What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-14 compared with 2020-11-13 · 1645 added, 1520 removed, 130 unchanged (96% of the section changed)

Financial Statements

BALANCE SHEETS

thousands, except shares and per share data)

September 30,

receivable trade, net

receivable-other

SENESTECH, INC.

CONDENSED BALANCE SHEETS

(In thousands, except shares and per share data)

Current assets:

to use asset-operating leases

and equipment, net

AND STOCKHOLDERS’

Accounts receivable trade, net

Prepaid expenses

Total current assets

Right to use asset-operating leases

Property and equipment, net

LIABILITIES AND STOCKHOLDERS’

Current liabilities:

lease liability

and contingencies (See note 12)

Stockholders’

stock, $0.001 par value, 100,000,000 shares authorized, 3,398,832 and 1,414,671 shares issued and outstanding at September

30, 2020 and December 31, 2019, respectively

paid-in capital

Short-term debt

Accounts payable

Accrued expenses

Total current liabilities

Long-term debt, net

Operating lease liability

Total liabilities

Commitments and contingencies (See note 12)

Stockholders’

liabilities and stockholders’

accompanying notes to financial statements.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

thousands, except shares and per share data)

Common stock, $0.001 par value, 100,000,000 shares authorized, 12,164,046 and 5,099,512 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated deficit

Total stockholders’

Total liabilities and stockholders’

See accompanying notes to financial statements.

SENESTECH, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except shares and per share data)

For the Three Months

For the Nine Months

and development

general and administrative

Ended March 31,

Cost of sales

Operating expenses:

operating loss

income (expense):

income (expense)

Research and development

Selling, general and administrative

Total operating expenses

Net operating loss

Other income (expense):

loss and comprehensive loss

dividend-warrant price protection-revaluation adjustment

loss attributable to common shareholders

average common shares outstanding - basic and fully diluted

loss per common share - basic and fully diluted

accompanying notes to financial statements.

STATEMENTS OF CHANGES IN STOCKHOLDERS’

Interest income

Interest expense

Total other income

Net loss and comprehensive loss

Deemed dividend-warrant price protection-revaluation adjustment

Net loss attributable to common shareholders

Weighted average common shares outstanding - basic and fully diluted

Net loss per common share - basic and fully diluted

See accompanying notes to financial statements.

SENESTECH, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’

EQUITY (DEFICIT)

thousands, except shares and per share data)

The Three Months Ended September 30, 2019 and 2020

(In thousands, except shares and per share data)

For The Three Months Ended March 31,

2020 and 2021

Stockholders’

June 30, 2019

of common stock, sold for cash, net

of common stock for services

of common stock upon exercise of warrants

for employee withholding taxes related to share-based awards

for the three months ended June 30, 2019

September 30, 2019

June 30, 2020

expenses for June share offering

for the three months ended June 30, 2020

September 30, 2020

The Nine Months Ended September 30, 2019 and 2020

December 31, 2018

of common stock, sold for cash, net

of common stock for services

of common stock upon exercise of warrants

of common stock upon exercise of stock options

for employee withholding taxes related to share-based awards

for the six months ended June 30, 2019

September 30, 2019

December 31, 2019

of common stock for services

of common stock upon exercise of warrants

of common stock, sold for cash, net

antidilution price protection adjustment

of common stock for fractional shares-20-1 reverse split

for the six months ended June 30, 2020

September 30, 2020

accompanying notes to financial statements.

STATEMENTS OF CASH FLOWS

For the Nine Months

FLOWS FROM OPERATING ACTIVITIES

to reconcile net loss to net cash used in operating activities:

and amortization

loss on sale of equipment

decrease in current assets:

receivable - trade

receivable - other

(decrease) in current liabilities:

cash used in operating activities

FLOWS FROM INVESTING ACTIVITIES

received on sale of property and equipment

of property and equipment

cash used in investing activities

FLOWS FROM FINANCING ACTIVITIES

from the issuance of common stock, net

from the issuance of notes payable

of notes payable

of finance lease obligations

from the exercise of warrants

of employee withholding taxes relating to share-based awards

cash provided by financing activities

CHANGE IN CASH

AT BEGINNING OF PERIOD

AT END OF PERIOD

INVESTING AND FINANCING ACTIVITIES:

of accrual in warrant exercise

stock issued on accrued bonus

accompanying notes to financial statements.

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

1 - Organization and Description of Business

(referred to in this report as “SenesTech,”

Equity (Deficit)

Balance, December 31, 2019

Stock based compensation

Issuance of common stock, sold for cash, net

Issuance of common stock upon exercise of warrants

Issuance costs of common stock issuances

Issuance of common stock for fractional shares-20-1 reverse split

Warrant antidilution price protection adjustment

Net loss for the three months ended March 31, 2020

Balance, March 31, 2020

Balance, December 31, 2020

Stock based compensation

Issuance of common stock, sold for cash, net

Issuance of common stock upon exercise of warrants

Issuance costs of common stock issuances

Net loss for the three months ended March 31, 2021

Balance, March 31, 2021

See accompanying notes to financial statements.

SENESTECH, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

For the Three Months

Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

Stock-based compensation

Gain on sale of equipment

(Increase) decrease in current assets:

Accounts receivable - trade

Accounts receivable - other

Prepaid expenses

Increase (decrease) in current liabilities:

Accounts payable

Accrued expenses

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Cash received on sale of property and equipment

Purchase of property and equipment

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from the issuance of common stock, net

Repayments of notes payable

Repayments of finance lease obligations

Proceeds from the exercise of warrants

Net cash provided by financing activities

NET CHANGE IN CASH

CASH AT BEGINNING OF PERIOD

CASH AT END OF PERIOD

SUPPLEMENTAL INFORMATION:

Interest paid

Income taxes paid

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Forgiveness of accrual in warrant exercise

Deemed dividend

See accompanying notes to financial statements.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 1 - Organization and Description of Business

SenesTech, Inc.

(referred to in this report

as “SenesTech,”

the “Company,”

“we”

or “us”)

was formed in July 2004 and incorporated in the state of Nevada.

The Company subsequently reincorporated in the state of Delaware

in November 2015.

Our corporate headquarters is in Phoenix, Arizona.

We have developed and are commercializing a global, proprietary

technology for managing animal pest populations, initially rat populations, through fertility control.

there are myriad tools available to control rat populations, most rely on some form of lethal method to achieve effectiveness.

Each of these solutions is inherently limited by rat species’

resilience and survival mechanisms as well as their extraordinary

rate of reproduction.

ContraPest®, our initial product, is unique in the pest control industry in attacking the reproductive

systems of both male and female rats, which our field data shows will result in a sustained reduction of the rat population.

have plagued humanity throughout history.

They pose significant threats to the health and food security of many communities.

addition, rodents cause significant product loss and damage through consumption and contamination.

Rats also cause significant

damage to critical infrastructure by burrowing beneath foundations and gnawing on electrical wiring, insulation, fire proofing

systems, electronics and computer equipment.

most prevalent solution to rat infestations is the use of increasingly powerful rodenticides.

Although these solutions provide

short term results, there are growing concerns about secondary exposure and bioaccumulation of rodenticides in the environment,

as well as concerns about rodenticides that have no antidotes.

The pest management industry and Pest Management Professionals

(“PMPs”) are being asked for new solutions that are both effective and less toxic.

Our goal is to provide customers

with not only a solution to combat their most difficult rat problems, but also offer a non-lethal option to serve customers that

are looking to decrease or remove the amount of rodenticide used in their pest control programs.

is a liquid bait containing the active ingredients 4-vinylcyclohexene diepoxide (“VCD”) and triptolide.

limits reproduction of male and female rats beginning with the first breeding cycle following consumption.

ContraPest is being

marketed for use in controlling Norway and roof rat populations.

began the registration process with the United States Environmental Protection Agency (the “EPA”) for ContraPest on

August 23, 2015.

On August 2, 2016, the EPA granted an unconditional registration for ContraPest as a Restricted Use Product (“RUP”),

due to the need for applicator expertise for deployment.

or “us”) has developed and is commercializing

a global, proprietary technology for managing animal pest populations, initially rat populations, through fertility control.

Although there are myriad tools available

to control rat populations, most rely on some form of lethal method to achieve effectiveness.

Each of these solutions is inherently

limited by rat species’

resilience and survival mechanisms as well as their extraordinary rate of reproduction.

ContraPest®,

our initial product, is unique in the pest control industry in attacking the reproductive systems of both male and female rats,

which our field data shows results in a sustained reduction of the rat population.

Rats have plagued humanity throughout history.

They pose significant threats to the environment and to the health and food security of many communities.

In addition, rodents

cause extensive product loss and damage through consumption and contamination.

Rats also cause significant damage to critical infrastructure

by burrowing beneath foundations and gnawing on electrical wiring, insulation, fire proofing systems, electronics and computer

The most prevalent solution to rat infestations

is the use of increasingly powerful rodenticides.

Although these solutions provide short term results, there are growing concerns

about secondary exposure and bioaccumulation of rodenticides in the environment, as well as concerns about rodenticides that have

no antidotes.

The pest management industry and Pest Management Professionals (“PMPs”) are being asked for new solutions

that are both effective and less toxic.

Our goal is to provide customers with not only a solution to combat their most difficult

rat problems, but also offer an effective, non-lethal option to serve customers that are looking to decrease or remove the amount

of rodenticide used in their pest control programs.

ContraPest is a liquid bait containing

the active ingredients 4-vinylcyclohexene diepoxide (“VCD”) and triptolide.

ContraPest limits reproduction of male

and female rats beginning with the first breeding cycle following consumption.

ContraPest is being marketed for use in controlling

Norway and roof rat populations.

SenesTech began the registration process

with the United States Environmental Protection Agency (the “EPA”) for ContraPest on August 23, 2015.

2016, the EPA granted an unconditional registration for ContraPest as a Restricted Use Product (“RUP”), due to the

need for applicator expertise for deployment.

On October 18, 2018, the EPA approved the removal of the RUP designation.

We believe ContraPest is the first and only non-lethal, fertility control product approved by the EPA for the management of rodent

addition to the EPA registration of ContraPest in the United States, ContraPest must obtain registration from the various state

regulatory agencies prior to selling in each state.

We have received registration for ContraPest in all 50 states and the District

of Columbia, 47 of which have approved the removal of the RUP designation.

expect to continue to pursue regulatory approvals and amendments to the existing U.S.

registration for ContraPest, and if ContraPest

begins to generate sufficient revenue, regulatory approvals for additional jurisdictions beyond the United States.

cases, our EPA and state registrations require completion of testing and certifications even though we have received approval

for the product or its labelling.

ContraPest is the first and only non-lethal, fertility control product approved by the EPA for the management of rodent populations.

In addition to the EPA registration of

ContraPest in the United States, ContraPest must obtain registration from the various state regulatory agencies prior to selling

in each state.

We have received registration for ContraPest in all 50 states and the District of Columbia, 48 of which have approved

the removal of the RUP designation.

We expect to continue to pursue regulatory

approvals and amendments to the existing U.S.

registration for ContraPest to broaden the marketability and use of ContraPest, and

if ContraPest begins to generate sufficient revenue, regulatory approvals for additional jurisdictions beyond the United States.

In certain cases, our EPA and state registrations require completion of testing and certifications even though we have received

approval for the product or its labelling.

We continue to seek to comply with these requirements.

Company also continues to research and develop enhancements to ContraPest that align with our target verticals and other potential

fertility control options for additional species.

February 4, 2020, we amended our amended and restated certificate of incorporation to effect a 1-for-20 reverse split of our issued

and outstanding shares of our common stock.

The accompanying condensed financial statements and notes thereto give retrospective

effect to the reverse stock split for all periods presented.

All issued and outstanding common stock, options and warrants exercisable

for common stock, restricted stock units, preferred stock conversions to common stock and per share amounts contained in our condensed

financial statements have been retrospectively adjusted.

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

1 - Organization and Description of Business –

financial statements as of September 30, 2020 and 2019 have been prepared under the assumption that we will continue as a going

Our independent registered public accounting firm included in its opinion for the years ended December 31, 2019 and 2018

an explanatory paragraph referring to our net loss from operations and net capital deficiency and expressing substantial doubt

in our ability to continue as a going concern without additional capital becoming available.

If we encounter continued issues

or delays in the commercialization of ContraPest, our prior losses and expected future losses could have an adverse effect on

our financial condition and negatively impact our ability to fund continued operations, obtain additional financing in the future

and continue as a going concern.

There are no assurances that such financing, if necessary, will be available to us at all or

will be available in sufficient amounts or on reasonable terms.

Our financial statements do not include any adjustments that may

result from the outcome of this uncertainty.

If we are unable to generate additional funds in the future through additional financings,

sales of our products, licensing fees, royalty payments or from other sources or transactions, we will exhaust our resources and

will be unable to continue operations.

for Additional Capital

our inception, we have sustained significant operating losses in the course of our research and development and commercialization

activities and expect such losses to continue for the near future.

We have generated limited revenue to date from product sales,

research grants and licensing fees received under our former license agreement with Neogen.

In 2017, we began to prepare and launch

commercialization of our first product, ContraPest.

We have primarily funded our operations to date through the sale of equity

securities, including convertible preferred stock, common stock and warrants to purchase common stock.

See Note 10 for a description

of our public equity sales.

have also raised capital through debt financing, consisting primarily of convertible notes and government loan programs, and,

to a lesser extent, payments received in connection with product sales, research grants and licensing fees.

September 30, 2020, we received net proceeds of $73.2 million from our sales of common stock, preferred stock and warrant exercises

and issuance of convertible and other promissory notes, an aggregate of $1.7 million from licensing fees and an aggregate of $0.8

million in net product sales.

As of September 30, 2020, we had an accumulated deficit of $102.2 million and cash and cash equivalents

of $2.7 million.

ultimate success depends upon the outcome of a combination of factors, including:

(i) successful commercialization of ContraPest

and maintaining and obtaining regulatory approvals of our products and product candidates;

(ii) market acceptance, commercial

viability and profitability of ContraPest and other products;

(iii) the ability to market our products and establish an effective

sales force and marketing infrastructure to generate significant revenue;

(iv) the success of our research and development activities;

(v) our ability to retain and attract key personnel to develop, operate and grow our business;

and (vi) our ability to meet our

working capital needs.

will need additional funding in order to continue to fund our operations, achieve profitability and become cash flow positive,

and will continue to seek additional financing.

If such equity or debt financing is not available at adequate levels or on acceptable

terms, we may need to delay, limit or terminate commercialization and development efforts or discontinue operations.

of Presentation

accompanying unaudited condensed financial statements of the Company have been prepared pursuant to the rules and regulations

of the Securities and Exchange Commission (“SEC”) for interim financial reporting.

Certain information and footnote

disclosures normally included in the annual financial statements prepared in accordance with U.S.

generally accepted accounting

principles (“U.S.

GAAP”) have been condensed or omitted pursuant to such rules and regulations.

In the Company’s

opinion, the unaudited condensed financial statements include all material adjustments, all of which are of a normal and recurring

nature, necessary to present fairly the Company’s financial position as of September 30, 2020, the Company’s operating

results for the three and nine months ended September 30, 2020 and 2019, and the Company’s cash flows for the nine months

ended September 30, 2020 and 2019.

The accompanying financial information as of December 31, 2019 is derived from audited financial

The Company also continues to research

and develop enhancements to ContraPest that align with our target verticals and other potential fertility control options for additional

We were formed in July 2004 and incorporated

in the state of Nevada.

The Company subsequently reincorporated in the state of Delaware in November 2015.

Our corporate headquarters

and manufacturing site are in Phoenix, Arizona.

On December 8, 2016, we went public and are currently traded on Nasdaq under the

On February 4, 2020, we amended our amended

and restated certificate of incorporation to effect a 1-for-20 reverse split of our issued and outstanding shares of our common

The accompanying condensed financial statements and notes thereto give retrospective effect to the reverse stock split for

all periods presented.

All issued and outstanding common stock, options and warrants exercisable for common stock, restricted stock

units, preferred stock conversions to common stock and per share amounts contained in our condensed financial statements have been

retrospectively adjusted.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 1 - Organization and Description of Business –

Going Concern

Our financial statements as of March 31, 2021,

December 31, 2020 and March 31, 2020 have been prepared under the assumption that we will continue as a going concern.

Our independent

registered public accounting firm included in its opinion for the years ended December 31, 2020 and 2019 an explanatory paragraph referring

to our net loss from operations and net capital deficiency and expressing substantial doubt in our ability to continue as a going concern

without additional capital becoming available.

If we encounter continued issues or delays in the commercialization of ContraPest, our

prior losses and expected future losses could have an adverse effect on our financial condition and negatively impact our ability to fund

continued operations, obtain additional financing in the future and continue as a going concern.

There are no assurances that such financing,

if necessary, will be available to us at all or will be available in sufficient amounts or on reasonable terms.

Our financial statements

do not include any adjustments that may result from the outcome of this uncertainty.

If we are unable to generate additional funds in

the future through additional financings, sales of our products, licensing fees, royalty payments or from other sources or transactions,

we will exhaust our resources and will be unable to continue operations.

Liquidity and Capital Resources

Since our inception, we have sustained

significant operating losses in the course of our research and development and commercialization activities and expect such losses

to continue for the near future.

We have generated limited revenue to date from product sales, research grants and licensing fees

received under our former license agreement.

We have primarily funded our operations to date through the sale of equity securities,

including convertible preferred stock, common stock and warrants to purchase common stock.

See Note 10 for a description of our

public equity sales.

We have also raised capital through debt

financing, consisting primarily of convertible notes and government loan programs, and, to a lesser extent, payments received in

connection with product sales, research grants and licensing fees.

Through March 31, 2021, we received net

proceeds of $89.3 million from our sales of common stock, preferred stock and warrant exercises and issuance of convertible and

other promissory notes, an aggregate of $1.7 million from licensing fees and an aggregate of $1.0 million in net product sales.

As of March 31, 2021, we had an accumulated deficit of $106.1 million and cash and cash equivalents of $15.2 million.

Our ultimate success depends upon the outcome

of a combination of factors, including:

(i) successful commercialization of ContraPest and maintaining and obtaining regulatory

approval of our products and product candidates;

(ii) market acceptance, commercial viability and profitability of ContraPest and

other products;

(iii) the ability to market our products and establish an effective sales force and marketing infrastructure to

generate significant revenue;

(iv) the success of our research and development;

(v) the ability to retain and attract key personnel

to develop, operate and grow our business;

and (vi) our ability to meet our working capital needs.

Based upon our current operating plan, we

expect that cash and cash equivalents at March 31, 2021, in combination with anticipated revenue and any additional sales of our

equity securities, will be sufficient to fund our current operations for at least the next 12 months.

We have evaluated and will

continue to evaluate our operating expenses and will concentrate our resources toward the successful commercialization of ContraPest

in the United States.

However, if anticipated revenue targets and margin targets are not achieved or expenses are more than we have

budgeted, we may need to raise additional financing before that time.

If we need more financing and we are unable to raise necessary

capital through the sale of our securities, we may be required to take other measures that could impair our ability to be successful

and operate as a going concern.

In any event, we may require additional capital in order to fund our operating losses and research

and development activities before we become profitable and may opportunistically raise capital.

We may never achieve profitability

or generate positive cash flows, and unless and until we do, we will continue to need to raise capital through equity or debt

If such equity or debt financing is not available at adequate levels or on acceptable terms, we may need to delay, limit

or terminate commercialization and development efforts or discontinue operations.

Basis of Presentation

The accompanying unaudited condensed financial

statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”)

for interim financial reporting.

Certain information and footnote disclosures normally included in the annual financial statements

prepared in accordance with U.S.

generally accepted accounting principles (“U.S.

GAAP”) have been condensed or omitted

pursuant to such rules and regulations.

In the Company’s opinion, the unaudited condensed financial statements include all

material adjustments, all of which are of a normal and recurring nature, necessary to present fairly the Company’s financial

position as of March 31, 2021, the Company’s operating results for the three months ended March 31, 2021 and 2020, and the

Company’s cash flows for the three months ended March 31, 2021 and 2020.

The accompanying financial information as of December

31, 2020 is derived from audited financial statements.

Interim results are not necessarily indicative of results for a full year.

The information included in this Quarterly

Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K, as amended by Form 10-K/A,

for the year ended December 31, 2019, filed with the SEC on March 17, 2020 and April 21, 2020, respectively.

All amounts shown

in these financial statements and accompanying notes are in thousands, except percentages and per share and share amounts.

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

2 - Summary of Significant Accounting Policies

preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect

the reported amounts and classification of assets and liabilities, disclosure of contingent assets and liabilities at the date

of the financial statements and reported amounts of revenues and expenses during the reporting period.

The significant estimates

in the Company’s financial statements include the valuation of preferred stock, if issued, common stock and related warrants,

and other stock-based awards.

Actual results could differ from such estimates.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report

on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 29, 2021.

All amounts shown in these financial statements

and accompanying notes are in thousands, except percentages and per share and share amounts.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 2 - Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements

in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts and classification

of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported

amounts of revenues and expenses during the reporting period.

The significant estimates in the Company’s financial statements

include the valuation of preferred stock, if issued, common stock and related warrants, and other stock-based awards.

Actual results

could differ from such estimates.

Reclassifications

prior year amounts have been reclassified to conform to the current period presentation.

These reclassifications had no material

impact on net earnings, financial position or cash flows.

Receivable-Trade

receivable-trade consist primarily of receivables from customers.

The Company provides an allowance for doubtful trade receivables

equal to the estimated uncollectible amounts.

That estimate is based on historical collection experience, current economic and

market conditions and a review of the current status of each customer’s trade accounts receivable.

The allowance for doubtful

trade receivables was $123 at September 30, 2020 and December 31, 2019.

Receivable-Other

receivable-other at September 30, 2020 was $0.

Accounts receivable-other at December 31, 2019 of $123 consisted primarily of receivables

related to insurance reimbursements due the Company.

are stated at the lower of cost or market value, using the first-in, first-out convention.

Inventories consist of raw materials,

work in progress and finished goods.

Raw materials are stocked to reduce the risk of impact on manufacturing for potential supply

interruptions due to the COVID-19 pandemic or long lead times on certain ingredients.

of inventory are:

September 30,

net inventory

expenses consist primarily of payments made for director and officer insurance, director compensation, rent, legal and inventory

purchase deposits and seminar fees to be expensed in the current year.

Certain prior year amounts have been reclassified

to conform to the current period presentation.

These reclassifications had no material impact on net earnings, financial position

or cash flows.

Cash and Cash Equivalents

The Company considers money market fund

investments to be cash equivalents.

The Company had cash equivalents in the form of money market fund investment of $7,000 and

$1,500 at March 31, 2021 and December 31, 2020, respectively, included in cash as reported.

Accounts Receivable-Trade

Accounts receivable-trade consist primarily

of receivables from customers.

The Company provides an allowance for doubtful trade receivables equal to the estimated uncollectible

That estimate is based on historical collection experience, current economic and market conditions and a review of the

current status of each customer’s trade accounts receivable.

The allowance for doubtful trade receivables was $0 at March

31, 2021 and December 31, 2020.

Inventories are stated at the lower of

cost or market value, using the first-in, first-out convention.

Inventories consist of raw materials, work in progress and finished

Raw materials are stocked to reduce the risk of impact on manufacturing for potential supply interruptions due to the COVID-19

pandemic or long lead times on certain ingredients.

Components of inventory are:

Raw materials

Work in progress

Finished goods

Total inventory

Reserve for obsolete

Total net inventory

Prepaid Expenses

Prepaid expenses consist primarily of payments

made for director and officer insurance, director compensation, rent, legal and inventory purchase deposits and seminar fees to

be expensed in the current year.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

2 - Summary of Significant Accounting Policies –

and Equipment

and equipment are stated at cost less accumulated depreciation.

Equipment held under finance leases are stated at the present

value of minimum lease payments less accumulated amortization.

on property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets.

The cost of leasehold improvements is amortized over the life of the improvement or the term of the lease, whichever is shorter.

Equipment held under finance leases is amortized over the shorter of the lease term or estimated useful life of the asset.

Company incurs repair and maintenance costs on its major equipment, which are expensed as incurred.

of Long-Lived Assets

assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that

the carrying amount of an asset may not be recoverable.

If circumstances require long-lived assets or asset groups to be tested

for possible impairment, the Company compares the undiscounted cash flows expected to be generated from the use of the asset or

asset group to its carrying amount.

If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted

cash flow basis, an impairment charge is recognized to the extent that the carrying amount exceeds its fair value.

is determined through various valuation techniques, such as discounted cash flow models and the use of third-party independent

The Company has not recorded an impairment of long-lived assets since its inception.

January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) 606 —

Revenue from Contracts

with Customers (“ASC 606”) .

Under ASC 606, the Company recognizes revenue from the commercial sales of

products, licensing agreements and contracts to perform pilot studies by applying the following steps:

(1) identify the contract

with a customer;

(2) identify the performance obligations in the contract;

Note 2 - Summary of Significant Accounting

Policies –

Property and Equipment

Property and equipment are stated at cost

less accumulated depreciation.

Equipment held under finance leases are stated at the present value of minimum lease payments less

accumulated amortization.

Depreciation on property and equipment

is computed using the straight-line method over the estimated useful lives of the respective assets.

The cost of leasehold improvements

is amortized over the life of the improvement or the term of the lease, whichever is shorter.

Equipment held under finance leases

is amortized over the shorter of the lease term or estimated useful life of the asset.

The Company incurs repair and maintenance

costs on its major equipment, which are expensed as incurred.

Impairment of Long-Lived Assets

Long-lived assets, such as property and

equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may not be recoverable.

If circumstances require long-lived assets or asset groups to be tested for possible impairment, the Company

compares the undiscounted cash flows expected to be generated from the use of the asset or asset group to its carrying amount.

If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment

charge is recognized to the extent that the carrying amount exceeds its fair value.

Fair value is determined through various valuation

techniques, such as discounted cash flow models and the use of third-party independent appraisals.

The Company has not recorded

an impairment of long-lived assets since its inception.

Revenue Recognition

Effective January 1, 2018, the Company

adopted Accounting Standards Codification (“ASC”) 606 —

Revenue from Contracts with Customers (“ASC

606”) .

Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and

contracts to perform pilot studies by applying the following steps:

(1) identify the contract with a customer;

(2) identify the

performance obligations in the contract;

(3) determine the transaction price;

(4) allocate the

transaction price to each performance obligation in the contract;

and (5) recognize revenue when each performance obligation is

Company recognizes revenue when product is shipped at a fixed selling price on payment terms of 30 to 120 days from invoicing.

The Company recognizes other revenue earned from pilot studies, consulting and implementation services upon the performance of

specific services under the respective service contract.

Company derives revenue primarily from commercial sales of products, net of discounts and promotions, as well as consulting and

implementation services provided in conjunction with our product deployments.

and Development

and development costs are expensed as incurred.

Research and development expenses primarily consist of salaries and benefits for

research and development employees, stock-based compensation, consulting fees, lab supplies, costs incurred related to conducting

scientific trials and field studies, regulatory compliance costs, and manufacturing costs associated with process improvement.

Research and development expenses include an allocation of facilities related costs, including depreciation of research and development

based awards, consisting of restricted stock units and stock options expected to be settled in shares of the Company’s common

stock, are recorded as equity awards.

The grant date fair value of these awards is measured using the Black-Scholes option pricing

model for stock options and grant date market value for restricted stock units.

The Company expenses the grant date fair value

of its stock options on a straight-line basis over their respective vesting periods.

Performance-based awards are expensed over

the performance period when the related performance goals are probable of being achieved.

(4) allocate the transaction price to each performance

obligation in the contract;

and (5) recognize revenue when each performance obligation is satisfied.

The Company recognizes revenue when product

is shipped at a fixed selling price on payment terms of 30 to 120 days from invoicing.

The Company recognizes other revenue earned

from pilot studies, consulting and implementation services upon the performance of specific services under the respective service

The Company derives revenue primarily from

commercial sales of products, net of discounts and promotions, as well as consulting and implementation services provided in conjunction

with our product deployments.

Research and Development

Research and development costs are expensed

Research and development expenses primarily consist of salaries and benefits for research and development employees,

stock-based compensation, consulting fees, lab supplies, costs incurred related to conducting scientific trials and field studies,

regulatory compliance costs, and manufacturing costs associated with process improvement.

Research and development expenses include

an allocation of facilities related costs, including depreciation of research and development equipment.

Stock-based Compensation

Stock based awards, consisting of stock

options and restricted stock units expected to be settled in shares of the Company’s common stock, are recorded as equity

The grant date fair value of these awards is measured using the Black-Scholes option pricing model for stock options and

grant date market value for restricted stock units.

The Company expenses the grant date fair value of its stock options on a straight-line

basis over their respective vesting periods.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

2 - Summary of Significant Accounting Policies –

stock-based compensation expense recorded for the three and nine months ended September 30, 2020 and 2019, is as follows:

September 30,

and development

and administrative

stock-based compensation expense

Note 11 for additional discussion on stock-based compensation.

Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets

and liabilities for the expected future tax consequences of events that have been included in the financial statements.

this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and

tax bases of assets and liabilities and net operating loss carryforwards using enacted tax rates in effect for the year in which

the differences are expected to reverse.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized

in the period that includes the enactment date.

Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized.

These deferred

tax assets are subject to periodic assessments as to recoverability and if it is determined that it is more likely than not that

the benefits will not be realized, valuation allowances are recorded which would increase the provision for income taxes.

such determination, the Company considers all available positive and negative evidence, including future reversals of existing

taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.

Company applies a more-likely-than-not recognition threshold for all tax uncertainties.

Only those benefits that have a greater

than fifty percent likelihood of being sustained upon examination by the taxing authorities are recognized.

Based on its evaluation,

the Company has concluded there are no significant uncertain tax positions requiring recognition in its financial statements.

Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense.

There are no uncertain

tax positions as of September 30, 2020 or December 31, 2019 and as such, no interest or penalties were recorded in income tax

Comprehensive

loss and comprehensive loss were the same for all periods presented;

therefore, a separate statement of comprehensive loss is

not included in the accompanying financial statements.

Per Share Attributable to Common Stockholders

loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders

by the weighted average number of common shares outstanding during the period.

Diluted loss per share attributable to common stockholders

is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares and potentially

dilutive securities outstanding for the period determined using the treasury stock and if-converted methods.

For purposes of the

computation of diluted loss per share attributable to common stockholders, common stock purchase warrants, and common stock options

are considered to be potentially dilutive securities but have been excluded from the calculation of diluted loss per share attributable

to common stockholders because their effect would be anti-dilutive given the net loss reported for the three and nine months ended

September 30, 2020 and 2019.

Therefore, basic and diluted loss per share attributable to common stockholders are the same for

each period presented.

Note 2 - Summary of Significant Accounting Policies –

The stock-based compensation expense recorded

for the three months ended March 31, 2021 and 2020, is as follows:

Three Months Ended

Research and development

Selling, general and administrative

Total stock-based compensation expense

See Note 11 for additional discussion on stock-based compensation.

The Company accounts for income taxes under

the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax

consequences of events that have been included in the financial statements.

Under this method, deferred tax assets and liabilities

are determined based on the differences between the financial statements and tax bases of assets and liabilities and net operating

loss carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse.

of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.

The Company records net deferred tax assets

to the extent it believes these assets will more likely than not be realized.

These deferred tax assets are subject to periodic

assessments as to recoverability and if it is determined that it is more likely than not that the benefits will not be realized,

valuation allowances are recorded which would increase the provision for income taxes.

In making such determination, the Company

considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected

future taxable income, tax planning strategies and recent financial operations.

The Company applies a more-likely-than-not

recognition threshold for all tax uncertainties.

Only those benefits that have a greater than fifty percent likelihood of being

sustained upon examination by the taxing authorities are recognized.

Based on its evaluation, the Company has concluded there are

no significant uncertain tax positions requiring recognition in its financial statements.

The Company recognizes interest and/or

penalties related to uncertain tax positions in income tax expense.

There are no uncertain tax positions as of March 31, 2021 or

December 31, 2020 and as such, no interest or penalties were recorded in income tax expense.

Comprehensive Loss

Net loss and comprehensive loss were the

same for all periods presented;

therefore, a separate statement of comprehensive loss is not included in the accompanying financial

Loss Per Share Attributable to Common

Basic loss per share attributable to common

stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common

shares outstanding during the period.

Diluted loss per share attributable to common stockholders is computed by dividing the loss

attributable to common stockholders by the weighted average number of common shares and potentially dilutive securities outstanding

for the period determined using the treasury stock and if-converted methods.

For purposes of the computation of diluted loss per

share attributable to common stockholders, common stock purchase warrants, and common stock options are considered to be potentially

dilutive securities but have been excluded from the calculation of diluted loss per share attributable to common stockholders because

their effect would be anti-dilutive given the net loss reported for the three months ended March 31, 2021 and 2020.

basic and diluted loss per share attributable to common stockholders are the same for each period presented.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

2 - Summary of Significant Accounting Policies –

following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted

loss per share attributable to common stockholders (in common stock equivalent shares):

stock purchase warrants

stock options

of New Accounting Standards :

January 1, 2019, the Company adopted Accounting Standards Updated (“ASU”) No.

2016-02, Leases (Topic 842) (“ASU

2016-02”).

Under ASU No.

2016-02, an entity is required to recognize right-of-use lease assets and lease liabilities

on its balance sheet and disclose key information about leasing arrangements.

The Company elected the optional transition

method provided by the FASB in ASU 2018-11, Leases (Topic 842):

Targeted Improvements , and as a result, has not restated

its condensed financial statements for prior periods presented.

The Company has elected the practical expedients upon transition

to retain the lease classification and initial direct costs for any leases that existed prior to adoption.

The Company has also

not reassessed whether any contracts entered into prior to adoption are leases.

The Company applied the new guidance to all operating

leases within the scope of the standard that were in effect on January 1, 2019, or entered into after, the adoption date.

information for prior periods has not been restated and continues to be reported under the accounting standards in effect for

those periods.

The adoption did not have a material impact on the Company’s condensed statement of comprehensive

income (loss).

However, the new standard established $87 of liabilities and corresponding right-of-use assets of $87

on the Company’s condensed balance sheet for leases, primarily related to operating leases on rented office properties,

that existed as of the January 1, 2019, adoption date.

September 30, 2020, the balance in Right to Use Asset-Long Term and Lease Liability-Long Term was $726 and ($731) respectively

and at December 31, 2019, the balance in Right to Use Asset-Long Term and Lease Liability-Long Term was $699 and ($694) respectively.

Company’s leases primarily relate to operating leases of rented office properties.

For contracts entered into

on or after January 1, 2019, at the inception of a contract the Company assesses whether the contract is, or contains, a lease.

Company’s assessment is based on:

(1) whether the contract involves the use of a distinct identified asset, (2) whether

the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (3)

whether the Company has the right to direct the use of the asset.

At inception of a lease, the Company allocates the

consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments.

leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of lease payments

over the term.

The right-of-use lease asset represents the right to use the leased asset for the lease term.

liability represents the present value of the lease payments under the lease.

right-of-use lease asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus

any initial direct costs incurred.

All right-of-use lease assets are reviewed for impairment.

liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the

lease or, if that rate cannot be readily determined, the Company’s secured incremental borrowing rate for the same term

as the underlying lease.

Company identified and assessed the following significant assumptions in recognizing the right-of-use lease assets and corresponding

lease term –

The expected lease term includes both contractual lease periods and, when applicable, cancelable option

When determining the lease term, the Company includes options to extend or terminate the lease when it is

reasonably certain that the Company will exercise that option.

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

2 - Summary of Significant Accounting Policies –

borrowing rate –

As the Company’s leases do not provide an implicit rate, the Company obtained the incremental

borrowing rate (“IBR”) based on the remaining term of each lease.

The IBR is the rate of interest that

a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a

similar economic environment.

Company has elected not to recognize right-of-use lease assets and lease liabilities for short-term leases that have a term of

12 months or less.

Company reports right-of-use lease assets within non-current assets in its condensed balance sheet.

The Company reports

the lease liabilities within long-term liabilities in its condensed balance sheet.

Note 12 - Commitments and Contingencies, for future minimum lease payments and maturities.

August 2018, the FASB issued authoritative guidance intended to address a customer’s accounting for implementation costs

incurred in a cloud computing arrangement that is a service contract.

This guidance aligns the requirements for capitalizing implementation

costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs

incurred to develop or obtain internal-use software.

The guidance also requires presentation of the capitalized implementation

costs in the statement of financial position and in the statement of cash flows in the same line item that a prepayment for the

fees of the associated hosting arrangement would be presented, and the expense related to the capitalized implementation costs

to be presented in the same line item in the statement of operations as the fees associated with the hosting element (service)

of the arrangement.

This guidance is effective for annual periods beginning after December 15, 2019, including interim periods

within those annual periods, with early adoption permitted.

Effective January 1, 2020, the Company adopted the guidance and determined

there was no applicability to the Company at this time and as such, there was no impact on our financial position, results of

operations, or cash flows.

December 2019, the FASB issued ASU No.

2019-12, “

Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU

2019-12”), which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes

certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December

15, 2020, with early adoption permitted.

The Company is currently evaluating the impact of this standard on its condensed financial

statements and related disclosures.

than the items noted above, there have been no new accounting pronouncements not yet effective or adopted in the current year

that we believe have a significant impact, or potential significant impact, to our unaudited condensed interim financial statements.

3 - Fair Value Measurements

Company issued common stock warrants to purchase shares of common stock in June of 2015 (see Note 11 - Stock-based Compensation

for more details) that contain a cash settlement provision resulting in a common stock warrant liability that is revalued at the

end of each reporting period.

value these warrant derivatives at fair value.

The accounting guidance for fair value, among other things, establishes a consistent

framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on

either a recurring or nonrecurring basis.

Fair value is defined as the price that would be received to sell an asset or paid to

transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date.

The framework

for measuring fair value consists of a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used

to measure fair value based upon whether such inputs are observable or unobservable.

Observable inputs reflect market data obtained

from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity.

The three-level hierarchy

for the inputs to valuation techniques is briefly summarized as follows:

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

3 - Fair Value Measurements –

1 —Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

2 —Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted

prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can

be corroborated by observable market data for substantially the full term of the related assets or liabilities;

3 —Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are

supported by little or no market data.

asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of

any input that is significant to the fair value measurement.

Valuation techniques used need to maximize the use of observable

inputs and minimize the use of unobservable inputs.

and liabilities measured at fair value are based on one or more of the following three valuation techniques:

Note 2 - Summary of Significant Accounting Policies –

The following table sets forth the outstanding

potentially dilutive securities that have been excluded in the calculation of diluted loss per share attributable to common stockholders

(in common stock equivalent shares):

Common stock purchase warrants

Restricted stock units

Common stock options

Adoption of New Accounting Standard:

In August 2018, the FASB issued ASU

2018-15 Accounting for Implementation Costs Related to Cloud Computing or Hosting Arrangements, authoritative guidance intended

to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract.

This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service

contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

also requires presentation of the capitalized implementation costs in the statement of financial position and in the statement

of cash flows in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented, and

the expense related to the capitalized implementation costs to be presented in the same line item in the statement of operations

as the fees associated with the hosting element (service) of the arrangement.

This guidance was effective for annual periods beginning

after December 15, 2019, including interim periods within those annual periods, with early adoption permitted.

Effective January

1, 2020, the Company adopted the guidance and determined there was no applicability to the Company at this time and as such, there

was no impact on our financial position, results of operations, or cash flows.

Other than the item noted above, there

have been no new accounting pronouncements not yet effective or adopted in the current year that we believe have a significant

impact, or potential significant impact, to our unaudited condensed interim financial statements.

Note 3 - Fair Value Measurements

The Company issued common stock warrants

to purchase shares of common stock in June of 2015 (see Note 9 - Common Stock Warrants and Common Stock Warrant Liability) that

expired in June of 2020.

These warrants contained a cash settlement provision that resulted in a common stock warrant liability

that was revalued at the end of each reporting period.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 3 - Fair Value Measurements –

We valued these warrant derivatives at

The accounting guidance for fair value, among other things, establishes a consistent framework for measuring fair value

and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price)

in an orderly transaction between market participants at the reporting date.

The framework for measuring fair value consists of

a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether

such inputs are observable or unobservable.

Observable inputs reflect market data obtained from independent sources, while unobservable

inputs reflect market assumptions made by the reporting entity.

The three-level hierarchy for the inputs to valuation techniques

is briefly summarized as follows:

Level 1 —Inputs

are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2 —Inputs

are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical

or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by

observable market data for substantially the full term of the related assets or liabilities;

Level 3 —Unobservable

inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no

An asset’s or liability’s fair

value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair

value measurement.

Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable

Assets and liabilities measured at fair

value are based on one or more of the following three valuation techniques:

Market approach:

1 unchanged sentence

Cost approach:

that would be required to replace the service capacity of an asset (replacement cost).

Amount that would be required to replace the service capacity of an asset (replacement cost).

Income approach:

Techniques to convert future amounts to a single present amount based upon market expectations, including present value techniques,

option-pricing and excess earnings models.

Company’s common stock warrant liabilities are classified as Level 3 because there is limited activity or less transparency

around the inputs to valuation.

Measured at Fair Value on a Recurring Basis

following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by

level within the fair value hierarchy (in thousands):

stock warrant liability

fixed income debt securities

stock warrant liability

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

3 - Fair Value Measurements –

Instruments Not Carried at Fair Value

carrying amounts of the Company’s financial instruments, including accounts payable and accrued liabilities, approximate

fair value due to their short maturities.

The estimated fair value of the convertible notes and other notes, not recorded at fair

value, are recorded at cost or amortized cost which was deemed to estimate fair value.

4 - Credit Risk

Company is potentially subject to concentrations of credit risk in its accounts receivable.

Credit risk with respect to receivables

is limited due to the number of companies comprising the Company’s customer base, however the Company did identify a potentially

uncollectable account and at September 30, 2020 and December 31, 2019 maintained a reserve for this receivable balance of $123.

The Company does not require collateral or other securities to support its accounts receivable.

5 - Prepaid Expenses

expenses consist of the following:

officer and other insurance

programs and conferences

services retainer

service deposits

software licenses and other

prepaid expenses

6 - Property and Equipment

and equipment, net consist of the following:

and development equipment

and computer equipment (1)

accumulated depreciation and amortization

Shorter of lease

term or estimated useful life

In the three and

nine months ended September 30, 2020, the Company received net proceeds of $0 and $44 in the sale of research and development

equipment and office and computer equipment, respectively, resulting in gains on the sale of these assets of $0 and $18 for

the three and nine months ended September 30, 2020, respectively.

and amortization expense was approximately $71 and $101 for the three months ended September 30, 2020 and 2019, respectively,

and $219 and $314 for the nine months ended September 30, 2020 and 2019, respectively.

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

7 - Accrued Expenses

expenses consist of the following:

September 30,

Compensation and related

Accrued Litigation

Techniques to convert future amounts to a single present amount based upon market expectations, including present value techniques, option-pricing and excess earnings models.

The Company’s common stock warrant

liabilities are classified as Level 3 because there is limited activity or less transparency around the inputs to valuation.

Financial Instruments Not Carried at Fair Value

The carrying amounts of the Company’s

financial instruments, including accounts payable and accrued liabilities, approximate fair value due to their short maturities.

The estimated fair value of the convertible notes and other notes, not recorded at fair value, are recorded at cost or amortized

cost which was deemed to estimate fair value.

Note 4 - Credit Risk

The Company is potentially subject to concentrations

of credit risk in its accounts receivable.

Credit risk with respect to receivables is limited due to the number of companies comprising

the Company’s customer base, however the Company did identify a potentially uncollectable account and at December 31, 2019

and maintained a reserve for this receivable balance of $123.

At December 31, 2020, the account was deemed uncollectable and offset

against the reserve.

The Company did not have any potentially uncollectable account at March 31, 2021 or December 31, 2020 and

therefore, did not record a reserve for uncollectable accounts at March 31, 2021 or December 31, 2020.

The Company does not require

collateral or other securities to support its accounts receivable.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 5 - Prepaid Expenses

Prepaid expenses consist of the following:

Director, officer and other insurance

Legal retainer

Marketing programs and conferences

Professional services retainer

Engineering, software licenses and other

Total prepaid expenses

Note 6 - Property and Equipment

Property and equipment, net consist of the following:

Research and development equipment

Office and computer equipment (1)

Furniture and fixtures

Leasehold improvements

Construction in progress

Less accumulated depreciation and amortization

Shorter of lease term or estimated useful life

In the three months ended March 31, 2021,

the Company received net proceeds of less than $1 in the sale of research and development equipment resulting in gains on the sale

of these assets of less than $1.

In the three months ended March 31, 2020, the Company received net proceeds of $40 in the sale

of research and development equipment and office and computer equipment, resulting in a gain on the sale of these assets of $15.

Depreciation and amortization expense was

approximately $73 and $77 for the three months ended March 31, 2021 and 2020, respectively.

Note 7 - Accrued Expenses

Accrued expenses consist of the following:

Compensation and related benefits

Board Compensation

1 unchanged sentence

Total accrued expenses

8 - Borrowings

summary of the Company’s borrowings, including finance lease obligations, is as follows:

September 30,

portion of long-term debt

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share

Note 8 - Borrowings

A summary of the Company’s borrowings, including finance

lease obligations, is as follows:

Short-term debt:

lease obligations

promissory notes

Current portion of long-term debt

Total short-term debt

Long-term debt:

Lease Obligations

lease obligations at September 30, 2020 are for computer and lab equipment leased through GreatAmerica Financial Services and

ENGS Commercial Finance Co.

These finance leases expire at various dates through April 2022 and carry interest rates ranging from

11.4% to 18.3%.

Promissory Notes

included in the table above are notes payable to Direct Capital, M2 Financing and Fidelity Capital, all for the financing of fixed

These notes expire at various dates through June 2022 and carry interest rates ranging from 13.1% to 13.3%.

included in the table above is a loan agreement payable to BMO Harris Bank National Association as the lender in an aggregate

principal amount of $645,700 pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief,

and Economic Security Act (the “CARES Act”).

The loan is evidenced by a promissory note dated April 15, 2020 and matures

April 15, 2022.

The loan bears interest at a rate of 1.00% per annum and contains customary events of default including, among

other things, payment defaults.

The loan closed and was funded April 20, 2020.

Under the terms of the CARES Act, PPP loan recipients

can apply for and be granted forgiveness for all or a portion of loans granted under the PPP.

The loan is subject to forgiveness

to the extent proceeds are used for qualifying expenses, including certain payroll, utility, rent and mortgage interest expenses.

No assurance is provided that the Company will obtain forgiveness of the loan in whole or in part.

to amendments to the CARES Act, as long as the Company submits its application for loan forgiveness within ten months after the

expiration of the applicable covered period, the Company will not be required to make any payments until the forgiveness amount

is remitted to the lender by the SBA.

In the event the PPP loan is not forgiven in whole or in part, the lender is responsible

for notifying the Company of the date on which the Company’s first repayment is due.

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

9 - Common Stock Warrants and Common Stock Warrant Liability

table summarizes the common stock warrant activity as of September 30, 2020 as follows:

September 30,

Finance lease obligations

Other promissory notes

current portion of long-term debt

Total long-term debt

Finance Lease Obligations

Finance lease obligations at March 31,

2021 are for computer and lab equipment leased through GreatAmerica Financial Services and ENGS Commercial Finance Co.

These finance

leases expire at various dates through April 2022 and carry interest rates ranging from 11.4% to 18.3%.

Other Promissory Notes

Also included in the table above are notes

payable to Direct Capital, M2 Financing and Fidelity Capital, all for the financing of fixed assets.

These notes expire at various

dates through June 2022 and carry interest rates ranging from 13.1% to 13.3%.

Also included in the table above is a loan

agreement payable to BMO Harris Bank National Association as the lender in an aggregate principal amount of $645,700 pursuant to

the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES

The loan is evidenced by a promissory note dated April 15, 2020 and matures April 15, 2022.

The loan bears interest

at a rate of 1.00% per annum and contains customary events of default including, among other things, payment defaults.

closed and was funded April 20, 2020.

Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness

for all or a portion of loans granted under the PPP.

The loan is subject to forgiveness to the extent proceeds are used for qualifying

expenses, including certain payroll, utility, rent and mortgage interest expenses.

No assurance is provided that the Company will

obtain forgiveness of the loan in whole or in part.

Pursuant to amendments to the CARES Act, as

long as the Company submits its application for loan forgiveness within ten months after the expiration of the applicable covered

period, the Company will not be required to make any payments until the forgiveness amount is remitted to the lender by the SBA.

Company applied for forgiveness in February 2021.

We cannot guarantee that the PPP loan will be forgiven.

In the event the PPP loan

is not forgiven in whole or in part, the lender is responsible for notifying the Company of the date on which the Company’s

first repayment is due.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Note 9 - Common Stock Warrants and Common Stock Warrant Liability

The table summarizes the common stock warrant activity as of

March 31, 2021 as follows:

December 31, 2019

December 31, 2020

March 31, 2021

2016 and prior

Various-2020/2021

Stock Offering Warrants

Manager Warrants

Offering Warrants

Manager Warrants

Direct Offering

Manager Warrants

Direct Offering

Manager Warrants

Direct Offering

Pursuant to antidilution

price adjustment protection contained within these warrants, the initial exercise price of these warrants was $30.00 per share,

which adjusted downward to $29.40 on July 24, 2018, the record date of the Rights Offering, downward to $19.00 per share on

August 13, 2018, the date of the Rights Offering, downward to $7.13 per share on January 28, 2020, the date of a Registered

Direct Offering and downward to $2.1122 per share on March 6, 2020, the date of a Registered Direct Offering.

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

9 - Common Stock Warrants and Common Stock Warrant Liability –

of September 30, 2020, we had 2,504,597 shares of common stock issuable upon exercise of outstanding common stock warrants, at

a weighted-average exercise price of $6.18 per share.

November 21, 2017, the Company issued a total of 232,875 detachable common stock warrants issued with the second public offering

of 293,000 shares of its common stock at $20.00 per share.

The common stock warrant is exercisable until five years from the date

The common shares of the Company’s stock and detachable warrants exist independently as separate securities.

such, the Company estimated the fair value of the common stock warrants, exercisable at $30.00 per share, to be $661 using a lattice

model based on the following significant inputs:

November 21,2017

Common Stock Offering Warrants

November 21, 2022

November 21,2017

Dealer Manager Warrants

November 21, 2022

Warrant Reissue

December 20, 2023

August 13,2018

Rights Offering Warrants

July 25, 2023

August 13,2018

Dealer Manager Warrants

August 13, 2023

Dealer Manager Warrants

July 11, 2024

January 28,2020

Registered Direct Offering

January 28,2020

Dealer Manager Warrants

Registered Direct Offering

September 8,2025

Dealer Manager Warrants

April 21,2020

Dealer Manager Warrants

April 21,2025

April 24,2020

Registered Direct Offering

April 24,2025

October 26, 2020

Private Warrant Inducement

April 27,2026

October 26, 2020

Dealer Manager Warrants

April 27,2026

February 2, 2021

Private Placement Agreement

August 2,2026

February 2, 2021

Dealer Manager Warrants

August 2,2026

March 23, 2021

Dealer Manager Warrants

March 23, 2026

The initial exercise price of these warrants was $30.00 per share.

Pursuant to antidilution price adjustment protection contained within these warrants, the initial exercise price of these warrants was adjusted downward to $29.40 on July 24, 2018, the record date of the Right’s Offering and downward to $19.00 per share on August 13, 2018.

These warrants were further adjusted downward from $19.00 to $7.13 and to $2.1122 on January 28, 2020 and March 4, 2020, respectively, in connection with separate Registered Direct Offerings.

These warrants were further adjusted downward from $2.1122 to $1.3659 on October 26, 2020 in connection with a Registered Direct Offering.

These warrants are subject to further adjustment pursuant to antidilution price adjustment protection.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share

Note 9 - Common Stock Warrants and Common Stock Warrant Liability

Outstanding Warrants

As of March 31, 2021, we had 4,553,733

shares of common stock issuable upon exercise of outstanding common stock warrants, at a weighted-average exercise price of $3.98603

On November 21, 2017, the Company issued

a total of 232,875 detachable common stock warrants issued with the second public offering of 293,000 shares of its common stock

at $20.00 per share.

The common stock warrant is exercisable until five years from the date of grant.

The common shares of the

Company’s stock and detachable warrants exist independently as separate securities.

As such, the Company estimated the fair

value of the common stock warrants, exercisable at $30.00 per share, to be $661 using a lattice model based on the following significant

common stock price of $20.00;

comparable company volatility of 73.8%;

term 5 years;

dividend yield of 0% and risk-free interest rate of 1.87.

The initial exercise price of these warrants was $30.00

per share, which adjusted downward to $29.40 on July 24, 2018, the record date of the Right’s Offering and downward to $19.00

per share on August 13, 2018, the date of the Rights Offering, pursuant to antidilution price adjustment protection contained

within these warrants.

The exercise price of the warrants was adjusted downward to $7.13 on January 28, 2020 in connection with

a private placement of common stock.

Per guidance of ASC 260, the Company recorded a deemed dividend of $285 on the 143,501 unexercised

warrants that contained this antidilution price adjustment protection provision and was calculated as the difference between the

fair value of the warrants immediately prior to downward exercise price adjustment and immediately after the adjustment using

a Black Scholes model based on the following significant inputs:

On January 28, 2020, common stock price of $7.90;

company volatility of 73.8%;

remaining term 5 years;

dividend yield of 0% and risk-free interest rate of 1.45%.

exercise price of the warrants was adjusted downward to $2.1122 on March 4, 2020 in connection with a private placement of common

Per guidance of ASC 260, the Company recorded a deemed dividend of $129 on the 143,501 unexercised warrants that contained

this antidilution price adjustment protection provision and was calculated as the difference between the fair value of the warrants

dividend yield of 0% and

risk-free interest rate of 1.87%.

The initial exercise price of these warrants was $30.00 per share, which adjusted downward to

$29.40 on July 24, 2018, the record date of the Right’s Offering and downward to $19.00 per share on August 13, 2018, the

date of the Rights Offering, pursuant to antidilution price adjustment protection contained within these warrants.

price of the warrants was adjusted downward to $7.13 on January 28, 2020 in connection with a private placement of common stock.

Per guidance of ASC 260, the Company recorded a deemed dividend of $285 on the 143,501 unexercised warrants that contained this

antidilution price adjustment protection provision and was calculated as the difference between the fair value of the warrants

immediately prior to downward exercise price adjustment and immediately after the adjustment using a Black Scholes model based

on the following significant inputs:

on January 28, 2020, common stock price of $7.90;

comparable company volatility of 73.8%;

remaining term 2.82 years;

dividend yield of 0% and risk-free interest rate of 1.45%.

The exercise price of the warrants was

adjusted downward to $2.1122 on March 4, 2020 in connection with a private placement of common stock.

Per guidance of ASC 260,

the Company recorded a deemed dividend of $129 on the 143,501 unexercised warrants that contained this antidilution price adjustment

protection provision and was calculated as the difference between the fair value of the warrants immediately prior to downward

exercise price adjustment and immediately after the adjustment using a Black Scholes model based on the following significant inputs:

on March 4, 2020, common stock price of $2.88;

comparable company volatility of 74.5%;

term 2.71 years;

remaining term 2.71 years;

dividend yield

of 0% and risk-free interest rate of 0.68%.

The exercise price of the warrants was adjusted

downward to $1.3659 on October 26, 2020 in connection with an inducement offering of common stock.

Per guidance of ASC 260, the Company

recorded a deemed dividend of $22 on the 143,501 unexercised warrants that contained this antidilution price adjustment protection provision

and was calculated as the difference between the fair value of the warrants immediately prior to downward exercise price adjustment and

immediately after the adjustment using a Black Scholes model based on the following significant inputs:

On October 26, 2020, common stock

price of $1.47;

comparable company volatility of 96.5%;

remaining term 2.08 years;

dividend yield of 0% and risk-free interest rate of

June 20, 2018, the Company entered into an agreement with a holder of 56,696 of the November 2017 warrants to exercise its original

warrant representing 56,696 shares of common stock for cash at the $30.00 exercise price for gross proceeds of $1.7 million and

the Company issued to holder a new warrant to purchase 56,696 shares of common stock at an exercise price of $36.40 per share.

The new warrant did not contain the antidilution price adjustment protection that was contained within the exercised warrants.

In June 2018, the Company recorded stock compensation expense of $1,700 representing the fair value of the of 56,696 inducement

warrants issued.

The Company estimated the fair value of the common stock warrants, exercisable at $36.40 per share, to be $1,700

using a Black Scholes model based on the following significant inputs:

On June 20, 2018, the Company entered into

an agreement with a holder of 56,696 of the November 2017 warrants to exercise its original warrant representing 56,696 shares

of common stock for cash at the $30.00 exercise price for gross proceeds of $1.7 million and the Company issued to holder a new

warrant to purchase 56,696 shares of common stock at an exercise price of $36.40 per share.

The new warrant did not contain the

antidilution price adjustment protection that was contained within the exercised warrants.

In June 2018, the Company recorded stock

compensation expense of $1,700 representing the fair value of the of 56,696 inducement warrants issued.

The Company estimated the

fair value of the common stock warrants, exercisable at $36.40 per share, to be $1,700 using a Black Scholes model based on the

following significant inputs:

common stock price of $42.20;

comparable company volatility

comparable company volatility of 72.6%;

remaining term 5 years;

yield of 0% and risk-free interest rate of 2.8%.

Also, in June 2018, an additional 17,088 of the November 8, 2017 warrants that

were in the money at the time of exercise, were exercised for gross proceeds of $513.

On August 13, 2018, in connection with

a Rights Offering of 267,853 shares of its common stock, the Company issued 267,853 warrants to purchase shares of its common stock

at an exercise price of $23.00 per share.

The Company estimated the fair value of the common stock warrants, exercisable at $23.00

per share, to be $3,600 using a Monte Carlo model based on the following significant inputs:

common stock price of $18.80;

company volatility of 159.0%;

remaining term 5 years;

dividend yield of 0% and risk-free interest rate of 2.77%.

Also, in June 2018, an additional

17,088 of the November 8, 2017 warrants that were in the money at the time of exercise, were exercised for gross proceeds of $513.

August 13, 2018, in connection with a Rights Offering of 267,853 shares of its common stock, the Company issued 267,853 warrants

to purchase shares of its common stock at an exercise price of $23.00 per share.

The Company estimated the fair value of the common

stock warrants, exercisable at $23.00 per share, to be $3,600 using a Monte Carlo model based on the following significant inputs:

In connection with the closing of the Rights

Offering, the Company issued a warrant to purchase 13,393 shares of common stock to Maxim Partners LLC, an affiliate of the dealer-manager

of the Rights Offering.

The Company estimated the fair value of the common stock warrants, exercisable at $34.50 per share, to

be $169 using a using a Monte Carlo model based on the following significant inputs:

common stock price of $18.80;

comparable company volatility of 159.0%;

comparable company

volatility of 159.0%;

remaining term 5 years;

dividend yield of 0% and risk-free

interest rate of 2.77%.

connection with the closing of the Rights Offering, the Company issued a warrant to purchase 13,393 shares of common stock to

Maxim Partners LLC, an affiliate of the dealer-manager of the Rights Offering.

The Company estimated the fair value of the common

stock warrants, exercisable at $34.50 per share, to be $169 using a using a Monte Carlo model based on the following significant

dividend yield of 0% and risk-free interest rate of 2.77%.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share

Note 9 - Common Stock Warrants and Common Stock Warrant Liability

Common Stock Warrant Issued to Underwriter of Common Stock

In July 2019, the Company issued to H.C.

Wainwright & Co., as placement agent, a warrant to purchase 8,334 shares of common stock at an exercise price of $33.75 per

share as consideration for providing services in connection with a common stock offering in July 2019.

The warrant was fully vested

and exercisable on the date of issuance.

The common stock warrant is exercisable until five years from the date of grant.

estimated the fair value of the common stock warrants, exercisable at $33.75 per share, to be $127 using a lattice model based

on the following significant inputs:

common stock price of $26.80;

1 unchanged sentence

remaining term 5 years;

dividend yield of 0% and

risk-free interest rate of 2.77%.

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

9 - Common Stock Warrants and Common Stock Warrant Liability –

Stock Warrant Issued to Underwriter of Common Stock Offering

July 2019, the Company issued to H.C.

Wainwright & Co., as placement agent, a warrant to purchase 8,334 shares of common stock

at an exercise price of $33.75 per share as consideration for providing services in connection with a common stock offering in

The warrant was fully vested and exercisable on the date of issuance.

The common stock warrant is exercisable until

five years from the date of grant.

The Company estimated the fair value of the common stock warrants, exercisable at $33.75 per

share, to be $127 using a lattice model based on the following significant inputs:

dividend yield of 0% and risk-free interest rate of 2.07%.

Common Stock Warrants Issued in January and March 2020 Private

In January and March 2020, in separate

private placements concurrent with registered direct offerings (collectively, the “2020 Registered Direct Offerings”)

of shares of the Company’s common stock, the Company also issued warrants to purchase an aggregate of up to 353,872 shares

of common stock to certain institutional and accredited investors that participated in the 2020 Registered Direct Offerings (the

“2020 Warrants”).

The warrants were issued in reliance on the exemption from registration provided by Section 4(a)(2)

of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506(b) of Regulation D promulgated thereunder.

Terms used but not otherwise defined herein will have the meanings given them in the warrants, attached as Exhibit 4.1 to

our Form 8-K filed on January 28, 2020, and our Form 8-K filed on March 6, 2020.

The warrants issued in January 2020 to

purchase 177,500 shares of common stock have an exercise price of $9.00 per share, are exercisable after July 28, 2020 and

will expire July 28, 2025.

The Company estimated the fair value of the common stock warrants, exercisable at $9.00 per share, to

be $813 using a Black Scholes model based on the following significant inputs:

common stock price of $7.90;

3 unchanged sentences

dividend yield of 0% and risk-free interest rate of 1.53%.

of Arizona Common Stock Warrant

connection with the June 2015 amended and restated exclusive license agreement with the University of Arizona (“University”),

the Company issued to the University a common stock warrant to purchase 750 shares of common stock at an exercise price of $150.00

The warrant was fully vested and exercisable on the date of grant, and expires, if not exercised, five years from the

date of grant.

In the event of a “terminating change”

of the Company, as defined in the warrant agreement, the warrant

holder would be paid in cash the aggregate fair market value of the underlying shares immediately prior to the consummation of

the terminating change event.

Due to the cash settlement provision, the derivative warrant liability was recorded at fair value

and is revalued at the end of each reporting period.

The changes in fair value are reported in other income (expense) in the statements

of operations and comprehensive loss.

The estimated fair value of the derivative warrant liability was $53 at the date of grant.

These warrants expired, unexercised, on June 26, 2020.

Stock Warrants Issued in January and March 2020 Private Placements

January and March 2020, in separate private placements concurrent with registered direct offerings (collectively, the “2020

Registered Direct Offerings”) of shares of the Company’s common stock, the Company also issued warrants to purchase

an aggregate of up to 353,872 shares of common stock to certain institutional and accredited investors that participated in the

2020 Registered Direct Offerings (the “2020 Warrants”).

The warrants were issued in reliance on the exemption from

registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder.

but not otherwise defined herein will have the meanings given them in the warrants, attached as Exhibit 4.1 to our Form 8-K

filed on January 28, 2020, and our Form 8-K filed on March 6, 2020.

warrants issued in January 2020 to purchase 177,500 shares of common stock have an exercise price of $9.00 per share, are exercisable

after July 28, 2020 and will expire July 28, 2025.

The Company estimated the fair value of the common stock warrants, exercisable

at $9.00 per share, to be $813 using a Black Scholes model based on the following significant inputs:

The warrants issued in March 2020 to purchase

176,372 shares of common stock have an exercise price of $2.88 per share, are immediately exercisable and will expire September

The Company estimated the fair value of the common stock warrants, exercisable at $2.88 per share, to be $242 using a

Black Scholes model based on the following significant inputs:

common stock price of $2.35;

2 unchanged sentences

dividend yield of 0% and risk-free interest rate of 0.39%.

warrants issued in March 2020 to purchase 176,372 shares of common stock have an exercise price of $2.88 per share, are immediately

exercisable and will expire September 8, 2025.

The Company estimated the fair value of the common stock warrants, exercisable

at $2.88 per share, to be $242 using a Black Scholes model based on the following significant inputs:

For so long as the 2020 Warrants remain

outstanding, the exercise price and number of shares of common stock issuable upon exercise of the warrants are subject to adjustment

(a) upon payment of a stock dividend or other distribution on a class or series of shares common stock, not including

shares issued under this warrant;

(b) upon subdivision (by stock spilt, stock dividend, recapitalization, or otherwise) or

combination (by reverse stock split or otherwise) of shares of common stock;

or (c) upon the issuance of any shares of capital

stock by reclassification of shares of the common stock.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share

Note 9 - Common Stock Warrants and Common Stock Warrant Liability

In the event that the Company declares

or makes any dividend or other distribution of its assets to holders of its common stock, each 2020 Warrant holder will be entitled

to participate in such distribution to the same extent that such holder would have participated therein if the holder had held

the number of shares of common stock acquirable upon exercise of the 2020 Warrant.

In the event of a Fundamental Transaction,

as described in the 2020 Warrants and generally including the sale, transfer or other disposition of all or substantially all of

our properties or assets;

our consolidation or merger with or into another person or reorganization;

a recapitalization, reorganization

or reclassification in which our common stock is converted into other securities, cash or property;

or any acquisition of our outstanding

common stock that results in any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding

common stock, then the holders of the 2020 Warrants will be entitled to receive upon exercise of such warrants the kind and amount

of securities, cash, assets or other property that the holders would have received had they exercised the 2020 Warrants immediately

prior to such Fundamental Transaction.

Subject to certain limitations, in the event of a Fundamental Transaction the 2020 Warrant

holder may at its option require the Company or any Successor Entity to purchase such warrant from the holder by paying to the

holder an amount of cash equal to the Black Scholes Value of the remaining unexercised portion of the 2020 Warrant on the date

of the consummation of the Fundamental Transaction.

Any time that the Company grants, issues,

or sells any securities pro rata to all of the record holders of the common stock (the “2020 Purchase Right”), each

holder of 2020 Warrants will be entitled to acquire the aggregate amount of securities that the holder could have acquired if the

holder had held the number of shares of common stock acquirable upon exercise of the applicable 2020 Warrant.

However, to the extent

that an exercise of a 2020 Purchase Right would exceed the Beneficial Ownership Limitation (defined below), then to such extent

the 2020 Purchase Right will be held in abeyance until such time, if ever, that complete exercise of the 2020 Purchase Right would

not exceed the Beneficial Ownership Limitation.

After the Initial Exercisability Date (as

defined in the 2020 Warrants), the 2020 Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering

to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon

such exercise.

If, at the time a holder exercises the 2020 Warrant (but not sooner than six months following the date of such warrant),

a registration statement registering the issuance of the shares of common stock underlying the 2020 Warrants under the Securities

Act is not then effective or available, nor is any current prospectus thereto available, and an exemption from registration under

the Securities Act is not available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated

to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such

exercise (either in whole or in part) the number of shares of common stock determined according to a formula set forth in the 2020

Limitations on Exercise .

(together with its affiliates) may not exercise any portion of the 2020 Warrants to the extent that the holder would own more than

4.99% of the outstanding common stock after exercise (the “Beneficial Ownership Limitation”), except that upon at least

61 days’

prior notice from the holder to us, the holder may increase the Beneficial Ownership Limitation up to 9.99% of the

number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership

is determined in accordance with the terms of the 2020 Warrants.

No fractional shares of common stock will be issued in connection

with the exercise of a 2020 Warrant.

In lieu of fractional shares, we will either pay the holder an amount in cash equal to the

fractional amount multiplied by the exercise price or round up to the next whole share.

Except as otherwise provided in the 2020

Warrants or by virtue of such holder’s ownership of shares of our common stock, the holders of the 2020 Warrants do not have

the rights or privileges of holders of our common stock, including any voting rights, unless and until they exercise such warrants.

Common Stock Warrants Issued in April

2020 Public Offering

On April 24, 2020, in connection with a

previously announced public offering of 145,586 Class A Units and 1,428,722 Class B Units, the Company issued warrants to purchase

1,574,308 shares of common stock to the participants in the public offering and have an exercise price of $3.05 per share (the

“April 2020 Warrants”).

These warrants are immediately exercisable and will expire April 24, 2025.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share

Note 9 - Common Stock Warrants and Common Stock Warrant Liability

The Common Stock, Pre-Funded Warrants and

Warrants sold in this Public Offering were offered and sold pursuant to a registration statement on Form S-1 (File No.

initially filed with the SEC on February 7, 2020, as amended (“Registration Statement”), which was declared effective

by the SEC on February 14, 2020.

The Post-Effective Amendment No.

2 to the Registration Statement was declared effective by the

SEC on April 21, 2020.

The Company estimated the fair value of

the common stock warrants, exercisable at $3.05 per share, to be $2,402 using a Black Scholes model based on the following significant

common stock price of $2.40;

1 unchanged sentence

remaining term 5 years;

dividend yield of 0% and risk-free

interest rate of 0.18%.

Common Stock Warrants Issued to Placement

Agent in 2020 Registered Direct Offerings and Private Placement

In connection with the separate private

placements concurrent with registered direct offerings of shares of the Company’s common stock in January and March 2020,

the Company issued to H.C.

Wainwright & Co., LLC, as placement agent, a warrant to purchase 13,228 shares of common stock and

a warrant to purchase 13,313 shares of common stock.

The warrants were issued in reliance on the exemption from registration provided

by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder.

These warrants have substantially

similar terms as the 2020 Warrants described above, except that the placement agent warrant issued in January 2020 has an exercise

price of $10.00 per share, and the placement agent warrant issued in March 2020 has an exercise price of $3.7563 per share.

The Company estimated the fair value of

the common stock warrants issued in January, with an exercise price of $10.00 per share, to be $58 using a Black Scholes model

based on the following significant inputs:

common stock price of $7.90;

comparable company volatility of 73.8%;

remaining term

dividend yield of 0% and risk-free interest rate of 1.53%.

so long as the 2020 Warrants remain outstanding, the exercise price and number of shares of common stock issuable upon exercise

of the warrants are subject to adjustment as follows:

(a) upon payment of a stock dividend or other distribution on a class

or series of shares common stock, not including shares issued under this warrant;

(b) upon subdivision (by stock spilt, stock

dividend, recapitalization, or otherwise) or combination (by reverse stock split or otherwise) of shares of common stock;

upon the issuance of any shares of capital stock by reclassification of shares of the common stock.

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

9 - Common Stock Warrants and Common Stock Warrant Liability –

the event that the Company declares or makes any dividend or other distribution of its assets to holders of its common stock,

each 2020 Warrant holder will be entitled to participate in such distribution to the same extent that such holder would have participated

therein if the holder had held the number of shares of common stock acquirable upon exercise of the 2020 Warrant.

the event of a Fundamental Transaction, as described in the 2020 Warrants and generally including the sale, transfer or other

disposition of all or substantially all of our properties or assets;

our consolidation or merger with or into another person or

reorganization;

a recapitalization, reorganization or reclassification in which our common stock is converted into other securities,

cash or property;

or any acquisition of our outstanding common stock that results in any person or group becoming the beneficial

owner of 50% of the voting power represented by our outstanding common stock, then the holders of the 2020 Warrants will be entitled

to receive upon exercise of such warrants the kind and amount of securities, cash, assets or other property that the holders would

have received had they exercised the 2020 Warrants immediately prior to such Fundamental Transaction.

Subject to certain limitations,

in the event of a Fundamental Transaction the 2020 Warrant holder may at its option require the Company or any Successor Entity

to purchase such warrant from the holder by paying to the holder an amount of cash equal to the Black Scholes Value of the remaining

unexercised portion of the 2020 Warrant on the date of the consummation of the Fundamental Transaction.

time that the Company grants, issues, or sells any securities pro rata to all of the record holders of the common stock (the “2020

Purchase Right”), each holder of 2020 Warrants will be entitled to acquire the aggregate amount of securities that the holder

could have acquired if the holder had held the number of shares of common stock acquirable upon exercise of the applicable 2020

However, to the extent that an exercise of a 2020 Purchase Right would exceed the Beneficial Ownership Limitation (defined

below), then to such extent the 2020 Purchase Right will be held in abeyance until such time, if ever, that complete exercise

of the 2020 Purchase Right would not exceed the Beneficial Ownership Limitation.

the Initial Exercisability Date, the 2020 Warrants will be exercisable, at the option of each holder, in whole or in part, by

delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased

upon such exercise.

If, at the time a holder exercises the 2020 Warrant (but not sooner than six months following the date of

such warrant), a registration statement registering the issuance of the shares of common stock underlying the 2020 Warrants under

the Securities Act is not then effective or available, nor is any current prospectus thereto available, and an exemption from

registration under the Securities Act is not available for the issuance of such shares, then in lieu of making the cash payment

otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead

to receive upon such exercise (either in whole or in part) the number of shares of common stock determined according to a formula

set forth in the 2020 Warrant.

on Exercise .

A holder (together with its affiliates) may not exercise any portion of the 2020 Warrants to the extent that

the holder would own more than 4.99% of the outstanding common stock after exercise (the “Beneficial Ownership Limitation”),

except that upon at least 61 days’

prior notice from the holder to us, the holder may increase the Beneficial Ownership

Limitation up to 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise,

as such percentage ownership is determined in accordance with the terms of the 2020 Warrants.

No fractional shares of common stock

will be issued in connection with the exercise of a 2020 Warrant.

In lieu of fractional shares, we will either pay the holder

an amount in cash equal to the fractional amount multiplied by the exercise price or round up to the next whole share.

as otherwise provided in the 2020 Warrants or by virtue of such holder’s ownership of shares of our common stock, the holders

of the 2020 Warrants do not have the rights or privileges of holders of our common stock, including any voting rights, unless

and until they exercise such warrants.

Stock Warrants Issued in April 2020 Public Offering

April 24, 2020, in connection with a previously announced public offering of 145,586 Class A Units and 1,428,722 Class B Units,

the Company issued warrants to purchase 1,574,308 shares of common stock to the participants in the public offering and have an

exercise price of $3.05 per share (the “April 2020 Warrants”).

These warrants are immediately exercisable and will

expire April 24, 2025.

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

9 - Common Stock Warrants and Common Stock Warrant Liability –

Common Stock, Pre-Funded Warrants and Warrants sold in this Public Offering were offered and sold pursuant to a registration statement

on Form S-1 (File No.

333-236302) initially filed with the Securities and Exchange Commission (the “

SEC ”) on

February 7, 2020, as amended (“Registration Statement”), which was declared effective by the SEC on February 14, 2020.

The Post-Effective Amendment No.

2 to the Registration Statement was declared effective by the SEC on April 21, 2020.

Company estimated the fair value of the common stock warrants, exercisable at $3.05 per share, to be $2,402 using a Black Scholes

model based on the following significant inputs:

The Company estimated the fair value of

the common stock warrants issued in March, with an exercise price of $3.7563 per share, to be $17 using a Black Scholes model based

on the following significant inputs:

common stock price of $2.35;

comparable company volatility of 74.8%;

term 5 years;

remaining term 5.5 years;

dividend yield of 0% and risk-free interest rate of 0.39%.

Stock Warrants Issued to Placement Agent in 2020 Registered Direct Offerings and Private Placement

connection with the separate private placements concurrent with registered direct offerings of shares of the Company’s common

stock in January and March 2020, the Company issued to H.C.

Wainwright & Co., LLC, as placement agent, a warrant to purchase

13,228 shares of common stock and a warrant to purchase 13,313 shares of common stock.

The warrants were issued in reliance on

the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated

These warrants have substantially similar terms as the 2020 Warrants described above, except that the placement agent

warrant issued in January 2020 has an exercise price of $10.00 per share, and the placement agent warrant issued in March 2020

has an exercise price of $3.7563 per share.

Company estimated the fair value of the common stock warrants issued in January, with an exercise price of $10.00 per share, to

be $58 using a Black Scholes model based on the following significant inputs:

In connection with the public offering

of 145,586 Class A Units and 1,428,722 Class B Units on April 24, 2020, the Company issued to H.C.

Wainwright & Co., LLC, as

placement agent, warrants to purchase 118,073 shares of common stock.

The warrants were issued in reliance on the exemption from

registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder.

These warrants

have substantially similar terms as the April 2020 Warrants described above, except that the placement agent warrant issued has

an exercise price of $3.97 per share.

The Company estimated the fair value of

the common stock warrants issued in April, with an exercise price of $3.97 per share, to be $167 using a Black Scholes model based

on the following significant inputs:

common stock price of $2.40;

comparable company

volatility of 73.8%;

comparable company volatility of 87.9%;

remaining term 5.5 years;

dividend yield of 0% and risk-free interest rate of 0.18%.

Company estimated the fair value of the common stock warrants issued in March, with an exercise price of $3.7563 per share, to

be $17 using a Black Scholes model based on the following significant inputs:

Common Stock Warrants Issued in October

2020 Private Warrant Inducement

In October 2020, in connection with an

inducement agreement with an existing accredited investor to exercise 1,700,680 outstanding warrants (the “Original Warrants”)

to purchase an equal number of shares of the Company’s common stock, the Company issued new unregistered warrants to purchase

up to an aggregate of 1,700,680 shares of common stock at an exercise price of $1.725 per share.

The warrants issued were immediately

exercisable with an exercise period of five and one-half years from the date of issuance.

The Original Warrants were issued on

March 6, 2020 and on April 24, 2020.

Pursuant to the Letter Agreement, the per share exercise price of the Original Warrants were

reduced from $2.88 and $3.05, respectively, to $1.725.

The Company estimated the fair value of the common stock warrants, exercisable

at $1.725 per share, to be $1,806 using a Black Scholes model based on the following significant inputs:

common stock price of

comparable company

volatility of 74.8%;

comparable company volatility of 96.5%;

remaining term 5.5 years;

dividend yield of 0% and risk-free interest rate of 0.18%.

connection with the public offering of 145,586 Class A Units and 1,428,722 Class B Units on April 24, 2020, the Company issued

Wainwright & Co., LLC, as placement agent, warrants to purchase 118,073 shares of common stock.

The warrants were

issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation

D promulgated thereunder.

These warrants have substantially similar terms as the April 2020 Warrants described above, except that

the placement agent warrant issued has an exercise price of $3.97 per share.

Company estimated the fair value of the common stock warrants issued in April, with an exercise price of $3.97 per share, to be

In connection with the private warrant

inducement in October 2020 of 1,700,680 shares of the Company’s common warrants, the Company issued to H.C.

Co., LLC, as placement agent, warrants to purchase 85,034 shares of common stock.

These warrants have substantially similar terms

as the 2020 Warrants described above, except that the placement agent warrant issued in October 2020 has an exercise price of $2.156

The Company estimated the fair value of

these common stock warrants, with an exercise price of $2.156 per share, to be $86 using a Black Scholes model based on the following

significant inputs:

common stock price of $1.47;

comparable company volatility of 96.5%;

remaining term 5.5 years;

dividend yield

of 0% and risk-free interest rate of 0.18%.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share

Note 9 - Common Stock Warrants and Common Stock Warrant Liability

Common Stock Warrants Issued in February 2021 Private

Placement Agreement

In February 2021, in connection with a

private placement agreement with certain institutional and accredited investors, the Company issued common stock warrants to purchase

up to an aggregate of 2,194,427 shares of common stock at an exercise price of $2.216 per share.

The warrants were exercisable

immediately and have an exercise period of five and one-half years from the date of issuance.

The warrant holder may not exercise

any portion of such holder’s warrants to the extent that the holder, together with its affiliates, would beneficially own

more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s outstanding shares of common stock immediately

after exercise, except that upon at least 61 days’

prior notice from the holder to the Company, the holder may increase the

beneficial ownership limitation to up to 9.99% of the number of shares of common stock outstanding immediately after giving effect

to the exercise.

The Company estimated the fair value of the common stock warrants, exercisable at $2.216 per share, to be $3,052

using a Black Scholes model based on the following significant inputs:

3 unchanged sentences

dividend yield of 0% and risk-free interest rate of 0.18%.

Dividend Adjustment-Warrant Modified Terms Revaluation

December 2, 2019, in connection with the settlement of a filed lawsuit against the Company on February 20, 2018 by New Enterprises,

(“New Enterprises”), the Company agreed to modify the terms of 6,934 common stock warrants that were originally

issued to New Enterprises between September 2015 and February 2016.

Specifically, the original strike price was reduced to $20.00

per warrant from $150.00 per warrant and the expiration date of these warrants was extended one year to December 13, 2020.

guidance of ASC 260, the Company recorded a deemed dividend of $11 on the 6,934 unexercised warrants that were affected by the

modification of terms.

The dividend was calculated as the difference between the fair value of the warrants immediately prior

to modification of terms and immediately after the adjustment using a Black Scholes model based on the following significant inputs:

On December 2, 2019:

Common Stock Warrants Issued

to Placement Agent in February 2021 Private Placement Agreement

In connection with the private placement

in February 2021, the Company issued to H.C.

Wainwright & Co., LLC, as placement agent, warrants to purchase up to 329,164

shares of Common Stock with an exercise price of $2.8481 per share.

The warrants are exercisable immediately and have an exercise

period of five and one-half years from the date of issuance.

The Company estimated the fair value of these common stock warrants,

with an exercise price of $2.8481 per share, to be $435 using a Black Scholes model based on the following significant inputs:

common stock price of $1.93;

1 unchanged sentence

remaining term 5.5 years;

yield of 0% and risk-free interest rate of 1.63.

As adjusted, common stock price of $12.00;

dividend yield of 0% and risk-free

interest rate of 0.18%.

Common Stock Warrants Issued to Placement

Agent in March 2021 Registered Direct Offering

On March 23, 2021, the Company consummated

a registered direct offering with certain institutional investors and issued an aggregate of 1,975,000 shares of the Company’s

common stock, par value $0.001 per share at a purchase price of $2.00 per share for gross proceeds to the Company of approximately

$3.95 million, before deducting fees payable to the placement agent and other estimated offering expenses payable by the Company.

The 1,975,000 shares of Common Stock sold in the Offering were offered and sold pursuant to a prospectus, dated August 24, 2018,

and a prospectus supplement, dated March 22, 2021, in connection with a takedown from the Company’s shelf registration statement

on Form S-3 (File No.

In connection with the registered direct

offering in March 2021, the Company issued to H.C.

Wainwright & Co., LLC, as the placement agent, warrants to purchase up to

148,125 shares of Common Stock.

The Placement Agent Warrants will be exercisable commencing six months following the date of issuance,

expire five years following the date of sale and have an exercise price per share of $2.50 per share.

The Placement Agent Warrants,

and the shares of Common Stock issuable upon exercise thereof, will be issued in reliance on the exemption from registration provided

in Section 4(a)(2) under the Securities Act of 1933, as amended, and Regulation D promulgated thereunder.

The Company estimated

the fair value of these common stock warrants, with an exercise price of $2.50 per share, to be $181 using a Black Scholes model

based on the following significant inputs:

common stock price of $1.76;

comparable company volatility of 100.8%;

remaining term

dividend yield of 0% and risk-free interest rate of 0.31%.

Deemed Dividend Adjustment-Warrant

Modified Terms Revaluation

On March 3, 2020, the Company issued an

aggregate of 51,414 common shares in a cashless exercise of 56,625 warrants issued in December 2016 and November 2017.

Consideration

for the exercise of these warrants was the full settlement of an outstanding litigation reserve of $238.

On October 26, 2020, in connection with

the private warrant inducement with an existing accredited investor to exercise 1,700,680 Original Warrants, the Company agreed

to modify the terms of the Original Warrants that were originally issued on March 6, 2020 and on April 24, 2020.

Pursuant to the

agreement, the per share exercise price of the Original Warrants were reduced from $2.88 and $3.05, respectively, to $1.725.

Per recent proposed guidance of ASC 260,

the Company determined that this was an exchange of the existing 1,700,680 warrants that were affected and the difference between

the fair value of the warrants immediately prior to modification of terms and immediately after the adjustment was a cost of raising

capital and was recorded as a reduction of equity.

The difference between the fair value of the warrants immediately prior to modification

of terms and immediately after the adjustment was calculated as $237, using a Black Scholes model based on the following significant

On October 26, 2020:

common stock price of $1.47;

comparable company volatility of 96.5%;

remaining term 4.5-4.8 years;

dividend yield of 0% and risk-free interest rate of 0.18%.

March 3, 2020, the Company issued an aggregate of 51,414 common shares in a cashless exercise of 56,625 warrants issued in December

2016 and November 2017.

Consideration for the exercise of these warrants was the full settlement of an outstanding litigation

reserve of $238.

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

10 - Stockholders’

Company was organized under the laws of the state of Nevada on July 27, 2004 and was subsequently reincorporated under the laws

of the state of Delaware on November 10, 2015.

In connection with the reincorporation, as approved by the stockholders, the Company

changed its authorized capital stock to consist of (i) 100 million shares of common stock, $.001 par value, and (ii) 2 million

shares of preferred stock, $0.001 par value, designated as Series A convertible preferred stock.

In December 2015, the Company

amended its Certificate of Incorporation to change its authorized capital stock to provide for 15 million authorized shares of

preferred stock of which 7,515,000 was designated as Series B convertible preferred stock, par value $.001 per share.

to November 10, 2015, the Company’s authorized capital stock consisted of 100 million shares of common stock, $.001 par

value, and 10 million shares of preferred stock, $.001 par value.

Company had 3,398,832 and 1,414,671 shares of common stock issued and outstanding as of September 30, 2020 and December 31, 2019,

respectively.

the nine months ended September 30, 2020, the Company issued 1,984,161 shares of common stock as follows:

an aggregate of

177,500 shares in connection with a registered direct offering generating net proceeds to the Company in January 2020 of approximately

$973, as further described below;

an aggregate of

176,372 shares in connection with a registered direct offering generating net proceeds to the Company in March 2020 of approximately

$462, as further described below;

an aggregate of

1,574,308 shares in connection with a public offering and exercise of pre-funded warrants issued in connection with said public

offering, generating net proceeds to the Company in April 2020 of approximately $4,306, as further described below;

an aggregate of

51,414 shares for the exercise of outstanding warrants in settlement of an outstanding litigation reserve of $238 (see Note

9 - Common Stock Warrants and Common Stock Warrant Liability for further details);

an aggregate of

4,543 shares for service as a result of the vesting of restricted stock units;

an aggregate of

24 shares for true up of shares as a result of the 1-for-20 reverse stock split effected in February 2020.

Offerings and Registered Direct Offerings

April 24, 2020, the Company closed a public offering of 145,586 Class A Units and 1,428,722 Class B Units.

Each unit is comprised

of one share of common stock, par value $0.001 per share or common stock equivalent in the form of a pre-funded warrant and one

warrant to purchase one share of common stock.

The Class A Units were offered at a public offering price of $3.176 per unit, and

the Class B Units were offered at a public offering price of $3.175 per unit priced at-the-market under Nasdaq rules, generating

net proceeds of approximately $4,306, including the full exercise of the pre-funded warrants sold in this offering and after deducting

certain fees due to the placement agent and other estimated transaction expenses.

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

10 - Stockholders’

Deficit –

in connection with the public offering noted above, the Company issued warrants to purchase 1,574,308 shares of common stock to

the participants in the public offering, with an exercise price of $3.05 per share.

These warrants are immediately exercisable

and will expire April 24, 2025.

March 6, 2020, the Company closed a registered direct offering of an aggregate of 176,372 shares of our common Stock at a purchase

price of $3.005 per share for aggregate net proceeds of approximately $462, after deducting certain fees due to the placement

agent and other estimated transaction expenses.

In addition, we also issued warrants exercisable for an aggregate of up to 176,372

shares of our common stock with an exercise price of $2.88 per share.

In addition, in connection with the offering, we issued

the placement agent five-year warrants to purchase up to 13,228 shares of our common Stock at an exercise price of $3.7563 per

January 28, 2020, the Company closed a registered direct offering of an aggregate of 177,500 shares of our common stock at a purchase

price of $8.00 per share for aggregate net proceeds of approximately $973, after deducting certain fees due to the placement agent

and other estimated transaction expenses.

In addition, in a concurrent private placement, we also issued and sold warrants exercisable

for an aggregate of up to 177,500 shares of our common stock with an exercise price of $9.00 per share.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share

Note 10 - Stockholders’

Capital Stock

The Company was organized under the laws

of the state of Nevada on July 27, 2004 and was subsequently reincorporated under the laws of the state of Delaware on November

In connection with the reincorporation, as approved by the stockholders, the Company changed its authorized capital stock

to consist of (i) 100 million shares of common stock, $.001 par value, and (ii) 2 million shares of preferred stock, $0.001 par

value, designated as Series A convertible preferred stock.

In December 2015, the Company amended its Certificate of Incorporation

to change its authorized capital stock to provide for 15 million authorized shares of preferred stock of which 7,515,000 was designated

as Series B convertible preferred stock, par value $.001 per share.

Prior to November 10, 2015, the Company’s

authorized capital stock consisted of 100 million shares of common stock, $.001 par value, and 10 million shares of preferred stock,

$.001 par value.

The Company had 12,164,046 and 5,099,512

shares of common stock issued and outstanding as of March 31, 2021 and December 31, 2020, respectively.

During the three months ended March 31,

2021, the Company issued 7,064,534 shares of common stock as follows:

an aggregate of 4,388,854 shares in connection with a private placement offering and exercise of pre-funded warrants issued in connection with the offering, generating net proceeds to the Company in February 2021 of approximately $8,898, as further described below;

an aggregate of 1,975,000 shares in connection with a registered direct offering generating net proceeds to the Company in March 2021 of approximately $3,523, as further described below;

an aggregate of 700,680 shares in connection with the exercise of common stock warrants, generating net proceeds to the Company in March 2020 of approximately $1,209, as further described below.

Public Offerings and Registered Direct Offerings

On February 2, 2021, the Company consummated

a private placement agreement with certain institutional and accredited investors and issued an aggregate of 3,968,854 shares of

its common stock, par value $0.001 per share at a purchase price of $2.2785 per share, pre-funded warrants to purchase up to an

aggregate of 420,000 shares of common stock at a purchase price of $2.2775 per pre-funded warrant and associated warrants to purchase

up to an aggregate of 2,194,427 shares of common stock, for gross proceeds of approximately $10.0 million, prior to deducting placement

agent fees and offering expenses.

At March 29, 2021, all 420,000 pre-funded shares had been distributed.

In connection with the

offering, we issued the placement agent five-year warrants to purchase up to 13,312 shares of our common stock at an exercise

price of $10.00 per share.

11 - Stock-based Compensation

June 12, 2018, the Company’s stockholders approved the 2018 Equity Incentive Plan (the “2018 Plan”) to replace

the Company’s 2015 Equity Incentive Plan (the “2015 Plan”).

As of September 30, 2020, the 2018 Plan authorizes

the issuance of 50,000 shares of our common stock.

In addition, up to 122,279 shares of our common stock reserved for issuance

under the 2015 Plan became available for issuance under the 2018 Plan to the extent such shares were available for issuance under

the 2015 Plan as of June 12, 2018 or cease to be subject to awards outstanding under the 2015 Plan, such as by expiration, cancellation,

or forfeiture of such awards.

options are generally issued with a per share exercise price equal to no less than fair market value of our common stock at the

date of grant.

Options granted under the 2018 Plan generally vest immediately, or ratably over a two- to 36-month period coinciding

with their respective service periods.

offering, we issued the placement agent warrants to purchase up to 329,164 shares of Common Stock with an exercise price of $2.8481

On March 23, 2021, the Company consummated

a registered direct offering with certain institutional investors and issued an aggregate of 1,975,000 shares of the Company’s

common stock, par value $0.001 per share at a purchase price of $2.00 per share for gross proceeds to the Company of approximately

$3.95 million, pursuant to a prospectus, dated August 24, 2018, and a prospectus supplement, dated March 22, 2021, in connection

with a takedown from the Company’s shelf registration statement on Form S-3 (File No.

In connection with the offering, we issued

the placement agent warrants to purchase up to 148,125 shares of Common Stock at an exercise price per share of $2.50 per share.

On March 19, 2021, the Company issued an

aggregate of 700,680 shares of commons stock for the exercise of certain warrants.

The net proceeds to the Company for these exercises

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share

Note 11 - Stock-based Compensation

On June 12, 2018, the Company’s stockholders

approved the 2018 Equity Incentive Plan (the “2018 Plan”) to replace the Company’s 2015 Equity Incentive Plan

(the “2015 Plan”).

On July 8, 2020, the Company’s stockholders approved an amendment to the 2018 Plan to increase

the number of shares of common stock available for issuance under the 2018 Plan by 800,000 shares from 50,000 to 850,000.

up to 122,279 shares of our common stock previously reserved for issuance under the 2015 Plan are available for issuance under

the 2018 Plan to the extent such shares were available for issuance under the 2015 Plan as of June 12, 2018 or thereafter cease

to be subject to awards outstanding under the 2015 Plan, such as by expiration, cancellation, or forfeiture of such awards.

Stock options are generally issued with

a per share exercise price equal to no less than fair market value of our common stock at the date of grant.

Options granted under

the 2018 Plan generally vest immediately, or ratably over a two- to 36-month period coinciding with their respective service periods.

Options under the 2018 Plan generally have a term of five years.

Certain stock option awards

provide for accelerated vesting upon a change in control.

of September 30, 2020, the Company had 500,813 shares of common stock available for issuance under the 2018 Plan.

On July 8, 2020,

the Company’s stockholders approved an amendment to the 2018 Plan to increase the number of shares of common stock available

for issuance under the 2018 Plan by 800,000 shares.

Company measures the fair value of stock options with service-based and performance-based vesting criteria to employees, directors

and consultants on the date of grant using the Black-Scholes option pricing model.

The Black-Scholes valuation model requires

the Company to make certain estimates and assumptions, including assumptions related to the expected price volatility of the Company’s

stock, the period under which the options will be outstanding, the rate of return on risk-free investments, and the expected dividend

yield for the Company’s stock.

weighted-average assumptions used in the Black-Scholes option-pricing model used to calculate the fair value of options granted

during the nine months ended September 30, 2020 were as follows:

Certain stock option awards provide for accelerated vesting upon

a change in control.

As of March 31, 2021, the Company had 419,061

shares of common stock available for issuance under the 2018 Plan.

The Company measures the fair value of

stock options with service-based vesting criteria to employees, directors and consultants on the date of grant using the Black-Scholes

option pricing model.

The Black-Scholes valuation model requires the Company to make certain estimates and assumptions, including

assumptions related to the expected price volatility of the Company’s stock, the period during which the options will be

outstanding, the rate of return on risk-free investments, and the expected dividend yield for the Company’s stock.

The weighted-average assumptions used in

the Black-Scholes option-pricing model used to calculate the fair value of options granted during the three months ended March

31, 2021 were as follows:

Expected volatility

2 unchanged sentences

Risk-free interest rate

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

11 - Stock-based Compensation –

weighted average grant date fair value of options granted during the nine months ended September 30, 2020 was $1.94 per share,

as per the table below.

to the Company’s limited operating history and lack of company-specific historical or implied volatility, the expected volatility

assumption was determined based on historical volatilities from traded options of biotech companies of comparable size and stability,

whose share prices are publicly available.

The expected term of options granted to employees is calculated based on the mid-point

between the vesting date and the end of the contractual term according to the simplified method as described in SEC Staff Accounting

Bulletin 110 because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to

estimate the expected term due to the limited period of time its awards have been outstanding.

For non-employee options, the expected

term of options granted is the contractual term of the options.

The risk-free interest rate is determined by reference to the

implied yields of U.S.

Treasury securities with a remaining term equal to the expected term assumed at the time of grant.

expected dividend assumption is based on the Company’s history and expectation of dividend payouts.

The Company has not

paid and does not intend to pay dividends.

following table summarizes the stock option activity, for both equity plans, for the periods indicated as follows:

at December 31, 2019

at September 30, 2020

The aggregate intrinsic

value in the table was calculated based on the difference between the estimated fair market value of the Company’s stock

and the exercise price of the underlying options.

The estimated stock values used in the calculation were $1.88 and $11.00

per share for the nine months ended September 30, 2020 and the year ended December 31, 2019, respectively.

following table summarizes restricted stock unit activity for the nine months ended September 30, 2020:

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share

Note 11 - Stock-based Compensation –

The weighted average grant date fair value

of options granted during the three months ended March 31, 2021 was $1.94 per share, as per the table above.

Due to the Company’s limited operating

history and lack of company-specific historical or implied volatility, the expected volatility assumption was determined based

on historical volatilities from traded options of biotech companies of comparable size and stability, whose share prices are publicly

The expected term of options granted to employees is calculated based on the mid-point between the vesting date and

the end of the contractual term according to the simplified method as described in SEC Staff Accounting Bulletin 110 because the

Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term

due to the limited period of time its awards have been outstanding.

For non-employee options, the expected term of options granted

is the contractual term of the options.

The risk-free interest rate is determined by reference to the implied yields of U.S.

securities with a remaining term equal to the expected term assumed at the time of grant.

The expected dividend assumption is based

on the Company’s history and expectation of dividend payouts.

The Company has not paid and does not intend to pay dividends.

The following table summarizes the stock

option activity, for both equity plans, for the periods indicated as follows:

Outstanding at December 31, 2020

Outstanding at March 31, 2021

Exercisable at March 31, 2021

The aggregate intrinsic value in the table was calculated based on the difference between the estimated fair market value of the Company’s stock and the exercise price of the underlying options.

The estimated stock values used in the calculation were $1.73 and $1.66 per share for the year ended December 31, 2020 and the three months ended March 31, 2021, respectively.

Restricted Stock Units

The following table summarizes restricted

stock unit activity for the three months ended March 31, 2021:

Weighted Average

Grant-Date Fair

Value Per Unit

as of December 31, 2019

as of September 30, 2020

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

11 - Stock-based Compensation –

stock-based compensation expense was recorded as follows:

September 30,

and development

and administrative

stock-based compensation expense

allocation between research and development and selling, general and administrative expense was based on the department and services

performed by the employee or non-employee.

September 30, 2020, the total compensation cost related to restricted stock units and unvested options not yet recognized was

$979, which will be recognized over a weighted average period of 34 months, assuming the employees and non-employee s complete

their service period required for vesting.

12 - Commitments and Contingencies

Company may be subject to legal proceedings and claims arising from contracts or other matters from time to time in the ordinary

course of business.

Management is not aware of any pending or threatened litigation where the ultimate disposition or resolution

could have a material adverse effect on its financial position, results of operations or liquidity.

Company is obligated under finance leases for certain research and computer equipment that expire on various dates through April

At September 30, 2020, the gross amount of office, computer and research equipment, and the related accumulated amortization

recorded under the finance leases was $478 and $334, respectively.

February 2012, the Company entered into an operating lease for its then corporate headquarters in Flagstaff, Arizona with an expiration

in January 2015.

In December 2013 and February 2014, the Company amended its lease to extend the term to December 31, 2019 and

expand into the remaining area in the building and an adjacent building.

In December 2019, we extended the current lease for only

our manufacturing facilities located in Flagstaff, Arizona, occupying a total of 7,632 square feet of space, with an expiration

Outstanding as of December 31, 2020

Outstanding as of March 31, 2021

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share

Note 11 - Stock-based Compensation –

The stock-based compensation expense was recorded as follows:

Three Months Ended

Research and development

Selling, general and administrative

Total stock-based compensation expense

The allocation between research and development

and selling, general and administrative expense was based on the department and services performed by the employee or non-employee.

At March 31, 2021, the total compensation

cost related to restricted stock units and unvested options not yet recognized was $629, which will be recognized over a weighted

average period of 34 months, assuming the employees and non-employee s complete their service period required for vesting.

Note 12 - Commitments and Contingencies

Legal Proceedings

The Company may be subject to legal proceedings

and claims arising from contracts or other matters from time to time in the ordinary course of business.

Management is not aware

of any pending or threatened litigation where the ultimate disposition or resolution could have a material adverse effect on its

financial position, results of operations or liquidity.

Lease Commitments

In February 2012, the Company entered into

an operating lease for its then corporate headquarters in Flagstaff, Arizona, which expired in December 2019.

In December 2019,

The lease is guaranteed by the former President of the Company.

anticipation of the December 2020 Flagstaff, Arizona lease expiration, on June 22, 2020, the Company entered into an operating

lease for approximately 5,103 square feet of warehouse/manufacturing space in Phoenix, Arizona.

The lease commenced on August

1, 2020 and expires on November 30, 2024.

The lease required escalating rental payments over the lease term and minimum rental

payments under the operating lease are being recognized on a straight-line basis over the term of the lease.

Under guidance promulgated

under ASU No.

2016-02, Leases the Company recorded a right-of-use lease asset and a lease liability on its balance

sheet in the amount of $209.

December 1, 2019, we entered into a lease for our corporate headquarters in Phoenix, Arizona where we lease and occupy approximately

5,529 square feet of office space.

we extended the lease for only the manufacturing facilities located in Flagstaff, Arizona, occupying a total of 7,632 square feet

The lease for these manufacturing facilities expired in December 2020.

On November 16, 2016, we leased an additional

1,954 square feet of research and development space, also in Flagstaff.

This lease expired on November 15, 2018 but was extended

for an additional 24 months, through November 2020.

A subsequent amendment to the lease allows for the Company to cancel the lease

at any time through the lease term with 30 days’

The Company provided a 30-day cancellation notice effective February

On December 1, 2019, we entered into a

lease for our corporate headquarters in Phoenix, Arizona where we lease and occupy approximately 5,529 square feet of office space.

This lease expires in November 2024.

TO CONDENSED FINANCIAL STATEMENTS

thousands, except share and per share data)

12 - Commitments and Contingencies –

believe that our existing facilities are adequate and meet our current needs for business, manufacturing and research.

expense was $202 and $187 for the nine months ended September 30, 2020 and 2019, respectively.

The future minimum lease payments

under non-cancellable operating lease and future minimum finance lease payments as of September 30, 2020 are follows:

On August 1, 2020, we entered into a lease

for our manufacturing and research facility in Phoenix, Arizona where we occupy approximately 5,105 square feet of manufacturing

and warehouse space.

This lease expires on November 30, 2024.

We believe that our existing facilities

are adequate and meet our current needs for business, manufacturing and research.

SENESTECH, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share

Note 12 - Commitments and Contingencies

Rent expense was $54 and $69 for the three

months ended March 31, 2021 and 2020, respectively.

The future minimum lease payments under non-cancellable operating lease and

future minimum finance lease payments as of March 31, 2021 are follows:

Years Ending December 31,

1 unchanged sentence

amounts representing interest (ranging from 11.43% to 14.68%)

value of minimum lease payments

Present value of minimum lease payments

current installments under finance lease obligations

long-term portion

13 - Subsequent Events

Warrant Inducement

October 23, 2020, the Company entered into an inducement letter agreement (the “Letter Agreement”) with an existing

accredited investor to exercise certain outstanding warrants to purchase up to an aggregate of 1,700,680 shares of the Company’s

common stock at a reduced exercise price per share of $1.725 (the “Original Warrants”) for aggregate net proceeds

of approximately $2.93 million, before deducting fees payable to the placement agent and other estimated offering expenses payable

by the Company.

In consideration for the immediate exercise of the Original Warrants for cash, the Company issued a new unregistered

warrant to the exercising Holder to purchase up to an aggregate of 1,700,680 shares of common stock at an exercise price of $1.725

Through November 11, 2020, 700,680 of the exercised warrants had been converted to shares.

The remaining 1,000,000

shares will be issued as requested.

In addition, in connection with the offering, the Company issued the placement agent five-and-a-half year warrants

to purchase up to 85,034 shares of the Company’s common stock at an exercise price of $2.156 per share.

Also in connection

with the offering, the exercise price of the Company’s outstanding detachable common stock warrants, originally issued November

21, 2017, was adjusted downward to $1.3659 per share.

travel and other restrictions that began in March 2020 in response to the COVID-19 global pandemic have resulted in a significant

slowdown in our field studies and sales efforts.

We were able to resume some projects by late-April 2020, however, we still

have delays on certain projects that might remain on hold until certain government restrictions are lifted.

have impacted our results of operations and could impact our results in future quarters.

In addition, stay at home orders and

other social distancing initiatives continue to severely limit our ability to communicate with current and potential commercial

The COVID-19 pandemic is also placing a significant budgetary burden on federal, state and local governments, which

may impede or delay their ability to purchase our products.

Management’s

Discussion and Analysis of Financial Condition and Results of Operations

used in this Quarterly Report on Form 10-Q, “SenesTech,”

Total long-term portion

Note 13 - Subsequent Events

[Share Issuances for Services

On April 8, 2021, the Company issued 667

shares of common stock for service for restricted stock units that vested on that date.

On April 29, 2021, the Company net issued

20,284 shares of common stock for service for the net settlement of restricted stock units that vested on that date.

of common stock withheld were used to satisfy required withholding tax liability in connection with the vesting of shares.]

The travel and other restrictions that

began in March 2020 in response to the COVID-19 global pandemic have resulted in a significant slowdown in our field studies and

sales efforts.

We were able to resume some projects by mid-year 2020, however, we still have delays on certain projects that might

remain on hold until certain government restrictions are lifted.

These continued delays have impacted our results of operations

and could impact our results in future quarters.

In addition, extended stay at home orders and other social distancing initiatives

continue to severely limit our ability to communicate with current and potential commercial customers.

The COVID-19 pandemic is

also placing a significant budgetary burden on federal, state and local governments, which may impede or delay their ability to

purchase our products.

The Company has evaluated subsequent events from

the balance sheet date through May 14, 2021, the date at which the financial statements were issued, and determined that there were no

other items that require adjustment to or disclosure in the financial statements.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

As used in this Quarterly Report on Form

10-Q, “SenesTech,”

the “Company,”

2 unchanged sentences

or “our”

refer to SenesTech, Inc., a Delaware corporation.

following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction

with our condensed financial statements and related notes.

Forward-Looking

statements and information contained in this Management’s Discussion and Analysis of Financial Condition and Results of

Operations, notes to our condensed financial statements and elsewhere in this report are not historical facts but are forward-

looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),

and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

In some cases, readers can

identify forward- looking statements by terms such as “may,”

“will,”

“should,”

refer to SenesTech,

Inc., a Delaware corporation.

The following Management’s Discussion

and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed financial statements

and related notes.

Forward-Looking Statements

Some statements and information contained

in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, notes to our condensed financial

statements and elsewhere in this report are not historical facts but are forward-looking statements within the meaning of Section

27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act

of 1934, as amended (the “Exchange Act”) and within the meaning of the safe-harbor provisions of the U.S.

Private Securities

Litigation Reform Act of 1995.

Forward-looking statements can often be identified by words such as:

“expect,”

“plan,”

“intend,”

“forecast,”

“anticipate,”

“believe,”

“estimate,”

“predict,”

“plan,”

“strategy,”

“future,”

“potential,”

“continue,”

or the negative of these terms or other comparable terminology,

which when used are meant to signify the statement as forward-looking.

These forward-looking statements include, but are not limited

The impacts and

implications of the COVID-19 pandemic;

Our commercialization

and promotion strategy and plans, including key elements to our business strategy, how we commercialize, our sales approach,

our hiring and retention strategy;

our areas and markets of focus, our pricing strategy, our strategic relationships and which

geographic markets we target;

Our seeking, obtaining

or maintaining regulatory approvals for our product candidates;

Our expectations

regarding the potential market size for our products and how the market may develop;

Our estimates or

expectations related to our revenue, cash flow, expenses, capital requirements and need for additional financing;

Our ability, and

the time required, to improve our cost structure and gross margins, and limit our cash burn;

Our plans for our business, including for research

and development;

Our ability to enter

into strategic arrangements and to achieve the expected results from such arrangements;

The initiation,

timing, progress and results of field studies and other studies and trials and our research and development programs;

Our financial performance, including our ability

to fund operations;

Developments and

projections relating to our projects, competitors and our industry.

forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and situations

that are difficult to predict and that may cause our own, or our industry’s, actual results to be materially different from

the future results that are expressed or implied by these statements.

Accordingly, actual results may differ materially from those

anticipated or expressed in such statements as a result of a variety of factors, including those discussed in Item 1A of Part

II of our Annual Report on Form 10-K, as amended by Form 10-K/A, for the year ended December 31, 2019, filed with the SEC on March

17, 2020 and April 21, 2020, respectively, (collectively, the “2019 Annual Report”), and Item 1A of Part II of this

Form 10-Q, in each case entitled “Risk Factors,”

and those contained from time to time in our other filings with the

Securities and Exchange Commission.

Readers are cautioned not to place undue reliance on the forward-looking statements, which

speak only as of the date made.

“may,”

“should,”

“will,”

and similar references to future periods.

Examples include, among

others, statements about:

impacts and implications of the COVID-19 pandemic;

commercialization and promotion strategy and plans, including key elements to our business strategy, how we commercialize, our

sales approach, the tools we use, our hiring and retention strategy;

our areas and markets of focus, our pricing strategy, our

strategic relationships and which geographic markets we target;

success and effectiveness of our products;

seeking, obtaining or maintaining regulatory approvals for our product candidates;

expectations regarding the potential market size for our products and how the market may develop;

Our estimates or expectations related to our revenue, cash flow, expenses, operating results, capital requirements and need for additional financing;

Our ability, and the time required, to improve our cost structure and gross margins, and limit our cash burn;

Our plans for our business, including for research and development;

Our ability to enter into strategic arrangements and to achieve the expected results from such arrangements;

The adequacy of our facilities to meet our current needs;

The initiation, timing, progress and results of field studies and other studies and trials and our research and development programs;

Our financial performance, including our ability to fund operations;

Developments and projections relating to our projects, competitors and our industry, including legislative developments and impacts from those developments.

These forward-looking statements are not

guarantees of future performance and involve known and unknown risks, uncertainties and situations that are difficult to predict

and that may cause our own, or our industry’s, actual results to be materially different from the future results that are

expressed or implied by these statements.

Accordingly, actual results may differ materially from those anticipated or expressed

in such statements as a result of a variety of factors, including those discussed in Item 1A-“Risk Factors”

I of our Annual Report on Form 10-K, for the year ended December 31, 2020, filed with the SEC on March 29, 2021, and Item 1A of

Part II of this Form 10-Q, in each case entitled “Risk Factors,”

and those contained from time to time in our other

filings with the Securities and Exchange Commission.

Readers are cautioned not to place undue reliance on the forward-looking statements,

which speak only as of the date made.

Except as required by law, we undertake no obligation to update any forward-looking statement,

whether as a result of new information, future events or otherwise.

our inception, we have sustained significant operating losses in the course of our research and development activities and expect

Since our inception, we have sustained

significant operating losses in the course of our research and development activities and commercialization efforts and expect

such losses to continue for the near future.

We have generated limited revenue to date from product sales, research grants and

licensing fees received under our former license agreement with Neogen.

In 2017, we began to prepare and launch commercialization

of our first product, ContraPest.

We have primarily funded our operations to date through the sale of equity securities, including

convertible preferred stock, common stock and warrants to purchase common stock.

have also raised capital through debt financing, consisting primarily of convertible notes;

and, to a lesser extent, payments

received in connection with product sales, research grants and licensing fees.

September 30, 2020, we had received net proceeds of $73.2 million from our sales of common stock, preferred stock and warrant

exercises and issuance of convertible and other promissory notes, an aggregate of $1.7 million from licensing fees and an aggregate

of $0.8 million in net product sales.

At September 30, 2020, we had an accumulated deficit of $102.2 million and cash and cash

equivalents of $2.7 million.

have incurred significant operating losses every year since our inception.

Our net losses were $1.9 million and $6.3 million for

the three months and nine months ended September 30, 2020, respectively, and $2.6 million and $7.2 million for the three months

and nine months ended September 30, 2019, respectively.

We expect to continue to incur significant expenses and generate operating

losses for at least the next 12 months.

have historically utilized, and intend to continue to utilize, various forms of stock-based awards in order to hire, retain and

motivate talented employees, consultants and directors and encourage them to devote their best efforts to our business and financial

In addition, we believe that our ability to grant stock-based awards is a valuable and necessary compensation tool that

aligns the long-term financial interests of our employees, consultants and directors with the financial interests of our stockholders.

a result, a significant portion of our operating expenses includes stock-based compensation expense.

Stock-based compensation

expense has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important

part of our compensation strategy.

Specifically, our stock-based compensation expense was $162,000 and $453,000 for the three

and nine months ended September 30, 2020, which represented 8.3% and 7.6%, respectively, of our total operating expenses for those

periods and $204,000 and $675,000 for the three and nine months ended September 30, 2019, respectively, which represented 7.8%

and 9.3%, respectively, of our total operating expenses for those periods.

will need additional funding in order to continue to fund our operations and achieve profitability and become cash flow positive

and will continue to seek additional financing.

If such equity or debt financing is not available at adequate levels or on acceptable

terms, we may need to delay, limit or terminate commercialization and development efforts or discontinue operations.

the effects of the COVID-19 pandemic did not have a significant impact on revenue during the three and nine months ended September

30, 2020, the travel and other restrictions that started in March resulted in a significant slowdown in our proof of concept field

studies and sales efforts.

We were able to resume field studies in some important projects by late-April and initially believed

that we would re-start all our most significant field studies as we obtained limited waivers of certain travel bans;

we still have delays on certain projects that might remain on hold until the lifting of government restrictions.

could impact our results in future quarters.

Initially, we believed that pest control would continue through the pandemic as a

necessity and we were and have been able to maintain our manufacturing with cautionary, best practices put in place.

we have concerns about distributor, pest control operator and individual consumer spending as restrictive measures related to

the pandemic continue.

Stay at home orders across the world have impeded our ability to communicate with current and prospective

customers, potentially reducing sales until the orders are lifted.

In addition, federal, state and municipal budgets are under

severe strain as a result of the pandemic.

licensing fees received under a former license.

We have primarily funded our operations to date through the sale of equity securities,

including convertible preferred stock, common stock and warrants to purchase common stock;

and debt financing, consisting primarily

of convertible notes.

Through March 31, 2021, we have received

net proceeds of $89.3 million from our sales of common stock, preferred stock and warrant exercises and issuance of convertible

and other promissory notes, an aggregate of $1.7 million from licensing fees and an aggregate of $1.0 million in net product sales.

As of March 31, 2021, we had an accumulated deficit of $106.1 million and cash and cash equivalents of $15.2 million.

On April 15, 2020, the Company also received

cash proceeds of $645,700 from the Paycheck Protection Program (or “PPP”) of the Coronavirus Aid, Relief, and Economic

Security Act.

We used the proceeds from the PPP Loan to retain employees, maintain payroll and make lease, interest and utility

We have incurred significant operating

losses every year since our inception.

Our net losses were $1.8 million and $2.7 million for the three months ended March 31, 2021

and 2020, respectively.

We expect to continue to incur significant expenses and generate operating losses for at least the next

We will need additional funding in order

to continue to fund our operations and achieve profitability and become cash flow positive and will continue to seek additional

If such equity or debt financing is not available at adequate levels or on acceptable terms, we may need to delay, limit

or terminate commercialization and development efforts or discontinue operations.

While it is difficult to measure the effect

and impact of the COVID-19 pandemic on revenue during the three months ended March 31, 2021, the travel and other restrictions

that started in March 2020 resulted in a significant slowdown in our proof-of-concept field studies and sales efforts.

were able to resume field studies in some important projects by mid-year 2020 and initially believed that we would re-start all

our most significant field studies as we obtained limited waivers of certain travel bans, we still have delays on certain projects

that might remain on hold until further lifting of government restrictions.

These continued delays could impact our results in

future quarters.

Initially, we believed that pest control would continue through the pandemic as a necessity and we were and have

been able to maintain our manufacturing with cautionary, best practices put in place.

However, we have concerns about distributor,

pest control operator and individual consumer spending as restrictive measures related to the pandemic continue.

Extended stay

at home orders across the world have impeded our ability to communicate with current and prospective customers, potentially reducing

sales until the orders are lifted.

In addition, federal, state and municipal budgets continue to be severely strained as a result

of the pandemic.

This may delay or impede their ability to make near term purchases of our products.

While we have stocked certain long lead time inventory raw material ingredients, any prolonged impact on the suppliers we rely

on for the purchase of these items by the COVID-19 pandemic could impact future manufacturing operations.

of our Results of Operations

sales are comprised primarily of sales, net of discounts and promotions, of ContraPest and related components, to our distributors

and customers, as well as consulting and implementation services provided in conjunction with ContraPest deployments.

and Development Expenses

and development expenses consist primarily of costs incurred in connection with the research and development of ContraPest and

our other product candidates, which costs include:

Employee related

expenses, including salaries, related benefits, travel and stock-based compensation expense for employees engaged in research

and development functions;

Expenses incurred

in connection with the development of our product candidates;

Facilities, depreciation

and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies.

expense research and development costs as incurred.

continue to investigate other applications of our core technology to other product candidates, which includes laboratory tests

and academic collaborations.

We also continue to develop our supply chain, particularly identifying and improving our sourcing

of triptolide, a key active ingredient for our product candidates.

At this time, we cannot reasonably estimate the costs for further

development of ContraPest or the cost associated with the development of any of our other product candidates.

General and Administrative Expenses

general and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel

in executive, finance, sales, marketing and administrative functions.

Selling, general and administrative expenses also include

direct and allocated facility-related costs as well as professional fees for legal, consulting, accounting and audit services.

continue to focus on improving our cost structure, with the goals of shifting resources to commercialization, significantly reducing

our year-over-year burn rate and achieving a 50% or greater gross margin.

Steps have included relocating to more cost-efficient

space, organizational restructuring, and improving our manufacturing and supply processes and reducing staffing.

realize the benefits from these steps in the coming quarters.

plan to continue to utilize various forms of stock-based compensation awards in order to attract and retain qualified employees.

As a result, we anticipate that stock-based compensation expense will continue to represent a significant portion of our selling,

general and administrative expenses for the foreseeable future.

income consists primarily of interest income earned on cash and cash equivalents.

expense consists primarily of interest accrued on our finance lease and note commitments.

Income (Expense), Net

income (expense), net, consists primarily of recognized change in value of short-term investments, income (expense) related to

the year-over-year fair market value adjustment of our derivative warrant and any recognized gains or losses related to the sale

of fixed assets.

tax assets and liabilities are determined based on differences between the financial statement and tax bases of assets and liabilities,

as well as a consideration of net operating loss and credit carry forwards, using enacted tax rates in effect for the period in

which the differences are expected to impact taxable income.

A valuation allowance is established, when necessary, to reduce deferred

tax assets to the amount that is more likely than not to be realized.

The Company’s effective tax rate has been affected

by the full valuation allowance recorded since inception on the Company’s deferred tax assets.

our inception, we have not recorded any U.S.

federal or state income tax benefits for the net operating losses we have incurred

in each year in our history or for our generated research and development tax credits, due to the uncertainty regarding our ability

to realize a benefit from these tax attributes.

At September 30, 2020, the Company has federal and state net operating loss carryforwards

of approximately $61.3 million and $50.0 million, respectively, not considering any potential IRC Section 382 annual limitation

discussed below.

The federal loss carryforwards begin to expire in 2023, unless previously utilized.

Included in the $61.3 million

of federal loss carryforwards are approximately $16.9 million of net operating losses that do not expire due to the tax law changes

promulgated in conjunction with the Tax Cuts and Jobs Act of 2017.

Additionally,

the utilization of the net operating loss and tax credit carryforwards could be subject to annual limitations under sections 382

and 383 of the Internal Revenue Code of 1986, and similar state tax provisions, due to ownership change limitations that may have

occurred previously or that could occur in the future.

These ownership changes limit the amount of net operating loss carryforwards

and other deferred tax assets that can be utilized to offset future taxable income and tax, respectively.

In general, an ownership

change, as defined by section 382, results from transactions increasing ownership of certain stockholders or public groups in

the stock of the corporation by more than 50 percentage points over a three-year period.

The Company has not conducted an analysis

of an ownership change under section 382.

To the extent that a study is completed and an ownership change is deemed to have occurred,

the Company’s net operating losses could be limited.

of the Three and Nine Months Ended September 30, 2020 and 2019

following table summarizes our results of operations for the three and nine months ended September 30, 2020 and 2019:

While we have stocked certain

long lead time inventory raw material ingredients, any prolonged impact on the suppliers we rely on for the purchase of these items

by the COVID-19 pandemic could impact future manufacturing operations.

Components of our Results of Operations

Sales are comprised primarily of sales,

net of discounts and promotions, of ContraPest and related components, to our distributors and customers, as well as consulting

and implementation services provided in conjunction with ContraPest deployments.

Cost of Sales

Cost of sales consist primarily of cost

of products sold, including scrap and reserves for obsolescence.

We continue to focus on improving our cost structure, with the

goals of shifting resources to commercialization, significantly reducing our year-over-year burn rate and achieving a 50% or greater

gross margin.

Steps have included relocating to more cost-efficient space, organizational restructuring, and improving our manufacturing

and supply processes and reducing staffing.

We expect to realize the benefits from these steps in the coming quarters.

Operating Expenses

Research and Development Expenses

Research and development expenses consist

primarily of costs incurred in connection with the research and development of ContraPest and our other product candidates, which

costs include:

related expenses, including salaries, related benefits, travel and stock-based compensation expense for employees engaged

in research and development functions;

Expenses incurred in connection with the development of

our product candidates;

Facilities, depreciation and other

expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies.

We expense research and development costs

We continue to investigate other applications

of our core technology to other product candidates, which includes laboratory tests and academic collaborations.

We also continue

to develop our supply chain, particularly identifying and improving our sourcing of triptolide, a key active ingredient for our

product candidates.

At this time, we cannot reasonably estimate the costs for further development of ContraPest or the cost associated

with the development of any of our other product candidates.

Selling, General and Administrative

Selling, general and administrative expenses

consist primarily of salaries and related costs, including stock-based compensation, for personnel in executive, finance, sales,

marketing and administrative functions.

Selling, general and administrative expenses also include direct and allocated facility-related

costs as well as professional fees for legal, consulting, accounting and audit services.

We plan to continue to utilize various

forms of stock-based compensation awards in order to attract and retain qualified employees.

As a result, we anticipate that stock-based

compensation expense will continue to represent a significant portion of our selling, general and administrative expenses for the

foreseeable future.

Interest Income

Interest income consists primarily of interest

income earned on cash and cash equivalents.

Interest Expense

Interest expense consists primarily of

interest accrued on our finance lease and note commitments.

Other Income (Expense), Net

Other income (expense), net, consists primarily

of any recognized gains or losses related to the sale of fixed assets.

In 2021, other income also included the reversal of a payroll

benefits accrual from 2019 that was reversed as the liability period had expired.

Deferred tax assets and liabilities are

determined based on differences between the financial statement and tax basis of assets and liabilities, as well as a consideration

of net operating loss and credit carry forwards, using enacted tax rates in effect for the period in which the differences are

expected to impact taxable income.

A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount

that is more likely than not to be realized.

The Company’s effective tax rate for the three months ended March 31, 2021,

as well as for the year ended December 31, 2020, has been impacted by the full valuation allowance on the Company’s deferred

Since our inception, we have not recorded

federal or state income tax benefits for the net operating losses we have incurred in each year in our history or for

our generated research and development tax credits, due to the uncertainty regarding our ability to realize a benefit from these

tax attributes.

At March 31, 2021, the Company has federal and state net operating loss carryforwards of approximately $69.5 million

and $56.1 million, respectively, not considering any potential IRC Section 382 annual limitation discussed below.

The federal loss

carryforwards begin to expire in 2032, unless previously utilized.

Included in the $69.5 million of federal loss carryforwards

are approximately $25.1 million of net operating losses that do not expire due to the tax law changes promulgated in conjunction

with the Tax Cuts and Jobs Act of 2017.

Additionally, the utilization of the net

operating loss carryforwards are subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code od 1986,

and similar state tax provisions due to ownership change limitations that have occurred previously or that could occur in the future.

These ownership changes limit the amount of net operating loss carryforwards and other deferred tax assets that can be utilized

to offset future taxable income and tax, respectively.

In general, an ownership change, as defined by Section 382 and 383 results

from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50

percent points over a three-year period.

The Company has not conducted an analysis of an ownership change under section 382.

the extent that a study is completed and an ownership change is deemed to occur, the Company’s net operating losses could

Comparison of the Three Months Ended March 31, 2021 and

The following table summarizes our results

of operations for the three months ended March 31, 2021 and 2020:

For the Three Months

For the Nine Months

and development

general and administrative

Ended March 31,

Cost of sales

Operating expenses:

operating loss

income (expense):

income (expense)

Research and development

Selling, general and administrative

Total operating expenses

Net operating loss

Other income (expense):

loss and comprehensive loss

dividend-warrant price protection-revaluation adjustment

loss attributable to common shareholders

average common shares outstanding - basic and fully diluted

loss per common share - basic and fully diluted

Months Ended September 30, 2020 compared to Three Months Ended September 30, 2019:

sales were $77,000 for the three months ended September 30, 2020 and $36,000 for the same period in 2019.

Interest income

Interest expense

Total other income

Net loss and comprehensive loss

Deemed dividend-warrant price protection-revaluation adjustment

Net loss attributable to common shareholders

Weighted average common shares outstanding - basic and fully diluted

Net loss per common share - basic and fully diluted

Sales, shown net of sales discounts and

promotions, were $88,000 for the three months ended March 31, 2021, compared to $37,000 for the same period in 2020.

Sales increased

due, in part, to our implementation of an internet sales capability, augmenting our existing pull through sales strategy, where

demand from the consumer market encourages, or pulls, resellers and pest management professionals to offer our products, as well

as billings of $12,200 for customer product implementation services.

These initiatives have shown initial promise.

believe the benefit has been offset by reduced sales, reflecting continued reduced spending by customers due to the COVID-19 pandemic.

of sales was $41,000 or 53.3% of net sales for the three months ended September 30, 2020, compared to $25,000 or 69.4% of net

sales for the three months ended September 30, 2019.

The increase in cost of goods sold of $16,000 in 2020 is primarily due to

higher sales volume.

The decrease in cost of sales as a percentage of net sales was due to reduced scrap expense and continued

process improvement and efficiencies.

We anticipate cost of goods sold as a percentage of sales will improve in the future due

to manufacturing efficiencies as a result of scale-up activities.

profit for the three months ended September 30, 2020 was $36,000 or 46.7% of net sales, compared to a gross profit of $11,000

or 30.6% of net sales, for the same period in 2019.

The increase in gross profit was a direct result of decreased scrap related

to scale-up activities as well as continued process improvement and efficiencies.

and Development Expenses

September 30,

research and development expenses:

related (including stock-based compensation)

Facility-related

research and development expenses

and development expenses were $380,000 for the three months ended September 30, 2020, compared to $432,000 for the same period

The $52,000 decrease in research and development expenses was primarily due to a decrease of $15,000 in personnel-related

costs, including stock-based compensation expense, due to the classification of certain field support employees to sales and marketing.

With more focus on the commercialization of ContraPest, it was determined that these certain field support employees previously

classified as research and development are now refocused on sales and marketing efforts.

Facility-related

expenses decreased $14,000 due primarily to the cancellation of a facility lease of 1,954 square feet of research and development

space in Flagstaff, Arizona at December 31, 2019 and reduced allocation of facility expenses to research and development with

the renewal of only a portion of the Flagstaff facilities in December 2019, offset by rent expense at the new manufacturing facility

in Phoenix, Arizona, as discussed in Note 12 - Commitments and Contingencies.

decrease in other research and development expenses of $23,000 was primarily due to a reclass of other expenses related to certain

field support employees to sales and marketing as described above.

also continue to develop our supply chain, particularly identifying and improving our sourcing of key ingredients for our product

General and Administrative Expenses

general and administrative expenses were approximately $1.6 million for the three months ended September 30, 2020, as compared

to approximately $2.2 million for the three months ended September 30, 2019.

The decrease of $600,000 in selling, general and

administrative expenses was primarily due to a decrease of $378,000 in net salary costs, a decrease of $126,000 in travel expenses,

a $179,000 decrease in professional service fees and $67,000 decrease in marketing expenses, offset by increases in expenses related

to restricted use field projects.

The decrease in net salary costs of $378,000 was due primarily to a decrease in stock compensation

expenses as well as the impact of temporary salary reductions implemented in the second quarter of 2020 by management to control

expenses during the COVID-19 pandemic.

The decrease in professional services expenses was primarily due to reduced legal expenses

as the result of a legal expenses related to a litigation settlement in the third quarter of 2019 that were not incurred in 2020.

The decrease in travel expenses was a direct result of COVID-19 travel restrictions put in place in March 2020.

Likewise, the

pandemic restricted access to trade shows and other marketing activities in the three months ended September 30, 2020, resulting

in lower marketing expenses than the same period in 2019.

Income/Expense, Net

recorded interest expense, net of $7,000 for the three months ended September 30, 2020, as compared to interest expense, net of

$9 for the same period in 2019.

The $2,000 decrease in interest expense, net for the period was a result of decreased interest

expense on certain notes payable and finance leases that expired in the first nine months of 2020.

Income (Expense)

income, net, was $0 for the three months ended September 30, 2020 and the same period ended September 30, 2019.

Months Ended September 30, 2020 compared to Nine Months Ended September 30, 2019:

sales were $185,000 for the nine months ended September 30, 2020 compared to $79,000 for the same period in 2019.

Sales were $106,000

higher, in part due to our implementation of an internet sales capability, augmenting our existing pull through sales strategy,

where demand from the consumer market encourages, or pulls, resellers and pest management professionals to offer our products,

as well as due to billings of $29,900 for customer product implementation services.

This strategy has shown initial promise.

we believe the benefit of this strategy has been offset by reduced sales, reflecting continued reduced spending by customers due

to the COVID-19 pandemic.

of sales was $106,000 or 57.3% of net sales for the nine months ended September 30, 2020, compared to $58,000 or 73.4% of net

sales for the nine months ended September 30, 2019.

The increase in cost of goods sold of $48,000 in 2020 is primarily due to

higher sales volume.

The decrease in cost of sales as a % of net sales was due to reduced scrap expense and continued process

improvement and efficiencies.

We anticipate cost of goods sold as a percentage of sales will improve for the foreseeable future

due to manufacturing efficiencies as a result of the scale up activities.

profit for the nine months ended September 30, 2020 was $79,000 or 42.7% of net sales, compared to a gross profit of $21,000 or

26.6% of net sales, for the same period in 2019.

The increase in gross profit was a direct result of decreased scrap related to

scale-up activities as well as continued process improvement and efficiencies noted above.

and Development Expenses

September 30,

research and development expenses:

related (including stock-based compensation)

Facility-related

by $51,000 in the first three months of 2021 due, in part, to our implementation of an internet sales capability, augmenting our

existing pull through sales strategy, where demand from the consumer market encourages, or pulls, resellers and pest management

professionals to offer our products, as well as billings of $4,000 for customer product implementation services.

These initiatives

have shown initial promise.

However, we believe the benefit has been offset by reduced sales, reflecting continued reduced spending

by customers due to the COVID-19 pandemic.

Cost of Sales

Cost of sales was $50,000 or 56.8% of net

sales for the three months ended March 31, 2021, compared to $22,000 or 59.5% of net sales for the three months ended March 31,

The increase in cost of goods sold of $28,000 in 2021 is primarily due to higher sales volume.

The decrease in cost of sales

as a percentage of net sales was primarily due to the impact of customer product implementation billings.

We continue to focus

on manufacturing process improvement and efficiencies.

We anticipate cost of goods sold as a percentage of sales will improve in

the future due to manufacturing efficiencies as a result of scale-up activities.

Gross profit for the three months ended

March 31, 2021 was $38,000 or 43.2% of net sales, compared to a gross profit of $15,000 or 40.5% of net sales, for the same period

The increase in gross profit was a direct result of the impact of customer product implementation billings.

Research and Development Expenses

and development expenses were $902,000 for the nine months ended September 30, 2020, compared to $1,359,000 for the nine months

ended September 30, 2019.

The $457,000 decrease in research and development expenses was primarily due to a decrease of $247,000

in personnel-related costs, including stock-based compensation expense, due to the reclassification of certain field support employees

to sales and marketing, decreased facility related expenses of $62,000 and decreased other research and development expenses of

more focus on commercialization of ContraPest, it was determined that these certain field support employees previously classified

as research and development are now refocused on sales and marketing efforts and were reclassified as such.

Three Months Ended

(in thousands)

Direct research and development expenses:

Personnel related (including stock-based compensation)

Facility-related

expense decreased $62,000 during the nine months ended September 30, 2020 over the same period in 2019 due primarily to the cancellation

of a facility lease of 1,954 square feet of research and development space in Flagstaff, Arizona at December 31, 2019 and reduced

allocation of facility expenses to research and development with the renewal of only a portion of the Flagstaff facilities in

December 2019, offset by rent expense at the new manufacturing facility in Phoenix, Arizona, as discussed in Note 12 - Commitments

and Contingencies.

decrease in other research and development expenses of $148,000 was primarily due to a reclassification of other expenses related

to certain field support employees to sales and marketing as described above, reduced travel expenses and reduced depreciation

due to the sale of certain fixed assets and certain assets fully depreciating during the nine months ended September 30, 2020.

also continue to develop our supply chain, particularly identifying and improving our sourcing of key ingredients for our product

General and Administrative Expenses

general and administrative expenses were approximately $5.0 million for the nine months ended September 30, 2020, as compared

to approximately $5.9 million for the nine months ended September 30, 2019.

The decrease of $900,000 in selling, general and administrative

expenses was primarily due to lower salaries and wages of $775,000, including stock compensation expenses and reduced travel related

expenses of $149,000.

salaries and wages were lower due primarily to a decrease in stock compensation expenses related to option grants fully vesting

and resulting in lower stock compensation expense as well as the impact of temporary salary reductions by management to control

expenses during the COVID-19 pandemic, offset by an increase in salaries and wages due to the reclassification of certain field

support employees to sales and marketing, as noted above.

The decrease in travel expenses for the nine months ended September

30, 2020, as compared to the same period in 2019, was a direct result of COVID-19 travel restrictions put in place in March 2020

that continued into the three months ended September 30, 2020.

Income/Expense, Net

recorded interest expense, net, of $20,000, for the nine months ended September 30, 2020, as compared to interest income, net

of $11,000 for the same period in 2019.

The $31,000 decrease in interest income, net, was a result of decreased interest income

as a result of significantly lower interest rates, offset by higher average daily cash balances and reduced interest expense as

a result of finance leases and promissory notes that expired during the nine months ended September 30, 2020.

Income (Expense)

recorded $18,000 of other income, net, for the nine months ended September 30, 2020, compared to $3,000 of other expense, net,

for the same period in 2019.

The $21,000 net increase in other income was primarily due to gains on the sale of certain fixed

assets during the nine months ended September 30, 2020 and decreased, year-over-year fair market value adjustment of our derivative

warrant in the same period.

and Capital Resources

our inception, we have sustained significant operating losses in the course of our research and development activities and commercialization

efforts and expect such losses to continue for the near future.

We have generated limited revenue to date from product sales,

research grants and licensing fees received under our former license agreement with Neogen.

We have funded our operations to date

through the sale of equity securities, including convertible preferred stock, common stock and warrants to purchase common stock;

debt financing, consisting primarily of convertible notes;

and, to a lesser extent, payments received in connection with product

sales, research grants and licensing fees.

September 30, 2020, we received net proceeds of $73.2 million from our sales of common stock, preferred stock and warrant exercises

and issuance of convertible and other promissory notes, and an aggregate of $1.7 million from licensing fees and an aggregate

of $0.8 million from product sales.

At September 30, 2020, we had an accumulated deficit of $102.2 million and cash and cash equivalents

of $2.7 million.

discussed in Note 8 - Borrowings, of our Notes to Condensed Financial Statements, on April 15, 2020, the Company also received

cash proceeds of $645,700 from the Paycheck Protection Program (or “PPP”) of the Coronavirus Aid, Relief, and Economic

Security Act.

We are using the proceeds from the PPP Loan to retain employees, maintain payroll and make lease, interest and utility

addition, as described in Note 13 - Subsequent Events, we entered into a private warrant inducement transaction on October 23,

2020, which resulted in gross proceeds to the Company of approximately $2.93 million, before deducting fees payable to the placement

agent and other estimated offering expenses payable by us.

ultimate success depends upon the outcome of a combination of factors, including:

(i) successful commercialization of ContraPest

and maintaining and obtaining regulatory approval of our products and product candidates;

(ii) market acceptance, commercial viability

and profitability of ContraPest and other products;

(iii) the ability to market our products and establish an effective sales

force and marketing infrastructure to generate significant revenue;

Total research and development expenses

Research and development expenses were

$455,000 for the three months ended March 31, 2021, compared to $296,000 for the same period in 2020.

The $159,000 increase in

research and development expenses was primarily due to an increase of $95,000 in personnel-related costs, including stock-based

compensation expense, due to an increase in manufacturing and regulatory headcount to meet current and future demand.

Facility-related expenses decreased $22,000

due primarily to the expiration of a facility lease of 7,632 square feet of manufacturing space in Flagstaff, Arizona at December

The increase in other research and development

expenses of $86,000 in the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to increased

expenses related to field and product improvement studies as well as increased annual EPA and state registrations.

We also continue

to develop our supply chain, particularly identifying and improving our sourcing of key ingredients for our product candidates.

Selling, General and Administrative

Selling, general and administrative expenses were

approximately $1.4 million for the three months ended March 31, 2021, as compared to approximately $2.0 million for the three months ended

March 31, 2020.

The decrease of $600,000 in selling, general and administrative expenses was primarily due to a decrease of $142,000 in

net salary costs, a decrease of $28,000 in travel expenses, a $350,000 decrease in professional service fees, a $71,000 decrease in transfer

agent fees and a $29,000 decrease in marketing expenses.

The decrease in net salary costs of $142,000 was due primarily to a decrease

in administration headcount in March 2020 to control expenses.

The decrease in professional services expenses was primarily due to reduced

legal expenses related to a litigation settlement incurred in the three months ended March 31, 2020 that were not incurred in the same

period of 2021.

The decrease in travel expenses was a direct result of COVID-19 travel restrictions put in place at the end of March 2020.

Likewise, the pandemic continued to restrict access to trade shows and other marketing activities in the three months ended March 31,

2021, resulting in lower marketing expenses than the same period in 2020.

The $71,000 decrease in transfer agent fees in the three months

ended March 31, 2021 over the same period of 2020 was due to expenses related to a 20 for 1 reverse stock split effected by the Company

in February 2020.

Interest Income/Expense, Net

We recorded interest expense, net of $3,000

for the three months ended March 31, 2020, as compared to interest expense, net of $6 for the same period in 2020.

The $3,000 decrease

in interest expense, net for the period was a result of decreased interest expense on certain notes payable and finance leases

that expired after March 31, 2020.

Other Income (Expense)

Other income, net, was $21,000 for the

three months ended March 31, 2021 as compared to $15,000 for the period ended March 31, 2020.

The $21,000 of other

income, net for the three months ended March 31, 2021 represented a payroll benefits accrual from 2019 that was reversed as the

liability period had expired.

The $15,000 other income, net for the period ended March 31, 2020 represented recognized gains on

the sale of fixed assets during the period.

Liquidity and Capital Resources

Since our inception, we have sustained

significant operating losses in the course of our research and development activities and commercialization efforts and expect

such losses to continue for the near future.

We have generated limited revenue to date from product sales, research grants and

licensing fees received under a former license.

We have primarily funded our operations to date through the sale of equity securities,

including convertible preferred stock, common stock and warrants to purchase common stock;

and debt financing, consisting primarily

of convertible notes.

Through March 31, 2021, we have received

net proceeds of $89.3 million from our sales of common stock, preferred stock and warrant exercises and issuance of convertible

and other promissory notes, an aggregate of $1.7 million from licensing fees and an aggregate of $1.0 million in net product sales.

As of March 31, 2021, we had an accumulated deficit of $106.1 million and cash and cash equivalents of $15.2 million.

As discussed in Note 8 - Borrowings, of

our Notes to Condensed Financial Statements, on April 15, 2020, the Company also received cash proceeds of $645,700 from the PPP

of the Coronavirus Aid, Relief, and Economic Security Act.

We used the proceeds from the PPP Loan to retain employees, maintain

payroll and make lease, interest and utility payments.

Our ultimate success depends upon the outcome

of a combination of factors, including:

(i) successful commercialization of ContraPest and maintaining and obtaining regulatory

approval of our products and product candidates;

(ii) market acceptance, commercial viability and profitability of ContraPest and

other products;

(iii) the ability to market our products and establish an effective sales force and marketing infrastructure to

generate significant revenue;

(iv) the success of our research and development;

ability to retain and attract key personnel to develop, operate and grow our business;

and (vi) our ability to meet our working

capital needs.

will need additional funding in order to continue to fund our operations and achieve profitability and become cash flow positive

and will continue to seek additional financing.

If such equity or debt financing is not available at adequate levels or on acceptable

terms, we may need to delay, limit or terminate commercialization and development efforts or discontinue operations.

Funding Requirements

expect our expenses to continue or increase in connection with our ongoing activities, particularly as we focus on marketing and

sales of ContraPest.

Further, the COVID-19 pandemic will likely delay completion of field studies and achievement of sales, which

will further increase our need for financing.

In addition, we will continue to incur costs associated with operating as a public

particular, we expect to incur substantial and increased expenses as we:

Work to maximize

market acceptance for, and generate sales of, our products;

Manage the infrastructure

for the sales, marketing and distribution of ContraPest and any other product candidates for which we may receive regulatory

Continue the development

of ContraPest and our other product candidates, including engaging in any necessary field studies;

Seek additional regulatory approvals for ContraPest

and our other product candidates;

Scale up manufacturing

processes and quantities to meet future demand of ContraPest and any other product candidates for which we receive regulatory

Continue product

development of ContraPest and advance our research and development activities and advance the research and development programs

for other product candidates;

Maintain, expand

and protect our intellectual property portfolio;

Add operational,

financial and management information systems and personnel, including personnel to support our product development and commercialization

efforts and operations as a public company.

We are also increasing

our expenses to expand regulatory approvals for ContraPest, with an effort to make the product more user friendly and available

for use in an increased number of applications.

believe we will need additional financing to fund these continuing and additional expenses.

following table summarizes our sources and uses of cash for each of the periods presented:

September 30,

used in operating activities

used in investing activities

provided by financing activities

increase (decrease) in cash and cash equivalents

the nine months ended September 30, 2020, operating activities used $5.5 million of cash, primarily resulting from our net loss

of $5.9 million and by changes in our operating assets and liabilities of $285,000, offset by non-cash charges of $654,000, consisting

primarily of stock-based compensation, depreciation and amortization.

Our net loss was primarily attributable to research and

development activities and our selling, general and administrative expenses, as we generated limited product revenue during the

Net cash used by changes in our operating assets and liabilities for the nine months ended September 30, 2020, consisted

primarily of a net decrease in accrued expenses and accounts payable of $460,000 and an increase in prepaid expenses of $24,000

offset by a decrease in inventory of $78,000, a decrease in receivables of $119,000 and a decrease in other assets of $2,000.

the nine months ended September 30, 2019, operating activities used $6.1 million of cash, primarily resulting from our net loss

of $7.2 million offset by changes in our operating assets and liabilities of $154,000 and by non-cash charges of $992,000, consisting

primarily of stock-based compensation, depreciation and amortization.

Our net loss was primarily attributable to research and

development activities and our selling, general and administrative expenses, as we generated limited product revenue during the

Net cash provided by changes in our operating assets and liabilities for the nine months ended September 30, 2019, consisted

primarily of a net increase in accrued expenses and accounts payable of $164,000, a decrease in prepaid expenses of $38,000 and

a decrease in deposits of $3,000 offset by an increase in inventory of $24,000, an increase in receivables of $16,000 and a decrease

in deferred rent of $11,000.

the nine months ended September 30, 2020, net cash used in investing activities was $4,000 due to the sale of property and equipment

of $44,000, offset by purchases of property, plant and equipment and construction in progress of $40,000.

the nine months ended September 30, 2019, we used $64,000 in net cash related to investing activities due to purchases of property

and equipment.

the nine months ended September 30, 2020, net cash provided by financing activities was $6.3 million as a result of $5.7 million

in net proceeds from the issuance of common stock and net proceeds of $646,000 from the issuance of a note pursuant to the Paycheck

Protection Program, offset by $44,000 of repayments related to notes payable and $62,000 in repayments of finance lease obligations.

the nine months ended September 30, 2019, net cash provided by financing activities was $5.2 million as a result of $3.6 million

in net proceeds from the issuance of common stock and net proceeds of $1.8 million from the exercise of warrants, offset by payments

of $184,000 related to notes payable and $55,000 of payments for employee withholding taxes related to share-based awards.

Sheet Arrangements

Accounting Policies and Significant Judgments and Estimates

financial statements are prepared in accordance with generally accepted accounting principles in the United States, or U.S.

The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the

reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities

in our financial statements.

We base our estimates on historical experience, known trends and events and various other factors

that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying

values of assets and liabilities that are not readily apparent from other sources.

We evaluate our estimates and assumptions on

an ongoing basis.

Our actual results may differ from these estimates under different assumptions or conditions.

our significant accounting policies are described in more detail in Note 2 to our financial statements included elsewhere in this

Quarterly Report on Form 10-Q, we believe that the following accounting policies are those most critical to the judgments and

estimates used in the preparation of our financial statements.

January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) 606 —

Revenue from Contracts

with Customers (“ASC 606”) .

Under ASC 606, the Company recognizes revenue from the commercial sales of

products, licensing agreements and contracts to perform pilot studies by applying the following steps:

(1) identify the contract

with a customer;

(2) identify the performance obligations in the contract;

(v) the ability to retain and attract key personnel

to develop, operate and grow our business;

and (vi) our ability to meet our working capital needs.

Based upon our current operating plan, we

expect that cash and cash equivalents at March 31, 2021, in combination with anticipated revenue and any additional sales of our

equity securities, will be sufficient to fund our current operations for at least the next 12 months.

We have evaluated and will

continue to evaluate our operating expenses and will concentrate our resources toward the successful commercialization of ContraPest

in the United States.

However, if anticipated revenue targets and margin targets are not achieved or expenses are more than we have

budgeted, we may need to raise additional financing before that time.

If we need more financing and we are unable to raise necessary

capital through the sale of our securities, we may be required to take other measures that could impair our ability to be successful

and operate as a going concern.

In any event, we may require additional capital in order to fund our operating losses and research

and development activities before we become profitable and may opportunistically raise capital.

We may never achieve profitability

or generate positive cash flows, and unless and until we do, we will continue to need to raise capital through equity or debt

If such equity or debt financing is not available at adequate levels or on acceptable terms, we may need to delay, limit

or terminate commercialization and development efforts or discontinue operations.

Additional Funding Requirements

We expect our expenses to continue or increase

in connection with our ongoing activities, particularly as we focus on marketing and sales of ContraPest.

Further, the COVID-19

pandemic will likely delay completion of field studies and achievement of sales, which will further increase our need for financing.

In addition, we will continue to incur costs associated with operating as a public company.

In particular, we expect to incur substantial

and increased expenses as we:

Work to maximize market acceptance

for, and generate sales of, our products;

Manage the infrastructure for the sales, marketing

and distribution of ContraPest and any other product candidates for which we may receive regulatory approval;

Continue the development of ContraPest

and our other product candidates, including engaging in any necessary field studies;

Seek additional regulatory approvals

for ContraPest and our other product candidates;

Scale up manufacturing processes and

quantities to meet future demand of ContraPest and any other product candidates for which we receive regulatory approval;

Continue product development of ContraPest

and advance our research and development activities and advance the research and development programs for other product candidates;

Maintain, expand and protect our intellectual

property portfolio;

Add operational, financial and management information

systems and personnel, including personnel to support our product development and commercialization efforts and operations

as a public company;

Expand regulatory approvals for ContraPest,

with an effort to make the product more user friendly and available for use in an increased number of applications.

We believe we will need additional financing to fund these continuing

and additional expenses.

The following table summarizes our sources

and uses of cash for each of the periods presented:

Three Months Ended

Cash used in operating activities

Cash (used in) provided by investing activities

Cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Operating Activities .

During the three months ended March 31,

2021, operating activities used $2.0 million of cash, primarily resulting from our net loss of $1.8 million and by changes in our

operating assets and liabilities of $424,000, offset by non-cash charges of $228,000, consisting primarily of stock-based compensation,

depreciation and amortization.

Our net loss was primarily attributable to research and development activities and our selling,

general and administrative expenses, as we generated limited product revenue during the period.

Net cash used by changes in our

operating assets and liabilities for the three months ended March 31, 2021 of $424,000 consisted primarily of a net decrease in

accrued expenses and accounts payable of $283,000, an increase in prepaid expenses of $182,000 and an increase in accounts receivable

of 2,000, offset by a decrease in inventory of $40,000 and a decrease in other assets of $3,000.

During the three months ended March 31,

2020, operating activities used $1.9 million of cash, primarily resulting from our net loss of $2.3 million offset by changes in

our operating assets and liabilities of $233,000 and by non-cash charges of $213,000, consisting primarily of stock-based compensation,

depreciation and gains recognized on sale of equipment.

Our net loss was primarily attributable to research and development activities

and our selling, general and administrative expenses, as we generated limited product revenue during the period.

Net cash used

by changes in our operating assets and liabilities for the three months ended March 31, 2020 consisted primarily of a net increase

in prepaid expenses of $40,000 offset by a net decrease in accrued expenses and accounts payable of $119,000, a decrease in accounts

receivable-trade and accounts receivable-other of $127,000, a decrease in other assets of $9,000 and a decrease in inventory of

Investing Activities.

For the three months ended March 31, 2021,

net cash used in investing activities was $63,000 due to the purchases of property, plant and equipment and construction in progress.

For the three months ended March 31, 2020,

we generated $40,000 in net cash related to investing activities as a result of sales of fixed assets.

Financing Activities.

During the three months ended March 31,

2021, net cash provided by financing activities was $13.6 million as a result of $12.4 million in net proceeds from the issuance

of common stock and net proceeds of $1.2 million from the exercise of warrants, offset by $17,000 of repayments related to notes

payable and $13,000 in repayments of finance lease obligations.

During the three months ended March 31,

2020, net cash provided by financing activities was $1.4 million as a result of proceeds received from the issuance of common stock

of $1.4 million offset by $34,000 related to payments of finance lease obligations and 14,000 of payments of notes payable.

Off-Balance Sheet Arrangements

Critical Accounting Policies and Significant Judgments and

Our financial statements are prepared in

accordance with generally accepted accounting principles in the United States, or U.S.

The preparation of our financial statements

and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue,

costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements.

We base our estimates

on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances,

the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily

apparent from other sources.

We evaluate our estimates and assumptions on an ongoing basis.

Our actual results may differ from

these estimates under different assumptions or conditions.

While our significant accounting policies

are described in more detail in Note 2 to our financial statements included elsewhere in this Quarterly Report on Form 10-Q, we

believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of

our financial statements.

Revenue Recognition

Effective January 1, 2018, the Company

adopted Accounting Standards Codification (“ASC”) 606 —

Revenue from Contracts with Customers (“ASC

606”) .

Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and

contracts to perform pilot studies by applying the following steps:

(1) identify the contract with a customer;

(2) identify the

performance obligations in the contract;

(3) determine the transaction price;

(4) allocate the

transaction price to each performance obligation in the contract;

and (5) recognize revenue when each performance obligation is

For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 —

Recognition (“ASC 605”) .

(4) allocate the transaction price to each performance

obligation in the contract;

and (5) recognize revenue when each performance obligation is satisfied.

For the comparative periods,

revenue has not been adjusted and continues to be reported under ASC 605 —

Revenue Recognition (“ASC 605”) .

Under ASC 605, revenue is recognized when the following criteria are met:

1 unchanged sentence

(2) the performance of service has been rendered to a customer or delivery has occurred;

(3) the amount of the fee to be paid by a customer is fixed and determinable;

and (4) the collectability of the fee is reasonably

The performance obligations identified by the Company under ASC 606 are straightforward and similar to the unit of account

and performance obligation determination under ASC Topic 605, Revenue Recognition .

recognize compensation costs related to stock options granted to employees based on the estimated fair value of the awards on

the date of grant, net of estimated forfeitures, in accordance with ASC Topic 718 —

(3) the amount of the fee to be paid by

a customer is fixed and determinable;

and (4) the collectability of the fee is reasonably assured.

The performance obligations

identified by the Company under ASC 606 are straightforward and similar to the unit of account and performance obligation determination

under ASC Topic 605, Revenue Recognition .

The Company recognizes revenue when product

is shipped at a fixed selling price on payment terms of 30 to 120 days from invoicing.

The Company recognizes other revenue earned

from pilot studies, consulting and implementation services upon the performance of specific services under the respective service

The Company derives revenue primarily from

commercial sales of products, net of discounts and promotions, as well as consulting and implementation services provided in conjunction

with our product deployments.

Stock-Based Compensation

We recognize compensation costs related

to stock options granted to employees based on the estimated fair value of the awards on the date of grant, net of estimated forfeitures,

in accordance with ASC Topic 718 —

Stock Compensation .

We estimate the grant date fair value of the awards, and the resulting stock-based compensation expense, using the Black-Scholes

option-pricing model.

The grant date fair value of stock-based awards is expensed on a straight-line basis over the vesting period

of the respective award.

recorded stock-based compensation expense of approximately $162,000 and $453,000 for the three and nine months ended September

30, 2020, respectively, and $204,000 and $675,000 for the three and nine months ended September 30, 2019, respectively.

to continue to grant stock options and other equity-based awards in the future and continue to recognize stock-based compensation

We estimate the grant date fair value of the awards,

and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model.

The grant date fair value of

stock-based awards is expensed on a straight-line basis over the vesting period of the respective award.

We recorded stock-based compensation expense

of approximately $155,000 and $151,000 for the three months ended March 31, 2021 and March 31, 2020, respectively.

continue to grant stock options and other equity-based awards in the future and continue to recognize stock-based compensation

expense in future periods.

Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions, which determine the fair value

of stock-based awards.

If we had made different assumptions, our stock-based compensation expense, net loss and loss per share

of common stock could have been significantly different.

The Black-Scholes option-pricing model

requires the use of highly subjective and complex assumptions, which determine the fair value of stock-based awards.

made different assumptions, our stock-based compensation expense, net loss and loss per share of common stock could have been significantly

Our assumptions are as follows:

Expected term .

The expected term represents the period that the stock-based awards are expected to be outstanding.

Our historical share option

exercise experience does not provide a reasonable basis upon which to estimate an expected term because of a lack of sufficient

Therefore, we estimate the expected term by using the simplified method, which calculates the expected term as the average

of the time-to-vesting and the contractual life of the options.

The expected term represents the period that the stock-based awards

are expected to be outstanding.

Our historical share option exercise experience does not provide a reasonable basis upon which

to estimate an expected term because of a lack of sufficient data.

Therefore, we estimate the expected term by using the simplified

method, which calculates the expected term as the average of the time-to-vesting and the contractual life of the options.

Expected volatility .

Expected volatility is derived from the average historical volatilities of publicly traded companies within our industry that

we consider to be comparable to our business over a period approximately equal to the expected term.

We intend to continue

to consistently apply this process using the same or similar public companies unless circumstances change such that the identified

companies are no longer similar to us, in which case, more suitable companies whose share prices are publicly available would

be utilized in the calculation.

Risk-free interest

Expected volatility is derived from the average historical volatilities

of publicly traded companies within our industry that we consider to be comparable to our business over a period approximately

equal to the expected term.

We intend to continue to consistently apply this process using the same or similar public companies

unless circumstances change such that the identified companies are no longer similar to us, in which case, more suitable companies

whose share prices are publicly available would be utilized in the calculation.

Risk-free interest rate .

The risk-free interest rate is based on the U.S.

Treasury yield in effect at the time of grant for zero coupon U.S.

Treasury notes with maturities approximately equal to the expected term.

yield in effect at the time of grant for zero coupon U.S.

Treasury notes with maturities approximately equal to the expected

Expected dividend .

The expected dividend is assumed to be zero as we have never paid dividends and have no current plans to pay any dividends

on our common stock.

The expected dividend is assumed to be zero as we have never paid

dividends and have no current plans to pay any dividends on our common stock.

Expected forfeitures .

use historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those

awards that are expected to vest.

To the extent actual forfeitures differ from the estimates, the difference will be recorded

as a cumulative adjustment in the period that the estimates are revised.

Factors, Assumptions and Methodologies Used in Determining Fair Value of Our Common Stock

noted above, we are required to estimate the fair value of the common stock underlying our stock-based awards when performing

the fair value calculations using the Black-Scholes option-pricing model.

In the absence of an active market for our common stock,

we utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants’

Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation , to estimate the fair value

of our common stock.

In addition, we have conducted periodic assessments of the valuation of our common stock.

assumptions underlying these valuations represent management’s best estimates, which involve inherent uncertainties and

the application of management’s judgment.

If we had made different assumptions than those used, the amount of our stock-based

compensation expense, net income and net income per share amounts could have been significantly different.

The fair value per

share of our common stock for purposes of determining stock-based compensation expense is the closing price of our common stock

as reported on the applicable grant date.

The compensation cost that has been included in the statements of operations and comprehensive

loss for all stock-based compensation arrangements is as follows:

September 30,

and development

and administrative

stock-based compensation expense

intrinsic value of stock options outstanding as of September 30, 2020 was $0.

Growth Company Status

Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an “emerging growth company”

such as us to take

advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until

those standards would otherwise apply to private companies.

We use historical data to estimate pre-vesting option forfeitures

and record stock-based compensation expense only for those awards that are expected to vest.

To the extent actual forfeitures

differ from the estimates, the difference will be recorded as a cumulative adjustment in the period that the estimates are

Significant Factors, Assumptions and

Methodologies Used in Determining Fair Value of Our Common Stock

As noted above, we are required to estimate

the fair value of the common stock underlying our stock-based awards when performing the fair value calculations using the Black-Scholes

option-pricing model.

In the absence of an active market for our common stock, we utilized methodologies in accordance with the

framework of the American Institute of Certified Public Accountants’

Technical Practice Aid, Valuation of Privately-Held

Company Equity Securities Issued as Compensation , to estimate the fair value of our common stock.

In addition, we have conducted

periodic assessments of the valuation of our common stock.

The assumptions underlying

these valuations represent management’s best estimates, which involve inherent uncertainties and the application of management’s

If we had made different assumptions than those used, the amount of our stock-based compensation expense, net income

and net income per share amounts could have been significantly different.

The fair value per share of our common stock for purposes

of determining stock-based compensation expense is the closing price of our common stock as reported on the applicable grant date.

The compensation cost that has been included in the statements of operations and comprehensive loss for all stock-based compensation

arrangements is as follows:

Three Months Ended

Research and development

Selling, general and administrative

Total stock-based compensation expense

The intrinsic value of stock options outstanding as of March

31, 2021 was $0.

Emerging Growth Company Status

The Jumpstart Our Business Startups Act

of 2012, or the JOBS Act, permits an “emerging growth company”

such as us to take advantage of an extended transition

period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise

apply to private companies.

We have irrevocably elected to “opt out”

of this provision

and, as a result, we intend to comply with new or revised accounting standards when they are required to be adopted by public

companies that are not emerging growth companies.

and Qualitative Disclosures about Market Risk

of this provision and, as a result, we intend

to comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging

growth companies.

Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements