UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

(Mark One)

Commission File No. 001-31326

SENESCO TECHNOLOGIES, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)

(732) 296-8400

(Issuer’s Telephone Number, Including Area Code)

Check whether the Issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

State the number of shares outstanding of each of the Issuer’s classes of common stock, as of May 11, 2005:

Transitional Small Business Disclosure Format (check one):

SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY

TABLE OF CONTENTS

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PART I.  FINANCIAL INFORMATION.

Item 1.                                   Financial Statements.

Certain information and footnote disclosures required under generally accepted accounting principles have been condensed or omitted from the following consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission.  However, Senesco Technologies, Inc., a Delaware corporation, and its wholly owned subsidiary, Senesco, Inc., a New Jersey corporation (collectively, “Senesco” or the “Company”), believe that the disclosures are adequate to assure that the information presented is not misleading in any material respect.

The results of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for the entire fiscal year.

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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEET

See Notes to Condensed Consolidated Financial Statements.

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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

See Notes to 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, 1998 THROUGH MARCH 31, 2005
(unaudited)

(continued)

See Notes to Condensed Consolidated Financial Statements.

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(continued)

See Notes to Condensed Consolidated Financial Statements.

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See Notes to Condensed Consolidated Financial Statements.

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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)

See Notes to Condensed Consolidated Financial Statements.

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SENESCO TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1 - Basis of Presentation:

The financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations.  These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-KSB for the fiscal year ended June 30, 2004.

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting solely of those which are of a normal recurring nature, necessary to present fairly its financial position as of March 31, 2005, the results of its operations for the three-month and nine-month periods ended March 31, 2005, cash flows for nine-month periods ended March 31, 2005 and 2004, the results of its operations and cash flows for the period from inception on July 1, 1998 through March 31, 2005.

Interim results are not necessarily indicative of results for the full fiscal year.

Note 2 - Loss Per Share:

Net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period.  As of March 31, 2005 and 2004, shares to be issued upon the exercise of options and warrants aggregating 7,050,211 and 7,077,486 respectively, at an average exercise price of $2.88 and $2.81, respectively, are not included in the computation of diluted loss per share as the effect is anti-dilutive.

Note 3 - Stock Options and Warrants:

The Company applies APB Opinion No. 25 and related interpretations in accounting for its stock option plan.  Options to purchase Common Stock have been granted at or above the fair market value of the stock as of the date of grant.  Accordingly, no compensation costs have been recognized for the stock option plan.  Had compensation cost been determined based on the fair value at the grant dates for those awards consistent with the method of FASB No. 123, the Company’s net loss and net loss per share would have been increased to the pro forma amounts indicated below:

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The estimated grant date present value reflected in the above table is determined using the Black-Scholes model.  The material factors incorporated in the Black-Scholes model in estimating the value of the options reflected in the above table for the three-month and nine-month periods ended March 31, 2005 and 2004 include the following:  (i) an estimated life of 5 and 10 years; (ii) a risk-free rate range of 3.30% to 4.19% and 3.80% to 4.24%, respectively, that represents the interest rate on a U.S. Treasury security with a maturity date corresponding to that of the option term; (iii) volatility of 111.0% and 147.8%, respectively; and (iv) no annualized dividends paid with respect to a share of Common Stock at the date of grant.  The ultimate values of the options will depend on the future price of the Company’s Common Stock, which cannot be forecast with reasonable accuracy.

In December 2004, and as amended in April 2005, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment,” which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. A key provision of this statement is the requirement of a public entity to measure the cost of employee services received in exchange for an award of equity instruments (including stock options) based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award (i.e., the requisite service period or vesting period). The Company anticipates applying the standard beginning July 1, 2005. The table above reflects the estimated impact that such a change in accounting treatment would have had on the Company’s

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net income and net income per share if it had been in effect during the three and nine month periods ended March 31, 2005 and 2004.

Note 4 – Revenue Recognition:

The Company receives certain nonrefundable upfront fees in exchange for the transfer of its technology to licensees.  Upon delivery of the technology, the Company has no further obligations to the licensee with respect to the basic technology transferred and, accordingly, recognizes revenue at that time.  The Company may, however, receive additional payments from its licensees in the event such licensees achieve certain development or commercialization milestones in their particular field of use.  Other nonrefundable upfront fees and milestone payments, where the milestone payments are a function of time as opposed to achievement of specific achievement-based milestones, are deferred and amortized ratably over the estimated research period of the license.

Note 5 – Significant Events:

On January 3, 2005, the Company terminated the Collaboration Agreement with Anawah, Inc.  Under the terms of the agreement, Senesco will retain its exclusive license to Anawah’s DHS Gene Mutation technology for the selected gene target in the specific field of use.

Note 6 – Subsequent Event:

On May 9, 2005, the Company completed a private placement to certain institutional and accredited investors (the “Private Placement”) for an aggregate amount of 1,595,651 shares of Common Stock and warrants to purchase 797,836 shares of Common Stock for the aggregate cash consideration of $3,366,829.  The Private Placement offered units of one share of Common Stock and a five-year warrant to purchase 0.50 shares of Common Stock at a price equal to $2.11 per unit.  The warrants were issued at an exercise price equal to $3.38 per share, with such warrants vesting on the date of grant.  The estimated costs associated with the Private Placement totaled approximately $400,000.  In addition, the Company entered into a Registration Rights Agreement with these purchasers.  The Registration Rights Agreement requires the Company to file a registration statement on Form S-3 for the shares within 30 days of the closing date, and to have such registration statement declared effective within 90 days of the closing date to register the securities acquired by the purchasers in the Private Placement.  If the Company fails to file a registration statement or have such registration statement declared effective by those dates, it is required to pay to each purchaser in the Private Placement 1.5% of the aggregate purchase price paid by such purchaser.

Oppenheimer & Co. Inc. acted as the placement agent for the Private Placement.  As consideration for their services to the Company, Oppenheimer was issued warrants to purchase 167,544 shares of Common Stock, on the same terms and conditions as the warrants issued to the purchasers in the Private Placement.

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Item 2.                                   Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes thereto included in the Quarterly Report on Form 10-QSB.  The discussion and analysis may contain forward-looking statements that are based upon current expectations and entail various risks and uncertainties.  Our actual results and the timing of events could differ materially from those anticipated 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

We are a development stage biotechnology company whose mission is to utilize its patented and patent-pending genes, primarily DHS, Factor 5A and Lipase, to:

•                  enhance the quality and productivity of fruits, flowers, vegetables and agronomic crops through the control of cell death in plants, referred to as senescence;

•                  develop novel approaches to treat inflammatory and / or programmed cell death diseases in humans, referred to as apoptosis, such as rheumatoid arthritis, Crohn’s disease, glaucoma, or heart disease, which are the result of inflammation and / or premature apoptosis; and

•                  develop novel approaches to treat cancer, a group of diseases in which apoptosis does not occur normally.

Agricultural results to date include:

•                  longer shelf life of perishable produce;

•                  increased seed and biomass yield;

•                  greater tolerance to environmental stresses, such as drought; and

•                  greater tolerance to certain fungal diseases.

Human health results to date include:

•                  determining the expression of our patent-pending genes in both ischemic and non-ischemic heart tissue;

•                  correlating such genes to certain key immune regulators, known as cytokines, that have been found to be involved in apoptosis;

•                  reducing cytokine induced apoptosis in human optic nerve cell lines and in human epithelial cell lines of the intestine;

•                  inducing apoptosis, while retarding cell proliferation, in both human cancer cell lines derived from tumors and in lung tumors in mice which have the same genetic defect that can cause lung cancer in humans;  and

•                  increasing the survival rate in mice in which sepsis has been induced by a lethal injection of LPS.

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Our preliminary research reveals that DHS and Factor 5A genes regulate apoptosis in human cells.  We have shown that there are multiple, functionally distinct, isoforms of Factor 5A.  In humans, there are two different isoforms of Factor 5A: the apoptosis isoform, which carries out cell death and the growth isoform, which carries out cell proliferation. We believe that our Factor 5A technology may have potential application as a means for controlling a broad range of apoptotic diseases, both inflammatory/ischemic diseases and cancers. We have commenced preclinical in-vivo and in-vitro research to determine Factor 5A’s ability to regulate key execution genes, inflammatory cytokines, receptors, and transcription factors which are implicated in numerous apoptotic diseases.

We believe that our technology’s downregulation of the cell death isoform of Factor 5A may have potential application as a means for controlling a broad range of diseases that are attributable to either premature apoptosis, ischemia, or inflammation. Apoptotic diseases include neurodegenerative diseases, ocular diseases, such as glaucoma, heart disease, and certain inflammatory diseases such as Crohn’s disease, sepsis and rheumatoid arthritis, among others.  We have commenced preclinical research on a variety of these diseases. Using siRNAs against the apoptosis isoform of Factor 5A to inhibit its expression, we have reduced pro-inflammatory cytokine formation and formation of receptors for LPS, interferon gamma and TNF-alpha.   In-vitro experiments have shown that siRNAs against Factor 5A protected human lamina cribrosa (optic nerve) and colon epithelial (HT-29) cells from TNF alpha induced apoptosis.  In-vivo mouse studies have shown that the siRNAs against Factor 5A (i) protect thymocyte cells from apoptosis and decreases formation of myeloperoxidase, TNF, MIP-1alpha, and IL-1 in the lungs of mice challenged with LPS; and (ii) increases the survival rate in which sepsis had been induced by a lethal injection of LPS.  We have also determined that inhibiting the apoptosis isoform of Factor 5A downregulates NFkB and JAK1 and decreases the inflammatory cytokines formed through the NFkB and JAK/STAT pathways.  The siRNAs against Factor 5A are currently being tested in several preclinical in-vivo inflammatory disease models.

We have established in preclinical studies that upregulation of the apoptosis Factor 5A isoform carries out cell death in cancer cells through both the p53 (intrinsic) and cell death receptor (extrinsic) immune pathways. Tumors arise when cells that have been targeted by the immune system to undergo apoptosis are unable to do so because of an inability to activate the apoptotic pathways. Since the Factor 5A gene appears to function at the initiation point of the apoptotic pathways, we believe that our gene technology may have potential application as a means of combating a broad range of cancers and have initiated studies with in-vivo cancer models to determine Factor 5A’s ability to selectively cause cell death in human tumors grafted onto mice. We have found that upregulating the apoptosis isoform results in upregulation of p53, inflammatory cytokine production, increased cell death receptor formation, and caspase activity. These features, coupled with a simultaneous downregulation of bcl-2 and telomerase, result in apoptosis of cancer cells, while normal cells do not show any signs of irregular apoptosis or toxicity.

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Human Health Applications

We are currently working on certain ocular diseases, lung cancer, bladder cancer, multiple myeloma, Crohn.s disease, viral replication, lung and other organ inflammation and sepsis.

In April 2005, we reported on a preclinical lethal sepsis mouse study we conducted in which our Factor 5A inhibition technology was tested. The results revealed that the survival rate of the treated mice ranged from 20-100% depending on the dosing regimen and the strain of mouse utilized. None of the untreated mice survived. Based on these results, future experiments will focus on determining the mechanism of survival enhancement, examining the cytokine profile and ascertaining the most effective dosing and route of administration.

In April 2004, we reported on a preclinical study that had shown that Factor 5A induced apoptosis in lung cancer tumors of mice, while healthy tissue remained unaffected.  We conducted this study using mice with the same genetic defect that causes lung cancer in humans.  The mice spontaneously develop lung tumors due to this defect.  Factor 5A, without any targeted delivery technologies, was injected into the blood stream of the mice, and the lung tissue was subsequently analyzed for apoptosis.  The data from this study reveal that lung tumor cells underwent cell death, while the surrounding healthy tissue was unaffected.  There was no evidence of systemic toxicity in the mice as evidenced by no weight loss, mortality or any signs of abnormal apoptosis in any of the vital organs.  This study has recently been successfully repeated with testing taking place over an extended period of time.  Additional studies are planned in which dosing and delivery mechanisms will be addressed.

Agricultural Applications

We are currently working with lettuce, turfgrass, tomato, canola, Arabidopsis (a model plant that is similar to canola), banana, alfalfa, and certain species of trees and bedding plants, and we have obtained proof of concept for the use of the Factor 5A, DHS and lipase genes in several of these plants.  We have ongoing field trials of trees, lettuce and bananas with our respective partners.  The first round of lettuce field trials showed that our technology effectively reduces browning in cut lettuce.  The first and second round of banana field trials have shown that our technology extends the shelf life of banana fruit by 100%.  In addition to the shelf life benefits, field trials conducted during the 2004-2005 winter generated encouraging disease resistance data, specific to Black Sigatoka (Black Leaf Streak Disease), for banana plants.  Commercialization may require a combination of traits in a crop, such as both shelf life and disease resistance, or other traits.  Our near-term research and development initiatives include silencing or reducing the expression of DHS and Factor 5A genes in these plants and propagation and testing of plants with our silenced genes.

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Research Program

We do not expect to generate significant revenues for approximately the next one to three years, during which time we will engage in significant research and development efforts.  We expect to spend significant amounts on the research and development of our technology.  We also expect our research and development costs to increase as we continue to develop and ultimately commercialize our technology.  However, the successful development and commercialization of our technology is highly uncertain.  We cannot reasonably estimate or know the nature, timing and expenses of the efforts necessary to complete the development of our technology, or the period in which material net cash inflows may commence from the commercialization of our technology, including the uncertainty of:

•                                          the scope, rate of progress and expense of our research activities;

•                                          the interim results of our research;

•                                          the expense of additional research that may be required after review of the interim results;

•                                          the terms and timing of any collaborative, licensing and other arrangements that we may establish;

•                                          the expense and timing of regulatory approvals;

•                                          the effect of competing technological and market developments; and

•                                          the expense of filing, prosecuting, defending and enforcing any patent claims or other intellectual property rights.

Patent and Patent Applications

To date, we have been granted six patents by the United States Patent and Trademark Office, or PTO, five of which are for use of our technology in agricultural applications and one of which relates to human health applications.

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

Commercialization Strategy

We presently license our technology to agricultural companies capable of incorporating our technology into crops grown for commercial agriculture.  We anticipate revenues from these relationships in the form of licensing fees and royalties from our partners, usage fees in the case of the agreement with the Broin Company, or sharing gross profits in the case of the joint venture with Rahan Meristem.  In addition, we anticipate payments from our partners upon our achievement of certain

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research and development benchmarks.  This commercialization strategy allows us to generate revenue at various stages of product development, while ensuring that our technology is incorporated into a wide variety of crops.  Our optimal partners combine the technological expertise to incorporate our technology into their product line along with the ability to successfully market the enhanced final product, thereby eliminating the need for us to develop and maintain a sales force.  Through March 31, 2005, we have entered into five license and development agreements and one joint venture with established agricultural biotechnology companies.  Generally, projects with our license and joint venture partners begin by transforming seed or germplasm to incorporate our technology.  Those seeds or germplasm are then grown in a greenhouse.  After greenhouse trials, the plants are then transferred to the field.  The amount of time spent on each development phase depends on the crop, its growth cycle and the success of the transformation achieving the desired results.  The timeline below highlights the stage of development we are in for each of our respective licenses and joint venture:

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

In November 2002, we executed a non-binding letter of intent with the Tianjin Academy of Agricultural Sciences for the exclusive use of our technology in a large variety of fruit and vegetable crops in China.  Discussions were held with representatives of the Academy as well as government representatives from the city of Tianjin and from the central government of China.  We also initiated discussions with several Asian biotechnology companies to secure the financing for the proposed agreement with the Academy and to commercialize the seeds developed with our technology under the proposed license.  Because of the number of crops the Academy has expressed interest in, the letter of intent called for significant licensing and milestone fees to be paid to us by a commercial partner if the project was successful.  The size of the proposed financial terms in the letter of intent has made attracting such a commercial

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partner difficult.  As such, we have asked the Academy to reduce the number of crops selected so that the financial terms may correspondingly be reduced.  Because of the long effort to assist the Academy in finding an appropriate commercial partner, we have shifted our focus to Asian companies that could directly commercialize our technology without government or research academy involvement.  Such discussions with Asian companies are currently in process; however, we cannot assure you that any final agreements may be consummated.

We plan to employ the same partnering strategy in both the human health and agricultural target markets.  Our preclinical research has yielded data that we have presented to various biopharmaceutical companies that may be prospective licensees for the development and marketing of potential applications of our technology.  Consistent with our commercialization strategy, we intend to attract other companies interested in strategic partnerships or licensing our technology, which may result in additional license fees, revenues from contract research and other related revenues.  Successful future operations will depend on our ability to transform our research and development activities into commercializable technology.

Factors That May Affect Our Business, Future Operating Results and Financial Condition

The more prominent risks and uncertainties inherent in our business are described below. However, additional risks and uncertainties may also impair our business operations.  If any of the following risks actually occur, our business, financial condition or results of operations may suffer.

Risks Related to our Business

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

We are a development stage biotechnology company with a limited operating history and limited assets and capital.  We have incurred losses each year since inception and have an accumulated deficit of $14,292,237 at March 31, 2005.  We have generated minimal revenues by licensing certain of our technology to companies willing to share in our development costs. However, our technology may not be ready for widespread commercialization for several years. We expect to continue to incur losses over the next two to three years because we anticipate that our expenditures on research and development, commercialization and administrative activities will significantly exceed our revenues during that period. We cannot predict when, if ever, we will become profitable.

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

Our primary business is the development and commercial exploitation of technology to identify, isolate, characterize and silence genes which control the death of cells in plants and humans.  Our future revenue and profitability critically depend upon our ability to successfully develop senescence and apoptosis gene technology and later market and license such technology at a profit.  We have conducted experiments on certain crops with favorable results and have

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conducted certain preliminary cell-line and animal experiments, which have provided us with data upon which we have designed additional research programs. However, we cannot give any assurance that our technology will be commercially successful or economically viable for any crops or human health applications.

In addition, no assurance can be given that adverse consequences might not result from the use of our technology such as the development of negative effects on plants or humans or reduced benefits in terms of crop yield or protection.  Our failure to obtain market acceptance of our technology or to successfully commercialize such technology or develop a commercially viable product would have a material adverse effect on our business.

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

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

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

As of March 31, 2005, we had cash and highly-liquid investments valued at $2,286,473 and working capital of $2,007,393.  In May 2005, we received aggregate net proceeds of approximately $2,966,000 from a private placement of our equity securities.  Using our available reserves as of March 31, 2005 and the net proceeds from the private equity financing, we believe that we can operate according to our current business plan for at least the next twelve months.  To date, we have generated minimal revenues and anticipate that our operating costs will exceed any revenues generated over the next several years.  Therefore, we may be required to raise additional capital in the future in order to operate according to our current business plan, and this funding may not be available on favorable terms, if at all.  In addition, in connection with any funding, if we need to issue more equity securities than our certificate of incorporation currently authorizes, or more than 20% of the shares of our common stock outstanding, we may need stockholder approval.  If stockholder approval is not obtained or if adequate funds are not available, we may be required to curtail operations significantly or to obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain of our technologies, product candidates, products or potential markets. Investors may experience dilution in their investment from future offerings of our common stock. For example, if we raise additional capital by issuing equity securities, such an issuance would reduce the percentage ownership of existing stockholders.  In addition, assuming the exercise of all options and warrants outstanding, as of March 31, 2005, we had 9,078,052 shares of common stock authorized but unissued, which may be issued from time to time by our board of directors without stockholder approval.  In connection with our private placement of equity securities, in

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May 2005, we issued an aggregate of an additional 1,595,651 shares of common stock and warrants to purchase 965,380 shares of common stock.  Therefore, assuming the exercise of all options and warrants granted as of May 9, 2005 we had 6,517,021 shares of common stock authorized but unissued, which may be issued from time to time by our board of directors without stockholder approval. Furthermore, we may need to issue securities that have rights, preferences and privileges senior to our common stock.  Failure to obtain financing on acceptable terms would have a material adverse effect on our liquidity.

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

•                  the scope of our research and development;

•                  our ability to attract business partners willing to share in our development costs;

•                  our ability to successfully commercialize our technology;

•                  competing technological and market developments;

•                  our ability to enter into collaborative arrangements for the development, regulatory approval and commercialization of other products; and

•                  the cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights.

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

As a result of the substantial length of time and expense associated with developing products and bringing them to the marketplace in the agricultural and biotechnology industries, obtaining and maintaining patent and trade secret protection for technologies, products and processes is of vital importance.  Our success will depend in part on several factors, including, without limitation:

•                  our ability to obtain patent protection for our technologies and processes;

•                  our ability to preserve our trade secrets; and

•                  our ability to operate without infringing the proprietary rights of other parties both in the United States and in foreign countries.

We have been issued six patents by the U.S. Patent and Trademark Office, or PTO.  We have also filed patent applications for our technology in the United States and in several foreign countries, which technology is vital to our primary business, as well as several Continuations in Part on these patent applications.  Our success depends in part upon the grant of patents from our pending patent applications.

Although we believe that our technology is unique and will not violate or infringe upon the proprietary rights of any third party, we cannot assure you that these claims will not be made or if made, could be successfully defended against.  If we do not obtain and maintain patent protection, we may face increased competition in the United States and internationally, which would have a material adverse effect on our business.

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Since patent applications in the United States are maintained in secrecy until patents are issued, and since publication of discoveries in the scientific and patent literature tend to lag behind actual discoveries by several months, we cannot be certain that we were the first creator of the inventions covered by our pending patent applications or that we were the first to file patent applications for these inventions.

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

•                  our patent applications will result in the issuance of patents;