. Browne held key positions at Berlex/Schering AG from 1990 to 2000, including Corporate Vice President, Berlex Laboratories, Inc. and President of Schering Berlin Venture Corporation. In 1979, Dr. Browne began his industrial career at Ciba-Geigy, now Novartis, where he invented fadrozole, for the treatment of breast cancer and was closely involved in the discoveries of Femaraâ and Diovanâ, which became major products for Novartis. Dr. Browne received his Bachelor of Science degree in Chemistry in 1972 from the University of Strathclyde, Glasgow Scotland. He received his Ph.D. in Organic Chemistry in 1978 from the University of Michigan and his postdoctoral training as a National Institutes of Health Postdoctoral Fellow at Harvard University from January 1978 to April 1979. Dr. Browne is an experienced executive with former CEO experience and senior executive level experience at large multinational, as well as development stage, life sciences companies. He also has corporate governance experience through service on boards of other companies and organizations. Dr. Browne’s educational background also provides him with the tools necessary to understand the science underlying our technology and how it relates to human health and agricultural applications.

 

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John E. Thompson, Ph.D. has been our director since October 2001. Dr. Thompson was appointed our President and Chief Executive Officer in January 1999, and he continued in that capacity until September 1999 when he was appointed Executive Vice President of Research and Development. In July 2004, Dr. Thompson became our Executive Vice President and Chief Scientific Officer. Dr. Thompson is the inventor of the technology that we develop. Since July 2001, he has been the Associate Vice President, Research and, from July 1990 to June 2001, he was the Dean of Science at the University of Waterloo in Waterloo, Ontario, Canada. Dr. Thompson has a Ph.D. in Biology from the University of Alberta, Edmonton, and he is a Fellow of the Royal Society of Canada. Dr. Thompson is also the recipient of a Lady Davis Visiting Fellowship, the Sigma Xi Award for Excellence in Research, the CSPP Gold Medal and the Technion Visiting Fellowship. Dr. Thompson has an in-depth knowledge and understanding of the science underlying our technology and how it relates to human health and agricultural applications.

 

Joel Brooks was appointed our Chief Financial Officer and Treasurer in December 2000. Mr. Brooks was appointed our Secretary in May 2010. From September 1998 until November 2000, Mr. Brooks was the Chief Financial Officer of Blades Board and Skate, LLC, a retail establishment specializing in the action sports industry. Mr. Brooks was Chief Financial Officer from 1997 until 1998 and Controller from 1994 until 1997 of Cable and Company Worldwide, Inc. He also held the position of Controller at USA Detergents, Inc. from 1992 until 1994, and held various positions at several public accounting firms from 1983 through 1992. Mr. Brooks is also a director and chairman of the audit committee of USA Technologies, Inc. Mr. Brooks received his Bachelor of Science degree in Commerce with a major in Accounting from Rider University in February 1983.

 

Richard Dondero was appointed our Vice President of Research and Development in July 2004. From July 2002 until July 2004, Mr. Dondero was a Group Leader in the Proteomics Reagent Manufacturing division of Molecular Staging, Inc., a biotech firm engaged in the measurement and discovery of new biomarkers. From 1985 through June 2001, Mr. Dondero served in several roles of increasing responsibility through Vice President of Operations and Product Development at Cistron Biotechnology, Inc. From 1977 through 1985, Mr. Dondero served as a senior scientist at Johnson and Johnson, and from 1975 through 1977, as a scientist at Becton Dickinson. Mr. Dondero received his Bachelor of Arts degree from New Jersey State University in 1972 and his Master of Science degree from Seton Hall University in 1976.

 

Harlan W. Waksal, M.D. has been our chairman of the board of directors since June 2009 and a director since October 2008. From July 2003 to present, Dr. Waksal has been the President and Sole Proprietor of Waksal Consulting L.L.C., which provides strategic business and clinical development counsel to biotechnology companies. Dr. Waksal co-founded the biotechnology company ImClone Systems Inc. in 1984. From July 2011 to present, Dr. Waksal has served as the Executive Vice-President, Business and Scientific Affairs of Acasti Pharma, Inc., which is a subsidiary of Neptune Technologies & Bioresources, Inc. From March 1987 through July 2003, Dr. Waksal had served in various senior roles for ImClone Systems Inc. as follows: March 1987 through April 1994 – President; April 1994 through May 2002 – Executive Vice President and Chief Operating Officer; May 2002 through July 2003 – President, Chief Executive Officer and Chief Operating Officer. Dr. Waksal also served as a director of ImClone Systems Inc. from March 1987 through January 2005. Dr. Waksal is currently a member of the Board of Trustees of Oberlin College. Dr. Waksal received a Bachelor of Arts in Biology from Oberlin College and an M.D. from Tufts University School of Medicine. Dr. Waksal is knowledgeable in science, drug development, regulatory and clinical affairs. In addition, he ran and operated a public biotechnology company and is familiar with the issues of corporate governance.

 

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John N. Braca has been our director since October 2003. Mr. Braca has also served as a director and board observer for other healthcare, technology and biotechnology companies over the course of his career. Since April 2013, Mr. Braca has been the President and sole proprietor of JNB Consulting, which provides strategic business development counsel to biotechnology companies. From August 2010 through April 2013, Mr. Braca had been the executive director controller for Iroko Pharmaceuticals, a privately-held global pharmaceutical company based in Philadelphia. From April 2006 through July 2010, Mr. Braca was the managing director of Fountainhead Venture Group, a healthcare information technology venture fund based in the Philadelphia area, and has been working with both investors and developing companies to establish exit and business development opportunities. From May 2005 through March 2006, Mr. Braca was a consultant and advisor to GlaxoSmithKline management in their research operations. From 1997 to April 2005, Mr. Braca was a general partner and director of business investments for S.R. One, Limited, or S.R. One, the venture capital subsidiary of GlaxoSmithKline. In addition, from January 2000 to July 2003, Mr. Braca was a general partner of Euclid SR Partners Corporation, an independent venture capital partnership. Prior to joining S.R. One, Mr. Braca held various finance and operating positions of increasing responsibility within several subsidiaries and business units of GlaxoSmithKline. Mr. Braca is a licensed Certified Public Accountant in the state of Pennsylvania and is affiliated with the American Institute of Certified Public Accountants and the Pennsylvania Institute of Certified Public Accountants. Mr. Braca received a Bachelor of Science in Accounting from Villanova University and a Master of Business Administration in Marketing from Saint Joseph’s University. Mr. Braca’s financial background, operating experience with both large pharmaceutical companies and developing biotechnology companies, provides the board with practical experience for issues facing the Company. In addition, Mr. Braca also has a strong corporate governance background through his experience with other company boards.

 

Christopher Forbes has been our director since January 1999. From September 2011 to present, Mr. Forbes has been the Vice Chairman of Forbes Media LLC and Forbes Family Holdings, and Vice President of Forbes Management Co. Inc. From 1989 through September 2011, Mr. Forbes had been Vice Chairman of Forbes, Inc. From 1981 to 1989, Mr. Forbes was Corporate Secretary at Forbes. Prior to 1981, he held the position of Vice President and Associate Publisher. Mr. Forbes is the Chairman of the American Friends of the Louvre, and he also sits on the boards of The Friends of New Jersey State Museum and The New York Academy of Art. He is also a member of the board of advisors of The Princeton University Art Museum. Mr. Forbes received a Bachelor of Arts degree in Art History from Princeton University in 1972. In 1986, he was awarded the honorary degree of Doctor of Humane Letters by New Hampshire College and in 2003 was appointed a Chevalier of the Legion of Honor by the French Government. Mr. Forbes’s knowledge regarding corporate operations as well as his business acumen, provide the board with experience in running a corporation and addressing the issues that face a growing company, such as ours.

 

Warren J. Isabelle has been our director since June 2009. Mr. Isabelle is a founder and principal of Ironwood Investment Management L.L.C., located in Boston, MA. Mr. Isabelle founded Ironwood Investment Management L.L.C in August 1997. From 1983 until 1997, Mr. Isabelle was with Pioneer Management Corporation where he served most recently as Director of Research and Head of U.S. Equities. Mr. Isabelle has also, since January 2004, served as a member of the Public Board and Vice-Chairman of the Investment Committee of the University of Massachusetts Foundation. Mr. Isabelle is a Chartered Financial Analyst and member of the CFA institute and the American Chemical Society. Mr. Isabelle received a Bachelor of Science degree in chemistry from Lowell Technological Institute, a Master of Science degree in Polymer Science and Engineering from the University of Massachusetts, and a MBA from the Wharton School, University of Pennsylvania. Mr. Isabelle’s experience as an investment analyst and portfolio manager provides the Company with valuable insight into the biotechnology industry and the publicly-traded capital markets.

 

Thomas C. Quick has been our director since February 1999. Since 2003, Mr. Quick has been the President of First Palm Beach Properties, Inc. From 2001 through 2003, Mr. Quick was the Vice Chairman of Quick & Reilly/Fleet Securities, Inc., successor to The Quick & Reilly Group, Inc., a holding company for four (4) major financial services businesses. From 1996 until 2001, Mr. Quick was the President and Chief Operating Officer and a director of Quick & Reilly/Fleet Securities, Inc. From 1985 to 1996, he was President of Quick & Reilly, Inc., a Quick & Reilly subsidiary and a national discount brokerage firm. Mr. Quick serves as a member of the board of directors and compensation committee of B.F. Enterprises. He is also a member of the board of directors of Best Buddies, The American Ireland Fund and Venetian Heritage, Inc. He is a trustee of the National Corporate Theater Fund, Cold Spring Harbor Laboratories, the Norton Museum and the Inter-City Scholarship Foundation of New York City. Mr. Quick is a graduate of Fairfield University. As a result of his professional and other experiences, Mr. Quick has a deep understanding of corporate operations and strategy, and operations in both the US and internationally. Mr. Quick also has significant corporate governance experience through his service on other company boards.

 

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David Rector has been our director since February 2002. Mr. Rector also serves as a director and member of the compensation and audit committee of the Dallas Gold and Silver Exchange (formerly Superior Galleries, Inc.) Mr. Rector also serves on the board of directors of Valor Gold Corp. Since 1985, Mr. Rector has been the Principal of The David Stephen Group, which provides enterprise consulting services to emerging and developing companies in a variety of industries. Since November 2012 through present, Mr. Rector has served as the CEO and President of Valor Gold. Since February 2012 through present, Mr. Rector has served as the VP Finance & Administration of Pershing Gold Corp. From May 2011 through February 2012, Mr. Rector served as the President of Sagebrush Gold, Ltd. From October 2009 through August 2011, Mr. Rector had served as President and CEO of Li3 Energy, Inc. From July 2009 through May 2011, Mr. Rector had served as President and CEO of Nevada Gold Holdings, Inc. From September 2008 through November 2010, Mr. Rector served as President and CEO Universal Gold Mining Corp. Since October 2007 through present, Mr. Rector has served as President and CEO of Standard Drilling, Inc. From May 2004 through December 2006, Mr. Rector had served in senior management positions with Nanoscience Technologies, Inc., a development stage company engaged in the development of DNA Nanotechnology. From 1983 until 1985, Mr. Rector served as President and General Manager of Sunset Designs, Inc., a domestic and international manufacturer and marketer of consumer product craft kits, and a wholly-owned subsidiary of Reckitt & Coleman N.A. From 1980 until 1983, Mr. Rector served as the Director of Marketing of Sunset Designs. From 1971 until 1980, Mr. Rector served in progressive roles in the financial and product marketing departments of Crown Zellerbach Corporation, a multi-billion dollar pulp and paper industry corporation. Mr. Rector received a Bachelor of Science degree in Business/Finance from Murray State University in 1969. As a result of these professional and other experiences, Mr. Rector has a deep business understanding of developing companies. Mr. Rector also brings corporate governance experience through his service on other company boards.

 

Rudolf Stalder has been our director since February 1999 and was appointed as our Chairman and Chief Executive Officer on January 10, 2000. On October 4, 2001, Mr. Stalder resigned as our Chief Executive Officer. On June 8, 2009, Mr. Stalder resigned as our Chairman. Mr. Stalder is a former member of the executive boards of Credit Suisse Group and Credit Suisse First Boston and former Chief Executive Officer of the Americas Region of Credit Suisse Private Banking. Mr. Stalder joined Credit Suisse in 1980 as a founding member and Deputy Head of the Multinational Services Group. In 1986, he became Executive Vice President. He was named to Credit Suisse’s Executive Board in 1989. In 1990, he became Head of the Commercial Banking Division and a Member of the Executive Committee. From 1991 to 1995, Mr. Stalder was Chief Financial Officer of Credit Suisse First Boston and a Member of the Executive Boards of Credit Suisse Group and Credit Suisse First Boston. He became head of the Americas Region of Credit Suisse Private Banking in 1995 and retired in 1998. Prior to moving to the United States, Mr. Stalder was a member of the Board of Directors for several Swiss subsidiaries of major corporations including AEG, Bayer, BTR, Hoechst, Saint Gobain, Solvay and Sony. He is a fellow of the World Economic Forum. He was a member of the Leadership Committee of the Consolidated Corporate Fund of Lincoln Center for the Performing Arts, Board of The American Ballet Theatre and a Trustee of Carnegie Hall. From 1991 through 1998, Mr. Stalder was Chairman of the New York Chapter of the Swiss-American Chamber of Commerce. He continues to serve as an advisory board member of the American-Swiss Foundation. Mr. Stalder received a diploma in advanced finance management at the International Management Development Institute in Lausanne, Switzerland in 1976. He completed the International Senior Managers Program at Harvard University in 1985. Mr. Stalder is an experienced executive with former CEO experience and senior executive level experience at large multinational companies. He also has corporate governance experience through service on other public company boards.

 

Jack Van Hulst has been our director since January 2007. Mr. Van Hulst was appointed as our President and Chief Executive Officer effective November 16, 2009. Mr. Van Hulst was further appointed as our Secretary effective February 1, 2010. Mr. Van Hulst resigned as our President and Chief Executive Officer and Secretary effective May 25, 2010. Since June 2010, Mr. Van Hulst has been the operating partner of SK Capital Partners. Mr. Van Hulst also serves as a director and member of the compensation and audit committees of HiTech Pharmacal, Inc. He has more than 42 years of international experience in the pharmaceutical industry. He began his career in 1968 at Organon, which was subsequently acquired by AKZO, N.V., the multinational human and animal healthcare company, where he was based in Europe and the US and responsible for establishing AKZO’s position in the US in the manufacturing and sales and marketing of fine chemicals. Mr. Van Hulst later became President of AKZO’s US Pharmaceutical Generic Drug Business and was responsible for establishing AKZO in the US generic drug industry. From 1989 to 1999, Mr. Van Hulst successively owned and led two generic pharmaceutical companies, improving their operations and then selling them to a private equity group and a pharmaceutical company. From 1999 to 2005, he was Executive Vice President at Puerto Rico-based MOVA Pharmaceutical Corporation, a contract manufacturer to the pharmaceutical industry that recently merged with Canadian-based Patheon. Mr. Van Hulst also serves as Chairman of the Board of The International Center in New York, a non-profit organization. Mr. Van Hulst received a Masters degree in law from the University in Utrecht, Netherlands in 1968. Mr. Van Hulst possesses management experience as a result of his prior positions. Mr. Van Hulst spent years holding a number of management roles at other pharmaceutical companies and this experience assists the Company in working though the similar issues that it may face in its own operations.

 

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Director Independence

 

The Company is not a listed issuer and so is not subject to the director independence requirements of any exchange or interdealer quotation system. Although we are not currently subject to director independence requirements, we have, nevertheless,, in determining whether our directors and director nominees are independent, we use the definition of independence provided under Section 803 of the NYSE MKT Company Guide. Under this definition of independence, a director will, among other things, qualify as an “independent director” if, in the determination of our board, that person does not have a relationship that would interfere with his or her exercise of independent judgment in carrying out the responsibilities of a director. Our board has determined that each of Messrs. Stalder, Braca, Forbes, Isabelle, Quick and Rector is an “independent director” under Section 803 of the NYSE MKT Company Guide. Messrs. Browne, Thompson and Van Hulst would not be considered independent because they currently serve or have served as Executive Officers of the Company. Mr. Waksal would not be considered independent because he has personally guaranteed a line of credit from JMP Securities LLC to the Company.

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

This Compensation Discussion and Analysis explains the principles underlying our compensation policies and decisions and the principal elements of compensation paid to our executive officers during Fiscal 2013 and as anticipated for Fiscal 2014. Our Chief Executive Officer, Chief Financial Officer and all of our other executive officers included in the Summary Compensation Table will be referred to as the “named executive officers” for purposes of this discussion.

 

Compensation Objectives and Philosophy

 

The Compensation Committee, also referred to herein as the Committee, of the board is responsible for the following:

 

·annually reviewing and approving, or recommending for approval by our board, the corporate goals and objectives relevant to executive officer compensation;

 

·reviewing and approving, or recommending for approval by our board, the salaries and incentive compensation of our executive officers;

 

·preparing the Compensation Committee report, including the Compensation Discussion and Analysis;

 

·administering our 2008 Incentive Compensation Plan, or similar stock plan adopted by our stockholders; and

 

·reviewing and making recommendations to our board with respect to director compensation.

 

As part of this process, the Committee seeks to accomplish the following objectives with respect to our executive compensation programs:

 

· to motivate, recruit and retain executives capable of meeting our strategic objectives;

 

· to provide incentives to ensure superior executive performance and successful financial results for us; and

 

· to align the interests of executives with the long-term interests of our stockholders.

 

The Committee seeks to achieve these objectives by:

 

· linking a substantial portion of compensation to our achievement of long-term and short-term research and development objectives and financial objectives and the individual’s contribution to the attainment of those objectives;

 

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· providing long-term equity-based incentives and encouraging direct share ownership by executives with the intention of providing incentive-based compensation to encourage a long-term focus on company profitability and stockholder value; and

 

· understanding the marketplace and establishing a compensation structure that is adjusted for our position in the marketplace and our current financial condition and limited capital resources.

 

Setting Executive Compensation

 

For Fiscal 2013, the Committee’s objective was to target each component of compensation listed below to be competitive with comparable positions at peer group companies, and to target the total annual compensation of each named executive officer at the appropriate level for comparable positions at the competitive peer group companies.

 

During the compensation review process for Fiscal 2013, the Committee engaged J. Richard and Co., also referred to herein as J. Richard, a nationally recognized compensation consulting firm, as its compensation consultant, on an as needed basis regarding its proposed programs and approaches to compensation during Fiscal 2013, for which J. Richard was compensated. Other than as described above, J. Richard did not provide any additional services to the Committee or Senesco for Fiscal 2013, and compensation to J. Richard for services rendered in Fiscal 2013 was less than $120,000.

 

The Committee elected to identify various companies in the biotech sector it felt were somewhat close in scope of operation to Senesco. It became evident, as in prior years, that due to the key banner points listed above (the breadth of operations in general, executive officers scope of duties and responsibilities, position in the life cycle, financial responsibilities, capitalization and size of management staff) it is very difficult to identify such public entities for comparative purposes. For Fiscal 2013, the companies we elected to evaluate were as follows: Access Pharmaceuticals (ACCP); Adventrx (ANX); Poniard (PARD); Cortex Pharmaceuticals (CORX.OB); Callisto Pharmaceuticals (CLSP.OB); RXi Pharmaceuticals (RXII); Titan Pharmaceuticals (TTNP.OB); Oxigene (OXGN); Entremed (ENMD); and Silence Therapeutics (SLNCF). For Fiscal 2014, the companies we elected to evaluate were as follows: Access Pharmaceuticals (ACCP); Mast Therapeutics (MSTX); Cortex Pharmaceuticals (CORX); RXi Pharmaceuticals (RXII); Titan Pharmaceuticals (TTNP); Oxigene (OXGN); Entremed (ENMD); and Silence Therapeutics (SLN). In selecting companies to survey for such compensation purposes, the Committee considered many factors not directly associated with the stock price performance of those companies, such as geographic location, development stage, organizational structure and market capitalization. For this reason, there is not a meaningful correlation between the companies included within the peer group identified for comparative compensation purposes and the companies included within the RDG Micro Biotechnology Index. Because the biotechnology industry is a dynamic industry, our comparator group is periodically updated to ensure that companies continue to meet established criteria and remain similar in scope of operation to us.

 

In determining the compensation of each named executive officer, the Committee also considers a number of other factors, including our recent performance and the named executive officer’s individual performance, the Chief Executive Officer’s recommendations and the importance of the executive’s position and role in relation to execution of our strategic plan. There is no pre-established policy for allocation of compensation between cash and non-cash components or between short-term and long-term components. Instead, the Committee determines the mix of compensation for each named executive officer based on its review of the competitive data, its subjective analysis of that individual’s performance and contribution to our financial performance, the financial strength and outlook of Senesco and, most of all, what is considered fair and reasonable based on the scope of operations and responsibilities of the officer. For the Chief Executive Officer, for Fiscal 2013, the Committee set his performance targets and compensation levels based upon the Committee’s review and analysis of his performance and the factors described above. For other named executive officers, the Committee sets performance targets and compensation levels after taking into consideration recommendations from the Chief Executive Officer. As part of this process, the Committee considers a number of factors important to our stockholders, including ongoing concerns over the dilutive effect of option grants on our outstanding shares, the compensation expense we must take for financial accounting purposes in accordance with FASB Accounting Standards Codification Topic 718 (ASC 718, Compensation-Stock Compensation) with respect to option grants in relation to the actual value anticipated to be delivered to our executive officers from such awards, and the market volatility of our stock.

 

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Impact of 2013 Say-on-Pay Vote: The most recent stockholder advisory vote on executive officer compensation required under the federal securities laws was held on March 28, 2013. More than 93 percent of the votes cast on such proposal were in favor of the compensation of the named executive officers, as that compensation was disclosed in the Compensation Discussion and Analysis and the various compensation tables and narrative that appeared in the Company’s proxy statement dated February 26, 2013. Based on that level of stockholder approval, the Committee decided not to make any material changes to the Corporation’s compensation philosophies, policies and practices for the remainder of the 2013 fiscal year or for compensation decisions made in August 2013 with respect to the 2014 fiscal year compensation of the named executive officers. However, the Committee will continue to take into account future stockholder advisory votes on executive compensation and other relevant market developments affecting executive officer compensation in order to determine whether any subsequent changes to the Corporation’s executive compensation programs and policies would be warranted to reflect any stockholder concerns reflected in those advisory votes or to address market developments. Based on the voting preference of our stockholders, the frequency of future Say-on-Pay votes will be every three years. Accordingly, the next stockholder advisory vote on executive officer compensation will occur at the 2016 annual meeting.

 

Components of Compensation

 

For Fiscal 2013, our executive compensation program included the following components:

 

· base salary; and
· annual short-term equity incentives.

 

Currently, for Fiscal 2014, our executive compensation program includes the following components:

 

· base salary; and
· annual short-term equity incentives.

 

The Committee seeks to align the named executive officers’ and stockholders’ interests in a pay for performance environment. The Committee also reviews the compensation metrics of the Chief Executive Officer versus the other named executive officers. Although certain percentages and allocations may differ, the overall cash and equity compensation package of the CEO is not materially greater than the overall cash and equity compensation package of each other named executive officer. On average, a large portion of an executive officer's total compensation is at risk, with the amount actually paid tied to achievement of pre-established objectives and individual goals.

 

The Committee wishes to provide additional compensation to all of the named executive officers, including the Chief Executive Officer, through the development of incentive programs based on the named executives performance and attainment of stated objectives that enhance stockholder value in order to (i) link a substantial portion of their compensation to the achievement of short-term objectives and (ii) to save cash given our limited capital resources.

 

Base Salary

 

In General – It is the Committee’s objective to set a competitive rate of annual base salary or consulting fees for each named executive officer. The Committee believes competitive base salaries are necessary to attract and retain top quality executives, since it is common practice for public companies to provide their executive officers with a guaranteed annual component of compensation that is not subject to performance risk. However, the Committee recognizes that we are still a development stage company, with little to no revenue currently and believes that developing too rigid of a compensation structure can become detrimental to our progress.

 

When compared to comparable positions at the competitive peer group companies, it is the Committee’s objective to target the base compensation level of executive officers approximately around the 50th percentile because of our current financial position. However, historically, the base compensation level for our executive officers has been below the 25th percentile of competitive peer group companies. In determining the compensation of each executive officer, the Committee also considers a number of other factors, including recent Senesco and individual performance, the officer’s position and responsibilities and the CEO’s recommendations (with respect to officers other than the CEO).

 

49
 

 

Base Salary for Fiscal 2013 – For Fiscal 2013, after review of the factors discussed above, the following named executive officers’ salaries were increased as follows:

 

        2013     2012     %  
Name   Title   Salary     Salary     Increase  
                       
Leslie J. Browne, Ph.D.   President and Chief Executive Officer   $ 271,000     $ 262,500       3.5 %
                             
John E. Thompson, Ph.D.   Executive Vice-President and Chief Scientific Officer   $ 70,000 (1)   $ 67,500 (1)     3.5 %
                             
Joel P. Brooks   Chief Financial Officer, Secretary and Treasurer   $ 176,000     $ 170,000       3.5 %
                             
Richard Dondero   Vice-President of Research and Development   $ 159,000     $ 153,200       3.5 %

 

(1) Represents consulting fees paid under a consulting agreement.

 

Base Salary for Fiscal 2014 – For Fiscal 2014, after a review of the factors discussed above, the following named executive officer’s salaries were increased as follows.

 

        2014     2013     %  
Name   Title   Salary     Salary     Increase  
                       
Leslie J. Browne, Ph.D.   President and Chief Executive Officer   $ 271,000     $ 271,000       0 %
                             
John E. Thompson, Ph.D.   Executive Vice-President and Chief Scientific Officer   $ 70,000 (1)   $ 70,000 (1)     0 %
                             
Joel P. Brooks   Chief Financial Officer, Secretary and  Treasurer   $ 176,000     $ 176,000       0 %
                             
Richard Dondero   Vice-President of Research and Development   $ 159,000     $ 159,000       0 %

 

(1) Represents consulting fees paid under a consulting agreement.

 

In light of the Company’s performance and financial position, the Committee determined that it would not award salary increases to management at this time for Fiscal 2014, but reserved the right to increase salaries at a later date.

 

Annual Bonuses for Fiscal 2013 – There were no bonuses granted for Fiscal 2013.

 

Annual Bonuses for Fiscal 2014 – Bonuses will be determined at the discretion of the board after the end of the fiscal year based upon the recommendation of the Committee.

 

Short Term Incentive Equity Awards

 

In General – A portion of each named executive officer’s compensation is provided in the form of short-term equity awards. It is the Committee’s belief that properly structured equity awards are an effective method of aligning the short-term interests of our named executive officers with those of our stockholders.

 

Short-term equity awards were made in the form of incentive stock options, also referred to herein as ISO’s, for tax purposes. The Committee has followed a grant practice of tying equity awards to its annual year-end review of individual performance, its assessment of our performance and our operational results.

 

Short-Term Incentive Plan for Fiscal 2013 – The Committee, in coordination with our Chief Executive Officer, established our short-term goals and objectives for Fiscal 2013, which include the following:

 

· Contributions relating to the development of our SNS01-T assets:

 

50
 

 

o Maintain schedule to complete multiple myeloma study in the second half of fiscal 2013;
o Plan a clinical study for SNS01-T in B cell cancers in addition to multiple myeloma;
o Validate preclinical candidate for approval for IND preparation; and

o Develop an improved SNS01-T formulation;
· Contributions relating to finance objectives:

  

o Improve the capital resources of the company through a financing transaction; and
o Regain and maintain NYSE MKT compliance;

 

· Contributions relating to corporate development:

 

o Expand product portfolio; and
o Integrate business acquisitions.

 

The foregoing goals and objectives were generally weighted as follows: 50% for contributions relating to the development of our SNS01-T assets; 25% to contributions relating to finance objectives; and 25% to contributions relating to corporate development. However, the specific weighting varied from executive officer to executive officer, in order to reflect that officer’s specific duties and responsibilities.

 

The Committee identified additional individual performance goals and objectives for Fiscal 2013 for Messrs. Brooks and Dondero, Dr. Browne and Dr. Thompson. Mr. Brooks’s goals and objectives primarily include raising capital through financings, regaining and maintaining NYSE MKT compliance and increasing Senesco’s trading volume. Mr. Dondero’s goals and objectives primarily include management of Senesco’s clinical trials, initiation of new clinical trials for our SNS01-T assets and expanding our product portfolio. Dr. Browne’s goals and objectives primarily include the completion of the current clinical trial for SNS01-T, planning of the upcoming Phase 2 clinical trial and the expansion of Senesco’s product portfolio. Dr. Thompson’s goals primarily include demonstrating the pre-clinical effects of SNS01-T in combination with certain approved therapeutic products and developing an improved SNS01-T formulation.

 

In October 2012, the Committee determined to award the following options to purchase shares of our common stock, par value $0.01, to the following named executive officers in connection with the short-term goals and objectives for Fiscal 2013:

 

Leslie J. Browne, Ph.D.     1,365,000  
Joel Brooks     780,000  
Richard Dondero     780,000  
John E. Thompson, Ph.D.     780,000  

 

The option awards allotted for completion of Fiscal 2013 goals and objectives were allocated to the following named executive officers as follows – Dr. Browne: 35%, Mr. Brooks: 20%, Mr. Dondero: 20%, Dr. Thompson: 20%, and 5% of the option awards will be allocated at the Committee’s discretion for outstanding performance to assist Senesco in reaching such goals. Such options were granted on November 16, 2012, which was two days after the filing of our quarterly report on Form 10-Q for the quarter ended September 30, 2012, and had an exercise price equal to the closing price of the common stock on November 16, 2012. The options vest on the basis of a two-step process. First, options vest based on attainment of the pre-established corporate and individual performance goals. Second, the options that are earned based on attainment of performance will vest with respect to twenty-five percent (25%) of such options on the first anniversary of the date of grant with the balance vesting at a rate of 1/36 for each month thereafter, subject to the executive officer’s continued service through each applicable vesting date. No options will vest if the Committee has determined that the performance metrics have not been met.

 

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In August 2013, the Committee determined that the performance metrics had not been fully met. Therefore, a percentage of the options granted in November 2012 were forfeited as follows:

 

Name   Initial Grant     Performance
Adjustment
Percentage
    Options
Retained
    Options
Forfeited
 
Leslie J. Browne, Ph.D.     1,365,000       75 %     341,250       1,023,750  
Joel Brooks     780,000       75 %     195.000       585,000  
Richard Dondero     780,000       75 %     195,000       585,000  
John E. Thompson, Ph.D.     780,000       75 %     195,000       585,000  

 

The remaining retained options will continue to vest pursuant to the vesting schedule set forth above.

 

Short-Term Incentive Plan for Fiscal 2014 – The Committee, in coordination with our Chief Executive Officer, established our short-term goals and objectives for Fiscal 2014, which include the following:

 

· Contributions relating to the development of our SNS01-T assets:

 

o Complete the current phase 1b/2a study in multiple myeloma;
o Plan a clinical study for SNS01-T in B cell cancers in addition to multiple myeloma;
o Develop an eIF5A based therapy for another indication; and
o Develop an effective follow-up SNS01-T formulation;

 

· Contributions relating to finance objectives:

 

o Improve the capital resources of the company; and
o Regain a listing on a major stock exchange;

 

· Contributions relating to corporate development:

 

o Expand product portfolio; and
o Integrate business acquisitions.

 

The foregoing goals and objectives were generally weighted as follows: 40% for contributions relating to the development of our SNS01-T assets; 40% to contributions relating to finance objectives; and 20% to contributions relating to corporate development. However, the specific weighting varied from executive officer to executive officer, in order to reflect that officer’s specific duties and responsibilities.

 

The Committee identified additional individual performance goals and objectives for Fiscal 2014 for Dr. Browne, Messrs. Brooks and Dondero and Dr. Thompson. Dr. Browne’s goals and objectives primarily include the completion of the current clinical trial for SNS01-T, raising capital through financings, planning of the upcoming Phase 2 clinical trial and the expansion of Senesco’s product portfolio. Mr. Brooks’s goals and objectives primarily include raising capital through financings, regaining a listing on a major stock exchange, developing relationships with brokers, funding organizations and health organizations and developing certain financial planning models for Senesco. Mr. Dondero’s goals and objectives primarily include management of Senesco’s clinical trials, planning of new clinical trials for our SNS01-T assets, development of an improved and more cost effective formulation of SNS01-T and expanding our product portfolio. Dr. Thompson’s goals primarily include developing an eIF5A based therapy for another cancer indication and developing an improved and more cost effective SNS01-T formulation.

 

In August 2013, the Committee determined to award the following options to purchase shares of our common stock, par value $0.01, to the following named executive officers in connection with the short-term goals and objectives for Fiscal 2014:

 

Leslie J. Browne, Ph.D.     1,723,000  
Joel Brooks     985,000  
Richard Dondero     985,000  
John E. Thompson, Ph.D.     985,000  

 

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The option awards allotted for completion of Fiscal 2014 goals and objectives will be allocated to the following named executive officers as follows – Dr. Browne: 35%, Mr. Brooks: 20%, Mr. Dondero: 20%, Dr. Thompson: 20%, and 5% of the option awards will be allocated at the Committee’s discretion for outstanding performance to assist Senesco in reaching such goals. Such options will be granted two days after the filing of our annual report on Form 10-K for the year ended June 30, 2013, and will have an exercise price equal to the closing price of the common stock on such date. The options vest on the basis of a two-step process. First, options vest based on attainment of the pre-established corporate and individual performance goals. Second, the options that are earned based on attainment of performance will vest with respect to twenty-five percent (25%) of such options on the first anniversary of the date of grant with the balance vesting at a rate of 1/36 for each month thereafter, subject to the executive officer’s continued service through each applicable vesting date. No options will vest if the Committee has determined that the performance metrics have not been met.

 

Market Timing of Equity Awards

 

The Compensation Committee does not engage in any market timing of the equity awards made to the executive officers or other award recipients, and accordingly, there is no established practice of timing our awards in advance of the release of favorable financial results or adjusting the award date in connection with the release of unfavorable financial developments affecting our business. In general, we will attempt, when possible, to make equity awards to our executive officers and directors promptly after the release of our financial results.

 

Clawback Policy

 

We are reviewing our current “clawback” policy which provides for recoupment of incentive compensation in certain circumstances in connection with the enactment of recent regulations in that regard and are awaiting final SEC rules and regulations in order to revise our “clawback” policy in compliance with such rules and regulations.

 

Analysis of Risk Associated with our Compensation Plans

 

In making decisions regarding compensation program design and pay levels, our Compensation Committee and senior management, working with our Audit Committee, consider many factors, including any potential risks to Senesco and our stockholders. Although a significant portion of our executives’ compensation is performance-based and “at-risk,” we believe our compensation plans are appropriately structured and are not reasonably likely to have a material adverse effect on us.

 

We do not believe that the performance-based nature of the executive compensation program encourages excessive risk-taking by our executive officers that would threaten our economic viability. In Fiscal 2013, the Compensation Committee’s performance milestones under the stock option grants for certain clinical objectives were focused on the achievement of specific milestones, rather than a successful outcome. The Compensation Committee believes that this strategy protects against the potential of short-term incentives to encourage excessive risk taking. In addition, long-term equity awards tied to the value of our common stock represent a significant component of an executive officer’s total direct compensation, as evidenced by the compensation breakdown contained in the Summary Compensation Table that follows. Those awards promote a commonality of interest between the executive officers and our stockholders in sustaining and increasing stockholder value. Because the equity awards are typically made on an annual basis to the executive officers, those officers always have unvested awards outstanding that could decrease significantly in value if our business is not managed to achieve its long term goals. Accordingly the overall compensation structure is not overly-weighted toward short-term incentives, and we have taken what we believe are reasonable steps to protect against the potential of disproportionately large short-term incentives that might encourage excessive risk taking.

 

Executive Benefits and Perquisites

 

In General – The named executive officers are also provided with certain market competitive benefits, described below. It is the Committee’s belief that such benefits are necessary for us to remain competitive and to attract and retain top caliber executive officers, since such benefits are typically provided by companies in the biotechnology industry and with other companies with which we compete for executive talent.

 

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Retirement Benefits – The named executive officers may participate in the company-wide 401(k) plan. Generally, we do not make any contributions to the 401(k) plan and do not have any additional retirement benefits. During Fiscal 2012, due to an anomaly in the rules, the Company contributed $9,800 to the 401(k) plan for the benefit of Leslie J. Browne, Ph.D. Due to the plan structure and the rules regarding 401K plans, since Dr. Browne began his employment with the Company in May 2010 and our plan year ended June 30, 2010, he only was compensated for two months during the plan year ended June 30, 2010. As the rules do not provide for annualizing his compensation for purposes of determining whether he is a highly or non-highly compensated participant, he was deemed a non-highly compensated participant for that year and the Company was required to make a contribution on his behalf.

 

Other Benefits and Perquisites – All administrative employees, including the named executive officers, are eligible to receive standard health, disability, and life insurance. We do not provide any additional benefits and perquisites.

 

Executive Compensation Agreements

 

None of our named executive officers have a current employment agreement with us.

 

On October 9, 2012, our board of directors approved a Retention Policy for officers of the Company (the “Policy”). Pursuant to the terms and provisions of the Policy, in the event that an officer of the Company is terminated or resigns for good reason (as such term is defined in the Policy) in connection with a change of control transaction (as such term is defined in the Policy), such officer will be entitled to receive the following (subject to the limitation discussed below):

 

(i)        The involuntary termination benefits provided in the officer’s employment agreement, if any, including unpaid compensation and benefits.

(ii)        The full incentive bonus allocated to the officer for the calendar year in which termination occurs, as determined by the Board.

(iii)        A multiple of the officer’s annual base salary: (CEO=2x, CFO=1.5x, VP R&D=1.5x, VP Clinical=1.5x, other officers=1x);

(iv)        Medical coverage with term equal to base salary continuation under the Company’s group health insurance.

(v)        Allowance for all vested options to be exercisable for the remainder of each such vested option’s full remaining exercise period.

(vi)        Immediate vesting of all unvested options granted to the officer.

 

Notwithstanding the foregoing, if the aggregate compensation set forth in clauses (i), (ii), (iii) and (iv) above to be paid to all officers exceeds 10% of the value of the transaction as determined by the parties (as reflected in a definitive agreement, including the fair market value of any publicly traded securities), or if not reflected in a definitive agreement, then as determined by a qualified, independent third party selected by the board of directors of the Company, then the board of directors shall have the discretion to reduce such compensation pro-rata to the extent necessary to consummate the change of control transaction.

 

The Policy also provides that our board of directors shall have discretion to grant a termination package in the event an officer is terminated by the board without cause (as such term is defined in the Policy) or resigns for good reason (as such term is defined in the Policy).

 

The Compensation Committee believes that the severance benefits under the Policy provide financial protection against the potential loss of employment in designated circumstances and will allow our executive officers to focus attention on changes that are in the best interests of the stockholders, without undue concern as to each officer’s own financial situation. The Compensation Committee also believes the accelerated vesting of equity awards is justified because those awards are designed to serve as the primary vehicle for the executives to accumulate financial resources for retirement. Finally, given the time periods and risks involved in pharmaceutical development, the Compensation Committee believes that the extended exercise period is an appropriate way to provide the officers with an opportunity to realize financial gains from decisions made during his or her tenure as an officer. J. Richard advised the Compensation Committee that the Policy is within the competitive range of comparable executive officer severance packages at other companies in the comparator group.

 

54
 

 

IRC Section 162(m) compliance

 

As a result of Section 162(m) of the Internal Revenue Code, publicly-traded companies such as us are not allowed a federal income tax deduction for compensation, paid to the Chief Executive Officer and the three other highest paid executive officers, to the extent that such compensation exceeds $1 million per officer in any one year and does not otherwise qualify as performance-based compensation. Currently, our stock option compensation packages are structured so that compensation deemed paid to an executive officer in connection with the exercise of a stock option should qualify as performance-based compensation that is not subject to the $1 million limitation. However, other awards, like restricted stock units (“RSU’s”) that may be granted under our stock incentive plans may or may not so qualify. In establishing the cash and equity incentive compensation programs for the executive officers, it is the Committee’s view that the potential deductibility of the compensation payable under those programs should be only one of a number of relevant factors taken into consideration, and not the sole governing factor. For that reason the Committee may deem it appropriate to continue to provide one or more executive officers with the opportunity to earn incentive compensation, including cash bonus programs tied to our financial performance and RSU awards, which may be in excess of the amount deductible by reason of Section 162(m) or other provisions of the Internal Revenue Code. It is the Committee’s belief that cash and equity incentive compensation must be maintained at the requisite level to attract and retain the executive officers essential to our financial success, even if part of that compensation may not be deductible by reason of the Section 162(m) limitation.

 

It is important to note that as of June 30, 2013, the Company had net operating loss carryforwards for federal income tax purposes. These loss carryforwards would defer the impact of any deductions that the Company might lose under Section 162(m) for one or more of those carryforward years.

 

For Fiscal 2013, none of our executive officer’s compensation reached the $1 million limitation. The Committee will continue to evaluate such $1 million limitation in Fiscal 2014.

 

55
 

 

Summary Compensation Table

 

The following table sets forth information concerning compensation for services rendered in all capacities during the fiscal years ended June 30, 2013, June 30, 2012 and June 30, 2011 awarded to, earned by or paid to: (i) our Chief Executive Officer; (ii) our Chief Financial Officer; and (iii) each of our two other executive officers whose total compensation for Fiscal 2013 was in excess of $100,000, collectively referred to herein as the named executive officers. No other executive officers who would have otherwise been includable in such table on the basis of total compensation for Fiscal 2013 have been excluded by reason of their termination of employment or change in executive status during that year.

 

Name
and Principal
Position
  Year
(1)
  Salary
($)(2)
    Bonus
($)
    Stock
Awards
($) (3)
    Option
Awards
($) (4)
    Non-
Equity
Incentive
Plan
Compensation
($)
    Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings ($)
    All
Other
Compensation
($) (5)
    Total
($)
 
(a)   (b)   (c)     (d)     (e)     (f)     (g)     (h)     (i)     (j)  
Leslie J. Browne, Ph.D.   2013   $ 273,860       -       -     $ 180,180       -       -       -     $ 454,040  
 (President and Chief Executive Officer)   2012   $ 266,322       -       -     $ 151,515       -       -     $ 9,800     $ 427,637  
    2011   $ 250,468       -       -     $ 154,425       -       -       -     $ 404,893  
Joel Brooks   2013   $ 178,045       -       -     $ 102,960       -       -       -     $ 281,005  
 (Chief Financial Officer , Secretary and Treasurer)   2012   $ 172,682       -       -     $ 86,580       -       -       -     $ 259,262  
    2011   $ 165,976       -     $ 2,600     $ 90,525       -       -       -     $ 259,101  
Richard Dondero   2013   $ 161,041       -       -     $ 102,960       -       -       -     $ 264,001  
 (Vice-President of Research and Development)   2012   $ 155,775       -       -     $ 86,580       -       -       -     $ 242,355  
    2011   $ 148,827       -       -     $ 90,525       -       -       -     $ 239,352  
John E. Thompson Ph.D.   2013   $ 67,500       -       -     $ 102,960       -       -       -     $ 170,460  
 (Executive Vice-President and Chief Scientific Officer)   2012   $ 67,500       -       -     $ 86,580       -       -       -     $ 154,080  
    2011   $ 65,000       -       -     $ 90,525       -       -       -     $ 155,525  

 

 

 

(1)    Senesco’s fiscal year ends on June 30.

 

(2)    Such amount represents actual salary paid, including such amounts deferred in connection with our 401K plan.

 

(3)    The amounts shown are the grant date fair value of RSU’s awarded to each named executive officer in each year. The fair values of the RSU’s awarded were calculated based on the fair market value of the underlying shares of common stock on the respective grant dates in accordance with FASB ASC Topic 718 and were not adjusted to take into account any estimated forfeitures.

 

(4)   The amounts shown are the grant date fair value of stock options granted to each named executive officer, in accordance with FASB ASC Topic 718 pursuant to the Black-Scholes pricing model. For a discussion of valuation assumptions used in the calculations, see Notes 2 and 10 of Notes to Consolidated Financial Statements included in Part II, Item 8 of our 2013 Form 10-K. The grant date fair values used to calculate such compensation costs were not adjusted to take into account any estimated forfeitures. In October 2012, the Committee determined that the performance metrics for the 2012 grants had not been fully met. Therefore, a percentage of the options granted in Fiscal 2012 were forfeited as follows:

 

    Original     Percentage     Options     Grant Date  
    Grant     Forfeited     Forfeited     Fair Value  
                         
Leslie J. Browne, Ph.D.     819,000       55 %     450,450     $ 83,333  
Joel Brooks     468,000       60 %     280,800     $ 51,948  
Richard Dondero     468,000       60 %     280,800     $ 51,948  
John E. Thompson, Ph.D.     468,000       30 %     140,400     $ 25,974  

 

In August 2013, the Committee determined that the performance metrics for the Fiscal 2013 grants had not been fully met. Therefore, a percentage of the options granted in Fiscal 2013 were forfeited as follows:

 

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    Original     Percentage     Options     Grant Date  
    Grant     Forfeited     Forfeited     Fair Value  
Leslie J. Browne, Ph.D.     1,365,000       75 %     1,023,750     $ 135,135  
Joel Brooks     780,000       75 %     585,000     $ 77,220  
Richard Dondero     780,000       75 %     585,000     $ 77,220  
John E. Thompson, Ph.D.     780,000       75 %     585,000     $ 77,220  

 

The grant date fair values used to calculate such compensation costs were not adjusted to take into account the effect of the forfeitures.

 

(5) Represents company contribution to the 401(k) plan.

 

Grants of Plan-Based Awards

 

The following Grants of Plan Based Awards table provides additional information about stock and option awards and equity incentive plan awards granted to our named executive officers during the fiscal year ended June 30, 2013.

 

        Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
    Estimated Future Payouts Under
Equity Incentive Plan Awards
    All Other
Stock
Awards:
Number
of
Shares
of Stock
    All Other
Option
Awards:
Number of
Securities
Under-
lying
    Exercise
or Base
Price of
Option
    Grant
Date Fair
Value of
Equity
 
Name   Grant
Date
  Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
    or Units
(#)
    Options
(#)
    Awards
($/Sh)
    Awards
($)(1)
 
(a)   (b)   (c)     (d)     (e)     (f)     (g)     (h)     (i)     (j)     (k)        
Leslie J. Browne, Ph.D.   11/16/2012     -       -       -       -       1,365,000       1,365,000       -       -     $ 0.165     $ 180,180  
John E. Thompson, Ph.D.   11/16/2012     -       -       -       -       780,000       780,000       -       -     $ 0.165     $ 102,960  
Joel P. Brooks   11/16/2012     -       -       -       -       780,000       780,000       -       -     $ 0.165     $ 102,960  
Richard Dondero   11/16/2012     -       -       -       -       780,000       780,000       -       -     $ 0.165     $ 102,960  

  

 

  

(1) The amounts shown are the grant date fair value of stock options granted to each named executive officer, in accordance with FASB ASC Topic 718 pursuant to the Black Scholes pricing model. For a discussion of valuation assumptions used in the calculations, see Notes 2 and 10 of Notes to Consolidated Financial Statements included in Part II, Item 8 of our 2013 Form 10-K. The grant date fair values used to calculate such compensation costs were not adjusted to take into account any estimated forfeitures. In August 2013, the Committee determined that the performance metrics had not been fully met. Therefore, a percentage of the options granted in Fiscal 2013 were forfeited as follows:

 

    Original     Percentage     Options     Grant Date  
    Grant     Forfeited     Forfeited     Fair Value  
Leslie J. Browne, Ph.D.     1,365,000       75 %     1,023,750     $ 135,135  
Joel Brooks     780,000       75 %     585,000     $ 77,220  
Richard Dondero     780,000       75 %     585,000     $ 77,220  
John E. Thompson, Ph.D.     780,000       75 %     585,000     $ 77,220  

 

The grant date fair values used to calculate such compensation costs were not adjusted to take into account the effect of the forfeitures.

 

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Outstanding Equity Awards at Fiscal Year-End

 

The following table summarizes the equity awards we have made to our named executive officers which are outstanding as of June 30, 2013.

 

    Option Awards         Stock Awards  
Name   Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexer-
cisable
    Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
    Option
Exercise
Price ($)
    Option
Expiration
Date
  Number of
Shares or
Units of Stock
That Have Not
Vested (#)
    Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)
    Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested (#)
    Equity Incentive
Plan Awards:
Market or Payout
Value of
Unearned Shares,
Units or Other
Rights That Have
Not Vested ($)
 
(a)   (b)     (c)     (d)     (e)     (f)   (g)     (h)     (i)     (j)  
Leslie J. Browne, Ph.D.     -       -       1,365,000 (1)(5)   $ 0.165     11/16/2022     -       -       -       -  
      122,850 (1)     -       245,700 (1)   $ 0.23     09/30/2021     -       -       -       -  
      256,772 (1)     -       468,228 (1)   $ 0.26     11/17/2020     -       -       -       -  
      222,219 (1)     -       777,781 (1)   $ 0.55     05/25/2020     -       -       -       -  
Joel P. Brooks     -       -       780,000 (1)(5)   $ 0.165     11/16/2022     -       -       -       -  
      52,650 (1)     -       134,550 (1)   $ 0.23     9/30/2021     -       -       -       -  
      150,522 (1)     -       274,478 (1)   $ 0.26     11/17/2020     -       -       -       -  
      300,000 (2)     -       -     $ 0.29     02/19/2020     -       -       -       -  
      15,000 (3)     -       -     $ 3.15     12/16/2013     -       -       -       -  
      20,000 (3)     -       -     $ 3.45     12/16/2014     -       -       -       -  
      25,000 (3)     -       -     $ 1.40     12/14/2015     -       -       -       -  
      25,000 (3)     -       -     $ 1.08     12/14/2016     -       -       -       -  
Richard Dondero     -       -       780,000 (1)(5)   $ 0.165     11/16/2022     -       -       -       -  
      52,650 (1)     -       134,550 (1)   $ 0.23     09/30/2021     -       -       -       -  
      150,522 (1)     -       274,478 (1)   $ 0.26     11/17/2020     -       -       -       -  
      300,000 (2)     -       -     $ 0.29     02/19/2020     -       -       -       -  
      10,000 (3)     -       -     $ 3.45     12/16/2014     -       -       -       -  
      25,000 (3)     -       -     $ 1.40     12/14/2015     -       -       -       -  
      25,000 (3)     -       -     $ 1.08     12/14/2016     -       -       -       -  
      71,924 (4)     -       -     $ 0.99     12/13/2017     -       -       -       -  
      60,000 (4)     -       -     $ 0.99     12/13/2017     -       -       -       -  
      76,000 (4)     -       -     $ 0.60     11/19/2018     -       -       -       -  
John E. Thompson Ph.D.     -       -       780,000 (1)(5)   $ 0.165     11/16/2022     -       -       -       -  
      157,950 (1)     -       169,650 (1)   $ 0.23     09/30/2021     -       -       -       -  
      150,522 (1)     -       274,478 (1)   $ 0.26     11/17/2020     -       -       -       -  
      20,000 (3)     -       -     $ 3.15     12/16/2013     -       -       -       -  
      55,000 (3)     -       -     $ 3.45     12/16/2014     -       -       -       -  
      20,000 (3)     -       -     $ 1.40     12/14/2015     -       -       -       -  
      25,000 (3)     -       -     $ 1.08     12/14/2016     -       -       -       -  
      52,676 (4)     -       -     $ 0.99     12/13/2017     -       -       -       -  
      50,000 (4)     -       -     $ 0.99     12/13/2017     -       -       -       -  
      48,000 (4)     -       -     $ 0.60     11/19/2018     -       -       -       -  

 

(1) One-quarter of such options will vest on the first anniversary of the date of grant with one-thirty-sixth of the balance vesting each month thereafter.
(2) 60,000 of such options vested on the date of grant and an additional 60,000 of such options vested on each of June 30, 2010 and June 30, 2011. An additional 60,000 of such options will vest on each of June 30, 2012 and June 30, 2013.
(3) One-third of such options vested on the date of grant and an additional one-third of such options vested on each of the first and second anniversary of the date of grant.
(4) Such amounts consist of performance based options which vest upon the achievement of certain milestones under our long-term incentive plan and continued service.
(5) Such amounts consist of performance based options which vest upon the achievement of certain milestones under our stock incentive plan and continued service. In August 2013, the Committee determined that the performance metrics had not been fully met. Therefore, a percentage of the options granted in Fiscal 2013 were forfeited as follows:

 

58
 

 

    Original     Percentage     Options  
    Grant     Forfeited     Forfeited  
Leslie J. Browne, Ph.D.     1,365,000       75 %     1,023,750  
Joel Brooks     780,000       75 %     585,000  
Richard Dondero     780,000       75 %     585,000  
John E. Thompson, Ph.D.     780,000       75 %     585,000  

 

The equity awards outstanding as of June 30, 2013 were not adjusted to take into account the effect of the forfeitures.

 

Option Exercises and Stock Vested

 

There were no option exercises and stock vested activity for our named executive officers during the year ended June 30, 2013.

 

Employment Contracts, Termination of Employment, and Change-in-Control Arrangements

 

None of our named executive officers have a current employment agreement with us.

 

Executive Severance . On October 9, 2012, our board of directors approved a Retention Policy for officers of the Company (the “Policy”). Pursuant to the terms and provisions of the Policy, in the event that an officer of the Company is terminated or resigns for good reason (as such term is defined in the Policy) in connection with a change of control transaction (as such term is defined in the Policy), such officer will be entitled to receive the following (subject to the limitation discussed below):

 

(i)       The involuntary termination benefits provided in the officer’s employment agreement, if any, including unpaid compensation and benefits.

(ii)       The full incentive bonus allocated to the officer for the calendar year in which termination occurs, as determined by the Board.

(iii)       A multiple of the officer’s annual base salary: (CEO=2x, CFO=1.5x, VP R&D=1.5x, VP Clinical=1.5x, other officers=1x);

(iv)       Medical coverage with term equal to base salary continuation under the Company’s group health insurance.

(v)       Allowance for all vested options to be exercisable for the remainder of each such vested option’s full remaining exercise period.

(vi)       Immediate vesting of all unvested options granted to the officer.

 

Notwithstanding the foregoing, if the aggregate compensation set forth in clauses (i), (ii), (iii) and (iv) above to be paid to all officers exceeds 10% of the value of the transaction as determined by the parties (as reflected in a definitive agreement, including the fair market value of any publicly traded securities), or if not reflected in a definitive agreement, then as determined by a qualified, independent third party selected by the board of directors of the Company, then the board of directors shall have the discretion to reduce such compensation pro-rata to the extent necessary to consummate the change of control transaction.

 

The Policy also provides that our board of directors shall have discretion to grant a termination package in the event an officer is terminated by the board without cause (as such term is defined in the Policy) or resigns for good reason (as such term is defined in the Policy).

 

59
 

 

Compensation of Directors

 

We use a combination of cash and equity-based compensation to attract and retain qualified individuals to serve on our board. Dr. Thompson has received compensation for providing research and development management services to us and does not receive any additional compensation for his services as a board member. See “Certain Relationships and Related Transactions” which sets forth the details of the compensation for Dr. Thompson.

 

Equity Grants Fiscal 2013:

 

We do not automatically grant options or other equity to our board. Our Compensation Committee reviews the equity program each year with its compensation consultant and determines the appropriate level of the equity awards.

 

Effective November 16, 2012, the Committee granted the following options to the non-employee directors for their service during Fiscal 2012:

 

Director   Total # of Options
Granted
 
Harlan W. Waksal, M.D.     420,000 (1)
Rudolf Stalder     210,000 (1)
Christopher Forbes     252,000 (1)
Thomas C. Quick     210,000 (1)
John N. Braca     294,000 (1)
David Rector     294,000 (1)
Jack Van Hulst     210,000 (1)
Warren J. Isabelle     210,000 (1)

 

 

 

(1) Such grants vest as follows: one-half (1/2) upon the date of grant and the remaining one-half (1/2) will vest one (1) year from the date of grant, subject to continued board service through the vesting date.

 

In addition, certain board members received additional equity awards in lieu of cash compensation as more fully described below.

 

Cash Compensation

 

Commencing in Fiscal 2009, after review and consultation with the Compensation Committee’s compensation consultant, we implemented a new cash compensation plan for our directors pursuant to which we pay each non-employee director cash compensation as consideration for their service on our board for each fiscal year as follows:

 

Annual (Base) Retainer  $10,000 
Per Scheduled Board Meeting Fee  $1,500(1)
Per Committee Meeting Fee  $750(2)
Additional Annual Retainer:     
Chairman of the Board  $5,000 
Audit Committee Chair  $3,500 
Compensation Committee Chair  $3,500 
Nominating and Corporate Governance Committee Chair  $1,500 
Non-Chair Committee Member Additional Retainer
(All Committees)
  $1,000 
Maximum Per Diem For All Meetings  $2,000 

 

60
 

 

 

  

(1)$750 for telephonic meetings (less than 30 minutes: $375).

 

(2)$375 for telephonic meetings.

 

Such cash compensation is paid in quarterly increments. A director may elect to receive, in lieu of such cash payments, either (i) restricted stock units, or RSU’s, covering that number of shares having a fair market value on the grant date equal to such cash award or (ii) options in an amount equal to twice the number of RSU’s that would have been received. Such election to receive (y) cash or (z) equity in the form of RSU’s or options applies for the entire year. In Fiscal 2013, Messrs. Braca and Rector, elected to receive their retainer fees in cash and their meeting fees in options, and Mr. Isabelle, elected to receive his fees in cash. All other directors elected to receive options in lieu of retainer and meeting fees. The options for each quarter are granted effective two (2) days following the filing of our quarterly reports on Form 10-Q for that quarter and are fully vested as of the grant date. The exercise price of the options will be the closing price on the grant date.

 

In August 2013, the compensation committee decided to keep director compensation for Fiscal 2014 consistent with the compensation program for 2013. The directors have all elected to receive options in lieu of cash for Fiscal 2014, except for Mr. Isabelle who elected to receive his fees in cash. We provide reimbursement to directors for reasonable and necessary expenses incurred in connection with attendance at meetings of the board of directors and other Senesco business.

 

Director Compensation

 

The table below shows the compensation paid or awarded to our non-employee directors (other than Dr. Thompson) during the fiscal year ended June 30, 2013.

 

Name   Fees
Earned
or Paid in
Cash ($)
    Stock
Awards
($)
    Option
Awards(1) ($)
    Non-Equity
Incentive Plan
Compensation ($)
    Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
    All Other
Compensation ($)
    Total ($)  
(a)   (b)     (c)     (d)     (e)     (f)     (g)     (h)  
Rudolf Stalder               $ 63,953                       $ 63,953  
Christopher Forbes               $ 39,232                       $ 39,232  
Thomas C. Quick               $ 51,559                       $ 51,559  
John N. Braca   $ 14,500           $ 56,546                       $ 71,046  
David Rector   $ 14,500           $ 61,390                       $ 75,890  
Jack Van Hulst               $ 54,448                       $ 54,448  
Harlan W. Waksal, M.D.               $ 95,960                       $ 95,960  
Warren J. Isabelle   $ 24,250           $ 26,670                       $ 50,920  

 

 

  

(1) Represents the aggregate grant date fair value for stock options granted in Fiscal 2013 as described below calculated in accordance with the FASB ASC Topic 718 and were not adjusted to take into account any estimated forfeitures. For information regarding assumptions underlying the FASB ASC Topic 718 valuation of equity awards, see Notes 2 and 10 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended June 30, 2013.

 

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As described above, our non-employee directors (other than Mr. Isabelle and Messrs. Braca and Rector (only with respect to their retainer fees)) have elected to receive option grants in lieu of their cash compensation. Accordingly, on November 16, 2012, February 16, 2013, and May 17, 2013, each of these non-employee directors received options to purchase shares of our common stock pursuant to the provisions of the 2008 Stock Plan. Additionally, on November 16, 2012, the non-employee directors were granted additional options for their service during Fiscal 2012. The options have an exercise price of $0.165 per share, $0.165 per share, $0.135 per share and $0.043 per share, respectively, the fair market value of the common stock on the grant dates (except for the grants to Christopher Forbes, which have exercise prices of $0.18 per share, $0.18 per share, $0.15 per share and $0.043 per share, respectively (110% of the fair market value of the common stock on the grant date).

 

The following table sets forth information relating to options granted to the directors during Fiscal 2013.

 

Director   Option Grant
Date
  Exercise Price     # of Shares     Grant Date Fair Value  
    05/17/2013   $ 0.043       296,512     $ 9,192  
    02/16/2013   $ 0.135       119,318     $ 11,455  
Rudolf Stalder   11/16/2012   $ 0.165       136,364     $ 16,636  
    11/16/2012   $ 0.165       210,000 *   $ 26,670  
    05/17/2013   $ 0.043       238,372     $ 7,390  
    02/16/2013   $ 0.15       89,016     $ 4,362  
Christopher Forbes   11/16/2012   $ 0.18       124,242     $ 8,076  
    11/16/2012   $ 0.18       252,000 *   $ 19,404  
    05/17/2013   $ 0.043       162,790     $ 5,046  
    02/16/2013   $ 0.135       75,758     $ 7,273  
Thomas C. Quick   11/16/2012   $ 0.165       103,030     $ 12,570  
    11/16/2012   $ 0.165       210,000 *   $ 26,670  
  05/17/2013   $ 0.043       139,534     $ 4,326  
    02/16/2013   $ 0.135       56,818     $ 5,455  
John N. Braca   11/16/2012   $ 0.165       77,272     $ 9,427  
    11/16/2012   $ 0.165       294,000 *   $ 37,338  
    05/17/2013   $ 0.043       244,186     $ 7,570  
    02/16/2013   $ 0.135       96,590     $ 9,273  
David Rector   11/16/2012   $ 0.165       59,090     $ 7,209  
    11/16/2012   $ 0.165       294,000 *   $ 37,338  
    05/17/2013   $ 0.043       255,814     $ 7,930  
    02/16/2013   $ 0.135       71,970     $ 6,909  
Jack Van Hulst   11/16/2012   $ 0.165       106,060     $ 12,939  
    11/16/2012   $ 0.165       210,000 *   $ 26,670  
    05/17/2013   $ 0.043       273,256     $ 8,471  
    02/16/2013   $ 0.135       145,834     $ 14,000  
Harlan W. Waksal, M.D.   11/16/2012   $ 0.165       165,152     $ 20,149  
    11/16/2012   $ 0.165       420,000 *   $ 53,340  
Warren J. Isabelle      11/16/2012   $ 0.165       210,000 *   $ 26,670  

 

 

  

(*) Represents additional options granted for service during Fiscal 2013, not for cash compensation for Fiscal 2013.

 

The following table shows the total number of shares of our common stock subject to option awards (vested and unvested) held by each non-employee director as of June 30, 2013:

 

Director   Total # of Options
Outstanding
 
Rudolf Stalder     2,214,851  
Christopher Forbes     1,684,193  
Thomas C. Quick     1,372,763  
John N. Braca     1,621,215  
David Rector     1,709,765  
Jack Van Hulst     1,611,761  
Harlan W. Waksal, M.D.     2,706,572  
Warren J. Isabelle     490,000  

 

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Compensation Committee Interlocks and Insider Participation

 

No member of the Compensation Committee is or has been an officer or employee of our company or any of our subsidiaries. In addition, no member of the Compensation Committee had any relationships with us or any other entity that requires disclosure under the regulations promulgated by the SEC and none of our executive officers served on the Compensation Committee or board of any company that employed any member of our board.

 

63
 

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

Contractual Relationships

 

Service Agreements

 

Christopher Forbes, our director, is Vice Chairman of Forbes Media LLC, Vice Chairman of Forbes Family Holdings, Inc. and Vice President of Forbes Management Co., Inc. Mr. Forbes was also Vice Chairman of Forbes Inc. Forbes, Inc. and Forbes Management Company, Inc. have provided and will continue to provide us with introductions to strategic alliance partners and, from time to time, use of its office space. In recognition of these services, during Fiscal 2012, we granted to Forbes Management Company, Inc. an option to purchase shares of our common stock. The awards to the Forbes entities are described in the table below.

 

Date of Grant   # of Option Shares     Exercise Price     Value of Services
on Date of Grant
    # of Option Shares
Vested
 
September 30, 2011     10,000     $ 0.23     $ 1,780       6,666  

 

The exercise price of the option granted to Forbes Management Company, Inc. represented the fair market value of our common stock on the respective dates of grant. Research and Development Agreements

 

Effective September 1, 1998, we entered into a three-year research and development agreement, which has been extended for successive periods through August 31, 2013, with John E. Thompson, Ph.D. and the University of Waterloo in Waterloo, Ontario, Canada, referred to as the University. Dr. Thompson is our director and officer and beneficially owns approximately 0.9% of our common stock. Dr. Thompson is the Associate Vice President, Research and former Dean of Science of the University. Dr. Thompson and the University will provide research and development under our direction. Research and development expenses under this agreement for the years ended June 30, 2013 and 2012 aggregated US $628,995 and US $573,368, respectively. Effective September 1, 2012, we, Dr. Thompson and the University extended the agreement for an additional one-year period through August 31, 2013 in the amount of CAN $611,500. Effective September 1, 2013, we, Dr. Thompson and the University extended the agreement for an additional one-year period through August 31, 2014 in the amount of CAN $371,400. As of August 31, 2013, such amount represented approximately US $371,400.

 

Consulting Agreement

 

Effective May 1, 1999, we entered into a three-year consulting agreement, which has been extended for successive periods through June 30, 2014, for research and development with Dr. Thompson. This agreement provided for monthly payments of $3,000 through June 2004. However, effective January 1, 2003, 2006, 2007 and 2011, the agreement was amended to increase the monthly payments from $3,000 to $5,000, from $5,000 to $5,200, from $5,200 to $5,417, and from $5,417 to $5,625, respectively.

 

Debt / Equity Transactions

 

Line of Credit

 

On February 17, 2010, we entered into a credit agreement with JMP Securities LLC. The agreement provides us with, subject to certain restrictions, including the existence of suitable collateral, up to a $3.0 million line of credit upon which we may draw at any time (the “Line of Credit”). Any draws upon the Line of Credit accrue at a monthly interest rate of the broker rate in effect at the interest date (which was 3.75% at June 30, 2013), plus 2.0%. There are no other conditions or fees associated with the Line of Credit. The Line of Credit is not secured by any of our assets, but it is secured by certain assets of a member of our board of directors, Harlan W. Waksal, M.D., which security interest is currently held by JMP Securities. The balance outstanding as of June 30, 2013 was $2,187,082.

 

January 2012 Transaction with Christopher Forbes and Harlan W. Waksal, M.D.

 

On January 6, 2012, in connection with a public placement of our common stock, we entered into securities purchase agreements with, among others, certain of our directors, Christopher Forbes and Harlan Waksal, pursuant to which such directors purchased an aggregate of 1,153,846 shares of our common stock at a purchase price of $0.26 per share, for an approximate aggregate value of $300,000.

 

64
 

 

Conversion of Preferred Stock

 

On August 8, 2012, in connection with a warrant exchange, certain of our directors, Christopher Forbes and Harlan Waksal, converted their 1,200 shares of Series B preferred stock into 4,615,385 shares of our common stock, as determined pursuant to the terms set forth in the Certificate of Designation of Preferences, Rights and Limitations of 10% Series B Convertible Preferred Stock. The aggregate value of such shares of common stock was approximately $1,292,308 on the date of conversion based upon the closing price of $0.28 per share on August 8, 2012. Such conversions were not made pursuant to warrant exchange agreements and therefore such directors did not receive any additional Common Stock. Following this conversion, no shares of Series B Preferred Stock remain outstanding.

 

Review and Approval of Related Person Transactions

 

Our Audit Committee Charter requires that our Audit Committee review and approve or ratify transactions involving us and any executive officer, director, director nominee, 5% stockholder and certain of their immediate family members, also referred to herein as a related person. The policy and procedures cover any transaction involving a related person, also referred to herein as a related person transaction, in which the related person has a material interest and which does not fall under an explicitly stated exception set forth in the applicable disclosure rules of the SEC.

 

 A related person transaction will be considered approved or ratified if it is authorized by the Audit Committee after full disclosure of the related person’s interest in the transaction. In considering related person transactions, the Audit Committee will consider any information considered material to investors and the following factors:

 

·the related person’s interest in the transaction;
·the approximate dollar value of the transaction;
·whether the transaction was undertaken in the ordinary course of our business;
·whether the terms of the transaction are no less favorable to us than terms that we could have reached with an unrelated third party; and
·the purpose and potential benefit to us of the transaction.

 

65
 

 

PRINCIPAL STOCKHOLDERS

 

The following table sets forth, as of September 16, 2013, the beneficial ownership of the common stock by (i) each person known by us to be the beneficial owner of more than 5% of the total number of shares of our common stock outstanding as of such date; (ii) each of our directors, and our named executive officers; and (iii) all of our directors and our current executive officers as a group.

 

Name and Address of Beneficial Owner (1)   Amount and Nature of
Beneficial Ownership(2)
    Percent
of Class(3)
 
(i)        Certain Beneficial Owners:                
Paul E. Klaver
134 Columbia Street W
Unit 18
Waterloo, Ontario N2L 3K8
    24,449,780 (4)     10.4 %
                 
(ii)        Directors (which includes all nominees), Named Executive Officers and Chief Executive Officer:                
Harlan W. Waksal, M.D.     6,304,514 (5)     2.7 %
John N. Braca     1,946,707 (6)     *  
Jack Van Hulst     1,773,859 (7)     *  
Christopher Forbes     17,902,733 (8)     7.5 %
Warren J. Isabelle     728,292 (9)     *  
Thomas C. Quick     2,334,267 (10)     1.0 %
David Rector     2,251,092 (11)     *  
Rudolf Stalder     3,290,977 (12)     1.0 %
John E. Thompson, Ph.D.     1,421,263 (13)     *  
Joel P. Brooks     959,866 (14)     *  
Richard Dondero     1,091,917 (15)     *  
Leslie J. Browne, Ph.D.     1,849,788 (16)     *  
(iii)  All Directors and current executive officers as a group (12 persons)     41,855,277 (17)     16.2 %

____________

* Less than 1%

 

(1) Unless otherwise provided, all addresses should be care of Senesco Technologies, Inc., 721 Route 202/206, Suite 130, Bridgewater, New Jersey 08807.

 

(2) Except as otherwise indicated, all shares of common stock are beneficially owned and sole investment and voting power is held by the persons named.

 

(3) Applicable percentage of ownership is based on 234,820,952, shares of our common stock outstanding as of September 16, 2013, plus any common stock equivalents and options or warrants held by such holder which are presently or will become exercisable within sixty (60) days after September 16, 2013.

 

(4) Represents 6,000,000 shares of common stock held by Urantia Outreach, of which Mr. Klaver is the President. Represents 7,360,036 shares of common stock, 4,423,077 shares of common stock issuable pursuant to presently exercisable warrants and 6,666,667 shares of common stock issuable pursuant to the conversion of convertible preferred stock at a conversion rate of $0.03 held by Mr. Klaver.

 

(5) Includes 3,485,264 shares of common stock issuable pursuant to presently exercisable warrants and options or options which will become exercisable within sixty (60) days after September 16, 2013. Excludes 389,996 shares of common stock issuable pursuant to options which become exercisable after sixty (60) days from September 16, 2013.

 

66
 

 

(6) Includes 1,808,743 shares of common stock issuable pursuant to presently exercisable warrants and options or options which will become exercisable within sixty (60) days after September 16, 2013. Excludes 185,500 shares of common stock issuable pursuant to options which become exercisable after sixty (60) days from September 16, 2013.

 

(7) Includes 1,733,791 shares of common stock issuable pursuant to presently exercisable warrants and options or options which will become exercisable within sixty (60) days after September 16, 2013. Excludes 144,984 shares of common stock issuable pursuant to options which become exercisable after sixty (60) days from September 16, 2013.

 

(8) Includes 5,145,415 shares of common stock issuable pursuant to presently exercisable warrants and options or options which will become exercisable within sixty (60) days after September 16, 2013. Excludes 159,000 shares of common stock issuable pursuant to options which become exercisable after sixty (60) days from September 16, 2013.

 

(9) Includes 624,528 shares of common stock issuable pursuant to presently exercisable options or options which will become exercisable within sixty (60) days after September 16, 2013. Excludes 132,500 shares of common stock issuable pursuant to options which become exercisable after sixty (60) days from September 16, 2013.

 

(10) Represents 675,173 shares of common stock and 14,097 shares of common stock issuable pursuant to warrants issued to Thomas C. Quick Charitable Foundation, of which Mr. Quick is the sole trustee. Represents 139,734 shares of common stock and 1,505,263 shares of common stock issuable pursuant to presently exercisable options or options which will become exercisable within sixty (60) days after September 16, 2013 issued to Thomas C. Quick. Excludes 132,500 shares of common stock issuable pursuant to options issued to Thomas C. Quick which become exercisable after sixty (60) days from September 16, 2013.

 

(11) Includes 1,898,307 shares of common stock issuable pursuant to presently exercisable warrants and options or options which will become exercisable within sixty (60) days after September 16, 2013. Excludes 185,500 shares of common stock issuable pursuant to options which become exercisable after sixty (60) days from September 16, 2013.

 

(12) Includes 2,223,539 shares of common stock issuable pursuant to presently exercisable warrants and options or options which will become exercisable within sixty (60) days after September 16, 2013. Excludes 270,000 shares of common issuable pursuant to options which will become exercisable after sixty (60) days from September 16, 2013.

 

(13) Represents 572,000 shares of common stock held by 2091794 Ontario Ltd., of which Dr. Thompson is the sole owner, and 849,263 shares of common stock issuable pursuant to presently exercisable options or options which will become exercisable within sixty (60) days after September 16, 2013 issued to John E. Thompson, Ph.D. Excludes 1,354,013 shares of common issuable pursuant to options which will become exercisable after sixty (60) days from September 16, 2013.

 

(14) Includes 908,993 shares of common stock issuable pursuant to presently exercisable options or options which will become exercisable within sixty (60) days after September 16, 2013. Excludes 1,268,207 shares of common stock issuable pursuant to options which will become exercisable after sixty (60) days from September 16, 2013.

 

(15) Includes 1,091,917 shares of common stock issuable pursuant to presently exercisable options or options which will become exercisable within sixty (60) days after September 16, 2013. Excludes 1,268,207 shares of common stock issuable pursuant to options which will become exercisable after sixty (60) days from September 16, 2013.

 

(16) Includes 1,800,788 shares of common stock issuable pursuant to presently exercisable options or options which will become exercisable within sixty (60) days after September 16, 2013. Excludes 2,357,012 shares of common stock issuable pursuant to options which will become exercisable after sixty (60) days from September 16, 2013.

 

(17) See Notes 5 through 16.

 

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DESCRIPTION OF SECURITIES

 

Common Stock

 

General

 

The following description does not purport to be complete and is subject in all respects to applicable Delaware law and to the provisions of the Senesco Amended and Restated Certificate of Incorporation and bylaws, as amended to the date of this prospectus. Our stockholders are urged to read the Amended and Restated Certificate of Incorporation and bylaws for a more complete description of these provisions and other information that may be important to our stockholders.

 

Capital Stock

 

Our authorized capital stock consists of 505,000,000 shares, par value $0.01 per share, which includes 500,000,000 shares of authorized common stock, par value $0.01 per share and 5,000,000 shares of authorized preferred stock, par value $0.01 per share. The authorized capital stock is divisible into the classes and series, has the designation, voting rights, and other rights and preferences and is subject to the restrictions that our Board of Directors may from time to time establish. The holders of our common shares: (1) have equal ratable rights to dividends from funds legally available therefor, when, as and if declared by our Board of Directors; (2) are entitled to share ratably in all assets available for distribution to holders our common shares upon liquidation, dissolution or winding up of its affairs; (3) do not have preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions applicable thereto; and (4) are entitled to one vote per share on all matters which stockholders may vote on at all meetings of stockholders.

 

All shares of our common shares now outstanding are fully paid and nonassessable. The holders of our common shares do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares voting for the election of directors can elect all of our directors to be elected, if they so choose. In such event, the holders of the remaining shares will not be able to elect any directors.

 

After consummation of this offering, we expect to have common shares outstanding.

 

American Stock Transfer and Trust is the transfer agent for our common shares.

 

Delaware Law and Certain Certificate of Incorporation and By-Law Provisions

 

The provisions of Delaware law and of our certificate of incorporation and by-laws discussed below could discourage or make it more difficult to accomplish a proxy contest or other change in our management or the acquisition of control by a holder of a substantial amount of our voting stock. It is possible that these provisions could make it more difficult to accomplish, or could deter, transactions that stockholders may otherwise consider to be in their best interests or the best interests of Senesco.

 

·Business Combinations. We are subject to the provisions of Section 203 of the General Corporation Law of Delaware. Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to specified exceptions, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of the corporation’s voting stock.

 

·Limitation of Liability; Indemnification. Our certificate of incorporation contains provisions permitted under the General Corporation Law of Delaware relating to the liability of directors. The provisions eliminate, to the extent legally permissible, a director’s liability for monetary damages for a breach of fiduciary duty, except in circumstances involving wrongful acts, such as the breach of a director’s duty of loyalty or acts or omissions that involve intentional misconduct or a knowing violation of law. The limitation of liability described above does not alter the liability of our directors and officers under federal securities laws. Furthermore, our certificate of incorporation contains provisions to indemnify our directors and officers to the fullest extent permitted by the General Corporation Law of Delaware. These provisions do not limit or eliminate our right or the right of any stockholder of ours to seek non-monetary relief, such as an injunction or rescission in the event of a breach by a director or an officer of his duty of care to us. We believe that these provisions assist us in attracting and retaining qualified individuals to serve as directors.

 

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Trading

 

Our common shares currently trade on the OTCQB Marketplace under the symbol “SNTI”.

 

Transfer Agent and Registrar

 

The transfer agent and registrar for our common shares is American Stock Transfer and Trust.

 

Warrants

 

The following summary of certain terms and provisions of the warrants offered hereby is not complete and is subject to, and qualified in its entirety by reference to, the terms and provisions set forth in the form of warrant to be filed by us on Form 8-K. Prospective investors should carefully review the terms and provisions set forth in the form of warrant.

 

Exercise Price

 

The exercise price per share of common stock purchasable upon exercise of the warrants is per share of common stock being purchased. If we, at any time while the warrants are outstanding, pay a stock dividend on our common stock or otherwise make a distribution on any class of capital stock that is payable in shares of our common stock, subdivide outstanding shares of our common stock into a larger number of shares or combine the outstanding shares of our common stock into a smaller number of shares, then, the number, class and type of shares available under the warrants and the exercise price will be correspondingly adjusted to give the holder of the warrants, on exercise for the same aggregate exercise price, the total number, class, and type of shares or other property as the holder would have owned had the warrants been exercised prior to the event and had the holder continued to hold such shares until the event requiring adjustment.

 

Exercisability

 

Holders may immediately exercise the two year warrants at any time up to the date that is two years after such original issuance date.

 

Transferability

 

The warrants may be transferred at the option of the warrant holder and upon consent by the Company upon surrender of the warrants with the appropriate instruments of transfer.

 

Rights as a Stockholder

 

Except with respect to dividends or other distributions in which a holder has received an adjustment to the exercise price in accordance with the warrants, the holders of the warrants have the right to participate in dividends or other distributions of our assets (or rights to acquire our assets) to the same extent that such holder would have participated if such holder held the number of shares of common stock underlying such warrants at the time of the distribution.

 

Except as otherwise provided above or by virtue of such holder’s ownership of shares of our common stock, the holders of the warrants do not have any additional rights or privileges of holders of our common stock, including any voting rights, until they exercise their warrants.

 

Reorganization

 

In the event of a reorganization, recapitalization, reclassification, consolidation or merger involving the Company in which the Company’s common stock is converted or exchanged for securities, cash or other property (a “Reorganization”), then, following such Reorganization, the holders of the warrants shall receive upon exercise of the warrants the kind and amount of securities, cash or other property that the holders of such warrants would have been entitled to receive pursuant to the Reorganization if such holders had exercised their warrants prior to the occurrence of such Reorganization. Notwithstanding the foregoing, if (x) there shall occur any Reorganization in which the Company’s common stock is converted into or exchanged for anything other than solely equity securities, and (y) the common stock of the acquiring or surviving company is publicly traded, then, as part of such Reorganization, (i) the holders of the warrants shall have the right to receive upon the exercise of the warrants such number of shares of common stock of the acquiring or surviving company as set forth in the warrants.

 

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PLAN OF DISTRIBUTION

 

The Company will solicit offers to purchase the shares and warrants in this offering. No placement agent nor any broker-dealer or FINRA member has been retained for this offering.

 

In connection with the Company’s selling efforts in the offering, the Company will not register as a broker-dealer pursuant to Section 15 of the Exchange Act, but rather will rely upon the “safe harbor” provisions of SEC Rule 3a4-1, promulgated under the Exchange Act. Generally speaking, Rule 3a4-1 provides an exemption from the broker-dealer registration requirements of the Exchange Act for persons associated with an issuer that participate in an offering of the issuer’ securities. Each of our officers and directors is not subject to a statutory disqualification, as that term is defined in Section 3(a)(39) of the Exchange Act. Each of our officers and directors will not be compensated in connection with his participation in the offering by payment of commissions or other remuneration based either directly or indirectly on transactions in our securities. Each of our officers and directors is not now, nor have they been within the past 12 months, a broker or dealer, and they have not been, within the past 12 months, an associated person of a broker or dealer. At the end of the offering, each of our officers and directors will continue to primarily perform substantial duties for the Company or on its behalf otherwise than in connection with transactions in securities. Each of our officers and directors will not and has not participated in selling an offering of securities for any issuer more than once every 12 months other than in reliance on Exchange Act Rule 3a4-1(a)(4)(i) or (iii).

 

In order to comply with the applicable securities laws of certain states, the securities will be offered or sold in those states only if they have been registered or qualified for sale, exempted from such registration or if a qualification requirement is available and with which the Company has complied. In addition, and without limiting the foregoing, the Company will be subject to applicable provisions, rules and regulations under the Exchange Act with regarding to security transactions during the period of time when this Registration Statement is effective.

 

We are subject to Regulation M of the Exchange Act. Regulation M governs activities of underwriters, issuers, selling security holders and others in connection with offerings of securities. Regulation M prohibits distribution participants and their affiliated purchasers from bidding for, purchasing or attempting to induce any person to bid for or purchase the securities being distributed.

 

The Company proposes to arrange for the sale of the shares and warrants it is offering pursuant to this registration statement to one or more investors through a securities purchase agreement directly between the investors and the Company. All of the shares and warrants will be sold at the same price and, we expect, at a single closing. We established the price following negotiations with prospective investors and with reference to the prevailing market price of our common stock, recent trends in such price and other factors. It is possible that not all of the shares and warrants we are offering pursuant to this registration statement will be sold at the closing, in which case our net proceeds would be reduced. We expect that the sale of the shares and warrants will be completed on the date indicated on the cover page of this prospectus.

 

In connection with this offering, the Company may distribute this registration statement and the accompanying prospectus electronically.

 

The estimated offering expenses payable by us are approximately , which includes legal and printing costs and various other fees associated with registering the common stock. After deducting our estimated offering expenses, we expect the net proceeds from this offering to be approximately $           .

 

LEGAL MATTERS

 

Certain legal matters in connection with the securities offered hereby will be passed upon for us by Morgan, Lewis & Bockius LLP, Princeton, New Jersey.

 

EXPERTS

 

The financial statements of the Company as of June 30, 2013 and 2012, and for the years ended June 30, 2013, 2012 and 2011 and for the cumulative period from inception through June 30, 2013 included in this prospectus and registration statement, have been included in reliance of the reports on McGladrey LLP, an independent registered public accounting firm, given on the authority of said firm as experts in accounting and auditing.

 

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WHERE YOU CAN FIND MORE INFORMATION

 

We have filed with the SEC a registration statement under the Securities Act of 1933 that registers the distribution of the common shares offered under this prospectus. The registration statement contains additional relevant information about us and the common shares. The rules and regulations of the SEC allow us to omit from this prospectus certain information included in the registration statement. Statements contained in this prospectus as to the contents of any documents that we have filed as an exhibit to the registration statement are qualified in their entirety by reference to the exhibits for a complete statement of their terms and conditions.

 

In addition, we file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy this information and the registration statement at the SEC public reference room located at 100 F Street, N.E., Washington D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Any information we file with the SEC is also available on the SEC’s website at http://www.sec.gov. We also maintain a website at http://www.senesco.com/sec.php through which you can access our SEC filings. We have included our website address in this prospectus solely as an inactive textual reference. The information contained on, or that can be accessed through, our website is not part of this prospectus.

 

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SENESCO TECHNOLOGIES, INC.

 

INDEX TO FINANCIAL STATEMENTS

 

Audited Consolidated Financial Statements

 

Report of Independent Registered Public Accounting Firm F-2
Consolidated Balance Sheets as of June 30, 2013 and 2012 F-3
Consolidated Statements of Operations for the Fiscal Years Ended June 30, 2013, 2012, 2011 and From Inception on July 1, 1998 through June 30, 2013 F-4
Consolidated Statements of Stockholders’ Equity From Inception on July 1, 1998 through June 30, 2013 F-5
Consolidated Statements of Cash Flows for the Fiscal Years Ended June, 2013, 2012, 2011 and From Inception on July 1, 1998 through June 30, 2013 F-12
Notes to Consolidated Financial Statements F-13

 

F-1
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders
Senesco Technologies, Inc.
 
We have audited the accompanying consolidated balance sheets of Senesco Technologies, Inc. and Subsidiary (a development stage company) as of June 30, 2013 and June 30, 2012, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended June 30, 2013 and cumulative amounts from July 1, 1998 (inception) to June 30, 2013. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. 
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Senesco Technologies, Inc. and Subsidiary as of June 30, 2013 and June 30, 2012, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2013 and cumulative amounts from July 1, 1998 (inception) to June 30, 2013, in conformity with U.S. generally accepted accounting principles.
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, generated minimal revenues, and continues to incur significant expenses that exceed revenue streams. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
/s/ McGladrey LLP
New York, New York
September 11, 2013
 
 
F-2
 

SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
 
 
 
June 30,
 
June 30,
 
 
 
2013
 
2012
 
ASSETS
 
 
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,602,294
 
$
2,001,325
 
Prepaid research supplies and expenses
 
 
1,919,220
 
 
1,548,524
 
Total Current Assets
 
 
3,521,514
 
 
3,549,849
 
 
 
 
 
 
 
 
 
Equipment, furniture and fixtures, net
 
 
4,555
 
 
5,857
 
Intangible assets, net
 
 
3,566,497
 
 
3,393,992
 
Security deposit
 
 
5,171
 
 
5,171
 
TOTAL ASSETS
 
$
7,097,737
 
$
6,954,869
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
 
 
 
Accounts payable
 
$
637,320
 
$
594,514
 
Accrued expenses
 
 
387,540
 
 
369,695
 
Line of credit