Table of Contents

** **

 

** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION****WASHINGTON****,****D.C.20549**

 

**FORM 10-Q**

 

** (Mark One)**

 

| **x**      | ** ** | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                                                                                                                                                                                     |
|------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| ** ** | ** ** | **For the quarterly period ended  December 31, 2008**                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **or**     |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **o**      | ** ** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                                                                                                                                                                                    |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| ** ** | ** ** | **For  the transition period  from                                       to                                       ** |

 

**Commission File No. 001-31326**

 

**SENESCO TECHNOLOGIES, INC.**

(exact name of registrant as specified in itscharter)

 

| **Delaware**                                                   | ** ** | **84-1368850**                    |
|----------------------------------------------------------------|------------|-----------------------------------|
| (State or other jurisdiction of incorporation or organization) |       | (IRS Employer Identification No.) |

 

**303George Street, Suite 420**

**NewBrunswick, New Jersey 08901**

(Address ofprincipal executive offices)

 

**(732)296-8400**

(Registrant’s telephone number, includingarea code)

 

Indicate by check mark whether the registrant: (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the past 12 months (or for such shorter period thatthe registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

 
| Yes: x |   | No: o |
|--------|--------|-------|

 

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

 
| Large accelerated filer o   |   | Accelerated filer o     |
|-----------------------------|--------|-------------------------|
|                        |   |                    |
| Smaller reporting company x |   | Non-accelerated filer o |

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act).

 
| Yes: o |   | No: x |
|--------|--------|-------|

 

As of January 31, 2009, 19,027,719 shares of the issuer’s commonstock, par value $0.01 per share, were outstanding.

 

 

 

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Tableof Contents

 

SENESCOTECHNOLOGIES, INC. AND SUBSIDIARY

 

TABLE OF CONTENTS

 
| ** **    | ** **                                                                                                                                                                                                                                       | **Page** |
|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| PART I.  | FINANCIAL INFORMATION                                                                                                                                                                                                                            |     |
|          |                                                                                                                                                                                                                                             |     |
| Item 1.       | Financial Statements (Unaudited)                                                                                                                                                                                                                 | 1        |
|          |                                                                                                                                                                                                                                             |     |   |
|          | CONDENSED  CONSOLIDATED BALANCE SHEETS as of December 31, 2008 and June 30,  2008                                                                                                                                                      | 2        |
|          |                                                                                                                                                                                                                                             |
|          | CONDENSED  CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended  December 31, 2008 and 2007, For the Six Months Ended December 31,  2008 and 2007, and From Inception on July 1, 1998 through  December 31, 2008 | 3        |
|          |                                                                                                                                                                                                                                             |     |
|          | CONDENSED  CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY From Inception on July 1,  1998 through December 31, 2008                                                                                                               | 4        |
|          |                                                                                                                                                                                                                                             |     |
|          | CONDENSED  CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended  December 31, 2008 and 2007, and From Inception on July 1, 1998  through December 31, 2008                                                              | 8        |
|          |                                                                                                                                                                                                                                             |     |
|          | NOTES TO  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                                                                            | 9        |
|          |                                                                                                                                                                                                                                             |     |
| Item 2.       | Management’s Discussion and Analysis of  Financial Condition and Results of Operations                                                                                                                                                      | 18       |
|          |                                                                                                                                                                                                                                             |     |   |
|          | Overview                                                                                                                                                                                                                                         | 18       |
|          |                                                                                                                                                                                                                                             |     |
|          | Liquidity and  Capital Resources                                                                                                                                                                                                                 | 31       |
|          |                                                                                                                                                                                                                                             |     |
|          | Changes to  Critical Accounting Policies and Estimates                                                                                                                                                                                           | 32       |
|          |                                                                                                                                                                                                                                             |     |
|          | Results of Operations                                                                                                                                                                                                                            | 34       |
|          |                                                                                                                                                                                                                                             |     |
| Item 3.       | Quantitative and Qualitative Disclosures  about Market Risk                                                                                                                                                                                      | 41       |
|          |                                                                                                                                                                                                                                             |     |
| Item 4T.      | Controls and Procedures                                                                                                                                                                                                                          | 41       |
|          |                                                                                                                                                                                                                                             |     |   |
| PART II. | OTHER INFORMATION                                                                                                                                                                                                                                |     |
|          |                                                                                                                                                                                                                                             |     |
| Item 1A.      | Risk Factors                                                                                                                                                                                                                                     | 42       |
|          |                                                                                                                                                                                                                                             |     |
| Item 4.       | Submission of Matters to a Vote of Security  Holders                                                                                                                                                                                             | 55       |
|          |                                                                                                                                                                                                                                             |     |
| Item 5.       | Other Information                                                                                                                                                                                                                                | 56       |
|          |                                                                                                                                                                                                                                             |     |
| Item  6.      | Exhibits                                                                                                                                                                                                                                         | 57       |
|          |                                                                                                                                                                                                                                             |     |
| SIGNATURES    | 58                                                                                                                                                                                                                                               |
|               |                                                                                                                                                                                                                                                  |          |  |  |

 

i

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**PART I. FINANCIAL INFORMATION.**

 

**Item 1.****                                   Financial Statements.**

 

Certain information and footnote disclosures required under UnitedStates generally accepted accounting principles have been condensed or omittedfrom the following consolidated financial statements pursuant to the rules andregulations of the Securities and Exchange Commission.  However, Senesco Technologies, Inc., aDelaware corporation, and its wholly owned subsidiary, Senesco, Inc., aNew Jersey corporation (collectively, “Senesco” or the “Company”), believe thatthe disclosures are adequate to assure that the information presented is notmisleading in any material respect.

 

The results of operations for the interim periods presented herein arenot necessarily indicative of the results to be expected for the entire fiscalyear.

 

1

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SENESCO TECHNOLOGIES, INC. ANDSUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED BALANCE SHEETS

 
| ** **                                                                                                                     | ** ** | **December 31,** | ** ** | **June 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-------------------|------------|
| ** **                                                                                                                     | ** ** | **2008**              | ** ** | **2008**          | ** ** |
| ** **                                                                                                                     | ** ** | **(unaudited)**       | ** ** | ** **        | ** ** |
| ASSETS                                                                                                                         |       |                  |       |              |       |
|                                                                                                                           |       |                  |       |              |       |
| CURRENT ASSETS:                                                                                                                |       |                  |       |              |       |
| Cash and cash equivalents                                                                                                      |       | $                     | 1,115,788  |              | $          | 5,676,985 |   |
| Short-term investments                                                                                                         |       | 2,500,000             |       | 500,000           |       |
| Prepaid expenses and other  current assets                                                                                     |       | 828,919               |       | 180,556           |       |
| Total Current Assets                                                                                                           |       | 4,444,707             |       | 6,357,541         |       |
|                                                                                                                           |       |                  |       |              |       |
| Property and equipment, net                                                                                                    |       | 3,893                 |       | 5,459             |       |
| Intangibles, net                                                                                                               |       | 3,515,565             |       | 3,213,543         |       |
| Deferred financing costs                                                                                                       |       | 847,385               |       | 1,059,230         |       |
| Security deposit                                                                                                               |       | 7,187                 |       | 7,187             |       |
| TOTAL ASSETS                                                                                                                   |       | $                     | 8,818,737  |              | $          | 10,642,960 |   |
|                                                                                                                           |       |                  |       |              |       |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                      |       |                  |       |              |       |
|                                                                                                                           |       |                  |       |              |       |
| CURRENT LIABILITIES:                                                                                                           |       |                  |       |              |       |
| Accounts payable                                                                                                               |       | $                     | 468,280    |              | $          | 370,167 |   |
| Accrued expenses                                                                                                               |       | 413,684               |       | 314,267           |       |
| Total Current Liabilities                                                                                                      |       | 881,964               |       | 684,434           |       |
|                                                                                                                           |       |                  |       |              |       |
| Convertible note, net of discount                                                                                              |       | 609                   |       | 57                |       |
| Grant payable                                                                                                                  |       | 99,728                |       | 99,728            |       |
| Other liability                                                                                                                |       | 19,539                |       | 23,062            |       |
| TOTAL LIABILITIES                                                                                                              |       | 1,001,840             |       | 807,281           |       |
|                                                                                                                           |       |                  |       |              |       |
| STOCKHOLDERS’ EQUITY:                                                                                                     |       |                  |       |              |       |
|                                                                                                                           |       |                  |       |              |       |
| Preferred stock, $0.01 par value;  authorized 5,000,000 shares, no shares issued                                               |       | —                |       | —            |       |
| Common stock, $0.01 par value;  authorized 100,000,000 shares, issued and outstanding 19,027,719 and  18,375,117, respectively |       | 190,277               |       | 183,751           |       |
| Capital in excess of par                                                                                                       |       | 40,655,397            |       | 39,874,958        |       |
| Deficit accumulated during the  development stage                                                                              |       | (33,028,777           | )          | (30,223,030       | )          |
|                                                                                                                           |       |                  |       |              |       |
| TOTAL STOCKHOLDERS’ EQUITY                                                                                                |       | 7,816,897             |       | 9,835,679         |       |
|                                                                                                                           |       |                  |       |              |       |
| TOTAL LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                                               |       | $                     | 8,818,737  |              | $          | 10,642,960 |   |

 

See Notes to Condensed ConsolidatedFinancial Statements.

 

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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 
| ** **                                                              | ** ** | **For the Three  Months Ended  December 31,** | ** ** | **For the Three  Months Ended  December 31,** | ** ** | **For the Six  Months Ended  December 31,** | ** ** | **For the Six  Months Ended  December 31,** | ** ** | **From Inception on  July 1, 1998  through  December 31,** | ** ** |
|-------------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| ** **                                                              | ** ** | **2008**                                                          | ** ** | **2007**                                                          | ** ** | **2008**                                                        | ** ** | **2007**                                                        | ** ** | **2008**                                                                            | ** ** |
|                                                                    |       |                                                              |       |                                                              |       |                                                            |       |                                                            |       |                                                                                |       |
| Revenue                                                                 |       | $                                                                 | —     |                                                              | $          | 6,250                                                           |       | $                                                               | 200,000    |                                                                                | $          | 377,500 |   | $ | 1,375,000 |   |
|                                                                    |       |                                                              |       |                                                              |       |                                                            |       |                                                            |       |                                                                                |       |
| Operating Expenses:                                                     |       |                                                              |       |                                                              |       |                                                            |       |                                                            |       |                                                                                |       |
| General and administrative                                              |       | 649,056                                                           |       | 585,851                                                           |       | 1,178,921                                                       |       | 974,910                                                         |       | 22,904,377                                                                          |       |
| Research and development                                                |       | 579,286                                                           |       | 392,254                                                           |       | 1,083,672                                                       |       | 745,149                                                         |       | 11,041,267                                                                          |       |
| Total Operating Expenses                                                |       | 1,228,342                                                         |       | 978,105                                                           |       | 2,262,593                                                       |       | 1,720,059                                                       |       | 33,945,644                                                                          |       |
|                                                                    |       |                                                              |       |                                                              |       |                                                            |       |                                                            |       |                                                                                |       |
| Loss From Operations                                                    |       | (1,228,342                                                        | )          | (971,855                                                          | )          | (2,062,593                                                      | )          | (1,342,559                                                      | )          | (32,570,644                                                                         | )          |
|                                                                    |       |                                                              |       |                                                              |       |                                                            |       |                                                            |       |                                                                                |       |
| Sale of state income tax loss, net                                      |       | —                                                            |       | —                                                            |       | —                                                          |       | —                                                          |       | 586,442                                                                             |       |
| Other noncash income                                                    |       | —                                                            |       | —                                                            |       | —                                                          |       | —                                                          |       | 321,259                                                                             |       |
| Interest income, net                                                    |       | 17,994                                                            |       | 25,227                                                            |       | 41,051                                                          |       | 32,106                                                          |       | 521,288                                                                             |       |
| Amortization of debt discount and financing costs                       |       | (106,342                                                          | )          | (38,374                                                           | )          | (212,397                                                        | )          | (53,595                                                         | )          | (881,160                                                                            | )          |
| Interest expense on convertible notes                                   |       | (307,651                                                          | )          | (64,836                                                           | )          | (571,808                                                        | )          | (67,836                                                         | )          | (1,005,962                                                                          | )          |
| Net Loss                                                                |       | $                                                                 | (1,624,341 | )                                                                 | $          | (1,049,838                                                      | )          | $                                                               | (2,805,747 | )                                                                                   | $          | (1,431,884 | ) | $ | (33,028,777 | ) |
|                                                                    |       |                                                              |       |                                                              |       |                                                            |       |                                                            |       |                                                                                |       |
| Basic and Diluted Net Loss Per Common Share                             |       | $                                                                 | (0.09      | )                                                                 | $          | (0.06                                                           | )          | $                                                               | (0.15      | )                                                                                   | $          | (0.08 | ) |   |   |
|                                                                    |       |                                                              |       |                                                              |       |                                                            |       |                                                            |       |                                                                                |       |
| Basic and Diluted Weighted Average Number of Common  Shares Outstanding |       | 18,629,575                                                        |       | 17,474,870                                                        |       | 18,504,477                                                      |       | 17,474,282                                                      |       |                                                                                |       |

 

See Notesto Condensed Consolidated Financial Statements.

 

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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

FROM INCEPTION ON JULY 1, 1998THROUGH DECEMBER 31, 2008

(unaudited)

 
|                                                                                              |   |                  |   |               |   |                |   | **Deficit**         |   |       |   |
|---------------------------------------------------------------------------------------------------|--------|-----------------------|--------|--------------------|--------|---------------------|--------|---------------------|--------|------------|--------|
|                                                                                              |   |                  |   |               |   |                |   | **Accumulated**     |   |       |   |
|                                                                                              |   |                  |   |               |   | **Capital in** |   | **During the** |   |       |   |
|                                                                                              |   | **Common Stock** |   | **Excess of** |   | **Development**     |   |                |   |
|                                                                                              |   | **Shares**            |   | **Amount**         |   | **Par Value**  |   | **Stage**           |   | **Total**  |   |
|                                                                                              |   | ** **            |   | ** **         |   | ** **          |   | ** **          |   | ** ** |   |
| Common stock outstanding                                                                          |   | 2,000,462             |   | $                  | 20,005 |                | $      | (20,005             | )      | —     |   | — |   |
|                                                                                              |   |                  |   |               |   |                |   |                |   |       |   |
| Contribution of capital                                                                           |   | —                |   | —             |   | 85,179              |   | —              |   | $          | 85,179 |   |
|                                                                                              |   |                  |   |               |   |                |   |                |   |       |   |
| Issuance of common stock in  reverse merger on January 22, 1999 at $0.01 per share           |   | 3,400,000             |   | 34,000             |   | (34,000             | )      | —              |   | —     |   |
|                                                                                              |   |                  |   |               |   |                |   |                |   |       |   |
| Issuance of common stock for cash  on May 21, 1999 at $2.63437 per share                     |   | 759,194               |   | 7,592              |   | 1,988,390           |   | —              |   | 1,995,982  |   |
|                                                                                              |   |                  |   |               |   |                |   |                |   |       |   |
| Issuance of common stock for  placement fees on May 21, 1999 at $0.01 per share              |   | 53,144                |   | 531                |   | (531                | )      | —              |   | —     |   |
|                                                                                              |   |                  |   |               |   |                |   |                |   |       |   |
| Issuance of common stock for cash  on January 26, 2000 at $2.867647 per share                |   | 17,436                |   | 174                |   | 49,826              |   | —              |   | 50,000     |   |
|                                                                                              |   |                  |   |               |   |                |   |                |   |       |   |
| Issuance of common stock for cash  on January 31, 2000 at $2.87875 per share                 |   | 34,737                |   | 347                |   | 99,653              |   | —              |   | 100,000    |   |
|                                                                                              |   |                  |   |               |   |                |   |                |   |       |   |
| Issuance of common stock for cash  on February 4, 2000 at $2.934582 per share                |   | 85,191                |   | 852                |   | 249,148             |   | —              |   | 250,000    |   |
|                                                                                              |   |                  |   |               |   |                |   |                |   |       |   |
| Issuance of common stock for cash  on March 15, 2000 at $2.527875 per share                  |   | 51,428                |   | 514                |   | 129,486             |   | —              |   | 130,000    |   |
|                                                                                              |   |                  |   |               |   |                |   |                |   |       |   |
| Issuance of common stock for cash  on June 22, 2000 at $1.50 per share                       |   | 1,471,700             |   | 14,718             |   | 2,192,833           |   | —              |   | 2,207,551  |   |
|                                                                                              |   |                  |   |               |   |                |   |                |   |       |   |
| Commissions, legal and bank fees  associated with issuances for the year ended June 30, 2000 |   | —                |   | —             |   | (260,595            | )      | —              |   | (260,595   | )      |
|                                                                                              |   |                  |   |               |   |                |   |                |   |       |   |
| Fair market value of options and  warrants vested during the year ended June 30, 2000        |   | —                |   | —             |   | 1,475,927           |   | —              |   | 1,475,927  |   |
|                                                                                                   |        |                       |        |                    |        |                     |        |                     |        |            |        |  |  |  |

 

(continued)

 

See Notes to Condensed Consolidated FinancialStatements.

 

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SENESCO TECHNOLOGIES, INC. ANDSUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENT OFSTOCKHOLDERS’ EQUITY

FROM INCEPTION ON JULY 1, 1998THROUGH DECEMBER 31, 2008

(unaudited)

 
|                                                                                                                       |   |                  |   |               |   |                |      | **Deficit**         |   |       |      |
|----------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|--------|--------------------|--------|---------------------|-----------|---------------------|--------|------------|-----------|
|                                                                                                                       |   |                  |   |               |   |                |      | **Accumulated**     |   |       |      |
|                                                                                                                       |   |                  |   |               |   | **Capital in** |      | **During the** |   |       |      |
|                                                                                                                       |   | **Common Stock** |   | **Excess of** |   | **Development**     |      |                |   |
|                                                                                                                       |   | **Shares**            |   | **Amount**         |   | **Par Value**  |      | **Stage**           |   | **Total**  |      |
|                                                                                                                       |   | ** **            |   | ** **         |   | ** **          |      | ** **          |   | ** ** |      |
| Fair market value of options and  warrants vesting during the year ended June 30, 2001                                |   | —                |   | —             |   | $                   | 308,619   |                | — |       | $         | 308,619 |   |
|                                                                                                                       |   |                  |   |               |   |                |      |                |   |       |      |
| Issuance of common stock and  warrants for cash from November 30, 2001 through April 17, 2002 at  $1.75 per unit |   | 3,701,430             |   | $                  | 37,014 |                | 6,440,486 |                | — |       | 6,477,500 |   |
|                                                                                                                       |   |                  |   |               |   |                |      |                |   |       |      |
| Issuance of common stock and  warrants associated with bridge loan conversion on December 3, 2001                     |   | 305,323               |   | 3,053              |   | 531,263             |      | —              |   | 534,316    |      |
|                                                                                                                       |   |                  |   |               |   |                |      |                |   |       |      |
| Commissions, legal and bank fees  associated with issuances for the year ended June 30, 2002                          |   | —                |   | —             |   | (846,444            | )         | —              |   | (846,444   | )         |
|                                                                                                                       |   |                  |   |               |   |                |      |                |   |       |      |
| Fair market value of options and  warrants vested during the year ended June 30, 2002                                 |   | —                |   | —             |   | 1,848,726           |      | —              |   | 1,848,726  |      |
|                                                                                                                       |   |                  |   |               |   |                |      |                |   |       |      |
| Fair market value of options and  warrants vested during the year ended June 30, 2003                                 |   | —                |   | —             |   | 848,842             |      | —              |   | 848,842    |      |
|                                                                                                                       |   |                  |   |               |   |                |      |                |   |       |      |
| Issuance of common stock and  warrants for cash from January 15, 2004 through February 12, 2004 at  $2.37 per unit    |   | 1,536,922             |   | 15,369             |   | 3,627,131           |      | —              |   | 3,642,500  |      |
|                                                                                                                       |   |                  |   |               |   |                |      |                |   |       |      |
| Allocation of proceeds to  warrants                                                                                        |   | —                |   | —             |   | (2,099,090          | )         | —              |   | (2,099,090 | )         |
|                                                                                                                       |   |                  |   |               |   |                |      |                |   |       |      |
| Reclassification of warrants                                                                                               |   | —                |   | —             |   | 1,913,463           |      | —              |   | 1,913,463  |      |
|                                                                                                                       |   |                  |   |               |   |                |      |                |   |       |      |
| Commissions, legal and bank fees  associated with issuances for the year ended June 30, 2004                          |   | —                |   | —             |   | (378,624            | )         | —              |   | (378,624   | )         |
|                                                                                                                            |        |                       |        |                    |        |                     |           |                     |        |            |           |  |  |  |

 

(continued)

 

See Notes to Condensed Consolidated FinancialStatements.

 

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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENT OFSTOCKHOLDERS’ EQUITY

FROM INCEPTION ON JULY 1, 1998THROUGH DECEMBER 31, 2008

(unaudited)

 
|                                                                                                                     |   |                  |   |               |   |                |      | **Deficit**         |   |       |    |
|--------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|--------|--------------------|--------|---------------------|-----------|---------------------|--------|------------|---------|
|                                                                                                                     |   |                  |   |               |   |                |      | **Accumulated**     |   |       |    |
|                                                                                                                     |   |                  |   |               |   | **Capital in** |      | **During the** |   |       |    |
|                                                                                                                     |   | **Common Stock** |   | **Excess of** |   | **Development**     |      |                |   |
|                                                                                                                     |   | **Shares**            |   | **Amount**         |   | **Par Value**  |      | **Stage**           |   | **Total**  |    |
|                                                                                                                     |   | ** **            |   | ** **         |   | ** **          |      | ** **          |   | ** ** |    |
| Fair market value of options and  warrants vested during the year ended June 30, 2004                               |   | —                |   | —             |   | $                   | 1,826,514 |                | — |       | $       | 1,826,514 |   |
|                                                                                                                     |   |                  |   |               |   |                |      |                |   |       |    |
| Options and warrants exercised during the year ended June 30, 2004 at  exercise prices ranging from $1.00 - $3.25   |   | 370,283               |   | $                  | 3,704  |                | 692,945   |                | — |       | 696,649 |   |
|                                                                                                                     |   |                  |   |               |   |                |      |                |   |       |    |
| Issuance of common stock and  warrants for cash on May 9, 2005 at $2.11 per unit                                    |   | 1,595,651             |   | 15,957             |   | 3,350,872           |      |                |   | 3,366,829  |    |
|                                                                                                                     |   |                  |   |               |   |                |      |                |   |       |    |
| Allocation of proceeds to  warrants                                                                                      |   | —                |   | —             |   | (1,715,347          | )         | —              |   | (1,715,347 | )       |
|                                                                                                                     |   |                  |   |               |   |                |      |                |   |       |    |
| Reclassification of warrants                                                                                             |   | —                |   | —             |   | 1,579,715           |      | —              |   | 1,579,715  |    |
|                                                                                                                     |   |                  |   |               |   |                |      |                |   |       |    |
| Commissions, legal and bank fees  associated with issuance on May 9, 2005                                           |   | —                |   | —             |   | (428,863            | )         | —              |   | (428,863   | )       |
|                                                                                                                     |   |                  |   |               |   |                |      |                |   |       |    |
| Options and warrants exercised  during the year ended June 30, 2005 at exercise prices ranging from  $1.50 to $3.25 |   | 84,487                |   | 844                |   | 60,281              |      | —              |   | 61,125     |    |
|                                                                                                                     |   |                  |   |               |   |                |      |                |   |       |    |
| Fair market value of options and  warrants vested during the year ended June 30, 2005                               |   | —                |   | —             |   | 974,235             |      | —              |   | 974,235    |    |
|                                                                                                                     |   |                  |   |               |   |                |      |                |   |       |    |
| Fair market value of options and Warrants granted and vested During the year ended June 30, 2006                    |   | —                |   | —             |   | 677,000             |      | —              |   | 677,000    |    |
|                                                                                                                     |   |                  |   |               |   |                |      |                |   |       |    |
| Warrants exercised during the  year ended June 30, 2006 at an exercise price of $0.01                               |   | 10,000                |   | 100                |   | —              |      | —              |   | 100        |    |
|                                                                                                                     |   |                  |   |               |   |                |      |                |   |       |    |
| Issuance of common stock and  warrants for cash on October 11, 2006 at $1.135 per unit                              |   | 1.986,306             |   | 19,863             |   | 2,229,628           |      | —              |   | 2,249,491  |    |
|                                                                                                                          |        |                       |        |                    |        |                     |           |                     |        |            |         |  |  |  |

 

(continued)

 

See Notesto Condensed Consolidated Financial Statements

 

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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENT OFSTOCKHOLDERS’ EQUITY

FROM INCEPTION ON JULY 1, 1998THROUGH DECEMBER 31, 2008

(unaudited)

 
|                                                                                                                                          |   |                  |   |               |       |                |     | **Deficit**         |        |       |        |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|--------|--------------------|------------|---------------------|----------|---------------------|-------------|------------|-------------|
|                                                                                                                                          |   |                  |   |               |       |                |     | **Accumulated**     |        |       |        |
|                                                                                                                                          |   |                  |   |               |       | **Capital in** |     | **During the** |        |       |        |
|                                                                                                                                          |   | **Common Stock** |   | **Excess of** |       | **Development**     |     |                |        |
|                                                                                                                                          |   | **Shares**            |   | **Amount**         |       | **Par Value**  |     | **Stage**           |        | **Total**  |        |
|                                                                                                                                          |   |                  |   |               |       |                |     |                |        |       |        |
| Commissions, legal and bank fees  associated with issuance on October 11, 2006                                                           |   | —                |   | —             |       | $                   | (230,483 | )                   | —      |       | $           | (230,483 | ) |
|                                                                                                                                          |   |                  |   |               |       |                |     |                |        |       |        |
| Fair market value of options and  warrants vested during the year ended June 30, 2007                                                    |   | —                |   | —             | ** ** | 970,162             |     | —              |        | 970,162    |        |
|                                                                                                                                          |   |                  |   |               | ** ** |                |     |                |        |       |        |
| Warrants exercised during the  year ended June 30, 2007 at an exercise price of $0.01                                                    |   | 10,000                |   | $                  | 100        | ** **          | —   |                | **—**  |       | 100         |   |
|                                                                                                                                          |   |                  |   |               | ** ** |                |     |                |        |       |        |
| Fair market value of options and  warrants vested during the year ended June 30, 2008                                                    |   | **—**            |   | **—**         | ** ** | 1,536,968           |     | **—**          |        | 1,536,968  |        |
|                                                                                                                                          |   |                  |   |               | ** ** |                |     |                |        |       |        |
| Allocation of proceeds from  issuance of convertible notes and warrants from September 21, 2007  through June 30, 2008              |   | **—**            |   | **—**         | ** ** | 9,340,000           |     | **—**          |        | 9,340,000  |        |
|                                                                                                                                          |   |                  |   |               | ** ** |                |     |                |        |       |        |
| Issuance of common stock in lieu  of cash payment for interest during the year ended June 30, 2008                                       |   | 345,867          |   | 3,458              | ** ** | 430,696             |     | **—**          |        | 434,154    |        |
|                                                                                                                                          |   |                  |   |               | ** ** |                |     |                |        |       |        |
| Convertible notes converted into  common stock during the year ended June 30, 2008                                                       |   | 555,556               |   | 5,556              | ** ** | 430,952             |     | **—**          |        | 436,508    |        |
|                                                                                                                                          |   |                  |   |               | ** ** |                |     |                |        |       |        |
| Fair market value of options and  warrants vested during the six months ended December 31, 2008                                          |   | **—**            |   | **—**         | ** ** | 215,157             |     | **—**          |        | 215,157    |        |
|                                                                                                                                          |   |                  |   |               | ** ** |                |     |                |        |       |        |
| Cashless exercise of warrants  during the six months ended December 31, 2008 at an exercise price of  $0.74                              |   | 2,395                 |   | 24                 | ** ** | (24                 | )        | **—**          |        | **—** |        |
|                                                                                                                                          |   |                  |   |               | ** ** |                |     |                |        |       |        |
| Issuance of common stock in lieu  of cash payment for interest during the six months ended  December 31,2008                             |   | 537,507               |   | 5,375              | ** ** | 566,433             |     | **—**          |        | 571,808    |        |
|                                                                                                                                          |   |                  |   |               | ** ** |                |     |                |        |       |        |
| Issuance of common stock in  connection with the Company’s short term incentive plan during the six months  ended December 31, 2008 |   | 112,700               |   | 1,127              | ** ** | (1,127              | )        | —              |        | —     |        |
|                                                                                                                                          |   |                  |   |               | ** ** | ** **          |     |                |        |       |        |
| Net loss                                                                                                                                      |   | —                |   | —             |       | —              |     | $                   | (33,028,777 | )          | (33,028,777 | ) |
| Balance at December 31, 2008                                                                                                             |   | 19,027,719            |   | $                  | 190,277    |                | $        | 40,655,397          |        | $          | (33,028,777 | ) | $ | 7,816,897 |   |

 

See Notesto Condensed Consolidated Financial Statements.

 

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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 
| ** **                                                                             | ** ** | **For the Six Months Ended  December 31,** | ** ** | **From Inception on  July 1, 1998 through  December 31,** | ** ** |
|----------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------|------------|
| ** **                                                                             | ** ** | **2008**                                                            | ** ** | **2007**                                                                                | ** ** | **2008** | ** ** |
| Cash flows from operating  activities:                                                 |       |                                                                |       |                                                                                    |       |   |   |
| Net loss                                                                               |       | $                                                                   | (2,805,747 | )                                                                                       | $          | (1,431,884 | ) | $ | (33,028,777 | ) |
| Adjustments to reconcile net loss  to net cash (used in) operating activities:         |       |                                                                |       |                                                                                    |       |   |   |
| Noncash capital contribution                                                           |       | —                                                              |       | —                                                                                  |       | 85,179 |   |
| Noncash conversion of accrued  expenses into equity                                    |       | —                                                              |       | —                                                                                  |       | 131,250 |   |
| Noncash income related to change  in fair value of warrant liability                   |       | —                                                              |       | —                                                                                  |       | (321,259 | ) |
| Issuance of common stock and  warrants for interest                                    |       | 571,808                                                             |       | 67,836                                                                                  |       | 1,015,277 |   |
| Share-based compensation expense                                                       |       | 215,157                                                             |       | 146,189                                                                                 |       | 9,911,254 |   |
| Depreciation and amortization                                                          |       | 53,740                                                              |       | 44,042                                                                                  |       | 514,428 |   |
| Amortization of convertible note  discount and deferred financing costs                |       | 212,397                                                             |       | 53,594                                                                                  |       | 881,160 |   |
| (Increase) decrease in operating  assets:                                              |       |                                                                |       |                                                                                    |       |   |   |
| Accounts receivable                                                                    |       | —                                                              |       | —                                                                                  |       | — |   |
| Prepaid expense and other current  assets                                              |       | (648,363                                                            | )          | 51,567                                                                                  |       | (828,919 | ) |
| Security deposit                                                                       |       | —                                                              |       | —                                                                                  |       | (7,187 | ) |
| Increase (decrease) in operating  liabilities:                                         |       |                                                                |       |                                                                                    |       |   |   |
| Accounts payable                                                                       |       | 98,113                                                              |       | 442,768                                                                                 |       | 468,280  |   |
| Accrued expenses                                                                       |       | 99,417                                                              |       | (24,656                                                                                 | )          | 413,684 |   |
| Deferred revenue                                                                       |       | —                                                              |       | (12,500                                                                                 | )          | — |   |
| Other liability                                                                        |       | (3,523                                                              | )          | (3,067                                                                                  | )          | 19,539 |   |
| Net cash (used in) operating  activities                                               |       | (2,207,001                                                          | )          | (666,111                                                                                | )          | (20,746,091 | ) |
|                                                                                   |       |                                                                |       |                                                                                    |       |   |   |
| Cash flows from investing  activities:                                                 |       |                                                                |       |                                                                                    |       |   |   |
| Patent costs                                                                           |       | (354,196                                                            | )          | (394,471                                                                                | )          | (3,860,996 | ) |
| Redemption (purchase) of  investments, net                                             |       | (2,000,000                                                          | )          | (250,000                                                                                | )          | (2,500,000 | ) |
| Purchase of property and  equipment                                                    |       | —                                                              |       | —                                                                                  |       | (172,890 | ) |
| Net cash (used in) investing  activities                                               |       | (2,354,196                                                          | )          | (644,471                                                                                | )          | (6,533,886 | ) |
|                                                                                   |       |                                                                |       |                                                                                    |       |   |   |
| Cash flows from financing  activities:                                                 |       |                                                                |       |                                                                                    |       |   |   |
| Proceeds from grant                                                                    |       | —                                                              |       | —                                                                                  |       | 99,728 |   |
| Proceeds from issuance of bridge  notes                                                |       | —                                                              |       | —                                                                                  |       | 525,000 |   |
| Proceeds from issuance of common  stock, net and exercise of options and warrants      |       | —                                                              |       | —                                                                                  |       | 19,082,818  |   |
| Proceeds from issuance of  convertible note and warrants, net .                        |       | —                                                              |       | 6,550,000                                                                               |       | 9,340,000 |   |
| Deferred financing costs                                                               |       | —                                                              |       | (511,835                                                                                | )          | (651,781 | ) |
| Net cash provided by financing  activities                                             |       | —                                                              |       | 6,038,165                                                                               |       | 28,395,765 |   |
|                                                                                   |       |                                                                |       |                                                                                    |       |   |   |
| Net (decrease) increase in cash  and cash equivalents                                  |       | (4,561,197                                                          | )          | 4,727,583                                                                               |       | 1,115,788 |   |
|                                                                                   |       |                                                                |       |                                                                                    |       |   |   |
| Cash and cash equivalents at  beginning of period                                      |       | 5,676,985                                                           |       | 408,061                                                                                 |       | — |   |
|                                                                                   |       |                                                                |       |                                                                                    |       |   |   |
| Cash and cash equivalents at end  of period                                            |       | $                                                                   | 1,115,788  |                                                                                    | $          | 5,135,644 |   | $ | 1,115,788 |   |
|                                                                                   |       |                                                                |       |                                                                                    |       |   |   |
| Supplemental disclosure of cash  flow information:                                     |       |                                                                |       |                                                                                    |       |   |   |
| Cash paid during the period for  interest                                              |       | $                                                                   | —     |                                                                                    | $          | — |   | $ | 22,317 |   |
| Supplemental schedule of noncash  financing activity:                                  |       |                                                                |       |                                                                                    |       |   |   |
| Conversion of convertible notes  into common stock, net                                |       | $                                                                   | —     |                                                                                    | $          | — |   | $ | 500,000 |   |
| Conversion of bridge notes into  stock                                                 |       | $                                                                   | —     |                                                                                    | $          | — |   | $ | 534,316 |   |
| Allocation of convertible debt  proceeds to warrants and beneficial conversion feature |       | $                                                                   | —     |                                                                                    | $          | 6,550,000 |   | $ | 9,340,000 |   |
| Warrants issued for financing  costs                                                   |       | $                                                                   | —     |                                                                                    | $          | 277,979 |   | $ | 639,645 |   |
| Issuance of common stock for  interest on convertible notes                            |       | $                                                                   | 571,808    |                                                                                    | $          | 67,836 |   | $ | 1,015,277 |   |

 

See Notes to Condensed Consolidated FinancialStatements.

 

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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

**Note 1 - Basis ofPresentation:**

 

The financial statements included herein have been prepared by SenescoTechnologies, Inc. (the “Company”), without audit, pursuant to the rules andregulations of the Securities and Exchange Commission.  Certain information and footnote disclosuresnormally included in financial statements prepared in accordance with UnitedStates generally accepted accounting principles have been condensed or omittedpursuant to such rules and regulations. These unaudited condensed consolidated financial statements should beread in conjunction with the audited consolidated financial statements andnotes thereto included in the Company’s Annual Report on Form 10-K for thefiscal year ended June 30, 2008.

 

In the opinion of the Company’s management, the accompanying unauditedcondensed consolidated financial statements contain all adjustments, consistingsolely of those which are of a normal recurring nature, necessary to presentfairly its financial position as of December 31, 2008, the results of itsoperations for the three-month and six-month periods ended December 31,2008 and 2007, cash flows for the six-month periods ended December 31,2008 and 2007, and the results of its operations and cash flows for the periodfrom inception on July 1, 1998 through December 31, 2008.

 

Interim results are not necessarily indicative of results for the fullfiscal year.

 

**Note 2 — Liquidity:**

** **

There is substantial doubt about the Company’s ability tocontinue as a going concern due to its limited assets and capital and recurringlosses as explained in the following paragraph.

 

The Company has a limited operating history and limitedassets and capital and has incurred losses each year since inception with adeficit accumulated during the development stage from inception on July 1,1998 through December 31, 2008 of $33,028,777.  The Company has generated minimal revenues bylicensing its technology for certain crops to companies willing to share in itsdevelopment costs. In addition, the Company’s technology may not be ready forcommercialization for several years. The Company expects to continue to incurlosses for the next several years because it anticipates that its expenditureson research and development, and administrative activities will significantlyexceed its revenues during that period. The Company cannot predict when, ifever, it will become profitable.

 

The Company’s operations to date have required significantcash expenditures.  The Company’s futurecapital requirements will depend on the results of its research and developmentactivities, preclinical and clinical studies, and competitive and technologicaladvances.

 

The Company plans to address these matters byraising capital through the placement of debt instruments or equity orboth.  However, the Company may not beable to obtain adequate

 

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funds for its operations when needed or onacceptable terms.  If the Company is unableto raise additional funds, it will need to do one or more of the following:

 

·                  delay, scale-back oreliminate some or all of its research and product development programs;

·                  provide a license to thirdparties to develop and commercialize products or technologies that the Companywould otherwise seek to develop and commercialize itself;

·                  seek strategic alliances orbusiness combinations;

·                  attempt to sell theCompany;

·                  cease operations; or

·                  declare bankruptcy.

 

As of December 31, 2008, the Company had cash and investments inthe amount of $3,615,788, which consisted of money market funds and U.S.treasury bills.  The Company estimatesthat such amount will cover its expenses for approximately the next sevenmonths from December 31, 2008.  Theaccompanying financial statements do not include any adjustment from theoutcome of this uncertainty.

 

**Note 3 — Intangible Assets:**

** **

The Company conducts research and developmentactivities, the cost of which is expensed as incurred, in order to generatepatents that can be licensed to third parties in exchange for license fees androyalties.  Because the patents are thebasis of the Company’s future revenue, the patent costs are capitalized.   The capitalized patent costs represent theoutside legal fees incurred by the Company to submit and undertake all necessaryefforts to have such patent applications issued as patents.

 

The length of time that it takes for aninitial patent application to be approved is generally between four to sixyears.  However, due to the unique natureof each patent application, the actual length of time may vary.  If a patent application is denied, theassociated cost of that application would be written off.  However, the Company has not had any patentapplications denied as of December 31, 2008.  Additionally, should a patent applicationbecome impaired during the application process, the Company would write down orwrite off the associated cost of that patent application.

 

Issued patents and agricultural patentapplications pending are being amortized over a period of 17 years, theexpected economic life of the patent.

 

The Company assesses the impairment in valueof intangible assets whenever events or circumstances indicate that theircarrying value may not be recoverable. Factors the Company considers important which could trigger animpairment review include the following:

 

·                  significantnegative industry trends;

·                  significantunderutilization of the assets;

·                  significantchanges in how the Company uses the assets or its plans for their use; and

·                  changes intechnology and the appearance of competing technology.

 

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If the Company’s review determines that the futurediscounted cash flows related to these assets will not be sufficient to recovertheir carrying value, the Company will reduce the carrying values of theseassets down to its estimate of fair value and continue amortizing them overtheir remaining useful lives.  To date,the Company has not recorded any impairment of intangible assets.

 

**Note 4 - Loss Per Share:**

** **

Net loss per common share is computed by dividing theloss by the weighted-average number of common shares outstanding during theperiod.  Shares to be issued upon theexercise of the outstanding options and warrants aggregating 23,866,268 and19,281,261 as of December 31, 2008 and 2007, respectively, are notincluded in the computation of net loss per share, as their effect isanti-dilutive.  Additionally, as of December 31,2008, 10,555,556 shares to be issued upon the conversion of convertible notesat a fixed conversion price of $0.90 are not included in the computation ofdiluted net loss per share, as their effect is anti-dilutive.

 

**Note 5****—****Share-Based Transactions:**

 

The terms and vesting schedules for share-based awards varyby type of grant and the employment status of the grantee.  Generally, the awards vest based upontime-based conditions.

 

The fair value of each stock option and warrantgranted has been determined using the Black-Scholes model.  The material factors incorporated in theBlack-Scholes model in estimating the value of the options and warrants includethe following:

 
| ** **                   | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                   | ** ** | **December 31,**            | ** ** | **December 31,**          | ** ** |
|                         |       | **2008**                         | ** ** | **2007**                       | ** ** | **2008** | ** ** | **2007** | ** ** |
|                         |       |                             |       |                           |       |   |   |   |   |
| Estimated life in  years     |       | 3.5-5.5                          |       | 6                              |       | 3.5-5.5 |   | 6 |   |
| Risk-free interest  rate (1) |       | 1.1%–2.1%                   |       | 3.4% – 4.1%               |       | 1.1%-2.1% |   | 3.4%-4.1% |   |
| Volatility                   |       | 100%                             |       | 100%                           |       | 100% |   | 100% |   |
| Dividend paid                |       | None                             |       | None                           |       | None |   | None |   |

 

----

(1) Representsthe interest rate on a U.S. Treasury security with a maturity datecorresponding to that of the option term.

 

The economic values of the options will depend on thefuture price of the Company’s common stock, par value $0.01 (the “CommonStock”), which cannot be forecast with reasonable accuracy.

 

A summary of changes in the stock option plan for thesix month period ended December 31, 2008 is as follows:

 
| ** **                             | ** ** | **Number of** | ** ** | **Weighted-Average**     | ** ** |
|----------------------------------------|------------|--------------------|------------|--------------------------|------------|
| ** **                             | ** ** | **Options.**       | ** ** | **Exercise Price.** | ** ** |
|                                   |       |               |       |                     |       |
| Outstanding at  July 1, 2008      |       | 3,715,600          |       | $                        | 1.95       |   |
| Granted                                |       | 585,084            |       | $                        | 0.60       |   |
| Exercised                              |       | —             |       | —                   |       |
| Canceled                               |       | —             |       | —                   |       |
|                                   |       |               |       |                     |       |
| Outstanding at  December 31, 2008 |       | 4,300,684          |       | $                        | 1.77       |   |
|                                   |       |               |       |                     |       |
| Exercisable at  December 31, 2008 |       | 3,417,684          |       | $                        | 2.00       |   |

 

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A summary of changes to the non-vested stock optionsfor the six month period ended December 31, 2008 is as follows:

 
| ** **                                          | ** ** | **Weighted-Average** | ** ** |
|-----------------------------------------------------|------------|----------------------|------------|
| ** **                                          | ** ** | **Number of**   | ** ** | **Grant-Date** | ** ** |
|                                                |       | **Options.**         | ** ** | **Fair Value.** | ** ** |
|                                                |       |                 |       |   |   |
| Non-vested stock  options at July 1, 2008      |       | 937,264              |       | $ | 0.77 |   |
| Granted                                             |       | 585,084              |       | $ | 0.46 |   |
| Vested                                              |       | (639,348             | )          | $ | (0.65 | ) |
| Forfeited                                           |       | —               |       | — |   |
|                                                |       |                 |       |   |   |
| Non-vested stock  options at December 31, 2008 |       | 883,000              |       | $ | 0.66 |   |

 

As of December 31, 2008, the aggregate intrinsicvalue of stock options outstanding was $171,650, with a weighted-averageremaining term of 6.2 years.  Theaggregate intrinsic value of stock options exercisable at that same date was$77,550, with a weighted-average remaining term of 5.4 years.  As of December 31, 2008, the Company has5,137,200 shares available for future stock option grants.

 

As of December 31, 2008, total compensationexpense not yet recognized related to stock option grants and restricted stockunits amounted to approximately $267,000**,**which will be recognized over the next 24 months, and an additional $640,000which may be recognized as achievement of certain target goals under theCompany’s Long-Term Incentive Program become probable over the next 27 months.

 

*Short-Term Incentive Program*

 

On November 19, 2008, upon recommendation of theCompany’s Compensation Committee, the Board adopted a Short-Term EquityIncentive Program for each of Bruce C. Galton, John E. Thompson, Ph.D., JoelBrooks, Richard Dondero and Sascha Fedyszyn. The Programs are intended to ensure the achievement of certain goals ofthe Company, continuity of the Company’s executive management, and to align theinterests of the executive management with those of the shareholders.

 

Pursuant to and as defined in the Short-Term EquityIncentive Program, each executive would be awarded shares of the Company’sCommon Stock, or options to acquire shares of the Company’s Common Stock, ifthe Company achieves certain target goals relating to research, financing,licensing, investor relations and other administrative items during the fiscalyear ending June 30, 2009.

 

The number of eligible shares and options to beawarded to the executive is based upon the following weightings:

 

1.               25% of eligible shares andoptions for contributions relating to the Company’s Human Health Objectives;

2.               15% of eligible shares andoptions for contributions relating to the Company’s Finance Objectives;

3.               20% of eligible shares andoptions for contributions relating to the Company’s Agricultural LicensingObjectives;

4.               25% of eligible shares andoptions for contributions relating to the Company’s Investor Relations,Intellectual Property and Website Administration; and

5.               15% of the eligible sharesand options relating to the Company’s Organizational Objectives.

 

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If the target goals are achieved by the Company, theexecutive officers would be awarded the following number of shares and optionsfor the fiscal year ended June 30, 2009:

 
| ** **               | ** ** | **Number of Shares** | ** ** | **Number of Options (1)** | ** ** |
|--------------------------|------------|--------------------------------|------------|------------------------------------------|------------|
| Bruce C. Galton          |       | 66,000                         |       | —                                   |       |
| John E. Thompson,  Ph.D. |       | —                         |       | 48,000                                   |       |
| Joel Brooks              |       | 28,000                         |       | —                                   |       |
| Richard Dondero          |       | —                         |       | 80,000                                   |       |
| Sascha P. Fedyszyn       |       | 42,000                         |       | —                                   |       |
| Total                    |       | 136,000                        |       | 128,000                                  |       |

 

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(1)            Such options areexercisable at a strike price of $0.60, which represents the closing price ofthe common stock on November 18, 2008.

 

As of December 31, 2008, the Company hasdetermined that the achievement of the target goals is probable.  The total amount of compensation expense inconnection with the short-term incentive program in the amount of $140,480 isbeing recorded ratably over the seven and one-half month period from November 19,2008 through June 30, 2009.   Forthe six months ended December 31, 2008, the Company recorded $28,096 ofsuch expense.

 

*Long-Term Incentive Program*

 

On December 13, 2007, upon recommendation of theCompany’s Compensation Committee, the Board adopted a Long-Term EquityIncentive Program for the members of the executive management team.  The Long-Term Equity Incentive Program isintended to ensure the achievement of certain goals of the Company, continuityof the Company’s executive management, and to align the interests of theexecutive management with those of the shareholders.

 

Pursuant to and as defined in the Long-Term EquityIncentive Program, each executive would be awarded shares of the Company’sCommon Stock and options to acquire shares of the Company’s Common Stock if theCompany achieves certain target goals relating to its Multiple Myeloma researchproject over the next three fiscal years.

 

The number of eligible shares and options to beawarded to the executives is based upon the following weightings:

 

1.                 20% of the eligible sharesupon the execution of a research agreement to conduct a phase I/II clinicaltrial at a research facility;

2.                 20% of the eligible sharesupon the filing and acceptance by the FDA of an investigational new drugapplication; and

3.                 60% of the eligible sharesupon the successful completion of a FDA approved phase I/II clinical trial .

 

If the target goals are achieved by the Company, theexecutive officers would be awarded the following number of shares and options:

 
| ** **               | ** ** | **Goal 1** | ** ** | **Goal 2** | ** ** | **Goal 3** | ** ** |
|--------------------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|
| Number of Shares         |       |            |       |            |       |            |       |
|                     |       |            |       |            |       |            |       |
| Bruce C. Galton          |       | 25,000          |       | 25,000          |       | 75,000          |       |
| Joel Brooks              |       | 10,000          |       | 10,000          |       | 30,000          |       |
| Sascha P. Fedyszyn       |       | 10,000          |       | 10,000          |       | 30,000          |       |
|                     |       |            |       |            |       |            |       |
| Total number of  shares  |       | 45,000          |       | 45,000          |       | 135,000         |       |
|                     |       |            |       |            |       |            |       |
| Number of Options (1)    |       |            |       |            |       |            |       |
|                     |       |            |       |            |       |            |       |
| John E. Thompson,  Ph.D. |       | 50,000          |       | 50,000          |       | 150,000         |       |
| Richard Dondero          |       | 60,000          |       | 60,000          |       | 180,000         |       |
|                     |       |            |       |            |       |            |       |
| Total number of  options |       | 110,000         |       | 110,000         |       | 330,000         |       |

 

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----

(1)          Such options areexercisable at a strike price of $0.99, which represents the closing price ofthe common stock on December 12, 2007.

 

As of December 31,2008, the Company is not able to determine if the achievement of the targetgoals under the Long-Term Equity Incentive Program are probable and, therefore,has not yet begun to recognize any of the $640,000 compensation expense thatwas computed on the date of adoption of the Long-Term Equity IncentiveProgram.  The Company will beginrecognizing such compensation expense ratably over the remaining term of theLong-Term Equity Incentive Program at such time that the Company is able todetermine that the achievement of the target goals are probable.

 

**Note 6** — **RevenueRecognition:**

 

The Company receives certain nonrefundableupfront fees in exchange for the transfer of its technology to licensees.  Upon delivery of the technology, the Companyhas no further obligations to the licensee with respect to the basic technologytransferred and, accordingly, recognizes revenue at that time.  The Company may, however, receive additionalpayments from its licensees in the event such licensees achieve certaindevelopment or commercialization milestones in their particular field ofuse.  Other nonrefundable upfront feesand milestone payments, where the milestone payments are a function of time asopposed to achievement of specific achievement-based milestones, are deferredand amortized ratably over the estimated research period of the license.

 

**Note 7 —ConvertibleNotes and Stockholders Equity:**

 

During the year ended June 30, 2008, theCompany issued $5,000,000 of convertible notes and warrants to YA GlobalInvestments L.P. (“YA Global”) and $5,000,000 of convertible notes and warrantsto Stanford Venture Capital Holdings, Inc. (“Stanford”), for an aggregategross proceeds of $10,000,000.  Theconvertible notes convert into the Company’s common stock at a fixed price of$0.90 per share, subject to certain adjustments (the “Fixed Conversion Price”),through August 1, 2009 and December 20, 2009, respectively, at whichtime the convertible notes may convert into shares of the Company’s commonstock at the lower of the fixed conversion price or 80% of the lowest dailyvolume-weighted average price (the “VWAP”) of the common stock during the fivetrading days prior to the conversion date. The maturity date of each of theconvertible notes for YA Global and Stanford is December 30, 2010 and December 31,2010, respectively.

 

The convertible notes accrue interest ontheir outstanding principal balances at an annual rate of 8%.  The Company has the option to pay interest incash or, upon certain conditions, common stock. If the Company pays interest in common stock, the stock will be valuedat a

 

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10% discount to the average daily VWAP for thefive day trading period prior to the interest payment date (the “InterestShares”).

 

At the Company’s option, it can redeem aportion of, or all of, the principal owed under the convertible notes byproviding the investors with at least 30 business days’ written notice,provided that, at the time of receipt of the notice, either: (A)(i) theVWAP of the common stock exceeds 130% of the Fixed Conversion Price for atleast 20 of 30 prior trading days, and (ii) there is an effectiveregistration statement for the resale of the common stock that will be issuedunder the redemption or (B) it redeems a portion, or all, of the principalowed at a 20% premium above the principal then outstanding and any accruedinterest thereupon.  If the Companyredeems all or any of the principal outstanding under the convertible notes, itwill pay an amount equal to the principal being redeemed plus accrued interest.

 

If there is an effective registrationstatement for the resale of the shares underlying the convertible notes or ifsuch shares become Rule 144(k) eligible, the Company will have theoption to force the investors to convert 50% and 100% of its then-outstandingconvertible notes if its common stock price exceeds 150% and 175% of the FixedConversion Price, respectively, for any 20 out of 30 trading days; providedthat such forced conversion meets certain conditions (the “Call Option”).  If the Company exercises its Call Optionprior to the third anniversary of the signing date, it will issue additionalwarrants to the investor equal to 50% of the number of shares underlying theconvertible note subject to the forced conversion.  These warrants will be exercisable at thefixed conversion price and will have the same maturity as the other warrantsissued under the YA Global financing.

 

The Company’s obligations under theconvertible notes are secured by all of its and its subsidiary’s assets andintellectual property, as evidenced by certain Security Agreements and certainPatent Security Agreements by and between the Company and each of YA Global andStanford.  Pursuant to a subordinationagreement, YA Global is the senior secured creditor.

 

The conversion rate of each convertible noteis subject to adjustment for certain events, including dividends, stock splits,combinations and the sale of the Company’s Common Stock or securitiesconvertible into or exercisable for the Company’s Common Stock at a price lessthan the then applicable conversion or exercise price.

 

The investors have a right of first refusalon any future funding that involves the issuance of the Company’s capital stockfor so long as a portion of the convertible notes are outstanding.

 

Pursuant to the Registration RightsAgreement, the Company filed an initial registration statement on October 12,2007 to register 3,333,333 shares of common stock, underlying the convertiblenotes, issuable to YA Global, and such registration statement became effectiveon November 1, 2007.

 

The convertible notes and warrants issued toYA Global are subject to a maximum cap of 30,500,000 on the number of shares ofcommon stock that can be issued upon the conversion of the convertible notesand the exercise of the warrants.

 

The convertible notes and warrants issued toStanford are subject to a maximum cap of 31,888,888 on the number of shares ofcommon stock that can be issued upon the conversion of the convertible notesand the exercise of the warrants.

 

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Currently, at the fixed conversion price, thenumber of shares of common stock issuable upon conversion of the remaining$9,500,000 of convertible notes outstanding and shares of common stock to beissued upon exercise of the warrants outstanding at December 31, 2008represents, in the aggregate, 24,438,888 shares, plus an estimated additional1,800,000 shares (based upon the stock price at December 31, 2008) for thepayment of interest in stock under the convertible notes.

 

As of December 31, 2008, the outstandingbalance of the Convertible Notes were $609, which is comprised of notes with anaggregate face amount of $9,500,000 less unamortized debt discount of$9,499,391.  Debt discount associated withthe Convertible Notes is amortized to interest expense, using the effectiveyield method, over the remaining life of the Convertible Notes.  Upon conversion of the Convertible Notes intoCommon Stock, any unamortized debt discount relating to the portion convertedwill be charged to interest.  Totalcharges to interest for amortization of debt discount were $133 and $419 forthe three month and six month periods ended December 31, 2008.

 

The costs associated with theissuances in the amount of $1,291,427 have been recorded as deferred financingcosts and are being amortized ratably over the term of the convertiblenotes.  The balance of deferred financingcosts as of December 31, 2008 amounted to $847,385.

 

**Note 8 — IncomeTaxes:**

 

No provisionfor income taxes has been made in the three month and six month periods ended December 31,2008 and 2007 given the Company’s losses in 2008 and 2007 and available netoperating loss carryforwards.  A benefithas not been recorded as the realization of the net operating losses is notassured and the timing in which the Company can utilize its net operating losscarryforwards in any year or in total may be limited by provisions of theInternal Revenue Code regarding changes in ownership of corporations.

 

**Note 9 — Effects ofNew Accounting Pronouncements Applicable to the Company**

 

*EITFIssue No. 07-1 — Accounting for Collaborative Arrangements*

 

Thispronouncement defines a collaborative arrangement as a contractual arrangementthat involves a joint operating activity that involves two or more parties whoare both active participants in the activity and exposed to significant risksand rewards dependent on the commercial success of the activity.  The pronouncement also defines how the costsincurred and revenues generated from transactions with third parties should berecorded and presented in each entity’s income statement.  This pronouncement is effective for financialstatements issued for fiscal years beginning after December 15, 2008, andinterim periods within those fiscal years, and shall be applied retrospectivelyto all prior periods presented for all collaborative arrangements existing asof the effective date.  The Company doesnot believe that this pronouncement will have any material effect on itsfinancial statements.

 

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*EITFIssue No. 07-3 — Accounting for Nonrefundable Advance Payments for Goodsor Services Received for Use in Future Research and Development Activities.*

 

Thispronouncement states that nonrefundable advance payments for future researchand development activities should be deferred and capitalized.  This pronouncement is effective for financialstatements issued for fiscal years beginning after December 15, 2007, andinterim periods within those fiscal years. Early application is not permitted. This pronouncement has not had a material effect on the Company’sfinancial statements.

 

*SFAS No. 157 — Fair Value Measurements*

 

In September 2006 the Financial Accounting Standards Board(“FASB”) issued Statement of Financial Accounting Standards No. 157, *Fair Value Measurements* (SFAS No. 157).  SFAS No. 157 defines fair value,establishes a framework for measuring fair value, and expands disclosures aboutfair value measurement.  SFAS No. 157also emphasizes that fair value is a market-based measurement, not anentity-specific measurement, and sets out a fair value hierarchy with thehighest priority being quoted prices in active markets.  Under SFAS No. 157, fair valuemeasurements are disclosed by level within that hierarchy.  In February 2008, the FASB issued FASBStaff Position No. 157-2, *EffectiveDate of FASB Statement No. 157*, which permits a one-yeardeferral for the implementation of SFAS No. 157 with regard tononfinancial assets and liabilities that are not recognized or disclosed atfair value in the financial statements on a recurring basis.  The Company adopted SFAS No. 157 for thefiscal year beginning July 1, 2008, except for nonfinancial assets andnonfinancial liabilities that are recognized or disclosed at fair value in thefinancial statements on a nonrecurring basis for which delayed application ispermitted until our fiscal year beginning July 1, 2009.  The adoption of the remaining provisions ofSFAS No. 157 is not expected to have a material impact on the Company’sfinancial position, results of operations or cash flows.

 

*EITFIssue No. 07-5 — Determining Whether an Instrument (or Embedded Feature)is Indexed to an Entity’s Own Stock.*

 

In June 2008, the FASB ratified EITFIssue No. 07-5, “Determining Whether an Instrument (or Embedded Feature)is Indexed to an Entity’s Own Stock” (“EITF 07-5”). EITF 07-5 provides guidanceon how to determine if certain instruments or embedded features are consideredindexed to our own stock, including instruments similar to our convertiblenotes and warrants to purchase our stock. EITF 07-5 requires companies to use atwo-step approach to evaluate an instrument’s contingent exercise provisionsand settlement provisions in determining whether the instrument is consideredto be indexed to its own stock and exempt from the application of SFAS No. 133,“Accounting for Derivative Instruments and Hedging Activities”. Although EITF07-5 is effective for fiscal years beginning after December 15, 2008, anyoutstanding instrument at the date of adoption will require a retrospectiveapplication of the accounting through a cumulative effect adjustment toretained earnings upon adoption. The Company is currently evaluating the impactthat adoption of EITF 07-5 will have on its consolidated financial statements.

 

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**Item 2.            Management’sDiscussion and Analysis of Financial Condition and Results of Operations.**

 

The following discussion and analysis should be read in conjunctionwith our condensed consolidated financial statements and the related notesthereto included in this Quarterly Report on Form 10-Q.  The discussion and analysis may containforward-looking statements that are based upon current expectations and entailvarious risks and uncertainties.  Ouractual results and the timing of events could differ materially from thoseanticipated in the forward-looking statements as a result of various factors,including those set forth under “Factors That May Affect Our Business,Future Operating Results and Financial Condition” and elsewhere in this report.

 

**Overview**

 

*Our Business*

 

The primarybusiness of Senesco Technologies, Inc., a Delaware corporationincorporated in 1999, and its wholly-owned subsidiary, Senesco, Inc., a NewJersey corporation incorporated in 1998, collectively referred to as “Senesco,”“we,” “us” or “our,” is to utilize our patented and patent-pending genes,primarily eucaryotic translation initiation Factor 5A, or Factor 5A, anddeoxyhypusine synthase, or DHS, and related technologies for their inhibitionin human health applications to develop novel approaches to treat inflammatorydiseases and cancer.

 

Inagricultural applications, we are developing and licensing Factor 5A, DHS andLipase to enhance the quality and productivity of fruits, flowers, andvegetables and agronomic crops through the control of cell death, referred toherein as senescence, and growth in plants.

 

*Human Health Applications*

 

We believe that our gene technology could have broad applicability inthe human health field, by either inhibiting or inducing apoptosis.  Inhibiting apoptosis may be useful inpreventing or treating a wide range of inflammatory and ischemic diseasesattributed to premature apoptosis. Inducing apoptosis may be useful in treatingcertain forms of cancer because the cancerous cells have failed to initiateapoptosis on their own due to damaged or inhibited apoptotic pathways.

 

We have commenced preclinical *in-vivo*and *in-vitro* research todetermine the ability of Factor 5A to regulate key execution genes,pro-inflammatory cytokines, receptors, and transcription factors, which areimplicated in numerous apoptotic diseases.

 

Certainpreclinical human health results to date include:

 

·                  Performingefficacy, toxicological and dose-finding studies in mice for our potentialmultiple myeloma drug candidate, SNS-01. SNS-01 is a nano-encapsulated combination therapy of Factor 5A and ansiRNA against Factor 5A.  Ouranti-myeloma efficacy study in severe combined immune-deficient mice with humanmultiple myeloma subcutaneous tumors tested SNS-01 dosages ranging from 0.15mg/kg to 1.5 mg/kg.  In these studies,mice treated with a dose of either 0.75 mg/kg or 1.5 mg/kg both showed a 91%reduction in tumor volume and a decrease in tumor weight of 87% and 95%,respectively.  For mice 

 

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that receivedsmaller doses of either 0.38 mg/kg or 0.15 mg/kg, there was also a reduction intumor volume (73% and 61%, respectively) and weight (74% and 36%,respectively).  All of the treated mice,regardless of dose, survived.  Thistherapeutic dose range provided the basis for an 8-day maximum tolerated dosestudy in which normal mice received two intravenous doses of increasing amountsof SNS-01 (from 2.2 mg/kg).  Body weight,organ weight and serum levels of liver enzymes were used as clinical indices toassess toxicity.  A dose between 2.2mg/kg and 2.9 mg/kg was well tolerated with respect to these clinical indices,and the survival rate at 2.9 mg/kg was 80%. Those mice receiving above 2.9 mg/kg of SNS-01 showed evidence ofmorbidity and up to 80% mortality.  The 2.9mg/kg threshold, twice the upper end of the therapeutic dose range, wastherefore determined to be the maximum tolerated dose in mice.

 

·                  demonstratedsignificant tumor regression and diminished rate of tumor growth of multiplemyeloma tumors in SCID mice treated with Factor 5A technology encapsulated innanoparticles;

 

·                  increasedmedian survival by approximately 250% in a tumor model of mice injected withmelanoma cancer cells;

 

·                  inducedapoptosis in both human cancer cell lines derived from tumors and in lungtumors in mice;

 

·                  inducedapoptosis of cancer cells in a human multiple myeloma cell line;

 

·                  measuredVEGF reduction in mouse lung tumors as a result of treatment with our genes;

 

·                  decreasedICAM and activation of NFKB in cancer cells employing siRNA against Factor 5A;

 

·                  increasedthe survival, while maintaining functionality, of mouse pancreatic islet cellsisolated for transplantation, using intraperitaneal administration of ourtechnology.  Initial animal studies haveshown that our technology administered prior to harvesting beta islet cellsfrom a mouse, has a significant impact not only on the survival of the betaislet cells, but also on the retention of the cells’ functionality whencompared to the untreated beta islet cells. Additional studies have shown that the treated beta islet cells survivea pro-inflammatory cytokine challenge, while maintaining their functionalitywith respect to insulin production. These further studies also revealed eIF-5A’s involvement in themodulation of inducible nitric oxide synthase (iNOS), an important indicator ofinflammation; and

 

·                  increasedthe survival rate of mice in a lethal challenge sepsis model.  Additionally, a broad spectrum of systemicpro-inflammatory cytokines were down-regulated, while not effecting theanti-inflammatory cytokine IL-10.

 

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AcceleratingApoptosis

 

The data from our pre-clinical studies indicate that the up-regulationof Factor 5A induces cell death in cancer cells through both the p53(intrinsic) and cell death receptor (extrinsic) apoptotic pathways. Tumorsarise when abnormal cells fail to undergo apoptosis due to an inability toactivate their apoptotic pathways. Just as the Factor 5A gene appears tofacilitate expression of the entire suite of genes required for programmed celldeath in plants, the Factor 5A gene appears to regulate expression of a suiteof genes required for programmed cell death in human cells. Because the Factor5A gene appears to function at the initiation point of the apoptotic pathways,both intrinsic and extrinsic, we believe that our gene technology has potentialapplication as a means of combating a broad range of cancers.  Based on the results obtained through our *in-vitro* studies, we have found that up-regulating Factor 5Aresults in: (i) the up-regulation of p53; (ii) increased inflammatorycytokine production; (iii) increased cell death receptor formation; and (iv) increasedcaspase activity.  These features,coupled with a simultaneous down-regulation Bcl-2, result in apoptosis ofcancer cells.  In addition, our *in-vitro* studies have shown that the up-regulation of Factor5A also down-regulates VEGF, a growth factor which allows tumors to developadditional vascularization needed for growth beyond a small mass of cells.

 

InhibitingApoptosis

 

Our preclinical studies indicate thatdown-regulation of our proprietary Factor 5A gene may have potentialapplication as a means for controlling the effects of a broad range of diseasesthat are attributable to premature cell death, ischemia, or inflammation. Suchinflammatory diseases include glaucoma, heart disease, and other certaininflammatory diseases such as Crohn’s disease, sepsis and diabetic retinopathy.  We are engaged in preclinical research oncertain inflammatory diseases. Using small inhibitory RNA’s, or siRNA’s,against Factor 5A to inhibit its expression, the results of our studies haveindicated a reduction in pro-inflammatory cytokine formation and the formationof receptors for liposolysaccharide, or LPS, interferon-gamma and TNF-alpha.  Our studies have also indicated that byinhibiting Factor 5A iNOS, MAPK, NFkB, JAK1 and ICAM are downregulated, whichdecreases the inflammatory cytokines formed through these pathways.Additionally, a mouse study has indicated that our siRNA is comparable to asteroid and to a prescription anti-TNF drug in its ability to reduce cytokineresponse to LPS.  Other mouse studies have also indicated that the siRNA againstFactor 5A (i) protects thymocyte cells from apoptosis and decreasesformation of myeloperoxidase, or MPO, TNF-a, MIP-1alpha, and IL-1 in the lungsof mice challenged with LPS; (ii) increases the survival rate in whichsepsis was induced by a lethal injection of LPS; and (iii) reduces blood serumlevels of inflammatory proteins, such as IL-1, IL-2, IL-6, IL-12, TNF-a, IFNgand MIP-1alpha, while not effecting IL-10, an anti-inflammatory cytokine.  Other experiments utilizing siRNA to Factor5A include inhibition of or apoptosis during the processing of mouse pancreaticbeta islet cells for transplantation, the inhibition of early inflammatorychanges associated with type-1 diabetes in an in-vivo rat model and the down-regulationof certain markers of viral replication in a human cell line infected withHIV-1.

 

Proteins requiredfor cell death include p53, interleukins, TNF-a and other cytokines andcaspases.  Expression of these cell deathproteins is required for the execution of apoptosis.  Based on our studies, we believe that down-regulatingFactor 5A by treatment with siRNA inhibits the expression of p53, a major celldeath transcription factor that in turn controls the 

 

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formation of a suite of other cell deathproteins.  In addition, we believe thatthe down-regulation of Factor 5A up-regulates Bcl-2, a suppressor of apoptosis.

 

*Human Health Target Markets*

 

We believe that our gene technology may have broad applicability in thehuman health field, by either inhibiting or accelerating apoptosis.  Inhibiting apoptosis may be useful inpreventing or treating a wide range of inflammatory and ischemic diseasesattributed to premature apoptosis, including diabetes, diabetic retinopathy andlung inflammation, among others. Accelerating apoptosis may be useful in treating certain forms of cancerbecause the body’s immune system is not able to force cancerous cells toundergo apoptosis.

 

Ourpreclinical research has yielded data that we have presented to variousbiopharmaceutical companies that may be prospective licensees for thedevelopment and marketing of potential applications of our technology.  Additionally, we are using the proceeds ofour recent financing to advance our research in multiple myeloma with the goalof initiating a Phase I clinical trial, and may select additional human healthindications to bring into clinical trials on our own. We believe that thesuccess of our future operations will likely depend on our ability to transformour research and development activities into a commercially feasibletechnology.

 

*Human Health Research Program*

 

Our human health research program, which hasconsisted of pre-clinical *in-vitro* and *in-vivo* experiments designed to assess the role and methodof action of the Factor 5A genes in human diseases, is being performed byapproximately thirteen (13) third party researchers, at our direction, at MayoClinic, the University of Virginia, and the University of Waterloo.

 

Our research and development expenses incurred on human healthapplications were approximately 71% and 52% of our total research anddevelopment expenses for the six months ended December 31, 2008 and 2007,respectively.  Since inception, theproportion of our research and development expenses on human healthapplications has increased, as compared to our research and developmentexpenses on agricultural applications. This change is primarily due to the fact that our research focus onhuman health has increased and some of our research costs for plantapplications have shifted to our license partners.

 

*Our planned future pre-clinical research and development initiativesfor human health include:*

* *

*·*                  Multiple Myeloma. Our objective is to advance our technology for the potential treatmentof multiple myeloma with the goal of initiating a clinical trial.  In connection with the potential clinicaltrial, we have engaged a clinical research organization, or CRO, to assist usthrough the process.  We have alsodetermined the delivery system for our technology, contracted for the supply ofpharmaceutical grade materials to be used in toxicology and human studies,performed certain toxicity studies, and have contracted with a third partylaboratory to conduct additional toxicoly studies.  Together with the assistance of our CRO, wewill have additional toxicology studies performed with the goal of 

 

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*filing an investigational new drug application, or IND application,with the U.S. Food and Drug Administration, or FDA, for their review andconsideration in order to initiate a clinical trial.  We estimate that it will take less thantwelve (12) months from December 31, 2008 to complete these objectives.*

* *

*·*                  Lung Inflammation. The objective of our planned future lung inflammation experiments is tooptimize the delivery and dose of the siRNA to Factor 5A to the lungs.  A mouse model system is currently beingconducted to illustrate the siRNA to Factor 5A’s ability to reduce morbidityand mortality of lung inflammation, caused by the up-regulation ofpro-inflammatory cytokines induced by a pathogen.

* *

*·*                  Other.  We maycontinue to look at other disease states in order to determine the role ofFactor 5A.

* *

*In order to pursue the above research initiatives, as well as otherresearch initiatives that may arise, we completed private placements of $10million of convertible notes and warrants in fiscal 2008.  However, it will be necessary for us to raisea significant amount of additional working capital in the future to continue topursue some of the above and new initiatives. If we are unable to raise the necessary funds, we may be required to significantlycurtail the future development of some of our research initiatives and we willbe unable to pursue other possible research initiatives.*

* *

*We may further expand our research and development program beyond theinitiatives listed above to include other research centers.*

* *

*Human Health Competition*

* *

Ourcompetitors in human health that are presently attempting to distribute theirtechnology have generally utilized one of the following distribution channels:

 

·                  Entering intostrategic alliances, including licensing technology to major marketing anddistribution partners; or

 

·                  developingin-house production and marketing capabilities.

 

Inaddition, some competitors are established distribution companies, which alleviatesthe need for strategic alliances, while others are attempting to create theirown distribution and marketing channels.

 

There are many large companies and development stage companies workingin the field of apoptosis research including: Amgen, Centocor, Genzyme, OSIPharmaceuticals, Inc., Novartis, Introgen Therapeutics, Inc., Genta, Inc.,and Vertex Pharmaceuticals, Inc., amongst others.

 

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*Agricultural Applications*

 

Ouragricultural research focuses on the discovery and development of certain genetechnologies, which are designed to confer positive traits on fruits, flowers,vegetables, forestry species and agronomic crops.  To date, we have isolated and characterizedthe senescence-induced Lipase gene, DHS, and Factor 5A in certain species ofplants. Our goal is to modulate the expression of these genes in order to achievesuch traits as extended shelf life, increased biomass, increased yield andincreased resistance to environmental stresses and disease, therebydemonstrating proof of concept in each category of crop.

 

Certain agricultural results to date include:

 

·                  longershelf life of perishable produce;

 

·                  increasedbiomass and seed yield;

 

·                  greatertolerance to environmental stresses, such as drought and soil salinity;

 

·                  greatertolerance to certain fungal and bacterial pathogens;

 

·                  moreefficient use of fertilizer; and

 

·                  advancementto field trials in banana and trees.

 

The technologypresently utilized by the industry for increasing the shelf life in certainflowers, fruits and vegetables relies primarily on reducing ethylenebiosynthesis, and therefore only has application to the crops that are ethylene-sensitive.  Because Factor 5A, DHS and Lipase are alreadypresent in all plant cells, our technology may be incorporated into crops byusing either conventional breeding methods (non-genetically modified) orbiotechnology techniques.

 

We have licensedthis technology to various strategic partners and have entered into a jointventure. We may continue to license this technology, as the opportunitiespresent themselves, to additional strategic partners and/or enter intoadditional joint ventures.  Ourcommercial partners have licensed our technology for use in turfgrass, canola,corn, soybean, cotton, banana, alfalfa, rice and certain species of trees andbedding plants, and we have obtained proof of concept for enhanced post harvestshelf life, seed yield, biomass, and resistance to disease in several of theseplant species.

 

We haveongoing field trials of certain trees and bananas with our respectivepartners.  The initial field trialsconducted with ArborGen over a three year period in certain species of treeshave concluded and the trees have been harvested for wood qualityassessment.  Preliminary data from ourjoint field trials show significantly enhanced growth rates in some of thetrees relative to controls.  Additionalfield trials for enhanced growth rates and other traits are currently beingperformed with ArborGen.

 

To date,banana field trials have indicated that our technology extends the shelf lifeof banana fruit by 100%.  In addition tothe post-harvest shelf life benefits, an additional field trial generatedencouraging disease tolerance data specific to Black Sigatoka (Black LeafStreak 

 

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Disease) for banana plants. Additional field trials for banana plantsare ongoing for the combined traits of disease tolerance and shelf lifeextension.

 

Commercializationby our partners may require a combination of traits in a crop, such as bothpost harvest shelf life and disease resistance, or other traits.  Our near-term research and developmentinitiatives include modulating the expression of DHS and Factor 5A genes inthese plants and then propagation and phenotype testing of such plants.

 

Our ongoing researchand development initiatives for agriculture include assisting our license andjoint venture partners to:

 

·                  furtherdevelop and implement the DHS and Factor 5A gene technology in banana, canola,cotton, turfgrass, bedding plants, rice, alfalfa, corn, soybean and trees; and

 

·                  testthe resultant crops for new beneficial traits such as increased yield,increased tolerance to environmental stress, disease resistance and moreefficient use of fertilizer.

 

*Agricultural Target Markets*

 

In order to address the complexities associated with marketing anddistribution in the worldwide market, we have adopted a multi-facetedcommercialization strategy in which we have entered into and plan to enterinto, as the opportunities present themselves, additional licensing agreementsor other strategic relationships with a variety of companies or other entitieson a crop-by-crop basis.  We anticipate revenues from these relationships inthe form of licensing fees, royalties, usage fees, or the sharing of grossprofits.  In addition, we anticipatepayments from certain of our partners, which are described in the *Agricultural Development and License Agreements* section ofthis Form 10-Q,  upon ourachievement of certain research and development benchmarks.  This commercialization strategy allows us togenerate revenue at various stages of product development, while ensuring thatour technology is incorporated into a wide variety of crops.  Our optimal partners combine thetechnological expertise to incorporate our technology into their product linealong with the ability to successfully market the enhanced final product,thereby eliminating the need for us to develop and maintain a sales force.

 

Becausethe agricultural market is dominated by privately held companies or subsidiariesof foreign-owned companies, market size and market share data for the cropsunder our license and development agreements is not readily available.  Additionally, because we have entered intoconfidentiality agreements with our license and development partners, we areunable to report the specific financial terms of the agreements as well as anymarket size and market share data that our partners may have disclosed to usregarding their companies.

 

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*Agricultural Development and License Agreements*

 

Through January 31, 2008, we have eight (8) activelicense agreements and one joint collaboration with established agriculturalbiotechnology companies or, in the case of Poet, as more fully described below,an established ethanol company, as follows:

 

·                  In June 2002, weentered into a three-year worldwide exclusive development and option agreementwith ArborGen, LLC to develop our technology in certain species of trees.  In June 2006, ArborGen exercised theiroption to license our technology and in December 2006, converted thedevelopment and option agreement into a license agreement, referred to hereinas the ArborGen Agreement.  To date, theresearch being conducted by ArborGen has proceeded according to schedule.  ArborGen has seen promising positive growthresponses in greenhouse-grown seedlings. These initial greenhouse data led to the initiation of field trials byArborGen in the second half of calendar year 2004.  At the end of the 2005 growing season,certain trees which were enhanced by our technology had approximately doublethe increase in volume relative to control trees.  Further field trials are ongoing to supportthese data and to analyze the growth rates of trees which incorporate ourtechnology. Under the ArborGen Agreement, we have received an upfront paymentand benchmark payments and we may receive additional benchmark payments uponachievement of certain development milestones and royalties uponcommercialization.

 

·                  In September 2002, weentered into an exclusive development and license agreement with Cal/WestSeeds, referred to herein as the Cal/West License, to commercialize ourtechnology in certain varieties of alfalfa. The Cal/West License will continue until the expiration of the patentsset forth in the agreement, unless terminated earlier by either party pursuantto the terms of the agreement.  TheCal/West License also grants Cal/West an exclusive option to develop ourtechnology in various other forage crops. The Cal/West Seeds development effort successfully incorporated ourtechnology into their alfalfa seed as of July 2004.  Seed transformation and greenhouse traitanalysis is ongoing.  Under the Cal/WestLicense, we have received an upfront payment and we may receive benchmarkpayments as certain development milestones are achieved and a royalty uponcommercialization based upon the volume of alfalfa seed sold that contains ourtechnology.

 

·                  In March 2004, weentered into an exclusive development and license agreement with The ScottsCompany, referred to herein as the Scotts Agreement, to commercialize ourtechnology in turfgrass and certain species of bedding plants.  Scotts is working on incorporating ourtechnology to enhance a variety of traits in these plants, includingenvironmental stress resistance, disease resistance and enhanced bloomproperties.  We are collaborating withScotts in the areas of ornamental bedding plants and turfgrass.  A large-scale greenhouse evaluation ofbedding plants was being conducted and additional greenhouse testing isplanned.  Transformation and initialtissue culture screening of events have been undertaken in turfgrass.  In tissue culture, turfgrass containing ourtechnology has grown more successfully than control turfgrass without ourtechnology.  Greenhouse testing of thegrass containing our technology is the next planned development step. Under theScotts Agreement, we have received an upfront payment and benchmarkpayments.  In January 2006, thedevelopment and license agreement with 

 

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Scotts was amended. Due to a change in the corporatefinancial policy at Scotts, Scotts requested that we defer certain milestonepayments, which were to be made on a calendar year basis.  We agreed and these payments have now beendeferred and incorporated in the amount to be paid to us uponcommercialization.  Additionally,the commercialization fee has been increased. All other aspects of the agreement remain unchanged, and the projectcontinues to move forward without interruption. We may also receive royaltiesupon commercialization from the net sales of turfgrass seed and bedding plantscontaining our technology.

 

·                  In October 2005, weentered into an agreement with Poet to license our proprietary gene technologyto Poet to improve aspects of Poet’s ethanol production capabilities.  We are currently revising our work plan toincorporate our technology into those aspects of Poet’s ethanolproduction.  We will receive an annualpayment for each Poet facility that incorporates our technology.  If Poet incorporates our technology into eachof its facilities, we would be entitled to receive an annual payment in excessof $1,000,000.

 

·                  On November 8, 2006, we entered into a licenseagreement with Bayer CropScience GmbH for the development and commercializationof canola.  Under the terms of theagreement, we received an upfront payment, will receive milestone payments uponthe achievement of certain development milestones and will receive****commercialization fees based uponspecified benchmarks.  In August, 2008,Bayer CropScience GmbH successfully completed the first developmentmilestone related to this license.

 

·                  On July 17, 2007, we entered into a licenseagreement with Bayer CropScience AG for the development and commercializationof cotton.  Under the terms of theagreement, we received an upfront payment, will receive milestone payments uponthe achievement of certain development milestones, and additionally, uponcommercialization, a royalty on net sales.

 

·                  On August 6, 2007, we entered into a licenseagreement with Monsanto for the development and commercialization of corn andsoy.  Under the terms of the agreement,we received an upfront payment, will receive milestone payments upon theachievement of certain development milestones, and additionally, uponcommercialization, a royalty on net sales.

 

·                  On September 11, 2007, we entered into a licenseagreement with Bayer CropScience AG for the development and commercializationof rice.  Under the terms of theagreement, we received an upfront payment, will receive milestone payments uponthe achievement of certain development milestones, and additionally, uponcommercialization, a royalty on net sales.

 

In December 2008,the Development and License Agreement with the Harris Moran Seed Company(“Harris Moran”) was terminated by mutual agreement due to Harris Moran’srecently announced corporate restructuring. Harris Moran has reported that its parent company, Limagrain, restructuredits vegetable seed operations and that Harris Moran will now be part of a newbusiness unit with Clause (France) and Marco Polo (Thailand).  This restructuring has resulted in aconsolidation of research and development efforts amongst Harris Moran and itssister companies that will not encompass our technology.  Harris Moran made us aware of this 

 

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shift in research and development focus andpresented us with a letter on December 1, 2008 formally ending therelationship through the mutual agreement of the parties.  Pursuant to the terms of the Development andLicense Agreement all rights to use our technology in lettuce and melon revertto us.

 

*Joint Venture*

 

On May 14,1999, we entered into a agreement with Rahan Meristem Ltd., or Rahan Meristem,an Israeli company engaged in the worldwide export marketing of bananagermplasm, referred to herein as the Rahan Joint Venture**. **Ingeneral, bananas are grown either for local domestic consumption or grown forexport.  According to the Food andAgriculture Organization of the United Nations, there were approximately 16million metric tons of bananas exported in 2004.  The level of production equates to the fruitof approximately 480 million banana plants. A percentage of these plants are replaced each year with new bananaseedlings.** **Rahan Meristem accounts for approximately 10% of theworldwide export of enhanced banana seedlings.

 

We havecontributed, by way of a limited, exclusive, worldwide license to the RahanJoint Venture, access to our technology, discoveries, inventions and know-how,whether patentable or otherwise, pertaining to plant genes and their cognateexpressed proteins that are induced during senescence for the purpose ofdeveloping, on a joint basis, genetically enhanced banana plants which willresult in a banana that has a longer shelf life.  Rahan Meristem has contributed itstechnology, inventions and know-how with respect to banana plants.  Rahan Meristem and Senesco have equallyshared the expense of field trials.

 

All aspects ofthe Rahan Joint Venture’s research and development initiative are proceeding ontime**. **Boththe DHS and lipase genes have been identified and isolated in banana, and theRahan Joint Venture is currently in the process of silencing these genes.  Two Israeli field trials indicated thatSenesco’s proprietary technology extends the shelf life of the banana fruit upto 100%, while allowing the banana fruit to ripen normally.  Later field trials have indicated what webelieve are promising disease tolerance results and we are currently performingadditional field trials to further assess disease tolerance.  However, as the banana modified with ourtechnology may be considered a genetically modified organism, or GMO, shelflife extension may have to be combined with disease tolerance to gainacceptance by the growers.

 

*Agricultural Research Program*

 

Ouragricultural research and development is performed by three (3) researchers,at our direction, at the University of Waterloo, where the technology wasdeveloped.  Additional agriculturalresearch and development is performed by our partners in connection with theScotts Agreement, the ArborGen License, the Cal/West License, the BayerLicenses, the Monsanto License and through the Rahan Joint Venture.

 

The discovererof our technology, John E. Thompson, Ph.D., is the Associate Vice President,Research and former Dean of Science at the University of Waterloo in Ontario,Canada, and is our Executive Vice President and Chief Scientific Officer.  Dr. Thompson is also 

 

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one of our directors and owns 3.0%of the outstanding shares of our common stock as of December 31,2008.  On September 1, 1998, weentered into, and have extended throughAugust 31, 2009, a research and development agreement with theUniversity of Waterloo and Dr. Thompson as the principal inventor.  The Research and Development Agreementprovides that the University of Waterloo will perform research and developmentunder our direction, and we will pay for the cost of this work and make certainpayments to the University of Waterloo. In return for payments made under the Research and DevelopmentAgreement, we have all rights to the intellectual property derived from theresearch.

 

## *Agricultural Competition*

##  

Ourcompetitors in both human health and agriculture that are presently attemptingto distribute their technology have generally utilized one or more of thefollowing distribution channels:

 

·                  licensingtechnology to major marketing and distribution partners;

 

·                  entering intostrategic alliances; or

 

·                  developing in-houseproduction and marketing capabilities.

 

Inaddition, some competitors are established distribution companies, whichalleviates the need for strategic alliances, while others are attempting tocreate their own distribution and marketing channels.

 

Our competitors in the field of delaying plant senescence are companiesthat develop and produce transformed plants with a variety of enhancedtraits.  Such companies include: Icora(formerly Paradigm Genetics); Mendel Biotechnology; Renessen LLC; ExelixisPlant Sciences, Inc.; Syngenta International AG; and Eden Bioscience,among others.

 

*Agricultural Development Program*

 

Generally, projects with our licensees and joint venture partner beginby transforming seed or germplasm to incorporate our technology.  Those seeds or germplasm are then grown inour partners’ greenhouses.  Aftersuccessful greenhouse trials, our partners will transfer the plants to thefield for field trials.  After completionof successful field trials, our partners may have to apply for and receiveregulatory approval prior to initiation of any commercialization activities.

 

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

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

 

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Theactual amount of time spent on each development phase depends on the crop, itsgrowth cycle and the success of the transformation achieving the desiredresults.  As such, the amount of time foreach phase of development could vary, or the time frames may change.

 

Thedevelopment of our technology with Poet is different than our other licenses inthat we are modifying certain production inputs for ethanol.  That process involves modifying the inputs,testing such inputs in Poet’s production process and if successful,implementing such inputs in Poet’s production process on a plant by plantbasis.

 

The status of each of ourprojects 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            |       | Greenhouse                |
| Corn                  |       | Monsanto            |       | Proof  of concept ongoing |
| Cotton                |       | Bayer               |       | Proof  of concept ongoing |
| Canola                |       | Bayer               |       | Seed  transformation      |
| Rice                  |       | Bayer               |       | Proof  of concept ongoing |
| Soybean               |       | Monsanto            |       | Proof  of concept ongoing |
| Turfgrass             |       | The  Scotts Company |       | Greenhouse                |
| Bedding  Plants       |       | The  Scotts Company |       | Greenhouse                |
| Ethanol               |       | Poet                |       | Modify  inputs            |

 

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

 

Basedupon our commercialization strategy, we anticipate that there may be asignificant period of time before plants enhanced using our technology reachconsumers.  Thus, we have not begun toactively market our technology directly to consumers, rather, we have sought toestablish ourselves within the industry through presentations at industryconferences, our website and direct communication with prospective licensees.

 

Consistent with our commercialization strategy, we intend to attractother companies interested in strategic partnerships or licensing ourtechnology, which may result in additional license fees, revenues from contractresearch and other related revenues. Successful future operations will depend on our ability to transform ourresearch and development activities into a commercially feasible technology.

 

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*IntellectualProperty*

 

## We havenineteen (19) issued patents from the United States Patent and TrademarkOffice, or PTO, and twenty-three (23) issued patents from foreign countries,thirty-one (31) of which are for the use of our technology in agriculturalapplications and eleven (11) of which relate to human health applications.

 

In addition to our forty-two (42) patents, we have a wide variety ofpatent applications, including divisional applications andcontinuations-in-part, in process with the PTO and internationally.  We intend to continue our strategy ofenhancing these new patent applications through the addition of data as it iscollected.

 

*Government Regulation*

 

At present,the U.S. federal government regulation of biotechnology is divided among threeagencies: (i) the U.S. Department of Agriculture regulates the import,field-testing and interstate movement of specific types of genetic engineeringthat may be used in the creation of transformed plants; (ii) theEnvironmental Protection Agency regulates activity related to the invention ofplant pesticides and herbicides, which may include certain kinds of transformedplants; and (iii) the FDA regulates foods derived from new plantvarieties.  The FDA requires thattransformed plants meet the same standards for safety that are required for allother plants and foods in general. Except in the case of additives that significantly alter a food’sstructure, the FDA does not require any additional standards or specificapproval for genetically engineered foods but expects transformed plantdevelopers to consult the FDA before introducing a new food into the marketplace.

 

In addition,our ongoing preclinical research with cell lines and lab animal models of humandisease is not currently subject to the FDA requirements that govern clinicaltrials.  However, use of our technology,if developed for human health applications, will also be subject to FDAregulation.  Generally, the FDA mustapprove any drug or biologic product before it can be marketed in the UnitedStates.  In addition, prior to being soldoutside of the U.S., any products resulting from the application of our humanhealth technology must be approved by the regulatory agencies of foreigngovernments.  Prior to filing a new drugapplication or biologics license application with the FDA, we would have toperform extensive clinical trials, and prior to beginning any clinical trial,we need to perform extensive preclinical testing which could take several yearsand may require substantial expenditures.

 

We believethat our current activities, which to date have been confined to research anddevelopment efforts, do not require licensing or approval by any governmentalregulatory agency. However, we, or our licensees, may be required to obtainsuch licensing or approval from governmental regulatory agencies prior to thecommercialization of our genetically transformed plants and the application ofour human health technology.

 

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**Liquidity andCapital Resources**

 

*Overview*

 

As of December 31, 2008, our cashbalance and investments, which consisted of money market funds and U.S.treasury bills, totaled $3,615,788**,**and we had working capital of $3,562,743. As of December 31, 2008, we had a federal tax loss carryforward ofapproximately $21,940,000 and a state tax loss carry-forward of approximately$14,580,000 to offset future taxable income. We cannot assure you that we willbe able to take advantage of any or all of such tax loss carryforwards, if atall, in future fiscal years.

 

*ContractualObligations*

 

The following table lists our cash contractual obligations as of December 31,2008:

 
| ** **                                                           | ** ** | **Payments Due by Period** | ** ** |
|----------------------------------------------------------------------|------------|-------------------------------------------|------------|
| **Contractual Obligations**                                     | ** ** | **Total**                                 | ** ** | **Less than  1 year** | ** ** | **1 - 3 years** | ** ** | **4 - 5 years** | ** ** | **More than  5 years** | ** ** |
|                                                                 |       |                                      |       |   |   |   |   |   |   |   |   |
| Research and  Development Agreements (1)                             |       | $                                         | 2,150,525  |   | $ | 2,150,525 |   | $ | — |   | $ | — |   | $ | — |   |
|                                                                 |       |                                      |       |   |   |   |   |   |   |   |   |
| Facility, Rent and  Operating Leases (2)                             |       | $                                         | 192,280    |   | $ | 78,964 |   | $ | 113,316 |   | $ | — |   | $ | — |   |
|                                                                 |       |                                      |       |   |   |   |   |   |   |   |   |
| Employment,  Consulting and Scientific Advisory Board Agreements (3) |       | $                                         | 514,511    |   | $ | 510,023 |   | $ | 4,488 |   | $ | — |   | $ | — |   |
|                                                                 |       |                                      |       |   |   |   |   |   |   |   |   |
| Total Contractual  Cash Obligations                                  |       | $                                         | 2,857,316  |   | $ | 2,739,512 |   | $ | 117,804 |   | $ | — |   | $ | — |   |

 

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(1)          Certain of our research and development agreementsdisclosed herein provide that payment is to be made in Canadian dollars and,therefore, the contractual obligations are subject to fluctuations in theexchange rate.

 

(2)          The lease for our office space in New Brunswick, NewJersey is subject to certain escalations for our proportionate share ofincreases in the building’s operating costs.

 

(3)          Certain of our employment and consulting agreementsprovide for automatic renewal, which is not reflected in the table, unlessterminated earlier by the parties to the respective agreements.

 

We expect our capital requirements to increase significantly over thenext several years as we commence new research and development efforts.  Our future liquidity and capital fundingrequirements will depend on numerous factors, including, but not limited to,the levels and costs of our research and development initiatives and the costand timing of the expansion of our business development and administrativestaff.

 

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Effective September 1, 2008, we extended our research anddevelopment agreement with the University of Waterloo for an additionalone-year period through August 31, 2009, in the amount of CAD $735,000 orapproximately USD $700,000. Research and development expenses under thisagreement aggregated USD $180,000 and USD $176,536 for the three month periodsended December 31, 2008 and 2007 and USD $349,518 and $368,792 for the sixmonth periods ended December 31, 2008 and 2007 and USD $4,976,782 for thecumulative period from inception through December 31, 2008.

 

During the six months ended December 31, 2008, we made significantpayments for services to be performed and for the manufacture of materials inconnection with our toxicology studies and clinical trial totalingapproximately $720,000, which have been included as prepaid expenses on ourBalance Sheet as of December 31, 2008.

 

*Capital Resources*

 

Since inception, we have generated revenues of $1,375,000 in connectionwith the initial fees and milestone payments received under our license anddevelopment agreements.  We have not beenprofitable since inception, we will continue to incur additional operatinglosses in the future, and we will require additional financing to continue thedevelopment and subsequent commercialization of our technology.  While we do not expect to generatesignificant revenues from the licensing of our technology for the next one tothree years, or longer, we may enter into additional licensing or otheragreements with marketing and distribution partners that may result inadditional license fees, revenues from contract research, or other relatedrevenue.

 

We anticipate that, based upon our currentcash and investments, as of December 31, 2008 we will be able to fund ouroperations for the next seven (7) months. Over the next twelve months, weplan 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 ourcurrent licensing agreements;

·                  through the possible execution of additionallicensing agreements for our technology; and

·                  through the placement of equity or debt instruments.

 

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

 

**Changes toCritical Accounting Policies and Estimates**

 

We adopted Financial Accounting Standards Board (“FASB”) Statement ofFinancial Accounting Standards No. 157, *FairValue Measurements* (SFAS No. 157) for the fiscal year beginningJuly 1, 2008, except for nonfinancial assets and nonfinancial liabilitiesthat are recognized or disclosed at fair value in the financial statements on anonrecurring basis for which delayed application is permitted until our fiscalyear beginning July 1, 2009.  Theadoption of the 

 

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remaining provisions of SFAS No. 157 is not expected to have amaterial impact on the Company’s financial position, results of operations orcash flows.

 

Except for the adoption of SFAS No. 157,there have been no changes to our critical accountingpolicies and estimates as set forth in our Annual Report on Form 10-K forthe fiscal year ended June 30, 2008.

 

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**Results of Operations**

 

Three Months Ended December 31, 2008 and Three Months Ended December 31, 2007

 

The net loss for the three month period endedDecember 31, 2008 was $1,624,341.  The net loss for the three month period ended December 31, 2007 was$1,049,838.  Such a change represents anincrease in net loss of $574,503**,**or54.7%.  This increase in net loss wasprimarily the result of an increase in non-cash expenses associated with theoutstanding convertible notes that were issued during the year ended June 30,2008, and an increase in operating expenses.

 

*Revenue*

 

There were no revenues for the three month period ended December 31,2008.  Total revenues of $6,250 for thethree month period ended December 31, 2007 consisted of the amortizedportion of previous milestone payments received in connection with certainagricultural license agreements.

 

We anticipatethat we will continue to receive milestone payments in connection with ourcurrent agricultural development and license agreements while we continue topursue our goal of attracting other companies to license our technologies invarious other crops.  Additionally, weanticipate that we will receive royalty payments from our license agreements whenour partners commercialize their crops containing our technology.  However, it is difficult for us to determineour future revenue expectations because we are a development stagebiotechnology company.  As such, thetiming and outcome of our experiments, the timing of signing new partners andthe timing of our partners moving through the development process intocommercialization is difficult to accurately predict.

 

*Operating Expenses*

 
| ** **                  | ** ** | **Three Months Ended December 31,** | ** ** |
|-----------------------------|------------|---------------------------------------------------------|------------|
| ** **                  | ** ** | **2008**                                                | ** ** | **2007** | ** ** | **Change** | ** ** | **%** | ** ** |
|                        |       | **(in thousands, except % values)**                     |       |
|                        |       |                                                    |       |   |   |   |   |   |   |
| General and  administrative |       | $                                                       | 649        |   | $ | 586 |   | $ | 63 |   | 10.8 | % |
| Research and  development   |       | 579                                                     |       | 392 |   | 187 |   | 47.7 | % |
| Total operating  expenses   |       | $                                                       | 1,228      |   | $ | 978 |   | $ | 250 |   | 25.6 | % |

 

We expect operating expenses to increase over the next twelve months aswe anticipate that research and development expenses will increase as wecontinue to expand our research and development activities.

 

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*General and Administrative Expenses*

 
| ** **                        | ** ** | **Three Months Ended December 31,** | ** ** |
|-----------------------------------|------------|---------------------------------------------------------|------------|
| ** **                        | ** ** | **2008**                                                | ** ** | **2007** | ** ** | **Change** | ** ** | **%** | ** ** |
|                              |       | **(in thousands, except % values)**                     |       |
| Stock-based  compensation         |       | $                                                       | 131        |   | $ | 67 |   | $ | 64 |   | 95.5 | % |
| Payroll and  benefits             |       | 181                                                     |       | 177 |   | 4 |   | 2.3 | % |
| Investor relations                |       | 109                                                     |       | 160 |   | (51 | ) | (31.9 | )% |
| Professional fees                 |       | 134                                                     |       | 113 |   | 21 |   | 18.6 | % |
| Depreciation and  amortization    |       | 27                                                      |       | 22 |   | 5 |   | 22.7 | % |
| Director fees                     |       | 16                                                      |       | — |   | 16 |   | — |   |
| Other general and  administrative |       | 51                                                      |       | 47 |   | 4 |   | 8.5 | % |
| Total general and  administrative |       | $                                                       | 649        |   | $ |  586 |   | $ | 63 |   | 10.8 | % |

 

·                  Stock-based compensation for the three months ended December 31,2008 and 2007 consisted of the amortized portion of the Black-Scholes value ofoptions, restricted stock units and warrants granted to directors, employeesand consultants.  During the three monthperiods ended December 31, 2008 and 2007, there were 721,584 and 1,408,300options, restricted stock units and warrants granted to such directors,employees and consultants.

 

·                  Payroll and benefits increased primarily as a resultof salary increases.

 

·                  Investor relations decreased primarily as a result ofa decrease in the cost of our annual report and investor relations consultingcosts.

 

·                  Professional fees increased primarily as a result ofan increase in legal fees related to our multiple myeloma project and thereview and filing of our securities filings.

 

·                  Depreciation and amortization increased primarily asa result of additional agricultural and human health patent costs beingamortized.

 

·                  Director fees increased due to the Companyimplementing a cash compensation plan for non-employee directors beginning July 1,2008.  During the three month periodended December 31, 2007, the non-employee directors did not receive anycash compensation.

 

We expect general and administrative expenses to modestly increase overthe next twelve months primarily due to an increase in payroll and benefits andlegal and accounting fees related to the increased regulatory environmentsurrounding our business.

 

*Research and Development Expenses*

 
| ** **                      | ** ** | **Three Months Ended December 31,** | ** ** |
|---------------------------------|------------|---------------------------------------------------------|------------|
| ** **                      | ** ** | **2008**                                                | ** ** | **2007** | ** ** | **Change** | ** ** | **%** | ** ** |
| ** **                      | ** ** | **(in thousands, except % values)**                     | ** ** |
|                            |       |                                                    |       |   |   |   |   |   |   |
| Stock-based  compensation       |       | $                                                       | 7          |   | $ | 16 |   | $ | (9 | ) | (56.3 | )% |
| Other research and  development |       | 572                                                     |       | 376 |   | 196 |   | 52.1 | % |
| Total research and  development |       | $                                                       | 579        |   | $ | 392 |   | $ | 187 |   | 47.7 | % |

 

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·                  Stock-based compensation consists primarily of theamortized portion of Black-Scholes value of options, restricted stock units andwarrants granted to research and development consultants and employees.

 

·                  Other research and development costs increasedprimarily as a result of an expansion of our human health programs,specifically our multiple myeloma research program.

 

The breakdown of our research and development expenses between ouragricultural and human health research programs is as follows:
| ** **                      | ** ** | **Three Months Ended December 31,** | ** ** |
|---------------------------------|------------|---------------------------------------------------------|------------|
| ** **                      | ** ** | **2008**                                                | ** ** | **%** | ** ** | **2007** | ** ** | **%** | ** ** |
| ** **                      |       | **(in thousands, except % values)**                     |       |
| ** **                      |       | ** **                                              |       |
| Agricultural                    |       | $                                                       | 142        |   | 25 | % | $ | 172 |   | 44 | % |
| Human health                    |       | 437                                                     |       | 75 | % | 220 |   | 56 | % |
|                            |       |                                                    |       |   |   |   |   |   |   |
| Total research and  development |       | $                                                       | 579        |   | 100 | % | $ | 392 |   | 100 | % |

 

·                  Agriculturalresearch expenses decreased during the three month period ended December 31,2008 primarily as a result of a decrease in the allocation of resources fromagriculture to human health at the University of Waterloo .

 

·                  Human healthresearch expenses increased during the three month period ended December 31,2008 primarily as a result of the multiple myeloma project.

 

We expect the percentage of human health research programs to continueto increase as a percentage of the total research and development expenses aswe continue our current research projects and begin new human healthinitiatives.

 

*Amortization of debt discount, financing costs and interest expense*

 

During theyear ended June 30, 2008, we issued $10,000,000 in convertible notes and warrants.  The net proceeds of those notes and warrantswere recorded as equity.  The discount onthe convertible notes is being amortized, using the effective yield method,over the term of the convertible notes. The related costs of issuance were recorded as deferred financing costsand are being amortized on a straight line basis over the term of theconvertible notes.  At December 31,2008 there were $9,500,000 of convertible notes outstanding.  At December 31, 2007, there were$7,000,000 of convertible notes outstanding.

 

*Interest Income,net*

 

Interestincome was lower during the three month period ended December 31, 2008 asa result of lower interest rates compared to the three-month period endedDecember 31, 2007.

 

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Six Months Ended December 31, 2008 and Six Months Ended December 31, 2007

 

The net loss for the six month period ended December 31,2008 was $2,805,747.   The net loss forthe six month period ended December 31, 2007 was $1,431,884.  Such a change represents an increase in netloss of $1,373,863**,**or 96.0%.  This increase in net loss was primarily theresult of an increase in non-cash expenses associated with the outstandingconvertible notes that were issued during the year ended June 30, 2008, anincrease in operating expenses and a decrease in revenue.

 

*Revenue*

 

Total revenues of $200,000 for the six month period ended December 31,2008 consisted of milestone payments in connection with certain agriculturallicense agreements.  Total revenues of$377,500 for the six month period ended December 31, 2007 consisted of theinitial payments and the amortized portion of previous milestone paymentsreceived in connection with certain agricultural license agreements.

 

We anticipatethat we will continue to receive milestone payments in connection with ourcurrent agricultural development and license agreements while we continue topursue our goal of attracting other companies to license our technologies invarious other crops.  Additionally, weanticipate that we will receive royalty payments from our license agreementswhen our partners commercialize their crops containing our technology.  However, it is difficult for us to determineour future revenue expectations because we are a development stagebiotechnology company.  As such, thetiming and outcome of our experiments, the timing of signing new partners andthe timing of our partners moving through the development process intocommercialization is difficult to accurately predict.

 

*Operating Expenses*

 
| ** **                  | ** ** | **Six Months Ended December 31,** | ** ** |
|-----------------------------|------------|-------------------------------------------------------|------------|
| ** **                  | ** ** | **2008**                                              | ** ** | **2007** | ** ** | **Change** | ** ** | **%** | ** ** |
|                        |       | **(in thousands, except % values)**                   |       |
|                        |       |                                                  |       |   |   |   |   |   |   |
| General and  administrative |       | $                                                     | 1,179      |   | $ | 975 |   | $ | 204 |   | 20.9 | % |
| Research and  development   |       | 1,084                                                 |       | 745 |   | 339 |   | 45.5 | % |
| Total operating  expenses   |       | $                                                     | 2,263      |   | $ | 1,720 |   | $ | 543 |   | 31.6 | % |

 

We expect operating expenses to increase over the next twelve months aswe anticipate that research and development expenses will increase as wecontinue to expand our research and development activities.

 

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*General and Administrative Expenses*

 
| ** **                        | ** ** | **Six Months Ended December 31,** | ** ** |
|-----------------------------------|------------|-------------------------------------------------------|------------|
| ** **                        | ** ** | **2008**                                              | ** ** | **2007** | ** ** | **Change** | ** ** | **%** | ** ** |
|                              |       | **(in thousands, except % values)**                   |       |
|                              |       |                                                  |       |   |   |   |   |   |   |
| Stock-based  compensation         |       | $                                                     | 203        |   | $ | 115 |   | $ | 88 |   | 76.5 | % |
| Payroll and  benefits             |       | 345                                                   |       | 332 |   | 13 |   | 3.9 | % |
| Investor relations                |       | 155                                                   |       | 211 |   | (56 | ) | (26.5 | )% |
| Professional fees                 |       | 276                                                   |       | 171 |   | 105 |   | 61.4 | % |
| Depreciation and  amortization    |       | 54                                                    |       | 44 |   | 10 |   | 22.7 | % |
| Director fees                     |       | 44                                                    |       | — |   | 44 |   | — |   |
| Other general and  administrative |       | 102                                                   |       | 102 |   | — |   | — |   |
| Total general and  administrative |       | $                                                     | 1,179      |   | $ | 975 |   | $ | 204 |   | 20.9 | % |

 

·                  Stock-based compensation for the six months ended December 31,2008 and, 2007 consisted of the amortized portion of the Black-Scholes value ofoptions, restricted stock units and warrants granted to directors, employeesand consultants.  During the six monthperiods ended December 31, 2008 and 2007, there were 721,584 and 1,408,300options, restricted stock units and warrants granted to such directors,employees and consultants..

 

·                  Payroll and benefits increased primarily as a resultof salary increases.

 

·                  Investor relations decreased primarily as a result ofa decrease in the cost of our annual report and investor relations consultingcosts.

 

·                  Professional fees increased primarily as a result ofan increase in legal fees and accounting fees primarily due to an increase inlegal fees related to our multiple myeloma project and accounting and legalfees related to the review and filing of our securities filings.

 

·                  Depreciation and amortization increased primarily asa result of additional agricultural and human health patent costs beingamortized.

 

·                  Director fees increased due to the Companyimplementing a cash compensation plan for non-employee directors beginning July 1,2008.  During the six month period ended December 31,2007, the non-employee directors did not receive any cash compensation.

 

We expect general and administrative expenses to modestly increase overthe next twelve months primarily due to an increase in payroll and benefits andlegal and accounting fees related to the increased regulatory environmentsurrounding our business.

 

*Research and Development Expenses*

 
| ** **                      | ** ** | **Six Months Ended December 31,** | ** ** |
|---------------------------------|------------|-------------------------------------------------------|------------|
| ** **                      | ** ** | **2008**                                              | ** ** | **2007** | ** ** | **Change** | ** ** | **%** | ** ** |
|                            |       | **(in thousands, except % values)**                   |       |
|                            |       |                                                  |       |   |   |   |   |   |   |
| Stock-based  compensation       |       | $                                                     | 12         |   | $ | 31 |   | $ | (19 | ) | (61.3 | )% |
| Other research and  development |       | 1,072                                                 |       | 714 |   | 358 |   | 50.1 | % |
| Total research and  development |       | $                                                     | 1,084      |   | $ | 745 |   | $ | 339 |   | 45.5 | % |

 

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·                  Stock-based compensation consists primarily of theamortized portion of Black-Scholes value of options, restricted stock units andwarrants granted to research and development consultants and employees.

 

·                  Other research and development costs increased primarilyas a result of an expansion of our human health programs, specifically ourmultiple myeloma research program, which was partially offset by a decrease inthe cost of our research agreement with the University of Waterloo due to thestrengthening of the U.S. dollar against the Canadian dollar.

 

The breakdown of our research and development expenses between ouragricultural and human health research programs is as follows:
| ** **                      | ** ** | **Six Months Ended December 31,** | ** ** |
|---------------------------------|------------|-------------------------------------------------------|------------|
| ** **                      | ** ** | **2008**                                              | ** ** | **%** | ** ** | **2007** | ** ** | **%** | ** ** |
| ** **                      | ** ** | **(in thousands, except % values)**                   | ** ** |
|                            |       |                                                  |       |   |   |   |   |   |   |
| Agricultural                    |       | $                                                     | 311        |   | 29 | % | $ | 357 |   | 48 | % |
| Human health                    |       | 773                                                   |       | 71 | % | 388 |   | 52 | % |
|                            |       |                                                  |       |   |   |   |   |   |   |
| Total research and  development |       | $                                                     | 1,084      |   | 100 | % | $ | 745 |   | 100 | % |

 

·                  Agriculturalresearch expenses decreased during the three month period ended December 31,2008 primarily as a result of a decrease in the allocation of resources fromagriculture to human health at the University of Waterloo.  Human health research expenses increasedduring the six month period ended December 31, 2008 primarily as a resultof the multiple myeloma project.

 

We expect the percentage of human health research programs to continueto increase as a percentage of the total research and development expenses aswe continue our current research projects and begin new human healthinitiatives.

 

*Amortization of debt discount, financing costs and interest expense*

 

During theyear ended June 30, 2008, we issued $10,000,000 in convertible notes andwarrants.  The net proceeds of thosenotes and warrants were recorded as equity. The discount on the convertible notes is being amortized, using theeffective yield method, over the term of the convertible notes.  The related costs of issuance were recordedas deferred financing costs and are being amortized on a straight line basisover the term of the convertible notes. At December 31, 2008 there were $9,500,000 of convertible notesoutstanding.  At December 31, 2007,there were $7,000,000 of convertible notes outstanding.

 

*Interest Income,net*

 

Interestincome was higher during the six month period ended December 31, 2008 as aresult of an higher average cash balance compared to the six month period endedDecember 31, 2007, which was partially offset by lower interest ratesduring the six month period ended December 31, 2008.

 

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Period FromInception on July 1, 1998 through December 31, 2008

 

From inception of operations on July 1, 1998 through December 31,2008, we had revenues of $1,375,000, which consisted of the initial licensefees and milestone payments in connection with our various development andlicense agreements.  We do not expect togenerate significant revenues for approximately the next one to three years,during which time we will continue to engage in significant research anddevelopment efforts.

 

We have incurred losses each year since inception and have anaccumulated deficit of $33,028,777 at December 31, 2008.  We expect to continue to incur losses as aresult of expenditures on research and development and administrativeactivities.

 

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**Item 3.****                                   Quantitative and Qualitative Disclosures about MarketRisk.**

 

*Foreign Currency Risk*

 

Our financialstatements are denominated in United States dollars and, except for ouragreement with the University of Waterloo, which is denominated in Canadiandollars, all of our contracts are denominated in United States dollars.  Therefore, we believe that fluctuations inforeign currency exchange rates will not result in any material adverse effecton our financial condition or results of operations.  In the event we derive a greater portion ofour revenues from international operations or in the event a greater portion ofour expenses are incurred internationally and denominated in a foreigncurrency, then changes in foreign currency exchange rates could effect ourresults of operations and financial condition.

 

*Interest Rate Risk*

 

We invest inhigh-quality financial instruments, primarily money market funds and United Statestreasury notes, with an effective duration of the portfolio of less than oneyear, and no security with an effective duration in excess of one year, whichwe believe are subject to limited credit risk. We currently do not hedge our interest rate exposure.  Due to the short-term nature of ourinvestments, which we plan to hold until maturity, we do not believe that wehave any material exposure to interest rate risk arising from our investments.

 

**Item 4T.****                           Controls and Procedures.**

 

(a)          Evaluation of disclosurecontrols and procedures.

 

The principal executive officer and principal financial officer haveevaluated our disclosure controlsand procedures (as defined in Rules 13a-15(e) and 15d-15(e) underthe Exchange Act) as of December 31, 2008. Based on this evaluation, they have concluded that our disclosurecontrols and procedures were effective to ensure that the information requiredto be disclosed by us in reports that we file or submit under the SecuritiesExchange Act of 1934 is recorded, processed, summarized and reported within thetime periods specified in the Commission’s rules and forms, and to ensurethat information required to be disclosed by us in the reports that we file orsubmit under the Securities Exchange Act of 1934 is accumulated andcommunicated to our management, including our principal executive and principalfinancial officers, to allow timely decisions regarding required disclosure.

 

(b)           Changes in internalcontrols.

 

No change in our internal controlsover financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) underthe Exchange Act) occurred during the three month and six month periods ended December 31,2008 that has materially affected, or is reasonably likely to materiallyaffect, our internal controls over financial reporting.

 

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**PART II. OTHER INFORMATION.**

 

**Item1A.  Risk Factors.**

 

The more prominent risks and uncertainties inherent in ourbusiness are described below. However, additional risks and uncertainties mayalso impair our business operations.  Ifany of the following risks actually occur, our business, financial condition orresults of operations may suffer.

 

**Risks Related to Our Business**

 

***We have a limitedoperating history and have incurred substantial losses and expect future losses****.*

 

We are a development stage biotechnology company with alimited operating history and limited assets and capital.  We have incurred losses each year sinceinception and had an accumulated deficit of $33,028,777 at December 31,2008. We have generated minimal revenues by licensing our technology forcertain crops to companies willing to share in our development costs. Inaddition, our technology may not be ready for commercialization for severalyears. We expect to continue to incur losses for the next several years becausewe anticipate that our expenditures on research and development, andadministrative activities will significantly exceed our revenues during thatperiod. We cannot predict when, if ever, we will become profitable.

 

***We may need additional capital to fund ouroperations until we are able to generate a profit.***

 

Our operations to date have required significant cashexpenditures.  Our future capitalrequirements will depend on the results of our research and developmentactivities, preclinical and clinical studies, and competitive and technologicaladvances.

 

In addition, the recent financings with YAGlobal Investments, L.P., referred to herein as YA Global, and Stanford VentureCapital Holdings, Inc., referred to herein as Stanford, are secured by allof our assets.  If we default under theconvertible notes, the investors may foreclose on our assets and our business.  As a result, we may need to obtain morefunding in the future through collaborations or other arrangements withresearch institutions and corporate partners, or public and private offeringsof our securities, including debt or equity financing.  We may not be able to obtain adequate fundsfor our operations from these sources when needed or on acceptable terms.Future collaborations or similar arrangements may require us to licensevaluable intellectual property to, or to share substantial economic benefitswith, our collaborators.  If we raiseadditional capital by issuing additional equity or securities convertible intoequity, our stockholders may experience dilution and our share price maydecline.  Any debt financing may resultin restrictions on our spending.

 

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

 

·                  delay, scale-back oreliminate some or all of our research and product development programs;

·                  license third parties todevelop and commercialize products or technologies that we would otherwise seekto develop and commercialize ourselves;

 

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·                  seek strategic alliances orbusiness combinations;

·                  attempt to sell ourcompany;

·                  cease operations; or

·                  declare bankruptcy.

 

We believe that at the projected rate of spending we shouldhave sufficient cash and investments to maintain our present operations for thenext 7 months as of December 31, 2008.

 

***We may be adverselyaffected by the current economic environment.***

 

Ourability to obtain financing, invest in and grow our business, and meet ourfinancial obligations depends on our operating and financial performance, whichin turn is subject to numerous factors. In addition to factors specific to our business, prevailing economicconditions and financial, business and other factors beyond our control canalso affect our business and ability to raise capital.  We cannot anticipate all of the ways in whichthe current economic climate and financial market conditions could adverselyimpact our business.

 

***We depend on a singleprincipal technology and, if our technology is not commercially successful, wewill have no alternative source of revenue****.*

 

Our primary business is the development and licensing oftechnology to identify, isolate, characterize and promote or silence geneswhich control the death of cells in humans and plants. Our future revenue andprofitability critically depend upon our ability to successfully developapoptosis and senescence gene technology and later license or market suchtechnology.  We have conductedexperiments on certain crops with favorable results and have conducted certainpreliminary cell-line and animal experiments, which have provided us with dataupon which we have designed additional research programs. However, we cannotgive any assurance that our technology will be commercially successful oreconomically viable for any crops or human health applications.

 

In addition, no assurance can be given that adverseconsequences might not result from the use of our technology such as thedevelopment of negative effects on humans or plants or reduced benefits interms of crop yield or protection.  Ourfailure to obtain market acceptance of our technology or of our current orpotential licensees to successfully commercialize such technology would have amaterial adverse effect on our business.

 

***We outsource all of ourresearch and development activities and, if we are unsuccessful in maintainingour alliances with these third parties, our research and development effortsmay be delayed or curtailed.***

 

We rely on third parties to perform all of our research anddevelopment activities.  Our research anddevelopment efforts take place at the University of Waterloo in Ontario,Canada, where our technology was discovered, Mayo Clinic, the University ofVirginia, and with our commercial partners. At this time, we do not have the internal capabilities to perform ourresearch and development activities. Accordingly, the failure of third-partyresearch partners to perform under agreements entered into with us, or ourfailure to renew important research agreements with these third parties, maydelay or curtail our research and development efforts.

 

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***We have significantfuture capital needs and may be unable to raise capital when needed, whichcould force us to delay or reduce our research and development efforts.***

 

As of December 31, 2008, we had cash andhighly-liquid investments of $3,615,788 and working capital of $3,562,743.Using our available reserves as of December 31, 2008, we believe that wecan operate according to our current business plan for the next 7 months from December 31,2008.  To date, we have generated minimalrevenues and anticipate that our operating costs will exceed any revenuesgenerated over the next several years. Therefore, we will be required to raiseadditional capital in the future in order to operate in accordance with ourcurrent business plan, and this funding may not be available on favorableterms, if at all.  If we are unable toraise additional funds, we will need to do one or more of the following:

 

·                  delay, scale back oreliminate some or all of our research and development programs;

·                  provide a license to thirdparties to develop and commercialize our technology that we would otherwiseseek to develop and commercialize ourselves;

·                  seek strategic alliances orbusiness combinations;

·                  attempt to sell ourcompany;

·                  cease operations; or

·                  declare bankruptcy.

 

In addition, in connection with any funding, if we need toissue more equity securities than our certificate of incorporation currentlyauthorizes, or more than 20% of the shares of our common stock outstanding, wemay need stockholder approval.  Ifstockholder approval is not obtained or if adequate funds are not available, wemay be required to curtail operations significantly or to obtain funds througharrangements with collaborative partners or others that may require us torelinquish rights to certain of our technologies, product candidates, productsor potential markets.  Investors mayexperience dilution in their investment from future offerings of our commonstock.  For example, if we raiseadditional capital by issuing equity securities, such an issuance would reducethe percentage ownership of existing stockholders.  In addition, assuming the exercise of alloptions and warrants outstanding and the conversion of the notes into commonstock, as of December 31, 2008, we had 3,657,813 shares of common stockauthorized but unissued and unreserved, which may be issued from time to timeby our board of directors without stockholder approval.  The total number of shares that may be issuedunder the financing is subject to certain caps as more fully described in this Form 10-Q.  Furthermore, we may need to issue securitiesthat have rights, preferences and privileges senior to our common stock.  Failure to obtain financing on acceptableterms would have a material adverse effect on our liquidity.

 

Since our inception, we have financed all of our operationsthrough private equity and debt financings. Our future capital requirementsdepend on numerous factors, including:

 

·                  the scope of our researchand development;

·                  our ability to attractbusiness partners willing to share in our development costs;

·                  our ability to successfullycommercialize our technology;

·                  competing technological andmarket developments;

·                  our ability to enter intocollaborative arrangements for the development, regulatory approval andcommercialization of other products; and

·                  the costof filing, prosecuting, defending and enforcing patent claims and otherintellectual property rights.

 

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

 

As a result of the substantial length of time and expenseassociated with developing products and bringing them to the marketplace in thebiotechnology and agricultural industries, obtaining and maintaining patent andtrade secret protection for technologies, products and processes is of vitalimportance.  Our success will depend inpart on several factors, including, without limitation:

 

·                  our ability to obtainpatent protection for our technologies and processes;

·                  our ability to preserve ourtrade secrets; and

·                  our ability to operatewithout infringing the proprietary rights of other parties both in the UnitedStates and in foreign countries.

 

As of December 31, 2008, we have been issued nineteen(19) patents by the PTO and twenty-three (23) patents from foreigncountries.  We have also filed numerouspatent applications for our technology in the United States and in severalforeign countries, which technology is vital to our primary business, as wellas several Continuations in Part on these patent applications.  Our success depends in part upon the grant ofpatents from our pending patent applications.

 

Although we believe that our technology is unique and thatit 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 besuccessfully defended against.  If we donot obtain and maintain patent protection, we may face increased competition inthe United States and internationally, which would have a material adverseeffect on our business.

 

Since patent applications in the United States aremaintained in secrecy until patents are issued, and since publication ofdiscoveries in the scientific and patent literature tend to lag behind actualdiscoveries by several months, we cannot be certain that we were the firstcreator of the inventions covered by our pending patent applications or that wewere 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 theissuance of patents;

·                  any patents issued orlicensed to us will be free from challenge and if challenged, would be held tobe valid;

·                  any patents issued orlicensed to us will provide commercially significant protection for ourtechnology, products and processes;

·                  other companies will notindependently develop substantially equivalent proprietary information which isnot covered by our patent rights;

·                  other companies will notobtain access to our know-how;

·                  other companies will not begranted patents that may prevent the commercialization of our technology; or

 

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·                  we will not incur licensingfees and the payment of significant other fees or royalties to third partiesfor the use of their intellectual property in order to enable us to conduct ourbusiness.

 

***Our competitors mayallege that we are infringing upon their intellectual property rights, forcingus to incur substantial costs and expenses in resulting litigation, the outcomeof which would be uncertain.***

 

Patent law is still evolving relative to the scope andenforceability of claims in the fields in which we operate.  We are like most biotechnology companies inthat our patent protection is highly uncertain and involves complex legal andtechnical questions for which legal principles are not yet firmly established.  In addition, if issued, our patents may notcontain claims sufficiently broad to protect us against third parties withsimilar technologies or products, or provide us with any competitive advantage.

 

The PTO and the courts have not established a consistentpolicy regarding the breadth of claims allowed in biotechnology patents.  The allowance of broader claims may increasethe incidence and cost of patent interference proceedings and the risk ofinfringement litigation.  On the otherhand, the allowance of narrower claims may limit the scope and value of ourproprietary rights.

 

The laws of some foreign countries do not protectproprietary rights to the same extent as the laws of the United States, andmany companies have encountered significant problems and costs in protectingtheir proprietary rights in these foreign countries.

 

We could become involved in infringement actions to enforceand/or protect our patents.  Regardlessof the outcome, patent litigation is expensive and time consuming and woulddistract our management from other activities. Some of our competitors may be able to sustain the costs of complexpatent litigation more effectively than we could because they havesubstantially greater resources. Uncertainties resulting from the initiation and continuation of anypatent litigation could limit our ability to continue our operations.

 

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

 

If any relevant claims of third-party patents that are adverseto us are upheld as valid and enforceable, we could be prevented fromcommercializing our technology or could be required to obtain licenses from theowners of such patents.  We cannot assureyou that such licenses would be available or, if available, would be onacceptable terms.  Some licenses may benon-exclusive and, therefore, our competitors may have access to the sametechnology licensed to us.  In addition,if any parties successfully claim that the creation or use of our technologyinfringes upon their intellectual property rights, we may be forced to paydamages, including treble damages.

 

***Our security measures maynot adequately protect our unpatented technology and, if we are unable toprotect the confidentiality of our proprietary information and know-how, thevalue of our technology may be adversely affected.***

 

Our success depends upon know-how, unpatentable tradesecrets, and the skills, knowledge and experience of our scientific andtechnical personnel.  As a result, werequire all employees to agree to a confidentiality provision in theiremployment agreement that prohibits the disclosure of confidential informationto anyone outside of our company, during the term of

 

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employmentand thereafter.  We also require allemployees to disclose and assign to us the rights to their ideas, developments,discoveries and inventions.  We alsoattempt to enter into similar agreements with our consultants, advisors andresearch collaborators.  We cannot assureyou that adequate protection for our trade secrets, know-how or otherproprietary information against unauthorized use or disclosure will beavailable.

 

We occasionally provide information to researchcollaborators in academic institutions and request that the collaboratorsconduct certain tests.  We cannot assureyou that the academic institutions will not assert intellectual property rightsin the results of the tests conducted by the research collaborators, or thatthe academic institutions will grant licenses under such intellectual propertyrights to us on acceptable terms, if at all. If the assertion of intellectual property rights by an academic institutionis substantiated, and the academic institution does not grant intellectualproperty rights to us, these events could limit our ability to commercializeour technology.

 

***As we evolve from acompany primarily involved in the research and development of our technologyinto one that is also involved in the commercialization of our technology, wemay have difficulty managing our growth and expanding our operations.***

 

As our business grows, we may need to add employees andenhance our management, systems and procedures. We may need to successfully integrate our internal operations with theoperations of our marketing partners, manufacturers, distributors and suppliersto produce and market commercially viable products.  We may also need to manage additional relationshipswith various collaborative partners, suppliers and other organizations.  Although we do not presently conduct researchand development activities in-house, we may undertake those activities in thefuture.  Expanding our business may placea significant burden on our management and operations.  We may not be able to implement improvementsto our management information and control systems in an efficient and timelymanner and we may discover deficiencies in our existing systems andcontrols.  Our failure to effectivelyrespond to such changes may make it difficult for us to manage our growth andexpand our operations.

 

***We have no marketing orsales history and depend on third-party marketing partners.  Any failure of these parties to perform woulddelay or limit our commercialization efforts.***

 

We have no history of marketing, distributing or sellingbiotechnology products and we are relying on our ability to successfullyestablish 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 creatingstrategic alliances to access needed commercialization and marketing expertise.  We may not be able to attract qualifiedsub-licensees, distributors or marketing partners, and even if qualified, thesemarketing partners may not be able to successfully market agricultural productsor human health applications developed with our technology.  If our current or potential future marketingpartners fail to provide adequate levels of sales, our commercializationefforts will be delayed or limited and we may not be able to generate revenue.

 

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***We will depend on jointventures and strategic alliances to develop and market our technology and, ifthese arrangements are not successful, our technology may not be developed andthe expenses to commercialize our technology will increase.***

 

In its current state of development, our technology is notready to be marketed to consumers.  Weintend to follow a multi-faceted commercialization strategy that involves thelicensing of our technology to business partners for the purpose of furthertechnological development, marketing and distribution.  We have and are seeking business partners whowill share the burden of our development costs while our technology is stillbeing developed, and who will pay us royalties when they market and distributeproducts incorporating our technology upon commercialization.  The establishment of joint ventures andstrategic alliances may create future competitors, especially in certainregions abroad where we do not pursue patent protection.  If we fail to establish beneficial businesspartners and strategic alliances, our growth will suffer and the continueddevelopment of our technology may be harmed.

 

***Competition in the humanhealth and agricultural biotechnology industries is intense and technology ischanging rapidly.  If our competitorsmarket their technology faster than we do, we may not be able to generaterevenues from the commercialization of our technology.***

 

Many human health and agricultural biotechnology companiesare engaged in research and development activities relating to apoptosis andsenescence.  The market for plantprotection and yield enhancement products is intensely competitive, rapidlychanging and undergoing consolidation. We may be unable to compete successfully against our current and futurecompetitors, which may result in price reductions, reduced margins and theinability to achieve market acceptance for products containing ourtechnology.  Our competitors in the fieldof plant senescence gene technology are companies that develop and producetransgenic 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: Icoria (formerlyParadigm Genetics), Mendel Biotechnology, Renessen LLC, Exelixis Plant Sciences, Inc.,Syngenta International AG, and Eden Bioscience, among others.  Some of our competitors that are involved inapoptosis research include:  Amgen; Centocor;Genzyme; OSI Pharmaceuticals, Inc.; Novartis; Introgen Therapeutics, Inc.;Genta, Inc.; and Vertex Pharmaceuticals, Inc.  Many of these competitors have substantiallygreater financial, marketing, sales, distribution and technical resources thanus and have more experience in research and development, clinical trials,regulatory matters, manufacturing and marketing.  We anticipate increased competition in thefuture as new companies enter the market and new technologies becomeavailable.  Our technology may berendered obsolete or uneconomical by technological advances or entirelydifferent approaches developed by one or more of our competitors, which willprevent or limit our ability to generate revenues from the commercialization ofour technology.

 

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

 

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

 

·                  the USDA regulates the import, field testing andinterstate movement of specific types of genetic engineering that may be usedin the creation of transgenic plants;

 

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·                  the EPA regulates activity related to the inventionof plant pesticides and herbicides, which may include certain kinds oftransgenic plants; and

·                  the FDA regulates foods derived from new plantvarieties.

 

The FDA requires that transgenic plants meetthe same standards for safety that are required for all other plants and foodsin general.  Except in the case ofadditives that significantly alter a food’s structure, the FDA does not requireany additional standards or specific approval for genetically engineered foods,but expects transgenic plant developers to consult the FDA before introducing anew food into the marketplace.

 

Use of our technology, if developed for humanhealth applications, will also be subject to FDA regulation.  The FDA must approve any drug or biologicproduct before it can be marketed in the United States.  In addition, prior to being sold outside ofthe U.S., any products resulting from the application of our human healthtechnology must be approved by the regulatory agencies of foreigngovernments.  Prior to filing a new drugapplication or biologics license application with the FDA, we would have toperform extensive clinical trials, and prior to beginning any clinical trial,we would need to perform extensive preclinical testing which could take severalyears and may require substantial expenditures.

 

We believe that our current activities, which to date havebeen confined to research and development efforts, do not require licensing orapproval by any governmental regulatory agency. However, we are planning onperforming clinical trials, which would be subject to FDA approval.  Additionally, federal, state and foreignregulations relating to crop protection products and human health applicationsdeveloped through biotechnology are subject to public concerns and politicalcircumstances, and, as a result, regulations have changed and may changesubstantially in the future. Accordingly, we may become subject to governmental regulations orapprovals or become subject to licensing requirements in connection with ourresearch and development efforts. We may also be required to obtain suchlicensing or approval from the governmental regulatory agencies describedabove, or from state agencies, prior to the commercialization of ourgenetically transformed plants and human health technology.  In addition, our marketing partners whoutilize our technology or sell products grown with our technology may besubject to government regulations.  Ifunfavorable governmental regulations are imposed on our technology or if wefail to obtain licenses or approvals in a timely manner, we may not be able tocontinue our operations.

 

***Preclinical studies andclinical trials of our human health applications may be unsuccessful, whichcould delay or prevent regulatory approval.***

 

Preclinical studies may reveal that our human healthtechnology is ineffective or harmful, and/or clinical trials may beunsuccessful in demonstrating efficacy and safety of our human healthtechnology, which would significantly limit the possibility of obtainingregulatory approval for any drug or biologic product manufactured with ourtechnology.  The FDA requires submissionof extensive preclinical, clinical and manufacturing data to assess theefficacy and safety of potential products. Furthermore, the success ofpreliminary studies does not ensure commercial success, and later-stageclinical trials may fail to confirm the results of the preliminary studies.

 

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***Any inability to license fromthird parties their proprietary technologies or processes which we use inconnection with the development of our technology may impair our business.***

 

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

 

 ***Clinicaltrials for our human health technology will be lengthy and expensive and theiroutcome is uncertain***

 

Beforeobtaining regulatory approval for the commercial sales of any productcontaining our technology, we must demonstrate through clinical testing thatour technology and product containing our technology is safe and effective foruse in humans.  Conducting clinicaltrials is a time-consuming, expensive and uncertain process and typicallyrequires years to complete.  In ourindustry, the results from preclinical studies and early clinical trials oftenare not predictive of results obtained in later-stage clinical trials.  Some products and technologies that haveshown promising results in preclinical studies or early clinical trialssubsequently fail to establish sufficient safety and efficacy data necessary toobtain regulatory approval.  At any timeduring clinical trials we or the FDA might delay or halt any clinical trial forvarious reasons, including:

 

·                  occurrence ofunacceptable toxicities or side effects;

 

·                  ineffectiveness of theproduct candidate;

 

·                  negative orinconclusive results from the clinical trials, or results that necessitateadditional studies or clinical trials;

 

·                  delays in obtaining ormaintaining required approvals from institutions, review boards or otherreviewing entities at clinical sites;

 

·                  delays in patientenrollment; or

 

·                  insufficient fundingor a reprioritization of financial or other resources.

 

Anyfailure or substantial delay in successfully completing clinical trials andobtaining regulatory approval for our product candidates could severely harmour business.

 

***Even if we receiveregulatory approval, consumers may not accept products containing ourtechnology, which will prevent us from being profitable since we have no othersource of revenue.***

 

We cannot guarantee that consumers will accept productscontaining our technology.  Recently,there has been consumer concern and consumer advocate activism with respect togenetically-engineered agricultural consumer products.  The adverse consequences from heightenedconsumer concern in this regard could affect the markets for agriculturalproducts developed with our technology and could also result in increasedgovernment regulation in

 

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responseto that concern. If the public or potential customers perceive our technologyto be genetic modification or genetic engineering, agricultural products grownwith our technology may not gain market acceptance.

 

***We depend on ourkey personnel and, if we are not able to attract and retain qualifiedscientific and business personnel, we may not be able to grow our business ordevelop 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 keyemployees and our ability to identify, hire and retain additional qualifiedpersonnel in an intensely competitive market. Although we have employment agreements with all of our key employees anda research agreement with Dr. John Thompson, these agreements may be terminatedupon short or no notice.  We do notmaintain key person life insurance on any member of management.  The failure to attract and retain keypersonnel could limit our growth and hinder our research and developmentefforts.

 

***Certain provisionsof our charter, by-laws and Delaware law could make a takeover difficult.***

 

Certain provisions of our certificate of incorporation andby-laws could make it more difficult for a third party to acquire control ofus, even if the change in control would be beneficial to stockholders.  Our certificate of incorporation authorizesour board of directors to issue, without stockholder approval, except as may berequired by the rules of the NYSE Alternext US, 5,000,000 shares ofpreferred stock with voting, conversion and other rights and preferences thatcould adversely affect the voting power or other rights of the holders of ourcommon stock.  Similarly, our by-laws donot restrict our board of directors from issuing preferred stock withoutstockholder approval.

 

In addition, we are subject to the Business Combination Actof the Delaware General Corporation Law which, subject to certain exceptions,restricts certain transactions and business combinations between a corporationand a stockholder owning 15% or more of the corporation’s outstanding votingstock for a period of three years from the date such stockholder becomes a 15%owner.  These provisions may have theeffect of delaying or preventing a change of control of us without action by ourstockholders and, therefore, could adversely affect the value of our commonstock.

 

Furthermore, in the event of our merger or consolidationwith or into another corporation, or the sale of all or substantially all ofour assets in which the successor corporation does not assume outstandingoptions or issue equivalent options, our board of directors is required toprovide accelerated vesting of outstanding options.

*** ***

***Increasing political andsocial turmoil, such as terrorist and military actions, increase the difficultyfor us and our strategic partners to forecast accurately and plan futurebusiness activities.***

 

Recent political and social turmoil, can be expected to putfurther pressure on economic conditions in the United States andworldwide.  These political, social andeconomic conditions may make it difficult for us to plan future businessactivities.

 

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**Risks Related to Our Common Stock**

 

***Our management and otheraffiliates have significant control of our common stock and could significantlyinfluence our actions in a manner that conflicts with our interests and theinterests of other stockholders.***

 

As of December 31, 2008, our executive officers,directors and affiliated entities together beneficially own approximately 59.4%of the outstanding shares of our common stock, assuming the exercise of optionsand warrants which are currently exercisable or will become exercisable within60 days of December 31, 2008, held by these stockholders. As a result,these stockholders, acting together, will be able to exercise significantinfluence over matters requiring approval by our stockholders, including theelection of directors, and may not always act in the best interests of otherstockholders.  Such a concentration ofownership may have the effect of delaying or preventing a change in control ofus, including transactions in which our stockholders might otherwise receive apremium for their shares over then current market prices.

 

***A significant portion ofour total outstanding shares of common stock may be sold in the market in thenear future, which could cause the market price of our common stock to dropsignificantly.***

 

As of December 31, 2008, we had 19,027,719 shares ofour common stock issued and outstanding, of which approximately 5,319,639shares are registered pursuant to registration statements on Form S-3 andthe remainder of which are either eligible to be sold under SEC Rule 144or are in the public float.  In addition,we have registered 2,632,194 shares of our common stock underlying warrantspreviously issued on the Form S-3 registration statement and we registered6,000,000 shares of our common stock underlying options granted or to begranted under our stock option plan. Consequently, sales of substantial amounts of our common stock in thepublic market, or the perception that such sales could occur, may have amaterial adverse effect on our stock price.

 

***Our common stock has alimited trading market, which could limit your ability to resell your shares ofcommon stock at or above your purchase price.***

 

Our common stock is quoted on the NYSE Alternext US Exchangeand currently has a limited trading market. The NYSE Alternext US Exchange requires us to meet minimum financialrequirements in order to maintain our listing. We currently believe that we meet the continued listing requirements ofthe NYSE Alternext US Exchange.  However,we cannot assure you that we will continue to meet such standards.  If we do not meet the continued listingstandards, we could be delisted.  Wecannot assure you that an active trading market will develop or, if developed,will be maintained.  As a result, ourstockholders may find it difficult to dispose of shares of our common stockand, as a result, may suffer a loss of all or a substantial portion of theirinvestment.

 

***If our common stock isdelisted from the NYSE Alternext US Exchange, we may not be able to list on anyother stock exchange, and our common stock may be subject to the “penny stock”regulations, which may affect the ability of our stockholders to sell theirshares.***

 

The NYSE Alternext US Exchange requires us to meet minimum financialrequirements in order to maintain our listing. As of December 31, 2008, we believe that we continue to be incompliance with the NYSE Alternext US Exchange’s continued listingrequirements.  However,

 

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if we are unable to continue to bein compliance with the continued listing requirements, it is possible that wewill be delisted.  If we are delistedfrom the NYSE Alternext US Exchange, our common stock likely will become a “pennystock”.  In general, regulations of theSEC define a “penny stock” to be an equity security that is not listed on anational securities exchange or the NASDAQ Stock Market and that has a marketprice of less than $5.00 per share or with an exercise price of less than $5.00per share, subject to certain exceptions. If our common stock becomes a penny stock, additional sales practicerequirements would be imposed on broker-dealers that sell such securities topersons other than certain qualified investors. For transactions involving a penny stock, unless exempt, a broker-dealermust make a special suitability determination for the purchaser and receive thepurchaser’s written consent to the transaction prior to the sale.  In addition, the rules on penny stocksrequire delivery, prior to and after any penny stock transaction, ofdisclosures required by the SEC.

 

If our stock is not accepted for listing onthe NYSE Alternext US Exchange, we will make every possible effort to have itlisted on the Over the Counter Bulletin Board, or the OTC Bulletin Board.  If our common stock were to be traded on theOTC Bulletin Board, the Securities Exchange Act of 1934, as amended, andrelated SEC rules would impose additional sales practice requirements onbroker-dealers that sell our securities. These rules may adversely affect the ability of stockholders tosell our common stock and otherwise negatively affect the liquidity, tradingmarket and price of our common stock.

 

We believe that the listing of our commonstock on a recognized national trading market, such as the NYSE Alternext USExchange, is an important part of our business and strategy.  Such a listing helps our stockholders byproviding a readily available trading market with current quotations.  Without that, stockholders may have adifficult time getting a quote for the sale or purchase of our stock, the saleor purchase of our stock would likely be made more difficult and the tradingvolume and liquidity of our stock would likely decline.  The absence of such a listing may adverselyaffect the acceptance of our common stock as currency or the value accorded itby other parties.  In that regard, theabsence of a listing on a recognized national trading market will also affectour ability to benefit from the use of our operations and expansion plans,including for use in licensing agreements, joint ventures, the development ofstrategic relationships and acquisitions, which are critical to our businessand strategy and none of which is currently the subject of any agreement,arrangement or understanding, with respect to any future financing or strategicrelationship it may undertake.  Adelisting from the NYSE Alternext US Exchange could result in negative publicityand could negatively impact our ability to raise capital in the future.

 

***The market price of ourcommon stock may fluctuate and may drop below the price you paid.***

 

We cannot assure you that you will be able to resell theshares of our common stock at or above your purchase price.  The market price of our common stock mayfluctuate significantly in response to a number of factors, some of which arebeyond our control.  These factorsinclude:

·      quarterly variations in operating results;

·                  the progress or perceivedprogress of our research and development efforts;

·      changes in accounting treatments orprinciples;

·                  announcements by us or ourcompetitors of new technology, product and service offerings, significantcontracts, acquisitions or strategic relationships;

·      additions or departures of key personnel;

 

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·      future offerings or resales of our commonstock or other securities;

·                  stock market price and volumefluctuations of publicly-traded companies in general and development companiesin particular; and

·      general political, economic and marketconditions.

 

***Because we do not intendto 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 unlessthe value of our common stock appreciates and they sell their shares.***

 

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

 

***Our stockholders mayexperience substantial dilution as a result of the conversion of outstandingconvertible debentures, or the exercise of options and warrants to purchase ourcommon stock.***

 

As of December 31, 2008, we have grantedoptions outside of our stock option plan to purchase 10,000 shares of ourcommon stock and outstanding warrants to purchase 19,555,584 shares of ourcommon stock.  In addition, as of December 31, 2008, we have reserved5,137,200 shares of our common stock for issuance upon the exercise of optionsgranted pursuant to our stock option plan, all of which may be granted in thefuture.  The exercise of these options and warrants will result indilution to our existing stockholders and could have a material adverse effecton our stock price. In addition, any shares issued in connection with the YAGlobal financing or Stanford Financing, as further discussed elsewhere in this Form 10-Q,can also have a dilutive effect and a possible material adverse effect on ourstock price.  The conversion price of thewarrants are also subject to certain anti-dilution adjustments.  The agreements with YA Global and Stanfordprovide for the potential issuance of up to a total of 61,833,332 shares of ourcommon stock, of which 13,883,332 shares are included in outstanding warrantsnoted above.

 

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**Item 4.            Submission ofMatters to a Vote of Security Holders.**

 

(a)          Our annual meeting of stockholders was held on December 18,2008.

 

(b)         The following is a complete list of our directors asof December 18, 2008, each of whom was elected to a one-year term at themeeting, and whose term of office continued after the meeting.

 

Rudolf Stalder

Bruce C. Galton

John E. Thompson, Ph.D.

Christopher Forbes

Thomas C. Quick

David Rector

John N. Braca

Jack Van Hulst

Harlan W. Waksal, M.D.

 

(c)          There were 14,259,653 shares of common stock presentat the meeting in person or by proxy, out of a total number of 18,573,183shares of common stock issued and outstanding and entitled to vote at themeeting.

 

The proposals and results of the vote of thestockholders taken at the meeting by ballot and by proxy as solicited by us onbehalf of our Board of Directors were as follows:

 

(A)                              For the election of the nominees for our Board ofDirectors:

 
| **Nominee**              | ** ** | **For**    | ** ** | **Withheld** | ** ** |
|--------------------------|------------|------------|------------|--------------|------------|
| Rudolf Stalder           |       | 13,755,437 |       | 504,216      |       |
| Bruce C. Galton          |       | 12,781,048 |       | 1,478,605    |       |
| John E. Thompson,  Ph.D. |       | 13,920,478 |       | 339,175      |       |
| Christopher Forbes       |       | 13,960,278 |       | 299,375      |       |
| Thomas C. Quick          |       | 13,862,062 |       | 397,591      |       |
| David Rector             |       | 13,920,478 |       | 339,175      |       |
| John N. Braca            |       | 13,920,478 |       | 339,175      |       |
| Jack Van Hulst           |       | 13,808,893 |       | 450,760      |       |
| Harlan W. Waksal,  M.D.  |       | 13,920,478 |       | 339,175      |       |

 

(B)                                To (i) approve the Senesco Technologies, Inc.2008 Incentive Compensation Plan and (ii) the increase of the number ofshares of common stock reserved for issuance thereunder:

 
| **For**   | ** ** | **Against** | ** ** | **Abstain** | ** ** | **Broker Non-Votes** | ** ** |
|-----------|------------|-------------|------------|-------------|------------|---------------------------|------------|
| 6,735,907 |       | 1,469,766   |       | 95,036      |       | 5,958,944                 |       |

 

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**Item 5.            Other Information**

 

As of October 24, 2008, Harlan W. Waksal, M.D. was appointed to our board of directors, increasing the board from eight members to nine members.

 

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| **Item 6.** |   | **Exhibits.**                                                                                                                                                      |
|-------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |   |                                                                                                                                                               |
|        |   | Exhibits.                                                                                                                                                          |
|        |   |                                                                                                                                                               |
| 10.1*       |   | 2008 Incentive Compensation Plan (filed  herewith)                                                                                                                 |
| 31.1        |   | Certification of principal executive  officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  (filed herewith)                                    |
| 31.2        |   | Certification of principal financial and  accounting officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002. (filed herewith)                     |
| 32.1        |   | Certification of principal executive  officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18  U.S.C. 1350. (furnished herewith)                |
| 32.2        |   | Certification of principal financial and  accounting officer pursuant to Section 906 of the Sarbanes-Oxley Act of  2002, 18 U.S.C. 1350. (furnished herewith) |

 

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* Compensation Plan andarrangements for current and former executive officers and directors.

 

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**SIGNATURES**

 

In accordance with the requirements of the Securities Exchange Act of1934, the registrant caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.

 
|                         | SENESCO TECHNOLOGIES, INC. |
|------------------------------|----------------------------|
|                         |                       |
|                         |                       |
| DATE: February 17, 2009 | By:                        |  /s/  Bruce C. Galton |
|                         |                       | Bruce C. Galton, President |
|                         |                       | and Chief Executive Officer |
|                         |                       | (Principal Executive Officer) |
|                         |                       |   |
|                         |                       |   |
| DATE: February 17, 2009 | By:                        |  /s/  Joel Brooks |
|                         |                       | Joel Brooks, Chief Financial Officer |
|                         |                       | and Treasurer |
|                         |                       | (Principal Financial and Accounting  Officer) |

 

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